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~~June 30, ~~2022~~2023

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
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

(Address of Principal Executive Offices, Zip Code and Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MED

New York Stock Exchange

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the registrant’s common stock outstanding at ~~October 26, 2022~~July 24, 2023 was ~~10,926,989.~~10,889,368.

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Medifast, Inc. and Subsidiaries

Index


Part 1 – Financial Information



Item 1 – Financial Statements


Condensed Consolidated Statements of Income (unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			2

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			3

Condensed Consolidated Balance Sheets (unaudited) as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022			4

Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			5

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			6

Notes to Condensed Consolidated Financial Statements (unaudited)			8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			1513

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			2320

Item 4 – Controls and Procedures			2320

Part II – Other Information

Item 1 – Legal Proceedings			2422

Item 1A – Risk Factors			2422

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			2422

Item 6 – Exhibits			2523

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(U.S. dollars in thousands, except per share amounts & dividend data)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Revenue	Revenue	$	390,398	$	413,395	$	1,261,332	$	1,148,253	Revenue	$	296,188	$	453,333	$	645,170	$	870,933
Cost of sales	Cost of sales	107,549		106,338		354,515		298,942		Cost of sales	85,473		131,651		188,065		246,965
Gross profit	Gross profit	282,849		307,057		906,817		849,311		Gross profit	210,715		321,682		457,105		623,968

Selling, general, and administrative	Selling, general, and administrative	234,693		251,886		754,610		679,907		Selling, general, and administrative	172,009		272,718		364,887		519,917

Income from operations	Income from operations	48,156		55,171		152,207		169,404		Income from operations	38,706		48,964		92,218		104,051

Other income (expense)	Other income (expense)									Other income (expense)
Interest expense		(261)		(94)		(519)		(138)
Other income (expense)		(17)		115		(37)		112
Interest income (expense)										Interest income (expense)	462		(164)		281		(259)
Other expense										Other expense	(51)		(4)		(53)		(20)
		(278)		21		(556)		(26)			411		(168)		228		(279)

Income from operations before income taxes	Income from operations before income taxes	47,878		55,192		151,651		169,378		Income from operations before income taxes	39,117		48,796		92,446		103,772

Provision for income taxes	Provision for income taxes	11,723		13,210		34,601		39,370		Provision for income taxes	8,837		9,683		22,198		22,878

Net income	Net income	$	36,155	$	41,982	$	117,050	$	130,008	Net income	$	30,280	$	39,113	$	70,248	$	80,894

Earnings per share - basic	Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07	Earnings per share - basic	$	2.78	$	3.44	$	6.46	$	7.06

Earnings per share - diluted	Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98	Earnings per share - diluted	$	2.77	$	3.42	$	6.43	$	7.01

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	10,964		11,692		11,290		11,739		Basic	10,888		11,354		10,876		11,455
Diluted	Diluted	11,042		11,785		11,369		11,840		Diluted	10,917		11,435		10,923		11,534

Cash dividends declared per share	Cash dividends declared per share	$	1.64	$	1.42	$	4.92	$	4.26	Cash dividends declared per share	$	1.65	$	1.64	$	3.30	$	3.28

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. dollars in thousands)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Net income	Net income	$	36,155	$	41,982	$	117,050	$	130,008	Net income	$	30,280	$	39,113	$	70,248	$	80,894

Other comprehensive income (loss), net of tax:
Other comprehensive income, net of tax:										Other comprehensive income, net of tax:
Foreign currency translation	Foreign currency translation	123		63		$	300	$	130	Foreign currency translation	90		148		99		177
Unrealized losses on investment securities	Unrealized losses on investment securities	—		(16)		$	(21)	$	(49)	Unrealized losses on investment securities	—		(7)		—		(21)
		123		47		$	279	$	81		90		141		99		156

Comprehensive income	Comprehensive income	$	36,278	$	42,029	$	117,329	$	130,089	Comprehensive income	$	30,370	$	39,254	$	70,347	$	81,050

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(U.S. dollars in thousands, except par value)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	69,710	$	104,183	Cash and cash equivalents	$	147,405	$	87,691
Inventories	Inventories	145,279		180,043		Inventories	68,896		118,856
Investment securities		—		5,361
Income taxes, prepaid		150		945

Prepaid expenses and other current assets	Prepaid expenses and other current assets	14,445		16,334		Prepaid expenses and other current assets	12,516		16,237
Total current assets	Total current assets	229,584		306,866		Total current assets	228,817		222,784

Property, plant and equipment - net of accumulated depreciation	Property, plant and equipment - net of accumulated depreciation	58,107		56,131		Property, plant and equipment - net of accumulated depreciation	54,412		57,185
Right-of-use assets	Right-of-use assets	19,819		24,457		Right-of-use assets	16,699		18,460
Other assets	Other assets	12,691		6,468		Other assets	14,269		12,456
Deferred tax assets	Deferred tax assets	6,150		4,404		Deferred tax assets	4,528		5,328

TOTAL ASSETS	TOTAL ASSETS	$	326,351	$	398,326	TOTAL ASSETS	$	318,725	$	316,213

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	148,129	$	163,309	Accounts payable and accrued expenses	$	105,188	$	134,690
Revolving credit facility		—		—
Income taxes payable						Income taxes payable	4,302		428
Current lease obligations	Current lease obligations	6,126		6,523		Current lease obligations	5,405		5,776
Total current liabilities	Total current liabilities	154,255		169,832		Total current liabilities	114,895		140,894

Lease obligations, net of current lease obligations	Lease obligations, net of current lease obligations	21,574		26,020		Lease obligations, net of current lease obligations	18,269		20,275

Total liabilities	Total liabilities	175,829		195,852		Total liabilities	133,164		161,169

Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;	Common stock, par value $0.001 per share: 20,000 shares authorized;					Common stock, par value $0.001 per share: 20,000 shares authorized;
10,929 and 11,594 issued and 10,928 and 11,593 outstanding
at September 30, 2022 and December 31, 2021, respectively		11		12
10,889 and 10,928 issued and 10,889 and 10,873 outstanding						10,889 and 10,928 issued and 10,889 and 10,873 outstanding
at June 30, 2023 and December 31, 2022, respectively						at June 30, 2023 and December 31, 2022, respectively	11		11
Additional paid-in capital	Additional paid-in capital	18,617		12,018		Additional paid-in capital	21,542		21,555
Accumulated other comprehensive income	Accumulated other comprehensive income	391		111		Accumulated other comprehensive income	123		24
Retained earnings	Retained earnings	131,503		190,333		Retained earnings	163,885		139,852

Less: treasury stock at cost, 0 and 54 shares at June 30, 2023 and December 31, 2022, respectively						Less: treasury stock at cost, 0 and 54 shares at June 30, 2023 and December 31, 2022, respectively	—		(6,398)
Total stockholders' equity	Total stockholders' equity	150,522		202,474		Total stockholders' equity	185,561		155,044

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	326,351	$	398,326	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	318,725	$	316,213

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollar in thousands)


		Nine months ended September 30,					Six months ended June 30,
		2022		2021			2023		2022

Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	117,050	$	130,008	Net income	$	70,248	$	80,894
Adjustments to reconcile net income to cash provided by operating activities	Adjustments to reconcile net income to cash provided by operating activities					Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	8,026		3,767		Depreciation and amortization	6,342		5,176
Non-cash lease expense	Non-cash lease expense	4,740		3,508		Non-cash lease expense	2,514		3,211
Share-based compensation	Share-based compensation	8,103		6,613		Share-based compensation	3,120		5,140

Loss on sale or disposal of property, plant and equipment						Loss on sale or disposal of property, plant and equipment	619		—
Amortization of premium on investment securities	Amortization of premium on investment securities	14		70		Amortization of premium on investment securities	—		14
Deferred income taxes	Deferred income taxes	(1,746)		—		Deferred income taxes	800		—

Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Inventories	Inventories	34,764		(76,222)		Inventories	49,960		23,069
Income taxes, prepaid		795		—

Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,889		(5,094)		Prepaid expenses and other current assets	3,721		(376)
Other assets	Other assets	(8,545)		(3,393)		Other assets	(2,142)		(8,169)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(22,259)		42,747		Accounts payable and accrued expenses	(31,851)		(13,922)
Income taxes payable						Income taxes payable	3,874		(7,602)
Net cash flow provided by operating activities	Net cash flow provided by operating activities	142,831		102,004		Net cash flow provided by operating activities	107,205		87,435

Investing Activities	Investing Activities					Investing Activities
Sale and maturities of investment securities	Sale and maturities of investment securities	5,267		5,145		Sale and maturities of investment securities	—		5,267
Purchase of property and equipment	Purchase of property and equipment	(7,617)		(22,585)		Purchase of property and equipment	(3,859)		(5,849)
Net cash flow used in investing activities	Net cash flow used in investing activities	(2,350)		(17,440)		Net cash flow used in investing activities	(3,859)		(582)

Financing Activities	Financing Activities					Financing Activities

Options exercised by executives and directors		—		811
Net shares repurchased for taxes		(1,504)		(1,867)
Borrowing under revolving credit facility						Borrowing under revolving credit facility	—		27,000
Options exercised by directors						Options exercised by directors	105		—
Net shares repurchased for employee taxes						Net shares repurchased for employee taxes	(3,238)		(1,479)
Cash dividends paid to stockholders	Cash dividends paid to stockholders	(53,698)		(46,845)		Cash dividends paid to stockholders	(36,996)		(35,617)
Stock repurchases	Stock repurchases	(120,048)		(46,000)		Stock repurchases	(3,602)		(120,048)

Net cash flow used in financing activities	Net cash flow used in financing activities	(175,250)		(93,901)		Net cash flow used in financing activities	(43,731)		(130,144)

Foreign currency impact	Foreign currency impact	296		130		Foreign currency impact	99		177

Decrease in cash and cash equivalents		(34,473)		(9,207)
Increase (Decrease) in cash and cash equivalents						Increase (Decrease) in cash and cash equivalents	59,714		(43,114)
Cash and cash equivalents - beginning of the period	Cash and cash equivalents - beginning of the period	104,183		163,723		Cash and cash equivalents - beginning of the period	87,691		104,183
Cash and cash equivalents - end of period	Cash and cash equivalents - end of period	$	69,710	$	154,516	Cash and cash equivalents - end of period	$	147,405	$	61,069

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes paid	Income taxes paid	$	33,906	$	41,302	Income taxes paid	$	17,520	$	30,283
Dividends declared included in accounts payable	Dividends declared included in accounts payable	$	19,395	$	17,351	Dividends declared included in accounts payable	$	18,987	$	19,305

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(U.S. dollars in thousands)


		Nine months ended September 30, 2022														Six months ended June 30, 2023
		Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total			Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2021		11,594	$	12	$	12,018	$	111	$	190,333	$	—	$	202,474
Balance, December 31, 2022															Balance, December 31, 2022	10,928	$	11	$	21,555	$	24	$	139,852	$	(6,398)	$	155,044
Net income	Net income	—	—		—		—		41,781		—		41,781		Net income	—	—		—		—		39,968		—		39,968
Share-based compensation	Share-based compensation	18	—		2,275		—		—		—		2,275		Share-based compensation	69	—		606		—		—		—		606
Net shares repurchased for taxes		(8)	—		(1,459)		—		—		—		(1,459)
Options exercised by directors															Options exercised by directors	4	—		105		—		—		—		105
Net shares repurchased for employee taxes															Net shares repurchased for employee taxes	(30)	—		(3,236)		—		—		—		(3,236)
Treasury stock from stock repurchases	Treasury stock from stock repurchases	—	—		—		—		—		(10,000)		(10,000)		Treasury stock from stock repurchases	—	—		—		—		—		(3,602)		(3,602)
Treasury stock retired from stock repurchases	Treasury stock retired from stock repurchases	(51)	—		—		—		(10,000)		10,000		—		Treasury stock retired from stock repurchases	(84)	—		—		—		(10,000)		10,000		—
Other comprehensive income	Other comprehensive income	—	—		—		16		—		—		16		Other comprehensive income	—	—		—		9		—		—		9
Cash dividends declared to stockholders	Cash dividends declared to stockholders	—	—		—		—		(19,063)		—		(19,063)		Cash dividends declared to stockholders	—	—		—		—		(17,994)		—		(17,994)

Balance, March 31, 2022		11,553	$	12	$	12,834	$	127	$	203,051	$	—	$	216,024
Balance, March 31, 2023															Balance, March 31, 2023	10,887	$	11	$	19,030	$	33	$	151,826	$	—	$	170,900
Net income	Net income	—	—		—		—		39,113		—		39,113		Net income	—	—		—		—		30,280		—		30,280
Share-based compensation	Share-based compensation	1	—		2,865		—		—		—		2,865		Share-based compensation	2	—		2,514		—		—		—		2,514
Net shares repurchased for taxes		—	—		(20)		—		—		—		(20)
Treasury stock from stock repurchases		—	—		—		—		—		(90,038)		(90,038)
Treasury stock retired from stock repurchases		(535)	(1)		—		—		(90,038)		90,038		(1)
Stock repurchases, not yet settled		—	—		(15,679)		—		(4,331)		—		(20,010)
Net shares repurchased for employee taxes															Net shares repurchased for employee taxes	—	—		(2)		—		—		—		(2)
Other comprehensive income	Other comprehensive income	—	—		—		141		—		—		141		Other comprehensive income	—	—		—		90		—		—		90
Cash dividends declared to stockholders	Cash dividends declared to stockholders	—	—		—		—		(18,598)		—		(18,598)		Cash dividends declared to stockholders	—	—		—		—		(18,221)		—		(18,221)

Balance, June 30, 2022		11,019	$	11	$	—	$	268	$	129,197	$	—	$	129,476
Net income		—	—		—		—		36,155		—		36,155
Share-based compensation		1	—		2,963		—		—		—		2,963
Net shares repurchased for taxes		—	—		(25)		—		—		—		(25)
Treasury stock from stock repurchases		—	—		—		—		—		(20,010)		(20,010)
Treasury stock retired from stock repurchases		(91)	—		—		—		(20,010)		20,010		—
Settlement of accelerated share repurchase agreement		—	—		15,679		—		4,331		—		20,010
Other comprehensive income		—	—		—		123		—		—		123
Cash dividends declared to stockholders		—	—		—		—		(18,170)		—		(18,170)
Balance, June 30, 2023															Balance, June 30, 2023	10,889	$	11	$	21,542	$	123	$	163,885	$	—	$	185,561

Balance, September 30, 2022		10,929	$	11	$	18,617	$	391	$	131,503	$	—	$	150,522

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents


		Nine months ended September 30, 2021														Six months ended June 30, 2022
		Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total			Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2020		11,822	$	12	$	7,842	$	41	$	154,351	$	(5,000)	$	157,246
Balance, December 31, 2021															Balance, December 31, 2021	11,594	$	12	$	12,018	$	111	$	190,333	$	—	$	202,474
Net income	Net income	—	—		—		—		41,063		—		41,063		Net income	—	—		—		—		41,781		—		41,781
Share-based compensation	Share-based compensation	13	—		2,198		—		—		—		2,198		Share-based compensation	18	—		2,275		—		—		—		2,275
Options exercised by executives and directors		11	—		481		—		—		—		481
Net shares repurchased for taxes		(7)	—		(1,807)		—		—		—		(1,807)
Net shares repurchased for employee taxes															Net shares repurchased for employee taxes	(8)	—		(1,459)		—		—		—		(1,459)
Treasury stock from stock repurchases	Treasury stock from stock repurchases	—	—		—		—		—		(7,500)		(7,500)		Treasury stock from stock repurchases	—	—		—		—		—		(10,000)		(10,000)
Treasury stock retired from stock repurchases															Treasury stock retired from stock repurchases	(51)	—		—		—		(10,000)		10,000		—
Other comprehensive income	Other comprehensive income	—	—		—		62		—		—		62		Other comprehensive income	—	—		—		16		—		—		16
Cash dividends declared to stockholders	Cash dividends declared to stockholders	—	—		—		—		(16,852)		—		(16,852)		Cash dividends declared to stockholders	—	—		—		—		(19,063)		—		(19,063)

Balance, March 31, 2021		11,839	$	12	$	8,714	$	103	$	178,562	$	(12,500)	$	174,891
Balance, March 31, 2022															Balance, March 31, 2022	11,553	$	12	$	12,834	$	127	$	203,051	$	—	$	216,024
Net income	Net income	—	—		—		—		46,963		—		46,963		Net income	—	—		—		—		39,113		—		39,113
Share-based compensation	Share-based compensation	10	—		1,697		—		142		—		1,839		Share-based compensation	1	—		2,865		—		—		—		2,865
Options exercised by executives and directors		3	—		221		—		—		—		221
Net shares repurchased for taxes		—	—		(26)		—		—		—		(26)
Other comprehensive loss		—	—		—		(28)		—		—		(28)
Net shares repurchased for employee taxes															Net shares repurchased for employee taxes	—	—		(20)		—		—		—		(20)
Treasury stock from stock repurchases	Treasury stock from stock repurchases	—	—		—		—		—		(12,230)		(12,230)		Treasury stock from stock repurchases	—	—		—		—		—		(90,038)		(90,038)
Treasury stock retired from stock repurchases	Treasury stock retired from stock repurchases	(114)	—		—		—		(23,383)		23,383		—		Treasury stock retired from stock repurchases	(535)	(1)		—		—		(90,038)		90,038		(1)
Stock Repurchases, not yet settled															Stock Repurchases, not yet settled	—	—		(15,679)		—		(4,331)		—		(20,010)
Other comprehensive income															Other comprehensive income	—	—		—		141		—		—		141
Cash dividends declared to stockholders	Cash dividends declared to stockholders	—	—		—		—		(16,941)		—		(16,941)		Cash dividends declared to stockholders	—	—		—		—		(18,598)		—		(18,598)

Balance, June 30, 2021		11,738	$	12	$	10,606	$	75	$	185,343	$	(1,347)	$	194,689
Net income		—	—		—		—		41,982		—		41,982
Share-based compensation		1	—		2,269		—		—		—		2,269
Options exercised by executives and directors		3	—		109		—		—		—		109
Net shares repurchased for employee taxes		(1)	—		(34)		—		—		—		(34)
Other comprehensive Income		—	—		—		47		—		—		47
Treasury stock from stock repurchases		—	—		—		—		—		(26,270)		(26,270)
Treasury stock retired from stock repurchases		(123)	—		—		—		(27,617)		27,617		—
Cash dividends declared to stockholders		—	—		—		—		(16,553)		—		(16,553)
Balance, June 30, 2022															Balance, June 30, 2022	11,019	$	11	$	—	$	268	$	129,197	$	—	$	129,476

Balance, September 30, 2021		11,618	$	12	$	12,950	$	122	$	183,155	$	—	$	196,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MEDIFAST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, ~~2021~~2022 has been derived from the 2022 audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”).

The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, ~~2022.~~2023. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the ~~2021~~2022 Form 10-K.

Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated.

Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation.

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements ~~Adopted in 2022~~

~~In March 2020,~~The Company has not adopted any new accounting standards during the ~~FASB~~six months ended June 30, 2023. There are no recently issued ~~Accounting Standards Update (“ASU”) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for~~accounting pronouncements that are expected to have a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying accounting principles under GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change to the interest rates used for discounting, margining or contract price alignment. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material ~~impact~~effect on the ~~Company's~~Company’s financial position, ~~and~~ results of ~~operations.~~operations, cash flows, or disclosures.

2. INVENTORIES

Inventories consist principally of raw materials, packaging, non-food finished goods and finished packaged meal replacements held in the Company’s warehouses and outsourced distribution centers. Inventories are stated at the lower of cost or net realizable value, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor and other indirect manufacturing costs. On a quarterly basis, management reviews inventories for unsalable or obsolete inventories.

The Company donated inventory with an aggregate cost of $1.1 million and $10.5 million to Ukrainian refugees and those in need in Ukraine, increasing selling, general and administrative (“SG&A”) expenses during the three and nine months ended

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~~September 30, 2022. The donations were made to two 501(c)(3) organizations that are coordinating the distribution throughout refugee camps in Europe and in Ukraine.~~

Inventories consisted of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022

Raw materials	Raw materials	$	11,989	$	15,196	Raw materials	$	10,286	$	12,670
Packaging	Packaging	3,078		3,641		Packaging	2,933		3,611
Non-food finished goods	Non-food finished goods	10,455		15,991		Non-food finished goods	5,622		8,738
Finished goods	Finished goods	122,227		152,687		Finished goods	58,770		97,675
Reserve for obsolete inventory	Reserve for obsolete inventory	(2,470)		(7,472)		Reserve for obsolete inventory	(8,715)		(3,838)
Total	Total	$	145,279	$	180,043	Total	$	68,896	$	118,856

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3. EARNINGS PER SHARE

Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of shares of the Company’s common stock outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of shares of the Company’s common stock outstanding adjusted for the effect of dilutive common stock equivalents.

The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Numerator:	Numerator:									Numerator:
Net income	Net income	$	36,155	$	41,982	$	117,050	$	130,008	Net income	$	30,280	$	39,113	$	70,248	$	80,894

Denominator:	Denominator:									Denominator:
Weighted average shares of common stock outstanding	Weighted average shares of common stock outstanding	10,964		11,692		11,290		11,739		Weighted average shares of common stock outstanding	10,888		11,354		10,876		11,455
Effect of dilutive common stock equivalents	Effect of dilutive common stock equivalents	78		93		79		101		Effect of dilutive common stock equivalents	29		81		47		79
Weighted average shares of common stock outstanding	Weighted average shares of common stock outstanding	11,042		11,785		11,369		11,840		Weighted average shares of common stock outstanding	10,917		11,435		10,923		11,534

Earnings per share - basic	Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07	Earnings per share - basic	$	2.78	$	3.44	$	6.46	$	7.06

Earnings per share - diluted	Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98	Earnings per share - diluted	$	2.77	$	3.42	$	6.43	$	7.01

The calculation of diluted EPS excluded 1045 thousand and 03 thousand antidilutive restricted stock awards for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and 322 thousand and 01 thousand antidilutive restricted stock awards for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. EPS is computed independently for each of the periods presented above, and accordingly, the sum of the quarterly earnings per common share may not equal the year-to-date total computed.

4. SHARE-BASED COMPENSATION

Stock Options

The Company has issued non-qualified and incentive stock options to employees and non-employee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield. Options outstanding as of ~~September~~June 30, ~~2022~~2023 generally vest over a period of ~~three~~3 years and expire ~~ten~~10 years from the date of grant. The exercise price of these options ranges from $26.52 to $66.68. Due to the Company’s lack of option exercise history on the date of grant, the expected term is calculated using the simplified method defined as the midpoint

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between the vesting period and the contractual term of each option. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. The dividend yield is computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company did not grant stock options.

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The following table is a summary of our stock option activity (in thousands, except per share data):


		Nine months ended September 30,							Six months ended June 30,
		2022			2021				2023			2022
		Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price			Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price

Outstanding at beginning of period	Outstanding at beginning of period	33	$	54.98	61	$	48.19	Outstanding at beginning of period	33	$	54.98	33	$	54.98
Exercised	Exercised	—	—		(16)	49.69		Exercised	(4)	27.18		—	—

Outstanding at end of the period	Outstanding at end of the period	33	$	54.98	45	$	47.66	Outstanding at end of the period	29	$	58.65	33	$	54.98
Exercisable at end of the period	Exercisable at end of the period	28	$	52.76	35	$	42.00	Exercisable at end of the period	29	$	58.65	28	$	52.76

As of ~~September~~June 30, ~~2022,~~2023, the weighted-average remaining contractual life for both the outstanding stock options and exercisable stock options was ~~55 months~~4.1 years with an aggregate intrinsic value of ~~$1.8 million and the weighted-average remaining contractual life for exercisable stock options was 53 months with an aggregate intrinsic value of $1.5~~$1.0 million. The ~~unrecognized~~ compensation expense calculated under the fair value method for ~~stock options expected to vest as of September~~the six months ended June 30, ~~2022~~2023 was less than ~~$0.1~~$0.1 million and ~~is expected to be~~was fully recognized ~~over a weighted-average period of~~ ~~4 months~~.during the period. For the ~~nine~~six months ended ~~September~~June 30, ~~2022, there was no exercise activity of stock options. For the nine months ended September 30, 2021,~~2023, the Company received ~~$0.8~~$0.1 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 was ~~$3.3~~$0.3 million.

Restricted Stock

The Company has issued restricted stock to employees and non-employee directors generally with vesting terms up to ~~five~~5 years after the date of grant. The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period.

The following table summarizes our restricted stock activity (in thousands, except per share data):


		Nine months ended September 30,							Six months ended June 30,
		2022			2021				2023			2022
		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value			Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value

Outstanding at beginning of period	Outstanding at beginning of period	44	$	183.51	50	$	116.06	Outstanding at beginning of period	60	$	188.11	44	$	183.51
Granted	Granted	38	176.60		21	266.99		Granted	85	98.17		38	176.81
Vested	Vested	(19)	156.16		(26)	116.62		Vested	(24)	169.42		(19)	155.57
Forfeited	Forfeited	(1)	186.53		(3)	166.02		Forfeited	(3)	156.26		(1)	186.53
Outstanding at end of the period	Outstanding at end of the period	62	$	187.83	42	$	183.04	Outstanding at end of the period	118	$	127.93	62	$	187.80

The Company withheld approximately 89 thousand shares and 78 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The total fair value of restricted stock awards vested during the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was $3$2.5 million and $7$3.3 million, respectively.

Market and Performance-based Share Awards

The Company has issued market and performance-based share awards to certain key executives who were granted deferred shares and may earn between 0% and 250% of the target number depending upon both the Company’s total stockholder return

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(“TSR”) and the Company’s performance against predetermined performance goals over a three-year performance ~~period after the date of grant.~~period. Market and performance-based share awards that are tied to the Company’s TSR are valued using the Monte Carlo method and are recognized ratably as expense over the award’s performance period. The fair value of the performance-based share awards is equal to the market price of the Company’s common stock on the date of grant adjusted by expected level of achievement over the performance period. Expense for performance-based share awards is amortized ratably over the performance period. In the event that management determines that the Company will not reach the lower threshold of the predetermined performance goals established in the grant agreement, any previously recognized expense is reversed in the period in which such a determination is made. Management determined that the market and performance-based share awards granted in 2022 would

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not reach the lower threshold of the predetermined performance goal resulting in a $1.4 million decrease in the Company’s share-based compensation expense for the six months ended June 30, 2023.

Share-based compensation expense for all types of awards granted is recorded in selling, general, and administrative expense in the accompanying Condensed Consolidated Statements of Income. The total ~~expenses~~expense during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021 are~~2022 as follows (in thousands):

Three months ended September 30,
2022 2021
Shares Share-Based Compensation Expense Shares Share-Based Compensation Expense
Options and restricted stock 90 $ 1,392 89 $ 1,116
Market and performance-based share awards granted in 2022 25 438 — —
Performance-based share awards granted in 2021 15 654 14 309
Performance-based share awards granted in 2020 26 479 26 479
Performance-based share awards granted in 2019 — — 16 365
Total share-based compensation 156 $ 2,963 145 $ 2,269

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	Three months ended June 30,
	2023			2022
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	147	$	1,642	86	$	1,311
Market and performance-based share awards granted in 2023	47	482		—	—
Market and performance-based share awards granted in 2022	24	—		25	433
Performance-based share awards granted in 2021	14	340		15	647
Performance-based share awards granted in 2020	28	50		26	474
Total share-based compensation	260	$	2,514	152	$	2,865

The total ~~expenses~~expense during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021 are~~2022 as follows (in thousands):


		Nine months ended September 30,							Six months ended June 30,
		2022			2021				2023			2022
		Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense			Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	Options and restricted stock	90	$	3,789	89	$	3,175	Options and restricted stock	147	$	2,869	91	$	2,398
Market and performance-based share awards granted in 2023								Market and performance-based share awards granted in 2023	47	561		—	—
Market and performance-based share awards granted in 2022	Market and performance-based share awards granted in 2022	25	950		—	—		Market and performance-based share awards granted in 2022	24	(1,388)		25	512
Performance-based share awards granted in 2021	Performance-based share awards granted in 2021	15	1,941		14	666		Performance-based share awards granted in 2021	14	980		15	1,287
Performance-based share awards granted in 2020	Performance-based share awards granted in 2020	26	1,423		26	1,329		Performance-based share awards granted in 2020	28	98		26	943
Performance-based share awards granted in 2019		—	—		16	1,443
Total share-based compensation	Total share-based compensation	156	$	8,103	145	$	6,613	Total share-based compensation	260	$	3,120	157	$	5,140

The Company withheld approximately 21 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of market and performance-based share awards for the six months ended June 30, 2023. No market and performance-based share awards vested and no shares were withheld to cover minimum tax liability withholding obligations for the six months ended June 30, 2022. The total fair value of market and performance-based share awards vested during the six months ended June 30, 2023 and 2022 was $5.3 million and $0, respectively.

The total income tax benefit recognized in the accompanying Condensed Consolidated Statements of Income for restricted stock awards was ~~$0.4~~$0.0 million and ~~$0.1~~$0.4 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$1.2~~$0.1 million and ~~$2.3~~$0.9 million for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

There was ~~$7.6~~$11.0 million of total unrecognized compensation cost related to restricted stock awards as of ~~September~~June 30, ~~2022,~~2023, which is expected to be recognized over a weighted-average period of ~~23 months.~~2.1 years. There was ~~$7.9~~$6.2 million of unrecognized compensation costs related to the 66113 thousand market and performance-based shares presented in the table above as of ~~September~~June 30, ~~2022,~~2023, which is expected to be recognized over a weighted-average period of ~~23 months.~~2.1 years.

5. LEASES

Operating Leases

The Company has operating leases for office and warehouse space and certain equipment. In certain of the Company’s lease agreements, the rental payments are adjusted periodically based on defined terms within the lease. The Company did not have any finance leases as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, or for the ~~nine-month~~six-month-month periods then ended, respectively.

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Our leases relating to office and warehouse space have lease terms of 1819 months to ~~126~~122 months. Our leases relating to equipment have lease terms of 24 months to 203 months, with certain of them having automatic renewal clauses.

The Company’s warehouse agreements also contain non-lease components, in the form of payments towards variable logistics services and labor charges, which the Company is obligated to pay based on the services consumed by it. Such amounts are not included in the measurement of the lease liability but ~~are.~~are recognized as expenses when they are incurred.

The operating lease expense was ~~$1.7~~$1.3 million and ~~$1.4~~$1.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$5.2~~$2.8 million and ~~$3.8~~$3.5 million for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):


		Nine months ended September 30,					Six months ended June 30,
		2022		2021			2023		2022

Cash paid for amounts included in the measurements of lease liabilities	Cash paid for amounts included in the measurements of lease liabilities					Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow used in operating leases	Operating cash flow used in operating leases	$	5,413	$	3,175	Operating cash flow used in operating leases	$	3,387	$	3,674

Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations					Right-of-use assets obtained in exchange for lease obligations
Operating leases	Operating leases	$	103	$	9,745	Operating leases	$	753	$	103

As of ~~September~~June 30, ~~2022,~~2023, the weighted average remaining lease term was 604 years, 5 months and the weighted average discount rate was ~~2.1%~~2.00%.

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The following table presents the maturity of the Company’s operating lease liabilities as of ~~September~~June 30, ~~2022~~2023 (in thousands):


2022 (excluding the nine months ended September 30, 2022)		$	1,787
2023		6,241
2023 (excluding the six months ended June 30, 2023)				2023 (excluding the six months ended June 30, 2023)	$	2,888
2024	2024	5,693		2024	5,955
2025	2025	5,825		2025	6,095
2026	2026	4,160		2026	4,438
2027				2027	2,553
Thereafter	Thereafter	5,412		Thereafter	2,858
Total lease payments	Total lease payments	$	29,118	Total lease payments	$	24,787
Less: imputed interest	Less: imputed interest	(1,418)		Less: imputed interest	(1,113)
Total	Total	$	27,700	Total	$	23,674

6. ACCUMULATED OTHER COMPREHENSIVE INCOME

~~The following table sets forth the components of accumulated~~Accumulated other comprehensive income, net of tax, ~~where applicable (in thousands):~~

September 30,
2022 December 31,
2021
Foreign currency translation $ 391 $ 90
Unrealized gains on investment securities — 21
Accumulated other comprehensive income $ 391 $ 111
was comprised of $123 thousand of foreign currency translation as of June 30, 2023 and $24 thousand of foreign currency translation as of December 31, 2022.

7. ~~FINANCIAL INSTRUMENTS~~

Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.

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~~The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands):~~

September 30, 2022
Cost Unrealized Gains Accrued Interest Estimated Fair
Value Cash & Cash
Equivalents Investment
Securities
Cash $ 69,710 $ — $ — $ 69,710 $ 69,710 $ —
Level 1:
Money market accounts — — — — — —
Total $ 69,710 $ — $ — $ 69,710 $ 69,710 $ —

December 31, 2021
Cost Unrealized Gains Accrued Interest Estimated Fair
Value Cash & Cash
Equivalents Investment
Securities
Cash $ 94,824 $ — $ — $ 94,824 $ 94,824 $ —
Level 1:
Money market accounts 9,359 — — 9,359 9,359 —
Government & agency securities 1,401 12 — 1,413 — 1,413
10,760 12 — 10,772 9,359 1,413
Level 2:
Municipal bonds 3,880 9 59 3,948 — 3,948
Total $ 109,464 $ 21 $ 59 $ 109,544 $ 104,183 $ 5,361

The Company had no realized gain or loss for the three months ended September 30, 2022. The company had a realized loss of $0.2 million for the nine months ended September 30, 2022. There was no realized gain or losses for the three and nine months ended September 30, 2021.

8. DEBT

Credit Agreement

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “Credit Agreement”) among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent. On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on Secured Overnight Financing Rate (“SOFR”), from London Inter-Bank Offered Rate (LIBOR) (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a ~~$225.0~~$225.0 million senior secured revolving credit facility with a ~~$20.0~~$20.0 million letter of credit sublimit. The Amended Credit Agreement also provides for an uncommitted incremental facility that permits the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to ~~$100.0 million.~~$100.0 million. The Amended Credit Agreement matures on April 13, 2026.

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The Company’s obligations under the Amended Credit Agreement are guaranteed by the Guarantors. The obligations of the Company and the Guarantors are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

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Under the Amended Credit Agreement, the Company will pay to the administrative agent for the account of each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the revolving facility from 0.20% to 0.40% per annum depending on the Company’s Total Net Leverage Ratio (as defined in the Amended Credit Agreement). The Company is also obligated to pay the administrative agent customary fees for credit facilities of this size and type.

Revolving borrowings under the Amended Credit Agreement bear interest at a rate per annum equal to (i) the Term SOFR Rate for the interest period plus the Applicable Rate (as defined in the Amended Credit Agreement) based on the Company’s Total Net Leverage Ratio or (ii) the Alternate Base Rate (as defined in the Amended Credit Agreement) as in effect from time to time plus the Applicable Rate based on the Company’s Total Net Leverage Ratio. As of ~~September~~June 30, ~~2022,~~2023, the Applicable Rate for Term SOFR Loans is 1.25% per annum and the Applicable Rate for ABR Loans is 0.25% per annum. SOFR based loans also include a Credit Spread Adjustment based on the duration of the borrowing.

The Amended Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments and change the nature of their businesses. The Amended Credit Agreement also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness and judgment default. In addition, the Amended Credit Agreement requires the Company to maintain a Total Net Leverage Ratio of no more than 2.75 to 1.00 and an Interest Coverage Ratio of at least 3.50 to 1.00.

~~The~~As of June 30, 2023 and December 31, 2022, the Company ~~has~~had no borrowings outstanding under the Amended Credit Agreement ~~as of September 30, 2022.~~

and was in compliance with all covenants.

9.8. ACCELERATED SHARE REPURCHASE (“ASR”) PROGRAM

In the second quarter of fiscal 2022, the Company entered into an ASR agreement with JPMorgan Chase, National Association ("JPMorgan Chase") to purchase shares of its common stock from JPMorgan Chase for an aggregate purchase price of $100.0 million. Pursuant to the ASR program, the Company received an initial delivery of approximately 480 thousand shares of common stock based on the closing price of the common stock on May 31, 2022. Approximately 91 thousand additional shares of the Company's common stock were delivered upon termination of the agreement on August 8, 2022. The final number of shares delivered to the Company under the ASR agreement was based on the average of the daily volume-weighted average trading prices of the Company’s common stock during the term of the ASR program, less a discount.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

Certain information in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”). These forward-looking statements generally can be identified by use of phrases or terminology such as “intend,” “anticipate,” “expect” or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of our management and are subject to certain events, risks, uncertainties and other factors. These risks and uncertainties include, but are not limited to, those described in our ~~2021~~2022 Form 10-K and those described from time to time in our future reports filed with the SEC. Although Medifast believes that the expectations, statements and assumptions reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this report. All of the forward-looking statements contained herein speak only as of the date of this report.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing elsewhere herein.

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Overview

Medifast is the ~~global company behind one of the fastest-growing~~ health and wellness ~~communities,~~ ~~OPTAVIA~~®company known for its habit-based and Coach-guided lifestyle solution OPTAVIA®, which provides people with a simple, yet comprehensive approach to help them achieve lasting optimal health and wellbeing. OPTAVIA offers clinically proven plans, scientifically developed products and a framework for habit creation reinforced by independent Coaches and Community support. As a physician-founded company with a 40+ year history, Medifast is a leader in the U.S. weight management industry. The company continues to innovate and build upon its scientific and clinical heritage to deliver on its mission of offering the world Lifelong Transformation, One Healthy Habit at a ~~Time~~®Time®. Reflecting the success of our holistic approach to health and wellness, we have consistently grown annual revenue over the past five years. Of equal importance, we expect our differentiated model to continue to deliver growth in the foreseeable future.

Our OPTAVIA brand offers a highly competitive and effective lifestyle solution centered on developing new healthy habits through smaller, foundational changes called micro-habits. The program is built around four key components:

•Independent OPTAVIA Coaches: Provide individualized support and guidance to customers on the path to optimal health and wellbeing.

•OPTAVIA Community: A Community of like-hearted people providing each other with real-time connection and support.

•The Habits of Health® Transformational System: A proprietary system which offers easy steps to a sustainably healthy lifestyle.

•Products & Plans: Clinically proven plans and scientifically developed products, called “Fuelings,” backed by dietitians, scientists and physicians.

We help customers achieve their health goals through a network of approximately ~~66,200~~53,100 independent active earning OPTAVIA Coaches, about 90% of whom were customers first, and have impacted more than 23 million lives to date. OPTAVIA Coaches introduce customers to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTAVIA-branded Fuelings. Fuelings ~~which~~ are nutrient-dense, portion-controlled, nutritionally interchangeable and simple to use. They are formulated with high-quality ingredients and are fortified with probiotic BC30™ cultures, vitamins and minerals, as well as other nutrients essential for good health. Our products support the process of integrating healthy habits into our ~~customer’s~~customers’ day-to-day lives.

The OPTAVIA coaching model is customer-centric and boasts an energized health and wellness community. It promotes holistic health and wellness and positions healthy weight as a catalyst to greater lifestyle changes. OPTAVIA Coaches provide personalized support to customers and motivate them by sharing their passion for healthy living and lifestyle transformation. We believe this personal coaching is an essential factor in customer success based on findings from a clinical study published in Obesity Science and Practice in 2018, which validated the effectiveness of combining the ~~OPTAVIA meal plan with education and support consistent with that was provided by~~ ~~OPTAVIA Coaches.~~

The entrepreneurial spirit of our OPTAVIA Coaches is another key to our success, as they create a continuous cycle of growth, activating new customers, many of whom go on to become OPTAVIA Coaches. We offer economic incentives designed to support each OPTAVIA Coach’s long-term success, which we believe plays an important role in their financial wellness, providing the opportunity to improve their finances while changing the health trajectory of families, communities and generations.1

OPTAVIA Coaches are independent contractors, not employees, who support customers and market our products and services primarily through word of mouth, email and social media channels such as Facebook, Instagram, Twitter and video conferencing platforms. As entrepreneurs, OPTAVIA Coaches market our products to friends, family and other acquaintances. OPTAVIA products are shipped directly to OPTAVIA customers who are working with an OPTAVIA Coach. OPTAVIA Coaches do not handle inventory or deliver merchandise to customers. This arrangement frees our OPTAVIA Coaches from having to manage inventory and allows them to maintain an arms-length transactional relationship while focusing their attention on support and encouragement.

We measure our success by the results our customers are ~~one of~~able to achieve. The more OPTAVIA Coaches we have, the ~~fastest growing health and wellness companies in the United States, with a large and growing market opportunity.~~more customers we can serve. We believe our ~~coach-based~~Coach-based model is scalable and drives both customer success and growth. We expect our continued investment in fostering a robust community around our OPTAVIA brand and Coaching Model will continue to drive a sustainable, repeatable business rhythm focused on our ~~OPTAVIA Coaching model will~~mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.

1 OPTAVIA makes no guarantee of financial success. Success with OPTAVIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence, and leadership. Please see the OPTAVIA Income Disclosure Statement (http://bit.ly/idsOPTAVIA) for statistics on actual earnings of Coaches.

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~~continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.~~

Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTAVIA, LLC, Jason Enterprises, Inc., Jason Properties, LLC, Seven Crondall Associates, LLC, Corporate Events, Inc., OPTAVIA (Hong Kong) Limited, OPTAVIA (Singapore) PTE. LTD and OPTAVIA Health Consultation (Shanghai) Co., Ltd.

Recent Initiatives

As ~~we previously disclosed, global expansion~~part of the Company’s recently announced Fuel for the Future program, which is ~~an important component~~intended to optimize spending through value engineering, operational efficiency and improved procurement, and is expected to free up capital to invest in growth initiatives and raise margins. As a part of ~~our long-term growth strategy. In July 2019, we commenced our international~~these efforts and due to economic changes in the Asia-Pacific region following the COVID-19 pandemic, Medifast exited its operations ~~entering into the Asia Pacific markets of~~in Hong Kong and ~~Singapore. Our decision~~Singapore as of July 1, 2023. This transition is intended to ~~enter~~help better prioritize resources that were previously dedicated to these markets ~~was based~~in order to support initiatives that the Company anticipates will have a greater impact on revenues and profitability. This includes investing in technology and digital capabilities as well as rolling out product offerings that are complementary to its existing program, bringing OPTAVIA to new demographics and expanding the Company's total addressable market considerably.

On July 27, 2023, the Company announced a new product line, OPTAVIA ACTIVE, which includes premium amino acid supplements and protein powders, OPTAVIA ACTIVE Essential Amino Acid (EAAs) Blend and OPTAVIA ACTIVE Whey Protein, with other products expected to be rolled out next year. Both products are designed to help new and existing customers of all fitness levels. With the announcement of the new product line, the Company targets new customer segments and triples its total addressable market by entering the sports nutrition category, a $30 billion market. Formulated to work with or without OPTAVIA nutrition plans and guided by Coach support, OPTAVIA ACTIVE, similar to the Company’s other lines of products, is backed by science, made with no colors, flavors or sweeteners from artificial sources and is Informed Sport certified, which is a global standard in sports nutrition quality control that ensures its certified products contain no banned substances. The Company plans to launch OPTAVIA ACTIVE to customers in September 2023.

Through a small pilot launched in 2023, in partnership with a network of several telehealth providers, the Company began exploring a combination of its habit-based, Coach-guided solution, OPTAVIA, together with innovations in medically supported weight loss, including GLP-1 drugs.

Medifast plans to continue investing in its offer to support all areas of its proprietary Habits of Health Transformational System, which includes weight loss, motion, hydration, sleep, and other macro-habits. The Company is committed to innovating as the industry ~~market research~~evolves to continue delivering evidence-based solutions that ~~reflects a dynamic shift~~are effective in ~~how health care is being prioritized~~helping customers create healthy habits and ~~consumed in those countries. We outsource a distribution center in Hong Kong to provide adequate product distribution capacity for the foreseeable future in these markets.~~reach their wellness goals.

Macroeconomic Conditions

Global economic challenges including the impact of rising inflation, adverse labor market conditions, the war in Ukraine and the continuing impact of the COVID-19 pandemic have caused macroeconomic uncertainty and volatility in markets where we, our suppliers and our OPTAVIA Coaches operate. These uncertainties make it challenging for our management to estimate our future business performance.

We are exposed to market risks from changes in commodity or other raw material prices. Rising inflation could impact our cost structure and put pressure on consumer spending. Increases in commodity prices or food costs, including as a result of inflation, could affect the global and U.S. economies and could also adversely impact our business, financial condition or results of operations. Our variable cost structure can be utilized to adapt to changing market conditions with potential actions including adjustments to our manufacturing, distribution and customer support infrastructure. In addition, adverse labor market conditions could constrain our ability to manufacture and deliver products or increase the associated costs. ~~We continue to take steps to attract, train, and develop personnel.~~ As a response, we may periodically take incremental pricing actions to offset supply chain costs, inflationary pressures, and adverse labor market conditions.

In addition, beginning in February 2022, the war in Ukraine and corresponding events have had, and could continue to have, adverse effects on regional and global markets. While our operations are not directly impacted by the war in Ukraine, the duration of hostilities and the vast array of sanctions and related events (including cyberattacks) cannot be predicted. As a result, those events present uncertainty and risk. To date, the war in Ukraine has had no material impact on our business.

~~Throughout the COVID-19 pandemic, we took and continue to take significant measures to protect our employees,~~ ~~OPTA~~VIA Coaches and business, while remaining in compliance with local and national guidelines. Our manufacturing and distribution facilities remained fully operational during the pandemic, and we have not experienced any meaningful disruption to our worldwide supply chain due to the pandemic. It is possible the COVID-19 pandemic could negatively impact our operations and the operations of our suppliers and vendors. Should that occur, the extent to which the pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current expectations. Factors that could cause actual results to differ from management’s expectations include inherent uncertainties regarding the duration and further spread of the outbreak, its severity, the emergence of variant strains, government actions taken to contain the virus or treat its impact, changes in consumer behavior resulting from the pandemic and how quickly and to what extent normal economic and operating conditions can resume.

The senior management team meets regularly to review and assess the status of the Company’s operations and the health and safety of its various constituencies, and will continue to communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels. In response to changing macroeconomic conditions, the Company may take further actions that alter its business operations as may be required by governmental authorities, or that are determined to be in the best interests of employees, OPTAVIA Coaches and customers.

These macroeconomic uncertainties make it challenging for our management to estimate our future business performance. However, we intend to continue to actively monitor the impact of the pandemic and related developments on our business and will update our practices accordingly.

~~Critical Accounting Policies and Estimates~~

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~~all of our significant accounting policies~~Critical Accounting Policies and ~~estimates to be critical. There were no significant changes in our critical accounting policies during the first nine months of 2022.~~Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. There were no significant changes in our critical estimates during the first ~~nine~~six months of ~~2022.~~2023.

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the 2022 Form 10-K. We consider all of our significant accounting policies and estimates to be critical. During Q1 2023 we made a change to our customer terms and conditions (“Customer T&Cs”) that resulted in a change to our revenue recognition policy which is described below. There were no other significant changes in our critical accounting policies during the first six months of 2023.

Revenue Recognition: Our revenue is derived primarily from point of sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products. Prior to a change in our Customer T&Cs in the first quarter of 2023, revenue was recognized upon receipt by the customer and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns. Upon the change of our Customer T&Cs, revenue is now recognized upon delivery to the shipping carrier and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns. The impact of this change to the quarter ended March 31, 2023 was an increase of approximately $9.1 million in revenue and $2.8 million of income from operations.

Revenue is recognized when control of the promised products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products. When determining whether the customer has obtained control of the products, we consider any future performance obligations.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. Our contracts have performance obligations to fulfill and deliver products from the point of sale transaction along with the related customer reward programs.

Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the six months ended June 30, 2023 and 2022. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.

Our return policy allows for customer returns of consumable products within 30 days of purchase and upon our authorization. We adjust revenues for the products expected to be returned and a liability is recognized for expected refunds to customers. We estimate expected returns based on historical levels and project this experience into the future.

Our sales contracts may give customers the option to purchase additional products priced at a discount. Options to acquire additional products at a discount can come in many forms, such as customer reward programs and incentive offerings including pricing arrangements, and promotions.

We reduce the transaction price for customer reward programs and certain incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations. The Company accounts for sales rewards that provide the customer with a material right as a separate performance obligation of the transactions, and therefore allocates consideration between the initial sale of products and the customer reward program and incentive offering.

Amounts billed to customers for shipping and handling activities are treated as a promised service performance obligation and are recorded as revenue in our Consolidated Statements of Income upon fulfillment of the performance obligation. Shipping and handling costs incurred by the Company for the delivery of products to customers are considered a cost to fulfill the contract and are included in cost of sales in our Consolidated Statements of Income.

We expense OPTAVIA Coach compensation and credit card fees during the period in which the corresponding revenue is earned. These costs are recorded in selling, general and administrative expense in our Consolidated Statements of Income.

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Overview of Results of Operations

Our product sales accounted for approximately ~~98.0%~~98% of our revenues for each of the three ~~and nine~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

The following tables reflect our income statements (in thousands, except percentages):


		Three months ended September 30,											Three months ended June 30,
		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change

Revenue	Revenue	$	390,398		$	413,395		$	(22,997)	(5.6)	%	Revenue	$	296,188		$	453,333		$	(157,145)	(34.7)	%
Cost of sales	Cost of sales	107,549			106,338			1,211		1.1	%	Cost of sales	85,473			131,651			(46,178)		(35.1)	%
Gross profit	Gross profit	282,849			307,057			(24,208)		(7.9)	%	Gross profit	210,715			321,682			(110,967)		(34.5)	%

Selling, general, and administrative	Selling, general, and administrative	234,693			251,886			(17,193)		(6.8)	%	Selling, general, and administrative	172,009			272,718			(100,709)		(36.9)	%

Income from operations	Income from operations	48,156			55,171			(7,015)		(12.7)	%	Income from operations	38,706			48,964			(10,258)		(21.0)	%

Other income (expense)	Other income (expense)											Other income (expense)
Interest expense		(261)			(94)			(167)		177.7	%
Other income (expense)		(17)			115			(132)		(114.8)	%
Interest income (expense)												Interest income (expense)	462			(164)			626		381.7	%
Other expense												Other expense	(51)			(4)			(47)		(1175.0)	%
		(278)			21			(299)		(1423.8)	%		411			(168)			579		344.6	%

Income from operations before income taxes	Income from operations before income taxes	47,878			55,192			(7,314)		(13.3)	%	Income from operations before income taxes	39,117			48,796			(9,679)		(19.8)	%

Provision for income taxes	Provision for income taxes	11,723			13,210			(1,487)		(11.3)	%	Provision for income taxes	8,837			9,683			(846)		(8.7)	%

Net income	Net income	$	36,155		$	41,982		$	(5,827)	(13.9)	%	Net income	$	30,280		$	39,113		$	(8,833)	(22.6)	%

% of revenue	% of revenue											% of revenue
Gross profit	Gross profit	72.5		%	74.3		%					Gross profit	71.1		%	71.0		%
Selling, general, and administrative costs	Selling, general, and administrative costs	60.1		%	60.9		%					Selling, general, and administrative costs	58.1		%	60.2		%
Income from operations	Income from operations	12.3		%	13.3		%					Income from operations	13.1		%	10.8		%

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		Nine months ended September 30,											Six months ended June 30,
		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change

Revenue	Revenue	$	1,261,332		$	1,148,253		$	113,079	9.8	%	Revenue	$	645,170		$	870,933		(225,763)		(25.9)	%
Cost of sales	Cost of sales	354,515			298,942			55,573		18.6	%	Cost of sales	188,065			246,965			(58,900)		(23.8)	%
Gross profit	Gross profit	906,817			849,311			57,506		6.8	%	Gross profit	457,105			623,968			(166,863)		(26.7)	%

Selling, general, and administrative	Selling, general, and administrative	754,610			679,907			74,703		11.0	%	Selling, general, and administrative	364,887			519,917			(155,030)		(29.8)	%

Income from operations	Income from operations	152,207			169,404			(17,197)		(10.2)	%	Income from operations	92,218			104,051			(11,833)		(11.4)	%

Other income (expense)	Other income (expense)											Other income (expense)
Interest expense		(519)			(138)			(381)		276.1	%
Other income (expense)		(37)			112			(149)		(133.0)	%
Interest income (expense)												Interest income (expense)	281			(259)			540		208.5	%
Other expense												Other expense	(53)			(20)			(33)		(165.0)	%
		(556)			(26)			(530)		2038.5	%		228			(279)			507		181.7	%

Income from operations before income taxes	Income from operations before income taxes	151,651			169,378			(17,727)		(10.5)	%	Income from operations before income taxes	92,446			103,772			(11,326)		(10.9)	%

Provision for income taxes	Provision for income taxes	34,601			39,370			(4,769)		(12.1)	%	Provision for income taxes	22,198			22,878			(680)		(3.0)	%

Net income	Net income	$	117,050		$	130,008		$	(12,958)	(10.0)	%	Net income	$	70,248		$	80,894		$	(10,646)	(13.2)	%

% of revenue	% of revenue											% of revenue
Gross profit	Gross profit	71.9		%	74.0		%					Gross profit	70.9		%	71.6		%
Selling, general, and administrative costs	Selling, general, and administrative costs	59.8		%	59.2		%					Selling, general, and administrative costs	56.6		%	59.7		%
Income from operations	Income from operations	12.1		%	14.8		%					Income from operations	14.3		%	11.9		%

Revenue: Revenue decreased ~~$23.0~~$157.1 million, or ~~5.6%~~34.7%, to ~~$390.4~~$296.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 from ~~$413.4~~$453.3 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The decline in revenue for the three months ended June 30, 2023 was primarily driven by a decrease in the number of active earning OPTAVIA Coaches to 53,100 as of June 30, 2023 from 68,000 as of June 30, 2022 and the decline in the productivity per active earning OPTAVIA Coach. The average revenue per active earning OPTAVIA Coach was ~~$5,897~~$5,578 for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$6,773~~$6,667 for the three months ended ~~September~~June 30, ~~2021.~~2022. Revenue decreased $225.8 million, or 25.9%, to $645.2 million for the six months ended June 30, 2023 from $870.9 million for the six months ended June 30, 2023. The decline in revenue for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~primarily~~ driven by a decrease in the number of active earnings OPTAVIA Coaches and the decline in productivity per active earnings OPTAVIA Coach, partially offset by a $9.1 million impact from a timing difference related to changes in the ~~productivity~~Company’s sales order terms and conditions with its customers in the first quarter. The average revenue per active earning OPTAVIA Coach ~~partially offset by~~was $5,771 for the ~~increase in~~six months ended June 30, 2023 compared to $6,603 for the ~~number of active earning~~ ~~OPTAVIA Coaches to 66,200 as of September~~six months ended June 30, 2022 ~~from 61,000 as of September 30, 2021.~~. The decrease in productivity per active earning OPTAVIA Coach for the ~~quarter~~three months ended June 30, 2023 and six months ended June 30, 2023 was driven by a decrease in the number of customers supported by each Coach. Revenue increased $113.1 million, or 9.8%, to $1,261.3 million for the nine months ended September 30, 2022 from $1,148.3 million for the nine months ended September 30, 2021. The average revenue per active earning ~~OPTAVIA Coach was $6,367 for the nine months ended September 30, 2022 compared to $6,630 for the nine months ended September 30, 2021. The decrease in the productivity per active earning~~ ~~OPTA~~VIA Coach for the nine months ended September 30, 2022 was driven by an decrease in the number of customers supported by each Coach. The year-over-year growth in revenue was primarily driven by the increase in the number of active earning ~~OPTAVIA Coaches~~continued pressure on customer acquisition, partially offset by ~~the decrease~~a price increase implemented in ~~productivity per active earning~~ ~~OPTAVIA Coach.~~November 2022.

Cost of sales: Cost of sales ~~increased $1.2~~decreased $46.2 million, or ~~1.1%~~35.1%, to ~~$107.5~~$85.5 million from ~~$106.3~~$131.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 from the corresponding period in ~~2021.~~2022. Cost of sales decreased $58.9 million, or 23.8%, to $188.1 million from $247.0 million for the six months ended June 30, 2023. The ~~increase~~decrease in cost of sales for the three months ended ~~September~~June 30, ~~2022~~2023 and six months ended June 30, 2023 was primarily driven by decreased volumes, partially offset by higher product costs resulting from increases in raw ingredient costs, shipping costs, and labor costs. Cost of sales increased $55.6 million, or 18.6%, to $354.5 million from $298.9 million for the nine months ended September 30, 2022 from the corresponding period in 2021. The increase in cost of sales for the nine months ended September 30, 2022 was primarily driven by an increase in ~~OPTAVIA product sales and higher product costs resulting from increases in~~inflationary pressures on raw ingredient costs, shipping costs, and labor costs.

Gross profit: For the three months ended ~~September~~June 30, ~~2022,~~2023, gross profit decreased ~~$24.2~~$111.0 million, or ~~7.9%~~34.5%, to ~~$282.8~~$210.7 million from ~~$307.1~~$321.7 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The decrease in gross profit for the three months ended ~~September~~June 30, ~~2022~~2023 was due to ~~both~~lower revenue. As a ~~decrease~~percentage of revenue, gross profit increased 10 basis points to 71.1% for the three months ended June 30, 2023 from 71.0% for the corresponding period in 2022. For the ~~number of customers supported by each Coach and higher products costs~~six months ended June 30, 2023, gross profit decreased $166.9 million, or 26.7%, to $457.1 million from $624.0 million for the six months ended June 30, 2023. The

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~~resulting~~decrease in gross profit for the six months ended June 30, 2023 was due to lower revenue as well as cost inflation from ~~increases in~~ raw ingredient costs, shipping costs, and labor costs. As a percentage of revenue, gross profit decreased ~~183~~70 basis points to ~~72.5%~~70.9% for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~74.3%~~71.6% for the corresponding period in ~~2021.~~2022. The decrease in gross profit as a percentage of revenue for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 is due to ~~higher products~~deleveraging of fixed costs resulting from increases in raw ingredient costs, shipping costs, and labor costs. For the nine months ended September 30, 2022, gross profit increased $57.5 million, or 6.8%, to $906.8 million from $849.3 million for the nine months ended September 30, 2021. The increase in gross profit for the nine-month period was primarily attributable to higher revenue partially offset by increased cost of sales. As a percentage of revenue, gross profit decreased 207 basis points to 71.9% for the nine months ended September 30, 2022 from 74.0% for the corresponding period in 2021. The decrease in gross margin percentage for the nine months ended September 30, 2022 was primarily due to ~~a customer acquisition program, which ran from late March to early May in 2022,~~lower volumes and ~~higher~~ product ~~costs resulting from increases in raw ingredient costs, shipping costs, and labor costs.~~cost inflation.

Selling, general, and administrative: SG&A expenses were ~~$234.7~~$172.0 million for the three months ended ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$17.2~~$100.7 million, or ~~6.8%~~36.9%, as compared to ~~$251.9~~$272.7 million from the corresponding period in ~~2021.~~2022. As a percentage of revenue, SG&A expenses were ~~60.1%~~58.1% for the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~60.9%~~60.2% for the corresponding period in ~~2021.~~2022. SG&A expenses included research and development costs of $1.1 million and $1.2 million for the three months ended ~~September~~June 30, 2023 and 2022, respectively, in connection with the development of new products, programs and ~~2021,~~clinical research activities. SG&A expenses were $364.9 million for the six months ended June 30, 2023, a decrease of $155.0 million, or 29.8%, as compared to $519.9 million from the corresponding period in 2022. As a percentage of revenue, SG&A expenses were 56.6% for the six months ended June 30, 2023 as compared to 59.7% for the corresponding period in 2022. SG&A expenses included research and development costs of $2.1 million and $2.2 million for the six months ended June 30, 2023 and 2022, respectively, in connection with the development of new products and programs and clinical research activities. ~~The decrease in~~ SG&A expenses decreased for the three months ended ~~September~~June 30, ~~2022 was~~2023 and six months ended June 30, 2023 primarily due to ~~lower~~ ~~OPTAVIA~~progress on several cost reduction and optimization initiatives, charitable donations in the second quarter of 2022 that did not recur in 2023, and decreased Coach compensation expense. SG&A expenses were $754.6 million for the nine months ended September 30, 2022, an increase of $74.7 million, or 11.0%, as compared to $679.9 million from the corresponding period in 2021. As a percentage of revenue, SG&A expenses were 59.8% for the nine months ended September 30, 2022 as compared to 59.2% for the corresponding period in 2021. SG&A expenses included research and development costs of $3.3 million and $3.3 million for the nine months ended September 30, 2022 and 2021, respectively, in connection with the development of new products and programs and clinical research activities. The increase in SG&A expenses for the nine months ended September 30, 2022 was primarily due to ~~higher~~ ~~OPTAVIA Coach compensation expense, donations made to support the Ukraine relief effort, incremental costs related to continued investment in information technology~~lower volumes and ~~distribution infrastructure, as well as the increased credit card fees resulting from higher sales.~~

Non-GAAP adjusted SG&A expenses were $233.6 million for the three months ended September 30, 2022, a decrease of $18.3 million, or 7.3%, as compared to $251.9 million from the corresponding period in 2021. Non-GAAP adjusted SG&A expenses were $744.1 million for the nine months ended September 30, 2022, an increase of $64.2 million, or 9.4%, as compared to 679.9 million from the corresponding period in 2021. Non-GAAP adjusted SG&A excludes expenses in connection with donations made to support the Ukrainian relief effort of $1.1 million and $10.5 million for the three and nine months ended September 30, 2022, respectively. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

~~OPTA~~VIA Coach compensation expense, which is a variable expense, decreased $17.2 million, or 9.5%, to $164.8 million for the three months ended September 30, 2022 from $182.1 million for the corresponding period in 2021. The decrease was primarily the result of decreased ~~OPTAVIA product sales. For the nine months ended September 30, 2022,~~ ~~OPTAVIA compensation expense increased $47.7 million, or 9.5%, to $548.4 million from $500.7 million for the corresponding period in 2021. The increase was primarily the result of increased~~ ~~OPTAVIA product sales in the first half of the year. The total number of~~fewer active earning ~~OPTAVIA Coaches as of September 30, 2022 increased to 66,200 from 61,000 for the corresponding date in 2021, an increase of 8.5%.~~Coaches.

Income from operations: For the three months ended ~~September~~June 30, ~~2022,~~2023, income from operations decreased ~~$7.0~~$10.3 million to ~~$48.2~~$38.7 million from ~~$55.2~~$49.0 million for the corresponding period in ~~2021~~2022 primarily as a result of decreased gross profit partially offset by decreased SG&A expenses. Income from operations as a percentage of revenue ~~decreased~~increased to ~~12.3%~~13.1% for the three months ended ~~September~~June 30, ~~2022~~2023 from ~~13.3%~~10.8% for the corresponding period in ~~2021~~2022 due to the factors described above impacting revenue and SG&A expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, income from operations decreased ~~$17.2~~$11.8 million to ~~$152.2~~$92.2 million from ~~$169.4~~$104.1 million for the corresponding period in ~~2021~~2022 primarily as a result of ~~increased SG&A expenses~~decreased gross profit partially offset by ~~increased gross profit.~~decreased SG&A expenses. Income from operations as a percentage of revenue ~~decreased~~increased to ~~12.1%~~14.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~14.8%~~11.9% for the corresponding period in ~~2021~~2022 due to the factors ~~described~~ above impacting revenue ~~cost of sales~~ and SG&A expenses.

Non-GAAP adjusted income from operations was $49.2 million for the three months ended September 30, 2022, a decrease of $5.9 million, or 10.7%, as compared to $55.2 million from the corresponding period in 2021. Non-GAAP adjusted income from operations was $162.7 million for the nine months ended September 30, 2022, a decrease of $6.7 million, or 3.9%, as compared

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to $169.4 million from the corresponding period in 2021. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

Provision for income taxes: For the three months ended ~~September~~June 30, ~~2022,~~2023, the Company recorded ~~$11.7~~$8.8 million in income tax expense, an effective tax rate of ~~24.5%~~22.6%, as compared to ~~$13.2~~$9.7 million in income tax expense, an effective tax rate of ~~23.9%~~19.8%, for the three months ended ~~September~~June 30, ~~2021.~~2022. The increase in the effective tax rate for the three months ended ~~September~~June 30, ~~2022~~2023 was primarily driven by ~~an increase~~a decrease in ~~state income taxes partially offset by increased~~the tax ~~benefits~~benefit for charitable donations of inventory ~~donations and research and development tax credits.~~in the quarter. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recorded ~~$34.6~~$22.2 million in income tax expense, an effective tax rate of ~~22.8%~~24.0%, as compared to ~~$39.4~~$22.9 million in income tax expense, an effective tax rate of ~~23.2%~~22.0%, for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The ~~decrease~~increase in the effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was primarily driven by a decrease in the tax ~~benefits~~benefit for charitable donations of inventory ~~donations~~as well as an increase in the limitations on executive compensation and ~~research~~meals and ~~development tax credits~~entertainment costs partially offset by an increase in ~~state income taxes and a decrease in~~ the tax benefit ~~of stock compensation.~~

~~Non-GAAP adjusted income~~for research and development tax provision was $12.2 million for the three months ended September 30, 2022, an effective tax rate of 24.9% as compared to 23.9% for the corresponding period in 2021. Non-GAAP adjusted income tax provision was $39.4 million for the nine months ended September 30, 2022, an effective tax rate of 24.3%, as compared to 23.2% for the corresponding period in 2021. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.costs.

Net income: Net income was ~~$36.2~~$30.3 million and ~~$117.1~~$70.2 million, or ~~$3.27~~$2.77 and ~~$10.30~~$6.43 per diluted share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$42.0~~$39.1 million and ~~$130.0~~$80.9 million, or ~~$3.56~~$3.42 and ~~$10.98~~$7.01 per diluted share, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The period-over-period changes were driven by the factors described above in the section titled “Income from operations.”

Non-GAAP adjusted net income was $36.8 million or $3.32 per diluted share for the three months ended September 30, 2022 as compared to $3.56 per diluted share for the corresponding period in 2021. Non-GAAP adjusted net income was $122.8 million or $10.81 per diluted share for the nine months ended September 30, 2022 as compared to $10.98 per diluted share for the corresponding period in 2021. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

~~Non-GAAP Financial Measures~~

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in this quarterly report, our quarterly earnings press release and other public disclosures. The following GAAP financial measures have been presented on an as-adjusted basis: SG&A expenses, income from operations, provision for income taxes, net income and diluted earnings per share. Each of these as-adjusted financial measures excludes the impact of certain amounts related to our donations to support the Ukrainian relief effort as further identified below and have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below. These non-GAAP financial measures are not intended to replace GAAP financial measures.

We use these non-GAAP financial measures internally to evaluate and manage the Company’s operations because we believe they provide useful supplemental information regarding the Company’s on-going economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

~~The following tables reconcile the non-GAAP financial measures included in this report (in thousands, except per share amounts):~~

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Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
GAAP Donation
Adjustments Non-GAAP GAAP Donations Adjustments Non-GAAP
Selling, general, and administrative $ 234,693 $ (1,087) $ 233,606 $ 251,886 $ — $ 251,886
Income from operations 48,156 1,087 49,243 55,171 — 55,171
Provision for income taxes 11,723 491 12,214 13,210 — 13,210
Net income 36,155 596 36,751 41,982 — 41,982
Diluted earnings per share (1)
3.27 0.05 3.32 3.56 — 3.56
Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
GAAP Donation
Adjustments Non-GAAP GAAP Donations Adjustments Non-GAAP
Selling, general, and administrative $ 754,610 $ (10,513) $ 744,097 $ 679,907 $ — $ 679,907
Income from operations 152,207 10,513 162,720 169,404 — 169,404
Provision for income taxes 34,601 4,752 39,353 39,370 — 39,370
Net income 117,050 5,761 122,811 130,008 — 130,008
Diluted earnings per share (1)
10.30 0.51 10.81 10.98 — 10.98

(1) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

Liquidity and Capital Resources

The Company had stockholders’ equity of ~~$150.5~~$185.6 million and working capital of ~~$75.3~~$113.9 million at ~~September~~June 30, ~~2022~~2023 as compared with ~~$202.5~~$155.0 million and ~~$137.0~~$81.9 million at December 31, ~~2021,~~2022, respectively. The ~~$52.0~~$30.5 million net ~~decrease~~increase in stockholders’ equity reflects ~~$117.1~~$70.2 million in net income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 offset by ~~$120.0~~$3.6 million used for repurchases of the Company’s common stock and ~~$55.8~~$36.2 million for declared dividends paid to holders of the Company’s common stock as well as the other equity transactions described in the “Condensed Consolidated Statements of Changes in Stockholders’ Equity” included in this report. On ~~September 8, 2022,~~June 15, 2023, the Company declared a quarterly dividend of ~~$1.64~~$1.65 per share payable on ~~November~~August 8, ~~2022,~~2023, to stockholders of record as of ~~September 20, 2022. While we intend~~June 27, 2023. Future share repurchases and the payment of any future dividends are subject to ~~continue~~ the ~~dividend program~~business judgment of our Board of Directors, taking into consideration our historical and ~~believe we will have sufficient liquidity to do so, we can provide no assurance that we will be able to continue to declare~~projected results of operations, financial condition, cash flows, capital requirements, industry conditions, covenant compliance, changes in laws and ~~pay dividends.~~

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regulations, current economic environment and other factors considered relevant. The Company’s cash, and cash equivalents ~~and investment securities decreased~~increased from ~~$109.5~~$87.7 million at December 31, ~~2021~~2022 to ~~$69.7~~$147.4 million at ~~September~~June 30, ~~2022.~~2023.

Net cash provided by operating activities increased by ~~$40.8~~$19.8 million to ~~$142.8~~$107.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$102.0~~$87.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily driven by a ~~$111.0~~$26.9 million increase related to changes in inventory balances, a ~~$7.0~~$4.1 million increase in prepaid expenses and other current assets, a $6.0 million increase in other assets and a $11.5 million reduction in income taxes payable, partially offset by a reduction in net income, ~~as well as decreases related to changes~~a $2.0 million reduction in ~~certain balance sheet accounts, including $5.2~~share-based compensation, and a $17.9 million ~~in other assets and $65.0 million~~reduction in accounts payable and accrued expenses. We ~~continued to expand~~decreased our ~~cloud computing technology capabilities to support our planned growth~~inventory purchases during the ~~nine months~~period ended ~~September~~June 30, ~~2022.~~2023 to align with sales demand. Accounts payable and accrued expenses decreased due to the timing of payments.

Net cash used in investing activities was ~~$2.4~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$17.4~~$0.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Net cash used in financing activities ~~increased~~decreased by ~~$81.3~~$86.4 million to ~~$175.3~~$43.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$93.9~~$130.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. This ~~increase~~decrease was primarily due to ~~$74~~the $100.0 million ~~used for repurchases of the Company's common stock under the~~ accelerated share repurchase (“ASR”) program ~~and $6.9~~as of June 30, 2022 that did not recur in 2023, a $16.4 million decrease in other repurchases of the Company’s common stock, partially offset by $27.0 million in ~~cash dividends paid to stockholders. Under the terms~~borrowings under revolving credit facility as of ~~the ASR agreement, approximately 480 thousand shares were delivered~~June 30, 2022 that did not recur in ~~the second quarter of 2022. A final delivery of approximately 91 thousand shares was received on August 8, 2022 to complete the ASR agreement.~~2023.

In pursuing its business strategy, the Company may require additional cash for operating and investing activities. The Company expects future cash requirements in both the short term and the long term, if any, to be funded from operating cash flow and financing activities.

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From time to time the Company evaluates potential acquisitions that complement our business. If consummated, any such transactions may use a portion of our working capital or require the issuance of equity or debt. We have no present understandings, commitments or agreements with respect to any material acquisitions.

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent. On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on SOFR, from LIBOR (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a $225.0 million senior secured revolving credit facility with a $20.0 million letter of credit sublimit. The Amended Credit Agreement also provides for an uncommitted incremental facility that permits the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $100.0 million. The Amended Credit Agreement contains affirmative and negative covenants customarily applicable to credit facilities. As of ~~September~~June 30, ~~2022,~~2023, the Company had no borrowings under the credit facility and was in compliance with all of its debt covenants.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions or other financial instruments for trading or speculative purposes.

The Company is exposed to market risk related to changes in interest rates and market pricing impacting our credit facility. ~~If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels~~The Company did not have any outstanding borrowings or investments at ~~September~~June 30, ~~2022, the Company estimates that the fair value of its borrowings under its credit facility would decline by an immaterial amount~~2023, and therefore it would not expect its operating results or cash flows to be affected to any significant degree by the effect of a change in market ~~conditions on our investments.~~conditions.

There have been no material changes to our market risk exposure since December 31, ~~2021.~~2022.

Item 4. Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Act, as amended, as of ~~September~~June 30, ~~2022.~~2023. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is recorded, processed, summarized and reported accurately and on a timely basis. Based on this evaluation performed in accordance with the criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this report.

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Changes in Internal Control over Financial Reporting

There have been no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II Other Information

Item 1. Legal Proceedings

The Company is, from time to time, subject to a variety of litigation and similar proceedings that arise out of the ordinary course of its business. Based upon the Company’s experience, current information and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its results of operations, financial position or liquidity. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the ~~2021~~2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

2022
Total Number of Shares Purchased (1)(3)
Average Price Paid per Share Total Number of Shares Purchased
as Part of a Publicly Announced
Plan or Program
Maximum Number of Shares that May
Yet Be Purchased Under the Plans or Programs (2)
July 1 - July 31 120 $ 174.16 — 1,499,197
August 1 - August 31 91,292 $ 178.66 91,292 1,407,905
September 1 - September 30 52 $ 115.09 — 1,407,905


2023	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 - April 30	13	91.65	—	1,323,568
May 1 - May 31	—	—	—	1,323,568
June 1 - June 30	654	80.49	—	1,323,568

(1)Also included are shares of common stock surrendered by employees and directors to the Company to cover minimum tax liability withholding obligations upon the exercise of stock options or the vesting of shares of restricted stock and performance-based share awards previously granted to such employees and directors.

(2)At the outset of the quarter ended ~~September~~June 30, ~~2022,~~2023, there were ~~1,499,197~~1,323,568 shares of the Company’s common stock eligible for repurchase under the stock repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan").

~~(3)~~In the second quarter of fiscal 2022, the Company paid $100 million under an Accelerated Share Repurchase (“ASR”) agreement and received an initial delivery of approximately 480 thousand shares. A final delivery of approximately 91 thousand shares was received on August 8, 2022 to complete the ASR agreement. See Note 9 to the Consolidated Financial Statements included in this report for further description of the ASR.

As of ~~September~~June 30, ~~2022,~~2023, there were ~~1,407,905~~1,323,568 shares of the Company’s common stock eligible for repurchase under the Stock Repurchase Plan. There can be no assurances as to the amount, timing or prices of repurchases, which may vary based on market conditions and other factors. The Stock Repurchase Plan does not have an expiration date and can be modified or terminated by the Board of Directors at any time.

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Item 6. Exhibits


Exhibit Number						Description of Exhibit

3.1						Restated and Amended Certificate of Incorporation of Medifast, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 001-31573) filed February 27, 2015).

3.2						Amended and Restated Bylaws of Medifast, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 Current Report on Form 8-K (File No. 001-31573) filed on December 4, 2019).

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).



101						The following financial statements from Medifast, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 filed ~~November 3, 2022,~~August 7, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements (filed herewith).

104						Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

In accordance with SEC Release No. 33-8238, Exhibit 32.1 is being furnished and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Medifast, Inc.


By:			/s/ DANIEL R. CHARD
			Daniel R. Chard
			Chief Executive Officer
			(Principal Executive Officer)

Dated:			~~November 3, 2022~~August 7, 2023


			/s/ JAMES P. MALONEY
			James P. Maloney
			Chief Financial Officer
			(Principal Financial Officer)

Dated:			~~November 3, 2022~~August 7, 2023

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	September 30, 2022
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities

Cash	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—

Level 1:
Money market accounts	—		—		—		—		—		—






Total	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	GAAP		Donation Adjustments		Non-GAAP		GAAP		Donations Adjustments		Non-GAAP
Selling, general, and administrative	$	234,693	$	(1,087)	$	233,606	$	251,886	$	—	$	251,886
Income from operations	48,156		1,087		49,243		55,171		—		55,171
Provision for income taxes	11,723		491		12,214		13,210		—		13,210
Net income	36,155		596		36,751		41,982		—		41,982
Diluted earnings per share (1)	3.27		0.05		3.32		3.56		—		3.56


2022	Total Number of Shares Purchased (1)(3)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 - July 31	120	$	174.16	—	1,499,197
August 1 - August 31	91,292	$	178.66	91,292	1,407,905
September 1 - September 30	52	$	115.09	—	1,407,905