Question-and-Answer Session
Operator
[Operator Instructions] Our first question is from the line of Laura Richardson with BB&T.
Laura Richardson – BB&T
My big question for you guys is, the guidance for 2008 seems so different from what you reported in the fourth quarter, the revenue growth is a lot slower and the expense growth also a lot less. Can you explain to me the thinking behind that, why you were thinking you are going to be in the first quarter growing revenue 8% to 10% coming off this great recruiting you just had in Take Shape for Life as one example?
Michael McDevitt
What I’ll do it I’ll paint a picture of what growth we are expecting, the many different distribution channels of Medifast.
Laura Richardson – BB&T
By quarter if it’s different, that would be helpful.
Michael McDevitt
I’ll speak annually out of the gates and we can dive into quarters if you still have additional questions. What we are expecting in the businesses of both Take Shape for Life and Medifast Weight Control Centers, there is roughly 20% to 25% growth year over year. The reason that the overall growth rate is less than that is because these two businesses, although 20% to 25% is substantially higher than the overall 8% to 10% it’s because of the weighted average of their total sales in the business. Take Shape for Life representing 30%, Medifast Weight Control Centers representing roughly 6%.
We look at almost doubling the number of clinics corporately owned inside of the Medifast Weight Control Centers throughout the year. However, these are going to breaking into new markets and they are going to be done throughout the year so you are not going to get the full effects of the benefit. Therefore, as an unknown for us breaking into new markets we are being conservative in the growth rates of Medifast Weight Control Centers to see what that effectiveness of advertising will be in these new markets.
The Medifast direct response business, which is the largest piece of our revenue as we mentioned before we are anticipating an advertising spend that is equal to that was spent this past year, roughly $18.5 to $19 million. Where we are expecting the profit growth to come from largely is the more effective spend on advertising. The metric that we are using most frequently in house to track the effectiveness of our advertising is a revenue to spend number in 2007 that revenue to spend number was 2.5 to 1.
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