PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Medifast, known for its OPTAVIA brand, is a health and wellness company undergoing a business transformation by expanding into medically supported weight loss and sports nutrition markets [Summary](index=5&type=section&id=SUMMARY) Medifast is transforming its business by expanding into medically supported weight loss and sports nutrition markets - Medifast is transforming its business by expanding into medically supported weight loss and sports nutrition markets[21](index=21&type=chunk) - OPTAVIA has grown into a **billion-dollar** brand with over **41,100** active earning Coaches, impacting more than **3 million** customers[21](index=21&type=chunk)[23](index=23&type=chunk) - OPTAVIA's holistic lifestyle solution includes independent Coaches, community support, the Habits of Health Transformational System, and clinically proven products & plans[22](index=22&type=chunk)[24](index=24&type=chunk) - Through a collaboration with LifeMD, OPTAVIA customers gain access to board-certified affiliated clinicians and weight loss medications like GLP-1s[23](index=23&type=chunk) [Competition and Macroeconomic Conditions](index=6&type=section&id=Competition%20and%20Macroeconomic%20Conditions) Macroeconomic uncertainties and intense competition, including from GLP-1 medications, significantly impact Medifast's market position - Macroeconomic uncertainties, including inflation and adverse labor market conditions, impact Medifast's cost structure and consumer spending[28](index=28&type=chunk)[29](index=29&type=chunk) - The weight loss industry is highly competitive, with diverse offerings including commercial programs, pharmaceutical products (e.g., GLP-1s), surgical interventions, and digital tools[32](index=32&type=chunk) - GLP-1 medications pose a significant competitive threat, but Medifast integrates them into a tailored lifestyle plan that includes coaching, community, nutrition, and exercise[32](index=32&type=chunk)[33](index=33&type=chunk) - Medifast's competitive advantages include its holistic wellness focus, personalized coach support, proprietary habit development system, vibrant community, access to medical expertise via LifeMD, and a customer-centric direct-to-consumer model[35](index=35&type=chunk)[40](index=40&type=chunk) [Recent Initiatives](index=7&type=section&id=Recent%20Initiatives) The company is investing in new initiatives, including medically supported weight loss and sports nutrition, funded by existing capital and dividend discontinuation - The Company is focusing on broadening its customer base, increasing brand visibility, and significantly expanding its total addressable market[38](index=38&type=chunk) - In September **2023**, Medifast entered the **$30 billion** sports nutrition market with its OPTAVIA ACTIVE line of essential amino acids and whey protein powders[39](index=39&type=chunk) - Medifast expanded into the medically supported weight loss market in January **2024** through a collaboration with LifeMD, offering access to board-certified clinicians and GLP-1s alongside OPTAVIA's lifestyle program[42](index=42&type=chunk) - The Company discontinued its dividend payments effective December **7**, **2023**, to redirect capital towards growth initiatives, including marketing and technology, aimed at increasing customer acquisition and lifetime value[46](index=46&type=chunk) - **2024** is projected as an investment year, with significant impact on operations and revenue expected in late **2024** and into **2025** and beyond[47](index=47&type=chunk) [Markets](index=9&type=section&id=MARKETS) Medifast is expanding its market reach into sports nutrition and medically supported weight loss, addressing a large and growing population of overweight and obese individuals - The U.S. weight loss market is estimated at approximately **$20 billion** with a **6%** annual growth rate, and Medifast has expanded into the **$30 billion** sports nutrition market and the medically supported weight loss market, which is expected to reach up to **$100 billion** by **2030**[49](index=49&type=chunk) - Over two-thirds of the U.S. adult population is overweight or obese, with more than **30%** classified as obese in **2022**[48](index=48&type=chunk)[50](index=50&type=chunk) - **96%** of people recognize the need for lifestyle changes for weight loss and maintenance, but only **17%** are confident they can manage on their own, indicating a strong demand for support beyond prescriptions[50](index=50&type=chunk) - Medifast ceased operations in Hong Kong and Singapore in June **2023** to optimize spending and prioritize domestic growth initiatives, including expanding into new customer demographics domestically[56](index=56&type=chunk) [Products and Programs](index=13&type=section&id=PRODUCTS%20AND%20PROGRAMS) Medifast offers clinically proven, coach-supported weight management and healthy living products, including OPTAVIA Fuelings and OPTAVIA ACTIVE, complemented by the Habits of Health Transformational System - Medifast has a strong scientific heritage with over **66** peer-reviewed scientific abstracts and publications, and **28** completed research studies[60](index=60&type=chunk) - A clinical study showed that customers who participated in at least **75%** of their OPTAVIA Coaching calls lost up to twice as much weight[60](index=60&type=chunk) - Products include OPTAVIA Fuelings (nutrient-dense, portion-controlled, with probiotics) and OPTAVIA ACTIVE (essential amino acids and whey protein powders for muscle health)[64](index=64&type=chunk) - Lifestyle plans include Optimal Weight **5** & **1** Plan, Optimal Weight **4** & **2** & **1** Plan, and Optimal Health **3** & **3** Plan, all supported by the Habits of Health Transformational System[67](index=67&type=chunk)[68](index=68&type=chunk) - New product bundles, the OPTAVIA Nutrition Kit and OPTAVIA Muscle Health Kit, are designed to support customers on medically supported weight loss journeys by addressing nutrition and lean muscle retention[43](index=43&type=chunk)[67](index=67&type=chunk) [Incentives](index=16&type=section&id=INCENTIVES) Medifast provides economic incentives to support OPTAVIA Coaches' long-term success and customer acquisition - Medifast offers economic incentives to support OPTAVIA Coaches' long-term success and financial wellness[24](index=24&type=chunk)[69](index=69&type=chunk) - A "Client Support Bonus+" incentive was introduced in March **2023** to encourage and incentivize Coaches to acquire new and reactivated customers[70](index=70&type=chunk) [Customers](index=16&type=section&id=CUSTOMERS) No single customer accounted for a significant portion of Medifast's consolidated revenue in **2023** - No single customer accounted for **10%** or more of Medifast's consolidated revenue for the year ended December **31**, **2023**[72](index=72&type=chunk) [Seasonality](index=16&type=section&id=SEASONALITY) Medifast's sales patterns are primarily driven by the growth of its OPTAVIA Coach network, rather than typical industry seasonality - While the weight management industry typically experiences seasonality (lower sales in Q4, increases in Jan/Feb), Medifast believes its sales pattern is primarily driven by the growth of its OPTAVIA Coach network[73](index=73&type=chunk) [Scientific Advisory Board](index=16&type=section&id=SCIENTIFIC%20ADVISORY%20BOARD) The Scientific Advisory Board provides objective insights and guidance for product, plan, and program development based on scientific advancements - The Scientific Advisory Board, established in **2008** and comprising seven multi-disciplinary experts, provides objective insights and guidance for product, plan, and program development based on scientific advancements[74](index=74&type=chunk)[75](index=75&type=chunk) [Marketing](index=16&type=section&id=MARKETING) Medifast employs diverse marketing strategies and plans significant investments in technology and new campaigns to enhance customer acquisition and experience - Medifast employs multiple marketing strategies, including word-of-mouth, digital marketing, public relations, social media, and email, to attract and retain customers[76](index=76&type=chunk) - The Company plans to invest in technology and growth initiatives, including a new Company-led marketing campaign and digital advertising in **2024**, to improve customer acquisition and experience[77](index=77&type=chunk) [Manufacturing](index=18&type=section&id=MANUFACTURING) Medifast manufactures approximately **25%** of its products internally at its FDA and USDA-regulated facility, with the remaining **75%** produced by co-manufacturers - Jason Pharmaceuticals, a wholly-owned subsidiary, manufactures approximately **25%** of Medifast's total unit sales at its FDA and USDA-regulated facility in Owings Mills, Maryland[78](index=78&type=chunk) - The remaining **75%** of products are manufactured by co-manufacturers according to Medifast's proprietary formulas and standards[78](index=78&type=chunk) [Governmental Regulation](index=18&type=section&id=GOVERNMENTAL%20REGULATION) Medifast is subject to extensive federal, state, and local regulations concerning food, advertising, direct selling, and, with its LifeMD collaboration, healthcare laws - Medifast is subject to extensive federal, state, and local laws and regulations concerning food preparation and sale, advertising, direct selling, and relationships with employees and independent contractors[79](index=79&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Direct selling regulations are subject to discretionary interpretation by regulators, and changes or new industry standards (e.g., from FTC settlements) could require modifications to Medifast's compensation and business models[81](index=81&type=chunk)[85](index=85&type=chunk) - The FTC has increased scrutiny on testimonials and endorsements, and past consent decrees have required compliance with specific advertising procedures and disclosures[84](index=84&type=chunk)[92](index=92&type=chunk) - The collaboration with LifeMD may subject Medifast to additional federal and state healthcare regulatory laws, including anti-kickback, false claims, and other healthcare fraud and abuse laws[93](index=93&type=chunk)[94](index=94&type=chunk) [Product Liability and Insurance](index=21&type=section&id=PRODUCT%20LIABILITY%20

Medifast, Inc. (MED) is likely to register a top-and-bottom-line decline when it reports fourth-quarter 2023 earnings on Feb 20. The Zacks Consensus Estimate for revenues is pegged at nearly $174 million, suggesting a decrease of 48.4% from the prior-year quarter’s reported figure.The consensus mark for quarterly earnings has remained unchanged in the past 30 days at 99 cents per share, which indicates a decline of 73.2% from the year-ago quarter’s reported figure. MED has a trailing four-quarter earnings s ...

Financial Data and Key Metrics Changes - Revenues for Q3 2023 were $235.9 million, down 39.6% year-over-year, but at the high end of guidance [17][49] - Gross profit decreased 37.3% year-over-year to $177.4 million, while gross profit margin improved by 270 basis points to 75.2% due to efficiencies in inventory management and lower supply chain costs [24][43] - Net income for Q3 2023 was $23.1 million, or $2.12 per diluted share, compared to $36.2 million, or $3.27 per diluted share, in the prior year [76] Business Line Data and Key Metrics Changes - The average revenue per active earning OPTAVIA Coach for Q3 was $5,008, a decline of 15.1% year-over-year, reflecting challenges in customer acquisition [50] - The number of active earning OPTAVIA Coaches decreased by 28.9% from the previous year, impacting overall revenue [23] Market Data and Key Metrics Changes - The company is focusing on expanding its customer base, particularly in the U.S. Hispanic market, with over 70% of core materials translated into Spanish [18][44] - The entry into the sports nutrition market with the OPTAVIA ACTIVE line aims to attract a new demographic and expand the addressable market significantly [41] Company Strategy and Development Direction - The company is transitioning into a total lifestyle company, integrating medical weight loss solutions with lifestyle modifications [16] - The launch of the OPTAVIA ACTIVE product line is part of a strategy to enhance customer lifetime value and attract new demographics [15][41] - The company is exploring partnerships and acquisitions in the telehealth space to incorporate weight loss medications into its offerings [12][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in customer acquisition due to macroeconomic factors, including inflation and interest rates [21][23] - The company expects to see improvements in customer acquisition and revenue trends in 2024, driven by new initiatives and product offerings [17][21] Other Important Information - The effective tax rate for Q3 was 12.9%, significantly lower than the previous year's 24.5%, due to various tax benefits [25] - The company has a strong financial position with $157.8 million in cash and no interest-bearing debt as of September 30, 2023 [52] Q&A Session Summary Question: What is the sustainability of the gross margin level? - Management indicated that while the gross margin improvement is notable, lower revenues will impact gross margin due to fixed costs [55] Question: What trends are observed in October regarding customer acquisition? - Customer acquisition metrics are below historical norms, but retention and average revenue per order have remained steady [58] Question: What is the guidance for the tax rate in Q4? - The projected tax rate for Q4 is expected to be closer to 20%, following a one-time adjustment in Q3 [59] Question: What are the reasons for consumer hesitation towards medically-supported weight loss? - Consumers may feel confident in their ability to lose weight independently, with interest in medical solutions increasing as weight loss needs grow [65][86] Question: How is the company testing digital marketing methods? - The company is in the early stages of testing digital marketing to generate prospects, which may complement the existing coach-driven model [80][81]

Financial Performance - Medifast reported revenue of $236 million[2] - The company holds $158 million in cash and cash equivalents and investments[2] - Revenue per active earning coach is $5,008[8] - Operating income is $26 million[21] Strategic Initiatives - Medifast is actively exploring the medical weight loss (MSWL) market, analyzing pilot results[9] - The company is continuing to invest in growth initiatives expected to benefit results in 2024 and beyond[3] - Medifast aims to reduce expenses through the Fuel for the Future (4F4) initiative[22] - OPTAVIA ACTIVE™ was launched in September 2023[4] Market Expansion - The total addressable market for lifestyle products is $30 billion, over 3 times the size of the structured weight loss market[4] - Medifast is broadening its customer base, focusing on increased engagement of Hispanic coaches and customers[4] - The company is targeting the large and growing Hispanic population in the U S, which is approximately 62 million people[32] Market Trends - The medical weight loss market was $9 billion in 2022 and is estimated to grow up to 10 times by 2030[11] - The sports nutrition market in the US is approximately $30 billion[49] - Approximately 60% of adults trying to lose weight are interested in trying a weight-loss prescription drug[24]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________ to ________. Commission File Number: 001-31573 Medifast, Inc. (Exact name of registrant as specified in its charter) | Delaware | 13-371440 ...

1 Q3 Guidance reflects continued customer acquisition challenges from the macro economic environment and GLP-1 drugs 2 Continue to invest in growth initiatives that are expected to benefit results in 2024 and beyond 3 Continue to reduce expenses through F4F initiative - optimization of procurement, distribution, co-manufacturing, and R&D activities 4 Launch of OPTAVIA ACTIVE™ product line in September to Customers will tap into a much larger addressable market than the current structured weight loss market ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________ to ________. | Title of each class | Trading Symbol | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, par value ...

Financial Data and Key Metrics Changes - Revenue decreased 16.4% year-over-year to $349 million, primarily due to a lower number of active earning OPTAVIA Coaches and lower average revenue per active earning OPTAVIA Coach [67] - Gross profit decreased 18.5% year-over-year to $246.4 million, with gross profit margin declining 180 basis points to 70.6% [29] - Net income for Q1 2023 was $40 million or $3.67 per diluted share, compared to $41.8 million or $3.59 per diluted share in the prior year [52] - Cash flows from operations increased 46.7% to $64.1 million during the first quarter [53] Business Line Data and Key Metrics Changes - The number of active earning OPTAVIA Coaches decreased by 8.1% year-over-year to approximately 58,700 [49] - Average revenue per active earning OPTAVIA Coach was $5,945, a year-over-year decline of 9% but an increase from the previous two quarters [49] - SG&A expense decreased 22% year-over-year to $192.9 million, reflecting progress on cost reduction initiatives [68] Market Data and Key Metrics Changes - Customer retention levels have returned to historical norms, but customer acquisition remains challenging due to changes in spending and social media algorithms [11] - The Hispanic market has shown encouraging growth, with new Hispanic coach enrollments up 30% year-over-year [44] Company Strategy and Development Direction - The company aims for 15% annualized revenue growth and a 15% sustainable operating margin by 2025 as part of the 15x25 initiative [10] - Focus on enhancing customer acquisition through coach-led training, programming composition, and unique positioning [37] - Plans to expand into adjacent product categories and explore international markets, particularly in Latin America [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging operating environment due to macroeconomic factors and competitive landscape changes [34] - The company is optimistic about reestablishing growth and improving customer acquisition through strategic initiatives [15][27] - Future growth initiatives will require time to gain traction, and the company is not providing full-year guidance yet [73] Other Important Information - The company declared a quarterly cash dividend of $1.65 per share, representing a 0.6% increase compared to the prior year [71] - The effective tax rate for Q1 2023 was 25.1%, higher than the previous year's 24% [70] Q&A Session Summary Question: What are the expectations for growth initiatives spending? - Management expects that spending on growth initiatives will be concentrated in the latter half of 2023, with quarterly results likely below the previous year [57] Question: How is the company addressing the pressure on customer acquisition? - Management highlighted the focus on reestablishing coach productivity metrics and customer acquisition through new incentive structures [60] Question: Is the dividend at risk given the EPS guidance? - Management reassured that the dividend is not at risk and that excess cash flows will continue to support it [62] Question: How does the company view the new GLP-1 weight loss drugs? - Management emphasized that coaching remains central to their model and that they are exploring ways to remain relevant alongside these new drugs [64][96] Question: What were the operating cash flow and CapEx numbers for the quarter? - Operating cash flow was $64 million, an increase of 47%, and CapEx was $2 million for the quarter [86]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR Table of Contents o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________ to ________. Commission File Number: 001-31573 Medifast, Inc. (Exact name of registrant as specified in its charter) | Delaware | 13-3714405 | ...

Financial Data and Key Metrics Changes - Revenue in Q4 2022 decreased by 10.7% to $337.2 million from $377.8 million in Q4 2021 [60] - Net income in Q4 2022 was $26.5 million, or $2.41 per diluted share, while on a non-GAAP adjusted basis, net income increased by 19.4% year-over-year to $40.6 million [42][60] - SG&A expenses decreased by 13.1% to $200.9 million, reflecting lower coach compensation and internal labor expenses [19] - Adjusted gross margin compression of 80 basis points in Q4 was primarily due to inflation, with expectations for price increases to positively impact margins in 2023 [5] Business Line Data and Key Metrics Changes - The number of active earning OPTAVIA Coaches was approximately 60,900, an increase of 1.8% from Q4 2021, but Coach productivity declined both sequentially and year-over-year [60][29] - Average revenue per active earning OPTAVIA Coach for Q4 was $5,538, a year-over-year decline of 12.4% [60] Market Data and Key Metrics Changes - Customer retention levels have returned to historical norms, but customer acquisition remains pressured due to changes in purchasing behavior and social media algorithms [6][28] - The company is focusing on enhancing customer acquisition programs to improve engagement and retention [9][11] Company Strategy and Development Direction - The company is implementing initiatives to improve customer acquisition and optimize the tenure mix, which is crucial for growth [7][11] - A commitment to health business program was launched to align the coach network around customer acquisition [10] - The company aims to maintain operational effectiveness while leveraging investments to deliver high profitability rates even in inflationary environments [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by macroeconomic conditions and changing consumer behavior, impacting customer acquisition [22][28] - There is confidence in the ability to navigate the new business environment and achieve long-term growth targets of 15% [64][40] - Management is closely monitoring the impact of new weight loss drugs and increased competition in the wellness space [96][97] Other Important Information - The company declared a quarterly cash dividend of $17.9 million, or $1.64 per share, representing a 15.5% increase compared to the previous year [21] - The financial position remains strong with $87.7 million in cash and no interest-bearing debt as of December 31, 2022 [63] Q&A Session Summary Question: What metrics are being monitored for annual guidance? - Management is focused on customer acquisition metrics, which have not yet returned to historical norms, impacting guidance [71][72] Question: Are coaches able to run their own promotions? - Yes, coaches can run their own promotions through a system that allows them to manage health credits for new client acquisition [79][80] Question: What is the outlook for gross margins in 2023? - Gross margins are expected to be impacted in Q1 due to promotional programs, but long-term targets remain achievable [90][81] Question: How is the company addressing competition from new weight loss drugs? - Management is monitoring the situation closely but has not seen significant impact from these drugs yet [96][97]