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]

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Medifast's OPTAVIA community reported **$1.599 billion revenue in 2022**, driven by **60,900 Coaches** Revenue & Operating Income Trends (in millions) | Metric | 2022 | 2021 | 2020 | | :--------------------- | :----- | :----- | :----- | | Revenue | $1,599 | $1,526 | $934.8 | | Income from operations | $184.8 | $216.2 | $134.2 | Year-over-Year Growth | Metric | 2022 YoY Change | 2021 YoY Change | | :--------------------- | :-------------- | :-------------- | | Revenue | 4.8% | 63.2% | | Income from operations | (14.5)% | 61.2% | - The OPTAVIA brand was named the **1 weight loss program** in the U.S. by revenue for 2021[22](index=22&type=chunk) - As of December 31, 2022, the company had **60,900 active earning independent OPTAVIA Coaches**, with approximately 90% having been customers first[23](index=23&type=chunk)[26](index=26&type=chunk) - The OPTAVIA model differentiates itself by being customer-centric, having one sales price for coaches and customers, coaches not holding inventory, and promoting a holistic wellness program with a unified training system[45](index=45&type=chunk)[73](index=73&type=chunk) - Global expansion is a key long-term growth strategy, with international operations commenced in Hong Kong and Singapore in July 2019, targeting the Asia Pacific market[47](index=47&type=chunk)[49](index=49&type=chunk) - The company's manufacturing facility in Owings Mills, Maryland, produces approximately **20% of total unit sales**, with the remaining 80% manufactured by third-party vendors[73](index=73&type=chunk)[75](index=75&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from global economic conditions, direct selling model challenges, rapid growth, supply chain reliance, competition, and international expansion - Global economic downturns, inflation, and supply chain disruptions could negatively affect demand for products and increase operational costs[111](index=111&type=chunk)[112](index=112&type=chunk) - The direct selling model is subject to challenges from government regulators (e.g., FTC) and private civil actions, potentially requiring business model modifications, leading to fines, or negative publicity[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) - Rapid growth places significant demands on management, administrative, logistical, operational, and financial infrastructure, posing risks if not effectively managed[121](index=121&type=chunk)[122](index=122&type=chunk) - Reliance on third-party manufacturers for a majority of products and third-party distributors, along with the sole in-house manufacturing facility, creates supply chain disruption risks[125](index=125&type=chunk)[127](index=127&type=chunk) - Risks include claims that OPTAVIA Coaches are unqualified to provide proper weight loss advice or that products cause health problems, potentially leading to lawsuits and reputational damage[137](index=137&type=chunk)[138](index=138&type=chunk) - The weight management industry is highly competitive, with larger competitors and the constant threat of new, more effective weight loss solutions (e.g., drug therapies) that could create a competitive disadvantage[140](index=140&type=chunk)[141](index=141&type=chunk) - The success of the business is dependent on maintaining and growing the network of OPTAVIA Coaches, which is subject to high turnover and external factors like misconduct or negative public perceptions of multi-level marketing[150](index=150&type=chunk)[151](index=151&type=chunk) - International expansion increases operational, regulatory, compliance, and reputational risks, including exposure to currency exchange rate fluctuations and anti-corruption laws like the FCPA[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 1B. Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC for the fiscal year ended December 31, 2022 - No unresolved staff comments[190](index=190&type=chunk) [Item 2. Properties](index=37&type=section&id=Item%202.%20Properties) Medifast leases corporate offices and a research center, owns manufacturing and distribution facilities, and outsources other distribution centers - Owned facilities include a **49,000 square-foot manufacturing facility** in Owings Mills, Maryland, and a **119,000 square-foot distribution facility** in Ridgley, Maryland[192](index=192&type=chunk) - Leased properties include corporate headquarters in Baltimore, MD (expires Feb 2026), a satellite office in Lehi, UT (expires Oct 2023), a product innovation research center in Owings Mills, MD (expires Feb 2029), and a distribution center in Havre De Grace, MD (expires Aug 2026)[191](index=191&type=chunk)[192](index=192&type=chunk) - Outsourced domestic distribution centers are in Reno, Nevada, and Haltom City, Texas, and an international distribution center is in Hong Kong[192](index=192&type=chunk) [Item 3. Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to ordinary course litigation, not expecting material adverse effects, but acknowledges the unpredictability of legal outcomes - The company is subject to ordinary course litigation and similar proceedings[193](index=193&type=chunk) - Management does not believe current proceedings will have a material adverse effect on results, but acknowledges the unpredictability of legal outcomes[193](index=193&type=chunk) [Item 4. Mine Safety Disclosure](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to Medifast, Inc. as it does not engage in mining operations - Not applicable[194](index=194&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Medifast's common stock trades on NYSE, with **76 record holders** and **1.35 million shares** remaining for repurchase under its plan - Common stock is listed and traded on the NYSE under the ticker symbol "MED"[196](index=196&type=chunk) - As of February 13, 2023, there were approximately **76 record holders** of the Company's common stock[196](index=196&type=chunk) Common Stock Repurchases for Q4 2022 | Month | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :------------------------------- | :--------------------------- | | October 1 - October 31 | 94 | $110.98 | | November 1 - November 30 | 18,283 | $120.26 | | December 1 - December 31 | 35,789 | $117.30 | - As of December 31, 2022, **1,353,833 shares** remained eligible for repurchase under the Stock Repurchase Plan, which has no expiration date[198](index=198&type=chunk)[200](index=200&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew **4.8% to $1.599 billion** in 2022, net income fell **12.5%**, with strong operating cash flow Consolidated Results of Operations (2022 vs. 2021, in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | Revenue | $1,598,577 | $1,526,087 | $72,490 | 4.8% | | Cost of sales | $458,163 | $398,490 | $(59,673) | (15.0)% | | Gross Profit | $1,140,414 | $1,127,597 | $12,817 | 1.1% | | Selling, general, and administrative | $955,608 | $911,356 | $(44,252) | (4.9)% | | Income from operations | $184,806 | $216,241 | $(31,435) | (14.5)% | | Net income | $143,568 | $164,031 | $(20,463) | (12.5)% | Profitability Ratios (2022 vs. 2021) | Metric | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Gross Profit % of revenue | 71.3% | 73.9% | | Selling, general, and administrative % of revenue | 59.8% | 59.7% | | Income from Operations % of revenue | 11.6% | 14.2% | - Average revenue per active earning OPTAVIA Coach decreased **12.4% to $5,538** for Q4 2022 from $6,321 for Q4 2021, primarily due to headwinds in customer acquisition rates[227](index=227&type=chunk) - The total number of active earning OPTAVIA Coaches increased **1.8% to 60,900** for Q4 2022 from 59,800 for the corresponding period in 2021[235](index=235&type=chunk) - Cost of sales increased due to higher product and shipping costs resulting from inflation in raw materials, freight, and labor, and restructuring of certain external manufacturing agreements[228](index=228&type=chunk) - Net cash provided by operating activities increased **$100.0 million to $194.6 million** for 2022 from $94.5 million for 2021, primarily due to changes in operating assets and liabilities[249](index=249&type=chunk) - The company has a **$225.0 million senior secured revolving credit facility**, with no borrowings outstanding as of December 31, 2022[254](index=254&type=chunk)[369](index=369&type=chunk) Contractual Obligations as of December 31, 2022 (in thousands) | Obligation Type | 2023 | 2024 - 2025 | 2026 - 2027 | Thereafter | Total | | :-------------------------- | :----- | :---------- | :---------- | :--------- | :------ | | Operating leases | $6,243 | $11,518 | $6,713 | $2,858 | $27,332 | | Unconditional purchase obligations | $121,710 | $91,670 | $2,141 | $129 | $215,650 | | **Total contractual obligations** | **$127,953** | **$103,188** | **$8,854** | **$2,987** | **$242,982** | - The company increased prices for most products by an average of approximately **4.5%** in November 2022 (following a 3.5% increase in December 2021) to offset inflationary pressures[257](index=257&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rates and stock fluctuations but avoids derivatives, holding no municipal bonds or money market securities - Market risk exposure primarily stems from changes in interest rates and stock market fluctuations[258](index=258&type=chunk) - The company does not engage in derivatives, foreign exchange transactions, or other financial instruments for trading or speculative purposes[258](index=258&type=chunk) - As of December 31, 2022, the company did not hold any municipal bonds or United States money market securities[258](index=258&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2020-2022, with RSM US LLP providing an unqualified opinion on financial statements and internal controls - RSM US LLP issued an **unqualified opinion** on the Company's consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[265](index=265&type=chunk)[273](index=273&type=chunk) - The evaluation of the Company's provision for income taxes was identified as a **critical audit matter** due to significant judgments in assessing complex tax laws and regulations[278](index=278&type=chunk) [Reports of Independent Registered Public Accounting Firm](index=52&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This section contains the independent auditor's reports on the company's financial statements and internal control over financial reporting [Consolidated Statements of Income](index=57&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the company's consolidated statements of income for the fiscal years 2022, 2021, and 2020 Consolidated Statements of Income (in thousands, except per share amounts) | Metric | 2022 | 2021 | 2020 | | :-------------------------- | :--------- | :--------- | :--------- | | Revenue | $1,598,577 | $1,526,087 | $934,842 | | Cost of sales | $458,163 | $398,490 | $237,027 | | Gross profit | $1,140,414 | $1,127,597 | $697,815 | | Selling, general, and administrative | $955,608 | $911,356 | $563,656 | | Income from operations | $184,806 | $216,241 | $134,159 | | Net income | $143,568 | $164,031 | $102,859 | | Earnings per share - diluted | $12.73 | $13.89 | $8.68 | | Cash dividends declared per share | $6.56 | $5.68 | $4.52 | [Consolidated Statements of Comprehensive Income](index=58&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's consolidated statements of comprehensive income for the fiscal years 2022, 2021, and 2020 Consolidated Statements of Comprehensive Income (in thousands) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :--------- | :--------- | :--------- | | Net income | $143,568 | $164,031 | $102,859 | | Other comprehensive (loss) income, net of tax | $(87) | $70 | $16 | | Comprehensive income | $143,481 | $164,101 | $102,875 | [Consolidated Balance Sheets](index=59&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated balance sheets as of December 31, 2022, and 2021 Consolidated Balance Sheets (as of December 31, in thousands) | Metric | 2022 | 2021 | | :-------------------------- | :--------- | :--------- | | Cash and cash equivalents | $87,691 | $104,183 | | Inventories | $118,856 | $180,043 | | Total current assets | $222,784 | $306,866 | | Total assets | $316,213 | $398,326 | | Accounts payable and accrued expenses | $134,690 | $163,309 | | Total current liabilities | $140,894 | $169,832 | | Total liabilities | $161,169 | $195,852 | | Total stockholders' equity | $155,044 | $202,474 | [Consolidated Statements of Cash Flows](index=60&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's consolidated statements of cash flows for the fiscal years 2022, 2021, and 2020 Consolidated Statements of Cash Flows (in thousands) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :--------- | :--------- | :--------- | | Net cash flow provided by operating activities | $194,570 | $94,545 | $145,196 | | Net cash flow used in investing activities | $(11,414) | $(29,064) | $(1,282) | | Net cash flow used in financing activities | $(199,581) | $(125,133) | $(57,144) | | (Decrease) Increase in cash and cash equivalents | $(16,492) | $(59,540) | $86,749 | | Cash and cash equivalents - end of period | $87,691 | $104,183 | $163,723 | [Consolidated Statements of Changes in Stockholders' Equity](index=61&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section presents the company's consolidated statements of changes in stockholders' equity for the fiscal years 2022, 2021, and 2020 Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | :----------- | | Total stockholders' equity | $155,044 | $202,474 | $157,246 | | Net income | $143,568 | $164,031 | $102,859 | | Stock repurchases | $(126,445) | $(55,999) | $(5,000) | | Cash dividends declared to stockholders | $(74,002) | $(67,192) | $(53,303) | [Notes to Consolidated Financial Statements](index=62&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Nature of the Business](index=62&type=section&id=1.%20Nature%20of%20the%20Business) Medifast, Inc. is a Delaware corporation operating OPTAVIA, selling weight loss and healthy living products - Medifast, Inc. is a Delaware corporation, incorporated in 1989, operating primarily through wholly-owned subsidiaries including OPTAVIA, LLC[297](index=297&type=chunk) - The company sells weight loss, weight management, and healthy living products under brands like OPTAVIA, Optimal Health by Take Shape for Life, and Flavors of Home, with **over 65 consumable options**[298](index=298&type=chunk) [2. Significant Accounting Policies](index=62&type=section&id=2.%20Significant%20Accounting%20Policies) This section details the company's significant accounting policies, including revenue recognition, inventory, and share-based compensation - Revenue is primarily from e-commerce point-of-sale transactions for health products, recognized upon customer receipt, net of discounts and estimated returns[207](index=207&type=chunk)[311](index=311&type=chunk) - Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method[304](index=304&type=chunk) - The company donated **$19.0 million of inventory** to Ukrainian refugees in 2022, recorded as selling, general, and administrative expenses[305](index=305&type=chunk) - Incurred **$12.2 million in costs** for restructuring external manufacturing agreements in 2022, included in cost of sales[306](index=306&type=chunk) - Advertising costs and research and development costs are expensed as incurred[321](index=321&type=chunk)[322](index=322&type=chunk) - Share-based compensation includes restricted stock awards, performance-based share awards, and stock options, expensed over the vesting/performance period[323](index=323&type=chunk) [3. Inventories](index=67&type=section&id=3.%20Inventories) This section provides a breakdown of the company's inventories, including raw materials, packaging, and finished goods Inventories (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :---------------------- | :------------------ | :------------------ | | Raw materials | $12,670 | $15,196 | | Packaging | $3,611 | $3,641 | | Non-food finished goods | $8,738 | $15,991 | | Finished goods | $97,675 | $152,687 | | Reserve for obsolete inventory | $(3,838) | $(7,472) | | **Total** | **$118,856** | **$180,043** | [4. Property, Plant and Equipment](index=67&type=section&id=4.%20Property,%20Plant%20and%20Equipment) This section details the company's property, plant, and equipment, including land, buildings, and accumulated depreciation Property, Plant, and Equipment (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------------ | :------------------ | | Land | $565 | $565 | | Building and leasehold improvements | $25,905 | $23,518 | | Equipment and fixtures | $49,260 | $42,708 | | Software | $21,278 | $21,894 | | Vehicles | $118 | $145 | | Property, plant and equipment - gross | $97,126 | $88,830 | | Less: accumulated depreciation | $(39,941) | $(32,699) | | **Property, plant and equipment - net** | **$57,185** | **$56,131** | - Depreciation expense was **$7.9 million in 2022**, up from $5.7 million in 2021 and $4.1 million in 2020[333](index=333&type=chunk) [5. Accounts Payable and Accrued Expenses](index=67&type=section&id=5.%20Accounts%20Payable%20and%20Accrued%20Expenses) This section provides a breakdown of the company's accounts payable and accrued expenses Accounts Payable and Accrued Expenses (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------------ | :------------------ | | Trade payables and accrued expenses | $58,667 | $70,894 | | OPTAVIA Coach compensation payable | $23,633 | $28,733 | | Dividends payable | $19,641 | $17,186 | | Accrued payroll and related taxes | $13,581 | $24,940 | | Promotional sales incentive accruals | $10,240 | $10,935 | | Deferred revenue | $7,357 | $8,050 | | Sales tax payable | $1,571 | $2,571 | | **Total** | **$134,690** | **$163,309** | [6. Earnings Per Share](index=68&type=section&id=6.%20Earnings%20Per%20Share) This section details the calculation of basic and diluted earnings per share for the fiscal years 2022, 2021, and 2020 Earnings Per Share (in thousands, except per share data) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :--------- | :--------- | :--------- | | Net income | $143,568 | $164,031 | $102,859 | | Weighted average shares outstanding - Basic | 11,195 | 11,705 | 11,771 | | Weighted average shares outstanding - Diluted | 11,276 | 11,813 | 11,850 | | Earnings per share - basic | $12.82 | $14.01 | $8.74 | | Earnings per share - diluted | $12.73 | $13.89 | $8.68 | [7. Equity](index=68&type=section&id=7.%20Equity) This section outlines the company's equity structure, including authorized shares and stock repurchase plan details - The company is authorized to issue **20.0 million shares** of common stock and **1.5 million shares** of preferred stock[336](index=336&type=chunk) - Approximately **1.4 million shares** of common stock remained eligible for repurchase under the Stock Repurchase Plan as of December 31, 2022[338](index=338&type=chunk) [8. Share-Based Compensation](index=68&type=section&id=8.%20Share-Based%20Compensation) This section details the company's share-based compensation expense and unrecognized compensation costs - Share-based compensation expense totaled **$11.053 million in 2022**, $9.903 million in 2021, and $6.796 million in 2020[347](index=347&type=chunk) - As of December 31, 2022, there was **$6.2 million of unrecognized compensation cost** related to restricted stock awards and **$6.3 million for performance-based shares**, expected to be recognized over weighted-average periods of 20 and 21 months, respectively[348](index=348&type=chunk) [9. Accumulated Other Comprehensive Income](index=72&type=section&id=9.%20Accumulated%20Other%20Comprehensive%20Income) This section presents the components of accumulated other comprehensive income, including foreign currency translation Accumulated Other Comprehensive Income (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------------ | :------------------ | | Foreign currency translation | $24 | $90 | | Unrealized gains on investment securities | $0 | $21 | | **Accumulated other comprehensive income** | **$24** | **$111** | [10. Financial Instruments](index=73&type=section&id=10.%20Financial%20Instruments) This section details the fair value of the company's financial assets, including cash and investment securities Fair Value of Financial Assets (December 31, 2022, in thousands) | Category | Cost | Unrealized Gains | Accrued Interest | Estimated Fair Value | Cash & Cash Equivalents | Investment Securities | | :-------------------------- | :----- | :--------------- | :--------------- | :------------------- | :---------------------- | :-------------------- | | Cash and cash equivalents | $87,691 | $0 | $0 | $87,691 | $87,691 | $0 | | **Total** | **$87,691** | **$0** | **$0** | **$87,691** | **$87,691** | **$0** | Fair Value of Financial Assets (December 31, 2021, in thousands) | Category | Cost | Unrealized Gains | Accrued Interest | Estimated Fair Value | Cash & Cash Equivalents | Investment Securities | | :-------------------------- | :----- | :--------------- | :--------------- | :------------------- | :---------------------- | :-------------------- | | Cash and cash equivalents | $94,824 | $0 | $0 | $94,824 | $94,824 | $0 | | Level 1: Money market accounts | $9,359 | $0 | $0 | $9,359 | $9,359 | $0 | | Level 1: Government & agency securities | $1,401 | $12 | $0 | $1,413 | $0 | $1,413 | | Level 2: Municipal bonds | $3,880 | $9 | $59 | $3,948 | $0 | $3,948 | | **Total** | **$109,464** | **$21** | **$59** | **$109,544** | **$104,183** | **$5,361** | [11. Income Taxes](index=74&type=section&id=11.%20Income%20Taxes) This section provides a breakdown of the company's income tax expense and reconciliation of federal statutory tax Income Tax Expense (in thousands) | Category | 2022 | 2021 | 2020 | | :------------------ | :--------- | :--------- | :--------- | | Current | $41,415 | $55,813 | $30,805 | | Deferred | $(924) | $(3,715) | $601 | | **Provision for income taxes** | **$40,491** | **$52,098** | **$31,406** | Reconciliation of Federal Statutory Tax to Provision for Income Taxes (in thousands, except percentages) | Category | 2022 ($) | 2022 (%) | 2021 ($) | 2021 (%) | 2020 ($) | 2020 (%) | | :------------------------------------ | :--------- | :------- | :--------- | :------- | :--------- | :------- | | Statutory federal tax | $38,621 | 21.0% | $45,405 | 21.0% | $28,196 | 21.0% | | State income taxes, net of federal benefit | $4,635 | 2.5% | $4,980 | 2.3% | $1,470 | 1.1% | | Charitable donations | $(4,316) | (2.3)% | $0 | 0.0% | $0 | 0.0% | | **Provision for income taxes** | **$40,491** | **22.0%** | **$52,098** | **24.1%** | **$31,406** | **23.4%** | - The Inflation Reduction Act, signed in August 2022, will apply a **one percent surtax on share buybacks** to the Company starting in 2023, but the 15% alternative minimum tax will not apply[356](index=356&type=chunk) [12. Leases and Commitments](index=75&type=section&id=12.%20Leases%20and%20Commitments) This section details the company's operating lease expenses and future contractual obligations - Operating lease expense was **$6.7 million in 2022**, $5.6 million in 2021, and $3.6 million in 2020[360](index=360&type=chunk) Maturity of Operating Lease Liabilities (as of December 31, 2022, in thousands) | Year | Total Lease Payments | | :--- | :------------------- | | 2023 | $6,243 | | 2024 | $5,693 | | 2025 | $5,825 | | 2026 | $4,160 | | 2027 | $2,553 | | Thereafter | $2,858 | | **Total lease payments** | **$27,332** | - As of December 31, 2022, the company had **$215.7 million in unconditional purchase obligations**, primarily for inventories, outsourced information technology, and Coach events[363](index=363&type=chunk) [13. Debt](index=76&type=section&id=13.%20Debt) This section outlines the company's senior secured revolving credit facility and compliance with debt covenants - The company has a **$225.0 million senior secured revolving credit facility**, amended on May 31, 2022, with a $20.0 million letter of credit sublimit, maturing on April 13, 2026[364](index=364&type=chunk) - As of December 31, 2022, the company had **no borrowings outstanding** under the Amended Credit Agreement and was in compliance with all debt covenants[369](index=369&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=78&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no disagreements with independent auditors on accounting and financial disclosures for the fiscal year ended December 31, 2022 - No disagreements with independent auditors on accounting and financial disclosures for the fiscal year ended December 31, 2022[370](index=370&type=chunk) [Item 9A. Controls and Procedures](index=78&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Disclosure controls and procedures were **effective** as of December 31, 2022[371](index=371&type=chunk) - Internal control over financial reporting was **effective** as of December 31, 2022, based on the COSO 2013 framework[374](index=374&type=chunk) - RSM US LLP provided an **unqualified attestation report** on the effectiveness of the company's internal control over financial reporting[376](index=376&type=chunk) - No **material changes** in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2022[375](index=375&type=chunk) [Item 9B. Other Information](index=79&type=section&id=Item%209B.%20Other%20Information) No other information is applicable for this item - Not applicable[377](index=377&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=80&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the 2023 annual meeting proxy statement - Information incorporated by reference from the 2023 annual meeting of stockholders proxy statement[379](index=379&type=chunk) [Item 11. Executive Compensation](index=80&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the 2023 annual meeting proxy statement - Information incorporated by reference from the 2023 annual meeting of stockholders proxy statement[380](index=380&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=80&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the 2023 annual meeting proxy statement - Information incorporated by reference from the 2023 annual meeting of stockholders proxy statement[381](index=381&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=80&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information for this item is incorporated by reference from the 2023 annual meeting proxy statement - Information incorporated by reference from the 2023 annual meeting of stockholders proxy statement[382](index=382&type=chunk) [Item 14. Principal Accountant Fees and Services](index=80&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item is incorporated by reference from the 2023 annual meeting proxy statement - Information incorporated by reference from the 2023 annual meeting of stockholders proxy statement[383](index=383&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=81&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists exhibits and financial statement schedules, including consolidated financial statements and corporate governance documents - Includes Consolidated Financial Statements, Reports of RSM US LLP, and exhibits required by Item 601 of Regulation S-K[386](index=386&type=chunk) - Exhibits cover **corporate governance documents**, equity compensation plans, credit agreements, subsidiary lists, and **certifications (CEO, CFO)**[390](index=390&type=chunk)[395](index=395&type=chunk) [Item 16. Form 10-K Summary](index=85&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is applicable for this report - No Form 10-K Summary is applicable[394](index=394&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $390 million, down 5.6% from $413.4 million in Q3 2021, showing an improvement from earlier expectations of a mid-teen double-digit decline [9][23] - Gross margin decreased to 72.5% from 74.3% year-over-year, but improved by 150 basis points sequentially [9][24] - Earnings per share (EPS) was $3.27, an 8.1% decrease compared to the prior year, with adjusted EPS at $3.32 compared to $3.56 in the prior year [10][30] - SG&A expenses decreased by 6.8% to $234.7 million, with SG&A as a percentage of revenue decreasing to 60.1% from 60.9% year-over-year [25][26] Business Line Data and Key Metrics Changes - The number of active OPTAVIA Coaches increased by 8.5% year-over-year to 66,200, while revenue per active earning coach declined by 12.9% to $5,897 [9][23] - Gross profit for Q3 2022 decreased by 7.9% to $282.8 million, reflecting lower coach productivity [24] Market Data and Key Metrics Changes - The company operates in a $7 billion weight loss industry, with a unique positioning in the health and wellness market, which is projected to be $230 billion [18][20] - Consumer focus on health and wellness remains strong, with 70% of U.S. adults planning to implement better lifestyle changes despite recent spending cuts [17] Company Strategy and Development Direction - The company aims for a long-term target of 15% average annual revenue growth and a 15% operating margin [19][35] - A price increase of 4.5% on consumable products is set to take effect in November, aimed at offsetting inflationary pressures and supporting profitability [14][56] - Investments in technology and digital capabilities are prioritized to enhance customer engagement and operational efficiency [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macroeconomic challenges, emphasizing the strength of their long-term growth strategy [18][37] - Customer retention rates have returned to historical norms, although new customer acquisition remains a challenge [11][45] - The company is optimistic about the upcoming quarters, particularly Q1 2023, which is typically a strong period for customer acquisition [49][62] Other Important Information - The company declared a quarterly cash dividend of $18.2 million, representing a 15.5% increase per share compared to the previous year [31] - The financial position remains strong with $69.7 million in cash and no interest-bearing debt as of September 30, 2022 [32] Q&A Session Summary Question: Expectations for coach numbers in Q4 - Management indicated that while coach numbers increased in Q3, they expect a modest headwind in Q4 due to lower customer acquisition and productivity [40][51] Question: Impact of price increase on retention rates - Management believes the 4.5% price increase will be absorbed by new clients without significantly impacting retention rates, supported by successful program outcomes [54][56] Question: Guidance for positive year-over-year sales growth in 2023 - Management refrained from providing specific guidance for 2023 but reiterated their long-term objective of 15% growth [61][62]

Medifast, Inc. (NYSE:MED) Q2 2022 Earnings Conference Call August 3, 2022 4:30 PM ET Company Participants Reed Anderson - ICR, Investor Relations Dan Chard - Chairman & Chief Executive Officer Jim Maloney - Chief Financial Officer Conference Call Participants Chris Neamonitis - Jefferies Operator Good afternoon. And welcome to Medifast Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity t ...

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, 2022 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 | 13-3714405 | | ...

Call Start: 16:30 January 1, 0000 5:09 PM ET Medifast, Inc.???s (NYSE:MED) Q1 2022 Earnings Conference Call May 2, 2022, 4:30 PM ET Company Participants Dan Chard - Chairman and CEO Jim Maloney - Chief Financial Officer Conference Call Participants Chris Neamonitis - Jefferies Linda Bolton Weiser - D.A. Davidson Doug Lane - Lane Research Operator Good afternoon. And welcome to Medifast First Quarter of 2022 Earnings Conference Call. On the call with me today are Dan Chard, Chairman and Chief Executive Offic ...

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 March 31, 2022 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 100 International Drive Baltimore, Maryland 21202 Telephone Number: (410) 581-8042 (Address of P ...

Medifast, Inc. (NYSE:MED) Q4 2021 Earnings Conference Call February 23, 2022 4:30 PM ET Company Participants Reed Anderson ??? Investor Relations-ICR, Inc. Dan Chard ??? Chairman and Chief Executive Officer Jim Maloney ??? Chief Financial Officer Conference Call Participants Steph Wissink ??? Jefferies Linda Bolton Weiser ??? D.A. Davidson Doug Lane ??? Lane Research Operator Good day, and welcome to the Medifast Fiscal Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ 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 | | ...