Linda Bolton-Weiser: Hi. Thank you. So just so I understand the comments you made about the incremental costs and expenses. The 200 basis points to 300 basis points of incremental spending, which I think you said would all be in SG&A. Is that in — is that in addition to and separate from the advertising spending that you’re talking about?
James Maloney: No, that’s the same. So the 200 basis points to 300 basis points, which really equates to approximately $20 million to $30 million. We’re going to start spending that in the coming months as we get the seamless offer completed by midyear. So you’re going to see that type of spend start to happen probably towards the end of Q2 and then into Q3 and beyond. So that’s our expectations at this point, Linda.
Linda Bolton-Weiser: Right. But I’m trying to clarify, like, is that advertising spending to draw people into the seamless offering?
James Maloney: Yes, it is. Correct.
Linda Bolton-Weiser: Okay. Then you should have the seamless offering already to go at the time you start turning on that advertising spend. Is that the way to think about it?
James Maloney: That’s exactly right. Yes. And we’re thinking that’s going to happen midyear, and that’s when you’re going to see that type of incremental advertising happening. And that will be recorded in SG&A.
Linda Bolton-Weiser: Okay. I got you. So that means that well, I guess, I guess here’s the thing. I mean are you working in conjunction in a collaborative effort with LifeMD to put forth an advertising message and are they spending the same amount or are you spending? Like what’s the combined spending on the advertising front?
Dan Chard: I think that’s — we — what LifeMD spend is something for them to announce. The message is the message they’re putting out is to draw — is to say, their traditional message, which ties to their primary care physician services. What we do know, though, and we mentioned this in the comments, if you step back and you say, what is it really that we’re doing as a company, and it’s, first, we’re giving a new message to our coaches, which means that coaches can now offer the support of the clinician for the OPTAVIA programs. So it’s a modified message for them, and they’ll continue to use that message over both in our communities and using social media platforms. The second channel for client acquisition is the one that Jim just described and that you asked the question on, which is company-led acquisition.
That’s done in coordination with our coaches and it’s providing coaches — the coach offer within that message. The third is the one that you’re asking about now, which is client acquisition through our partner, LifeMD. So what — they have a very specific formula to drive the best results for their client — the patient acquisition. What they also know is that once their patients are in and using their prod, let they’ve surveyed them and they know that’s a significant portion. So I’ll describe that as above 50% and of the patients they bring in are looking for additional support for lifestyle programs. And the type of lifestyle programs that we offer through OPTAVIA. So the intention is to support those patients who want to have that kind of support.
So we’re at the very beginning of this. This was part of the reason they were excited and enthusiastic about partnering with us through this collaboration agreement. And we believe that through these three new client acquisition channels, we have an important and meaningful way to impact our client acquisition capabilities as we move through the year.
Linda Bolton-Weiser: So as we go forward in time, over the long term, do you expect to continue to ramp up the pull marketing spend? So you’re saying it’s going to be $20 million to $30 million. So that’s 2% to 3% of sales like does that go higher over time to 5% of sales or does it go lower as your coach network becomes used to marketing that message?
James Maloney: Yes. I don’t know we know that answer right now, and there will be more to come on that as we learn more information on this. This is the early stages of this. But what I can say on that is we’re going to look to see what the return on investment of that marketing spend is to that particular channel and determine the profitability of that channel to make additional adjustments within that channel on marketing spend. So there’s going to be more to come on that. There’s really — I can’t give you a full answer on that for you to model out 2025. But we wanted to give what 2024 will look like to investors at this point.
Linda Bolton-Weiser: Okay. And then I’m just curious, are you making any changes to your commission structure to help fund the advertising spend or are you making no changes at this time for the commission structure?
Dan Chard: No changes at this time to the commission structure.
Linda Bolton-Weiser: Okay. And maybe you could share with us what you’re learning from LifeMD about like what am I saying about the availability of the branded drugs versus compounded. I know they work with a compounder or compounders for the drug to get their drugs to their customers, to their patients. Are they seeing more availability of the branded drug or like kind of what are they saying on that front?
Dan Chard: I think their access is the same as everyone else’s to the brand. And I think there have been some supply shortages that I think you’re referencing. And they have a reliable supplier for the compounded version of the active GLP-1 ingredients. So they’re able to offer both solutions for their patients. And — but like I said, there’s no — I mean their access to the branded product is through the same pharmacies that everybody else is using.
