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What changed in MEDIFAST INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MEDIFAST INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+297 added−301 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-20)

Top changes in MEDIFAST INC's 2024 10-K

297 paragraphs added · 301 removed · 206 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

102 edited+74 added−68 removed40 unchanged
Biggest changeHigh-quality, complete protein evenly distributed throughout the day helps to activate muscle protein synthesis and supports muscle health. 12 No one can predict how long you are going to live, but research suggests that making an overall lifestyle change by taking an active role in your choices and behavior, including losing weight, eating healthier, moving more, and reducing stress, has the potential to help you live a longer, healthier life. 11 Table of Contents No matter what plan a customer is on, they learn healthy habits through the Habits of Health Transformational System, which is a crucial tool for customer success and provides the foundation for our community to learn and adopt healthy habits.
Biggest changeNo matter what plan a customer is on, they can learn healthy habits through the Habits of Health Transformational System, which is a crucial tool for customer success and provides the foundation for our community to learn and adopt healthy habits.
Our culture narrative is fully embedded in our core human capital processes to ensure our team members understand how their success translates to the success of the greater team and ultimately to an amazing Coach & customer experience.
Our culture narrative is fully embedded in our core human capital processes to ensure our team members understand how their success translates to the success of the greater team and ultimately to an amazing coach and customer experience.
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, OPTA VIA Coaches and customers. These macroeconomic uncertainties make it challenging for our management to estimate our future business performance.
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, OPTA VIA coaches and customers, and stockholders. These macroeconomic uncertainties make it challenging for our management to estimate our future business performance.
We recognize that these weight loss medications have attracted significant attention from the market and pose a threat to our interactions with our customer base. Importantly, the efficacy claims of GLP-1 medications for weight loss are based specifically on their incorporation of lifestyle changes that include a reduced calorie diet and increased physical activity.
We recognize that these weight loss medications have attracted significant attention from the market and pose a threat to our interactions with our traditional customer base. Importantly, the efficacy claims of GLP-1 medications for weight loss are based specifically on their incorporation of lifestyle changes that include a reduced calorie diet and increased physical activity.
We also compete with other direct-selling organizations, some of which have a longer operating history and greater visibility, name recognition and financial resources than we do. We also believe we have advantages over traditional direct selling companies: • OPTA VIA’s innovative model is customer-centric and has one sales price for both OPTA VIA Coaches and customers.
We also compete with other direct-selling organizations, some of which have a longer operating history and greater visibility, name recognition and financial resources than we do. We also believe we have advantages over traditional direct selling companies: • OPTA VIA’s innovative model is customer-centric, with one sales price for both OPTA VIA coaches and customers.
Medifast is focused on attracting and retaining top talent who are eager to participate in our mission. Our Total Rewards Program is intended to deliver competitive compensation and benefits that align with our company mission and values. Annually, we review our market reference ranges and pay to ensure we remain competitive, consistent, and equitable.
We are focused on attracting and retaining top talent who are eager to participate in our mission. Our Total Rewards Program is intended to deliver competitive compensation and benefits that align with our company mission and values. Annually, we review our market reference ranges and pay to ensure we remain competitive, consistent, and equitable.
Our #AcedIt program provides team members with a platform to recognize excellent work that supports our business strategy, applauds behaviors that reinforce our cultural values, and fosters a sense of gratitude — all key components in nurturing strong relationships and building tight-knit communities. #AcedIt allows for both social and point-based recognition and celebrates team members for achieving important milestones in service.
Our #AcedIt program provides team members with a platform to recognize excellent work that supports our business strategy, applauds behaviors that reinforce our cultural values, and fosters a sense of gratitude which are all key components in nurturing strong relationships and building tight-knit communities. #AcedIt allows for both social and point-based recognition and celebrates team members for achieving important milestones in service.
We continuously monitor our information systems and infrastructure, and have sufficient polices and committees in place to evaluate if and when an incident occurs and becomes material. We also use redundant carrier-diverse networks to interconnect our corporate locations. We annually evaluate SSAE 18 compliance of key third party service organizations by reviewing relevant System and Organization Controls (SOC) reports.
We continuously monitor our information systems and infrastructure, and have sufficient policies and committees in place to evaluate if and when an incident occurs and becomes material. We also use redundant carrier-diverse networks to interconnect our corporate locations. We annually evaluate SSAE 18 compliance of key third party service organizations by reviewing relevant System and Organization Controls (SOC) reports.
It is certified by the Safe Qualified Food Institute as a Safe Quality Food Program Level 2 facility compliant with the Global Food Safety Initiative, a global non-profit collaboration to advance food safety. The products underlying the remaining 75% of our total unit sales are manufactured by co-manufacturers in accordance with Medifast proprietary formulas and manufacturing standards.
It is certified by the Safe Qualified Food Institute as a Safe Quality Food Program Level 2 facility compliant with the Global Food Safety Initiative, a global non-profit collaboration to advance food safety. The products underlying the remaining 60% of our total unit sales are manufactured by co-manufacturers in accordance with Medifast proprietary formulas and manufacturing standards.
SCIENTIFIC ADVISORY BOARD Our Scientific Advisory Board consists of seven multi-disciplinary, internationally recognized scientific experts who provide objective insights to guide the Company in making informed decisions based on the latest scientific developments in health and wellness and serve as the foundation for scientifically-valid, evidence-based, customer-centric, high-quality innovations by the Company for lasting health.
Scientific Advisory Board Our Scientific Advisory Board consists of six multi-disciplinary, internationally recognized scientific experts who provide objective insights to guide the Company in making informed decisions based on the latest scientific developments in health and wellness and serve as the foundation for scientifically-valid, evidence-based, customer-centric, high-quality innovations by the Company for lasting health.
For example, in 2016, the FTC entered into a settlement with another multi-level marketing company, requiring the company to modify its business model, including basing sales compensation and qualification only on sales to retail and preferred customers and on purchases by a distributor for personal consumption within allowable limits.
For example, in 2016, the FTC entered into a settlement with another direct selling/multi-level marketing company, requiring the company to modify its business model, including basing sales compensation and qualification only on sales to retail and preferred customers and on purchases by a distributor for personal consumption within allowable limits.
Findings also showed most individuals interested in weight loss medications are looking for support beyond prescriptions, including clarity on how to incorporate components of healthy living, such as proper nutrition and exercise, into their lifestyles while utilizing these medical solutions 7 .
Findings also showed most individuals interested in weight loss medications are looking for support beyond prescriptions, including clarity on how to incorporate components of healthy living, such as proper nutrition and exercise, into their lifestyles while utilizing these medical solutions 9 .
The Habits of Health Transformational System is an innovative, mind and body lifestyle approach that encourages and educates customers to replace unhealthy habits with healthy ones that contribute to their long-term success. INCENTIVES We offer economic incentives designed to support each OPTA VIA Coach’s and customer’s success.
The Habits of Health Transformational System is an innovative, mind and body lifestyle approach that encourages and educates customers to replace unhealthy habits with healthy ones that contribute to their long-term success. Incentives From time to time we offer economic incentives designed to support each OPTA VIA coach’s and customer’s success.
Our north star is our Culture Compass that helps us understand the behaviors, values, and ways of working that define our culture today, identifying gaps, areas of growth and where we need to adjust in order to deliver on our strategy more effectively moving forward. Our Culture Contract lays out the explicit behaviors that underlie our Core Values.
Our north star is our Culture Compass that helps us understand the behaviors, values, and ways of working that define our culture today by identifying gaps, areas of growth, and where we need to adjust in order to deliver on our strategy more effectively. Our Culture Contract lays out the explicit behaviors that underlie our core values.
The total potential pool of OPTA VIA customers is sizable; there are about 200 million people in the United States looking to lose weight and willing to consider dieting 5 .
The total potential pool of OPTA VIA customers is sizable; there are about 200 million people in the United States looking to lose weight and willing to consider dieting 8 .
Several states have passed legislation that more clearly distinguishes between illegal pyramid schemes and legitimate multi-level marketing (“MLM”) business models. Recent settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales.
Several states have passed legislation that more clearly distinguishes between illegal pyramid schemes and legitimate multi-level marketing (“MLM”) business models. 12 Table of Contents Settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales.
Many have tried weight loss programs previously but have been unsuccessful at maintaining a healthy weight and embracing healthy habits for the long-term.
Many have tried weight loss programs previously but have been unsuccessful at managing a healthy weight and embracing healthy habits for the long-term.
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.
An inflationary economy 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.
Experts agree that lifestyle change remains foundational to long-term health and wellbeing, even for those utilizing weight loss medications. In fact, independent research commissioned by Medifast revealed 96% of people recognized that lifestyle changes are needed for weight loss and maintenance, yet only 17% are confident they can manage on their own.
Experts agree that lifestyle changes remain foundational to long-term health and wellbeing, even for those utilizing weight loss medications. In fact, independent research commissioned by Medifast revealed 96% of people recognized that lifestyle changes are needed for weight loss and management, yet only 17% are confident they can manage on their own.
OPTA VIA's holistic lifestyle solution is built around four key components: • Independent Coaches: Independent OPTA VIA Coaches provide individualized support and guidance to customers on the path to optimal health and wellbeing. • OPTA VIA 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 that offers easy steps to a sustainable healthy lifestyle. • Products & Plans: Clinically proven plans and scientifically developed products, backed by dietitians, scientists and physicians.
The lifestyle solution is designed for real life and built around four key components: • Independent Coaches: Independent OPTA VIA coaches provide individualized support and guidance to customers on the path to optimal health and wellbeing. • OPTA VIA Community: A community of like-minded people providing each other with real-time connection and support. • The Habits of Health ® Transformational System: A proprietary system that offers easy steps to a sustainable healthy lifestyle. • Products & Plans: Clinically proven plans and scientifically developed products, backed by dietitians, scientists and physicians.
CUSTOMERS Sales are made to individual customers. No single customer accounted for 10% or more of our consolidated revenue for the year ended December 31, 2023. SEASONALITY Demand for weight management products and programs are typically seasonal.
Customers Sales are made to individual customers. No single customer accounted for 10% or more of our consolidated revenue for the year ended December 31, 2024. Seasonality Demand for weight management products and programs throughout the industry are typically seasonal.
January and February generally show sequential increases in sales, as these months are considered the commencement of the “diet season” and "resolution season." We believe our sales pattern does not follow the seasonality of our industry, but rather is predicated on the growth of our OPTA VIA Coach network.
January and February generally show sequential increases in sales, as these months are considered the commencement of the “diet season” and "resolution season." We believe, however, that our sales pattern does not necessarily follow the seasonality of our industry, but rather is predicated on the growth or contraction of our OPTA VIA coach network.
We offer customers a radically different approach to health, with weight loss and weight management serving as a catalyst for an overall improvement in health, confidence, vitality and general well-being. Consumer Motivation Our core customers are highly motivated to adopt a healthy lifestyle that is transformative and sustainable.
We offer customers an approach to health that is designed for real life, with weight loss and weight management serving as a catalyst for an overall improvement in health, confidence, vitality and general well-being. Consumer Motivation Our core customers are highly motivated to adopt a healthy lifestyle that is transformative and sustainable.
However, we intend to continue to actively monitor the impact of these developments on our business and will update our practices accordingly. The weight loss industry is very competitive and encompasses a diverse array of weight loss products and programs.
However, we intend to continue to actively monitor the impact of these developments on our business and will update our practices accordingly. Competition The weight loss industry is very competitive and encompasses a multitude of weight loss products and programs.
The MLM Guidance explains, among other things, the FTC’s views concerning lawful and unlawful compensation structures, whether personal consumption by participants can be used in determining an MLM organization’s compensation structure, and how an MLM organization should approach representations to current and prospective participants.
The MLM Guidance explains, among other things, the FTC’s views concerning lawful and unlawful compensation structures, whether personal consumption by participants can be used in determining an MLM organization’s compensation structure, and how an MLM organization should approach representations to current and prospective participants. We believe our current business practices comply with the MLM Guidance.
Competition and Macroeconomic Conditions Certain global economic challenges including the impact of inflation and adverse labor market conditions have caused macroeconomic uncertainty and volatility in markets where we, our suppliers and our OPTA VIA Coaches operate. We are exposed to market risks from changes in commodity or other raw material prices.
Macroeconomic Conditions Certain global economic challenges, including the impact of inflation, have caused macroeconomic uncertainty and volatility in markets where we, our suppliers, and our OPTA VIA coaches operate. Like many product-focused companies, we are exposed to market risks from changes in commodity or other raw material prices.
If our collaboration and relationship with LifeMD grows, in the future, we may become subject to the same government regulators that regulate LifeMD’s business operations. These include federal and state healthcare regulatory laws which include, 14 Table of Contents but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.
If our collaboration and relationship with LifeMD grows, in the future, we may become subject to the same government regulators that regulate LifeMD’s business operations. These include federal and state healthcare regulatory laws which include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws. For additional information, see Item 1A.
Within our supply chain, we continued our Level Up shadow program for a second year, which creates opportunities for our supply chain team members to be cross trained in other areas of the supply chain and learn new skills. This program is geared towards enabling greater sponsorship of junior talent and an increase of internal mobility.
Within our supply chain, we have continued our Level Up shadow program, which creates opportunities for our supply chain team members to be cross trained in other areas of the supply chain and learn new skills. This program fosters greater sponsorship of junior talent and an increase of internal mobility.
OPTA VIA Coaches guide their customers on which Fuelings to select, and on how to develop healthy habits, such as preparing lean and green meals and choosing healthy snacks. • Optimal Weight 4 & 2 & 1 Plan ® .
OPTA VIA coaches guide their customers on which Fuelings to select, and on how to develop healthy habits, such as preparing lean and green meals and choosing healthy snacks.
Led by the Company’s team of researchers, food scientists, nutritionists, and other scientific experts, OPTA VIA ACTIVE Essential Amino Acid (EAAs) Blend and OPTA VIA ACTIVE Whey Protein are designed to address age-related muscle mass decline and support overall muscle health.
The Company’s team of researchers, food scientists, nutritionists, and other scientific experts, led the development of OPTA VIA ACTIVE EAA Blend and OPTA VIA ACTIVE Whey Protein, which are designed to address age-related muscle mass decline and support overall muscle health.
We have authored over 66 peer-reviewed scientific abstracts and publications, 33 scientific journal publications and 28 completed research studies.
We have authored over 73 peer-reviewed scientific abstracts and publications, 36 scientific journal publications and 28 completed research studies.
As an organization, we are committed to generating an open dialog with our team members and building a more inclusive work environment that enables all our team members to have a voice.
Diversity is one of Medifast’s Core Values. As an organization, we are committed to generating an open dialog with our team members and building a more inclusive work environment that enables all our team members to have a voice.
Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, Seven Crondall Associates, LLC, Corporate Events, Inc., OPTA VIA (Hong Kong) Limited, OPTA VIA (Singapore) PTE. LTD and OPTA VIA Health Consultation (Shanghai) Co., Ltd.
Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, OPTA VIA (Hong Kong) Limited, and OPTA VIA Health Consultation (Shanghai) Co., Ltd.
LIFESTYLE PLANS & BUNDLES Our Optimal Weight plans help customers enter a gentle, but efficient fat-burning state. Customers’ success is enhanced by the personal attention, accountability, education, advice, and motivation they receive from our OPTA VIA Coaches. They also benefit from being members of a broader OPTA VIA Community of customers with like-minded goals and objectives regarding their health.
Lifestyle Plans Customers’ success is enhanced by the personal attention, accountability, education, advice, and motivation they receive from our OPTA VIA coaches. They also benefit from being members of a broader OPTA VIA community of customers with like-minded goals and objectives regarding their health.
They support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, X, and video conferencing platforms. The more OPTA VIA Coaches we have, the more customers we can serve. The total number of active earning OPTA VIA Coaches as of December 31, 2023 was 41,100.
They support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, X, and video conferencing platforms. The more OPTA VIA coaches we have, the more customers we can serve.
Each year we host a program called Coach Encounters, which gives our team members an opportunity to hear directly from our amazing Coaches about their personal journey and how the Company supports their work in seeking positive health outcomes for our customers. In 2023, we were recognized by U.S.
Each year we host a program called Coach Encounters, which gives our team members an opportunity to hear directly from our inspiring coaches about their personal journeys as well as how our company supports their work in seeking positive health outcomes for our customers. In 2024, we were once again recognized by U.S.
In 2023, we conducted two cycles of our listening initiative, The Loop, which promotes communication transparency, empowers our team leaders to review their employee engagement results and facilitates candid conversations to shape and improve the work experience. Biannually, we repeat training for our senior leaders to foster inclusive leadership.
In 2024, we conducted two cycles of our listening initiative, The Loop, which promotes communication transparency, empowers our team leaders to review their employee engagement results and facilitates candid conversations to shape and improve the work experience.
If we are required to make changes or if the FTC seeks to enforce similar measures in the industry, either through rulemaking or an enforcement action against our Company, our business could be harmed.
If we are required to make changes or if the FTC changes current guidance, either through rulemaking or an enforcement action against our Company, our business could be harmed.
Our Fuelings contain high-quality protein which helps our customers retain lean muscle mass and contain the patented probiotic BC30™ to support digestive health as part of a balanced diet and healthy lifestyle. Our OPTA VIA Coaches market OPTA VIA Fuelings primarily through clinically proven Optimal Weight Plans.
Our Fuelings contain high-quality protein which helps our customers retain lean muscle mass and contain the patented probiotic BC30™ to support digestive health as part of a balanced diet and healthy lifestyle.
They promote a holistic wellness program and are not exclusively focused on product sales. Our competitive OPTA VIA Coach compensation plan is also deliberately structured to incentivize coaching and support customer success. • The field promotes a unified training system that aligns its leaders around a common mission.
Our competitive OPTA VIA coach compensation plan is also deliberately structured to incentivize coaching and support customer success. • The field promotes a unified training system that aligns its leaders around a common mission.
For additional information, see Item 1A. Risk Factors. PRODUCT LIABILITY AND INSURANCE The Company, like other producers and distributors of ingested products, faces an inherent risk of exposure to product liability claims in the event that, among other things, the use of its products results in injury or death.
Risk Factors. Product Liability and Insurance The Company, like other producers and distributors of ingested products, faces an inherent risk of exposure to product liability claims in the event that, among other things, the use of its products results in injury or death. The Company maintains insurance against product liability claims with respect to the products it manufactures.
The Company does not buy products from suppliers who do not maintain such coverage. WORKING CAPITAL PRACTICES We maintain sufficient amounts of inventory in stock in order to provide a high level of service to our customers. Substantial inventories are required to meet the needs of our dual role as manufacturer and distributor.
The Company does not buy products from suppliers who do not maintain such coverage. Working Capital Practices We maintain sufficient amounts of inventory in stock in order to provide a high level of service to our customers.
Customers purchase kits tailored to their individual needs on the advice and guidance of their OPTA VIA Coach. • OPTA VIA ACTIVE . OPTA VIA Essential Amino Acid (EAAs) Blend and OPTA VIA ACTIVE Whey Protein are designed to help new and existing customers of all fitness levels optimize their motion habits.
OPTA VIA Essential Amino Acid (EAAs) Blend and OPTA VIA ACTIVE Whey Protein are designed to help new and existing customers of all fitness levels optimize their motion habits.
Through our Optimal Learning platform, team members have access to online courses. In 2023, we launched a Culture Journey learning path to further integrate an understanding of our culture for new team members.
Through our learning management system, Optimal Learning, team members have access to online courses such as a Culture Journey learning path to further integrate an understanding of our culture for new team members.
They promote a holistic health and wellness program and are not focused solely on product sales. • OPTA VIA offers a differentiated direct-to-consumer model, with 100% of products shipped directly to customers. • The field promotes a unified Habits of Health training system that aligns its leaders around a common mission of Lifelong Transformation, One Healthy Habit at a Time.
There is no tiered pricing. • OPTA VIA boasts a health and wellness community, which promotes a holistic health and wellness program and is not focused solely on product sales. • OPTA VIA offers a differentiated direct-to-consumer model, with 100% of products shipped directly to customers. • The field promotes a unified Habits of Health training system that aligns its leaders around a common mission of Lifelong Transformation, Making a Healthy Lifestyle Second Nature.
These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions.
That said, the FTC's enforcement efforts have created a level of ambiguity as to the proper interpretation of the law and related court decisions.
The Optimal Weight and Health plans and product bundles we market to customers are: • Optimal Weight 5 & 1 Plan ® . Our proven Optimal Weight 5 & 1 Plan encourages customers to eat six small meals a day, an important habit that helps maintain healthy weight.
The plans the company markets to customers include: • Optimal Weight 5 & 1 Plan ® & Optimal Weight 5 & 1 ACTIVE Plan ® . Our proven Optimal Weight 5 & 1 Plan encourages customers to eat six small meals a day, an important habit that helps customers maintain healthy weight.
Although this settlement does not represent judicial precedent or a new FTC rule, the FTC has indicated that the industry should look at this settlement, and the principles underlying its specific measures, for guidance.
Although these settlements do not represent judicial precedent or new FTC rules, the FTC has indicated that the industry should look at these settlements, and the principles underlying their specific measures, for guidance.
The company eventually entered into a consent order with the FTC, pursuant to which the company was permanently prohibited from using a multi-level compensation plan in the United States. We have taken additional steps to educate our Coaches on proper earnings claims.
The company eventually entered into a consent order with the FTC, pursuant to which the company was permanently prohibited from using a multi-level compensation plan in the United States.
With this in mind, we will continue to invest in important growth initiatives, particularly as we explore the ways in which we can expand the markets we serve and deliver a high-quality experience for more customers.
With this in mind, we will continue to invest in important growth initiatives, particularly as we explore the ways in which we can expand our business in domestic markets we serve and deliver a high-quality experience for more customers. Our model, programs, and products resonate with broad swathes of consumers regardless of geography or demographic.
Under this plan, OPTA VIA Coaches guide their customers to eat four meals of OPTA VIA Fuelings and prepare two lean and green meals and one healthy snack themselves. • Optimal Health 3 & 3 Plan ® . The Optimal Health 3 & 3 Plan is designed for customers who want to sustain a healthy weight.
Under this plan, OPTA VIA coaches guide their customers to eat four meals of OPTA VIA Fuelings and prepare two lean and green meals and one healthy snack themselves.
We believe our current business practices comply with the MLM Guidance. 13 Table of Contents In 2019, the FTC took aggressive actions against a multi-level marketing company, alleging that the company operated an illegal pyramid scheme that deceived consumers into believing that they could earn significant income as distributors of its health and wellness products.
Similarly, in 2019, the FTC took aggressive actions against another direct selling/multi-level marketing company, alleging that the company operated an illegal pyramid scheme that deceived consumers into believing that they could earn significant income as distributors of its health and wellness products.
Each OPTA VIA Fueling is scientifically formulated with the right balance of carbohydrates, protein, and fat which help promote a gentle, but efficient fat-burning state when on one of our Optimal Weight Plans.
Each OPTA VIA Fueling is scientifically formulated with a proper balance of carbohydrates, protein, and fat which help promote a gentle, but efficient fat-burning state when on one of our clinically proven Optimal Weight Plans. Customers purchase kits tailored to their individual needs on the advice and guidance of their OPTA VIA coach. • OPTA VIA ACTIVE .
As a result, under 1 OPTA VIA makes no guarantee of financial success. Success with OPTA VIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence and leadership.
Success with OPTA VIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence and leadership.
There is no tiered pricing. • OPTA VIA Coaches focus on coaching and supporting customers. They do not hold inventory or manage cash. • OPTA VIA boasts an energized health and wellness community, where about 90% of Coaches come from the customer base and have been in their customers’ shoes.
They do not hold inventory or manage cash. • OPTA VIA boasts an energized health and wellness community, where about 90% of coaches come from the customer base and have been in their customers’ shoes. They promote a holistic wellness program and are not exclusively focused on product sales.
The OPTA VIA model: • Offers a solution that focuses on holistic wellness; it views healthy weight as a catalyst to greater changes and has impacted more than 3 million lives. • Provides personalized, empathetic support from Coaches who have been in their customers’ shoes. • Promotes lifelong habit development supported by a proprietary integrated approach to behavior change, the Habits of Health Transformational System. • Encompasses a vibrant health and wellness community of hundreds of thousands of others. • Provides customers with access to board-certified affiliated clinicians and weight loss medications, such as GLP-1s, that support treatment plans for obesity and other related health conditions through a collaboration with national virtual primary care provider, LifeMD.
The OPTA VIA model: 6 Table of Contents • Offers a solution that focuses on holistic wellness; it views healthy weight as a catalyst to greater changes and has impacted more than 3 million lives. • Provides personalized, empathetic support from coaches who have been in their customers’ shoes. • Promotes lifelong habit development supported by a proprietary integrated approach to behavior change, the Habits of Health Transformational System. • Encompasses a vibrant health and wellness community.
Lifestyle issues our customers often seek to address and resolve include: • physical limitations and chronic diseases linked to an unhealthy weight; • the desire for more energy to meet physical demands and aspirations (e.g. work, parenting, sports and recreation); • mental, emotional and psychological limitations caused by being at an unhealthy weight; • triggers that cause chronic “emotional eating” or “comfort eating”; • lack of knowledge or understanding about the impact of certain foods on their bodies and overall health; • lack of knowledge or understanding about healthy eating and proper hydration; • the role of physical activity and life-style behavior modification to support healthy habit creation; • the role of proper nutrition and lifestyle to augment their weight loss medication; • the need for a convenient and simple, healthy lifestyle solution or program to address their health and wellbeing goals and accommodate demands on their time; and • the need for a community of like-minded people for support to achieve their goals.
April 2023. 7 Table of Contents • triggers that cause chronic “emotional eating” or “comfort eating”; • lack of knowledge or understanding about the impact of certain foods on their bodies and overall health; • lack of knowledge or understanding about healthy eating and proper hydration; • the role of physical activity and life-style behavior modification to support healthy habit creation; • the role of proper nutrition and lifestyle to augment their weight loss medication; • the need for a convenient and simple, healthy lifestyle solution or program to address their health and wellbeing goals and accommodate demands on their time; and • the need for a community of like-minded people for support to achieve their goals.
For information about our OPTA VIA Coaches, see Item 1. Business. INFORMATION SYSTEMS & TECHNOLOGY We have adopted a cybersecurity framework that, where appropriate, aligns with the National Institute of Standards and Technology's ("NIST") Cybersecurity Framework, and we have maintained systems that, where appropriate, are Payment Card Industry Data Security Standard compliant ("PCI") under current standards.
The total number of active earning OPTA VIA coaches as of December 31, 2024 was 27,100. 16 Table of Contents Information Systems & Technology We have adopted a cybersecurity framework that, where appropriate, aligns with the National Institute of Standards and Technology's ("NIST") Cybersecurity Framework, and we have maintained systems that, where appropriate, are Payment Card Industry Data Security Standard compliant ("PCI") under current standards.
As entrepreneurs, OPTA VIA Coaches market our products to friends, family and other acquaintances. OPTA VIA products are shipped directly to OPTA VIA customers who are working with an OPTA VIA Coach. OPTA VIA Coaches do not handle or deliver merchandise to customers.
As independent contractors, OPTA VIA coaches market our products to friends, family, and other people in their communities. OPTA VIA products are shipped directly to OPTA VIA customers. OPTA VIA coaches do not handle or deliver merchandise to customers.
Additionally, in 2009 the FTC promulgated nonbinding Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides”) which explained what endorsement practices the FTC views as being unfair or deceptive acts or practices. In 2020, the FTC sought public comments on whether the Endorsement Guides should be amended.
Additionally, in 2023 the FTC updated its nonbinding Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides”) which explain what endorsement practices the FTC views as being unfair or deceptive acts or practices.
In the United States, for example, federal law provides law enforcement agencies, such as the Federal Trade Commission (the “FTC”), broad latitude in policing unfair or deceptive trade practices, but does not provide a bright-line test for identifying a pyramid scheme.
There is often ambiguity and uncertainty with respect to the state of direct selling and anti-pyramid laws and regulations. In the United States, for example, federal law provides the Federal Trade Commission (the “FTC”), broad latitude in policing unfair or deceptive trade practices, but does not provide a bright-line test for identifying a pyramid scheme.
Our Community is united by our values – we are one team with one mission, guided by clear, shared behaviors that help us stay aligned as we grow and enable us to prioritize our work, plan for the future and harness our combined energy to accomplish our company objectives.
Ensuring our organization is united by our values and one team, one mission mindset remains a top priority - helping us stay aligned as we grow and enabling us to prioritize our work, plan for the future, and harness our combined energy to accomplish our company objectives.
Medifast has perfected our model over the last 40 years, with habits, Coaches and community at the core, and we will continue to innovate as the industry evolves.
Medifast has perfected our model over the last 40+ years, with habits, coaches, and community at the core, and we will continue to innovate as the industry evolves. MARKETS Health & Wellness Consumers We develop and market products for consumers who want to lose weight and adopt a holistic approach to overall health and wellness.
If the requirements in this settlement lead to new industry standards or new rules, our business could be impacted, and we may need to amend our compensation plan. In 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing (“MLM Guidance”).
If the requirements in these settlements lead to new industry standards or new rules, our business could be impacted, and we may need to amend our compensation plan.
It’s estimated to be worth approximately $20 billion today with a growth rate of approximately 6% per annum 3 . Additionally, roughly 75% of the U.S. population above 18 wants to lose weight and is open to dieting, and approximately 70% of overweight/obese population considers paid meal plans effective 4 .
According to a proprietary analysis, the addressable market for weight loss is large and growing, estimated to be worth over $30 billion 6 . Additionally, roughly 75% of the U.S. population above the age of 18 wants to lose weight and is open to dieting, and approximately 70% of the overweight/obese population considers paid meal plans effective 7 .
Obesity is defined as a Body Mass Index (“BMI”) of 30 kg/m 2 or greater, whereas overweight is defined as a BMI ranging between 25 and 29.9 kg/m 2 . In the U.S., more than two-thirds of the adult population fall within the overweight or obese categories and more than 30% were obese in 2022 8 .
Obesity is defined as a Body Mass Index (“BMI”) of 30 kg/m 2 or greater, whereas overweight is defined as a BMI ranging between 25 and 29.9 kg/m 2 . Nearly three-quarters of U.S. adults are classified as overweight or obese, and between August 2021 and August 2023 more than 40% were classified as obese 5 .
OPTA VIA has adapted its rules regarding the practices of its Coaches in order to comply with the current Endorsement Guides, but we cannot be sure that the FTC will not challenge our advertising or other operations in the future. We continue to monitor developments to assess whether we should make any changes to our business or compensation plan.
OPTA VIA has adapted its rules regarding the practices of its coaches in order to comply with the current Endorsement Guides, but we cannot be sure that the FTC will not challenge our advertising or other operations in the future. In 2024, the FTC amended its nonbinding Business Guidance Concerning Multi-Level Marketing (“MLM Guidance”), which was originally released in 2018.
News & Reports as a Best Place to Work in the Food & Drink Industry, a reflection of the work we have done to nurture our culture and support a strong employee experience. 15 Table of Contents Building transparency and developing communication channels that allow us to cascade information and connect our teams are critical components of our people strategy.
News & Reports as a Best Place to Work in the Food & Drink Industry, a reflection of the work we have done to nurture our culture and support a strong employee experience.
OPTA VIA Coaches are focusing on word of mouth and social media marketing toward increasingly younger demographics, reaching out to important and increasingly diverse communities of health and wellness consumers, and identifying and marketing to consumers who are in varying stages of optimal well-being.
Adults are Now Overweight or Obese; NCHS Data Brief No. 508, September 2024, Obesity and Severe Obseity Prevalence in Adults: United States, August 2021 - August 2023 8 Table of Contents OPTA VIA coaches are focused on word of mouth and social media marketing toward increasingly younger demographics, reaching out to important and increasingly diverse communities of health and wellness consumers, and identifying and marketing to consumers who are in varying stages of optimal well-being.
Our Culture Contract Toolkit is a companion piece that provides many tools and activities that team members can bring into their daily work to improve in forming bonds, establishing healthy work/life balance, inclusive leadership and much more.
It details the commitments we make to one another and the commitments we make as a company to ensure an excellent work experience for all our team members. Our Culture Contract Toolkit is a companion piece that provides many tools to help improve in forming bonds, establishing healthy work/life balance, inclusive leadership, and much more.
Geographies The U.S. market continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, more than two-thirds of the adult population fall within the overweight or obese categories and more than 30% were obese in 2022 10 .
Geographies The U.S. market continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, where nearly three-quarters of U.S. adults are classified as overweight or obese, and between August 2021 and August 2023 more than 40% were classified as obese 10 .
Our variable pay targets are performance based and tied to organizational results. Wellness is not just what we do, it’s who we are, and our commitment to being a best-in-class wellness company starts with providing team members equal access to all our programs and products.
Wellness is not just what we do, it’s who we are, and our commitment to being a best-in-class wellness company starts with providing team members equal access to all our programs and products. Our Employees on Plan program allows our team members to experience the support of a coach, as they tackle their own weight loss journey.
These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, including “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales to consumers. The laws and regulations governing direct selling may be modified or reinterpreted from time to time, which may cause us to modify our sales compensation and business models.
If companies do not voluntarily modify practices identified by these reviewing entities, they may report the perceived violations to law enforcement agencies. Laws and regulations related to direct selling companies are generally intended to prevent fraudulent or deceptive schemes, including “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales to consumers.
If our Coaches make improper claims, or if regulators determine we are making any improper claims, this could lead to an FTC investigation and could harm our business.
While OPTAVIA has taken steps to educate our employees and coaches on proper earnings claims, if an employee or coach makes improper claims or if regulators issue new rules or change current guidance or determine we (or our coaches) are making any improper claims, this could lead to an FTC investigation and could harm our business.
We also launched a quarterly video series from our CEO to ensure team members hear directly from him about Company performance and updates on key initiatives.
We also have a weekly Pulse newsletter to ensure important initiatives and events are communicated in a timely matter. We continued our quarterly 15 Table of Contents video series from our Chairman & CEO, Dan Chard, to ensure team members hear directly from him about Company performance and progress on key initiatives.
As a response, we may periodically take incremental pricing actions to offset supply chain costs, inflationary pressures, and adverse labor market conditions.
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. As a response, we may periodically take incremental pricing actions to offset supply chain costs and inflationary pressures.
HUMAN CAPITAL MANAGEMENT As of December 31, 2023, the Company employed 634 team members, all employed in the United States, of whom 326 were engaged in manufacturing, logistics, and supply chain support, and 308 in marketing, administrative and corporate support functions. None of our team members are subject to a collective bargaining agreement with the Company.
Our variable pay targets are performance based and tied to organizational results. As of December 31, 2024, we employed 504 team members, all employed in the United States, of whom 229 were engaged in manufacturing, logistics, and supply chain support, and 275 in marketing, administrative, and corporate support functions.
The majority of our OPTA VIA Coaches began as customers and became OPTA VIA Coaches for a number of reasons, including to pay it forward and help others through their transformation journey. COACH SUPPORT • OPTA VIA Coach Business Kit . Coaches are required to purchase a business kit to join our network.
The majority of our OPTA VIA coaches began as customers and became OPTA VIA coaches for a number of reasons, including to pay it forward and help others through their own transformation journey. Products • OPTA VIA Fuelings . OPTA VIA Fuelings contain 24 vitamins and minerals, high quality, complete protein, and no colors, flavors or sweeteners from artificial sources.
Our growth does not depend on recruiting thousands of distributors who take on inventory to sell to customers. Rather, OPTA VIA Coaches help customers adopt healthy habits and learn the benefits of OPTA VIA products, which are shipped directly to customers. The more OPTA VIA Coaches we have, the more customers we can serve.
Rather, OPTA VIA coaches help customers adopt healthy habits and learn the benefits of OPTA VIA products, which are shipped directly to customers. The more OPTA VIA coaches we have, the more customers we can serve. We are often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different.
We have several resources and tools that help us nurture a “One Team” mindset centered around strong cross-functional teaming and partnering.
We continually seek new ways to evolve how we work and we each other grow, by investing in training, encouraging feedback and embracing challenges along the way. We have several resources and tools that help us nurture a “One Team” mindset centered around strong cross-functional teaming and partnering.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFuture laws or regulations, including laws or regulations affecting our marketing and advertising practices, relations with consumers, employees, service providers, or our services and products, may have an adverse impact on us. 25 Table of Contents The manufacture and sale of ingested products are subject to product liability claims and other risks.
Biggest changeIf we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if we are unable to comply with these laws, regulations, or interpretations, our business could be adversely affected. 25 Table of Contents Future laws or regulations, including laws or regulations affecting our marketing and advertising practices, relations with consumers, employees, service providers, or our services and products, may have an adverse impact on us.
For example, economic forces, including changes in disposable consumer income and/or reductions in discretionary spending, unemployment levels, labor shortages, demographic trends, inflation and consumer confidence in the economy, may cause consumers to defer or decrease purchases of our products and programs which could adversely affect our revenue, gross profit, and/or our overall financial condition and operating results.
For example, economic forces, including changes in disposable consumer income and/or reductions in discretionary spending, unemployment levels, labor shortages, demographic trends, inflation and consumer confidence in the economy, may cause consumers to defer or decrease purchases of our products which could adversely affect our revenue, gross profit, and/or our overall financial condition and operating results.
General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect consumer spending and demand for our products, and exacerbate some of the other risks that affect our business, financial condition and results of operations.
General global economic downturns and macroeconomic trends, including the possibility of heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect consumer spending and demand for our products, and exacerbate some of the other risks that affect our business, financial condition and results of operations.
Our failure to provide the business essentials and competitive compensation necessary to motivate OPTA VIA Coaches to grow their businesses will adversely affect our future growth and operating results. The growth and sustainability of our network of OPTA VIA Coaches is also subject to risks which may be outside of our control.
Our failure to provide the business essentials, education, and competitive compensation necessary to motivate OPTA VIA coaches to grow their businesses will adversely affect our future growth and operating results. The growth and sustainability of our network of OPTA VIA coaches is also subject to risks which may be outside of our control.
Our capital allocation strategy may change from time to time, and we cannot provide any assurance that we will declare dividends in the future or in any particular amounts. The discontinuation of our dividend payments could have a negative effect on our stock price.
Our capital allocation strategy may change from time to time, and we cannot provide any assurance that we will declare dividends in the future or in any particular amounts. The 2023 discontinuation of our dividend payments could have a negative effect on our stock price.
There can be no assurance that the occurrence of these or any other operational problems at our sole facility would not have a material adverse effect on our business, financial condition or results of operations. 19 Table of Contents Our ability to source quality ingredients and other products is critical to our business, and any disruption to our supply or supply chain could materially adversely affect our business.
There can be no assurance that the occurrence of these or any other operational problems at our sole facility would not have a material adverse effect on our business, financial condition or results of operations. 21 Table of Contents Our ability to source quality ingredients and other products is critical to our business, and any disruption to our supply or supply chain could materially adversely affect our business.
ITEM 1A. RISK FACTORS You should consider carefully the following risks and uncertainties when reading this Report. If any of the events described below actually occurs, the Company’s business, financial condition and operating results could be materially adversely affected. You should understand that it is not possible to predict or identify all such risks and uncertainties.
ITEM 1A. RISK FACTORS You should consider carefully the following risks and uncertainties when reading this Report. If any of the events described below actually occur, the Company’s business, financial condition, and operating results could be materially adversely affected. You should understand that it is not possible to predict or identify all such risks and uncertainties.
The popularity of weight management programs is dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends, which continue to evolve with the introduction of new technologies and innovations, and, on an ongoing basis, many existing and potential providers of weight loss solutions, including many pharmaceutical firms with significantly greater financial and operating resources than we have, are developing new products and services.
The popularity of weight management programs is dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends, which continue to evolve with the introduction of new technologies and innovations, and, on an ongoing basis, many existing and potential providers of weight loss solutions, 24 Table of Contents including many pharmaceutical firms with significantly greater financial and operating resources than we have, are developing new products and services.
Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business. 20 Table of Contents We may be subject to health or advertising related claims from our customers.
Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business. 22 Table of Contents We may be subject to health or advertising related claims from our customers.
On December 13, 2023, we announced a new strategic collaboration (the “Collaboration”) with telehealth company, LifeMD, in furtherance of our expansion into the medically supported weight loss market, and with the expectation that the Collaboration would result in various long-term benefits to both companies, including increase in revenue, customer acquisition increase, and longer tenure in customer retention.
On December 13, 2023, we announced a new strategic collaboration (the “Collaboration”) with telehealth company, LifeMD, in furtherance of our expansion into the medically supported weight loss market, and with the expectation that the Collaboration would result in various long-term benefits to both companies, including increase in revenue, customer acquisition increase, and 18 Table of Contents longer tenure in customer retention.
As laws and regulations, including FTC enforcement, rapidly evolve to govern the 22 Table of Contents use of these platforms and devices, the failure by us, our employees, or our Coaches or other third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.
As laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, or our coaches or other third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.
Our ability to attract and retain customers depends significantly on the effectiveness of our OPTA VIA Coaches’ advertising and marketing practices. Our OPTA VIA Coaches support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, X, and video conferencing platforms.
Our ability to attract and retain customers depends significantly on the effectiveness of our OPTA VIA coaches’ advertising and marketing practices. Our OPTA VIA coaches support our customers and market our products and services primarily through word of mouth, email and via social media 19 Table of Contents channels such as Facebook, Instagram, X, and video conferencing platforms.
Provisions of our certificate of incorporation (as amended) may have the effect of deterring unsolicited takeovers or delaying or preventing a third-party from acquiring control of us, even if our stockholders might otherwise receive a premium for their 26 Table of Contents shares over the then current market prices.
Provisions of our certificate of incorporation (as amended) may have the effect of deterring unsolicited takeovers or delaying or preventing a third-party from acquiring control of us, even if our stockholders might otherwise receive a premium for their shares over the then current market prices.
General Risk Factors If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately. Effective internal control over financial reporting is necessary for us to provide reliable financial reports.
If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately. Effective internal control over financial reporting is necessary for us to provide reliable financial reports.
We manufacture and produce a portion of our products, which account for approximately 25% of our total unit sales, at our manufacturing facility in Owings Mills, Maryland. As a result, we are dependent upon the uninterrupted and efficient operation of our sole manufacturing facility in Owings Mills, Maryland.
We manufacture and produce a portion of our products, which account for approximately 40% of our total unit sales, at our manufacturing facility in Owings Mills, Maryland. As a result, we are dependent upon the uninterrupted and efficient operation of this manufacturing facility.
Like other manufacturers and distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our products results in illness or injury.
The manufacture and sale of ingested products are subject to product liability claims and other risks. Like other manufacturers and distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our products results in illness or injury.
If we experience a security breach and such notice or public disclosure is required in the future, our reputation and our business may be harmed.
If we experience a security breach and such notice or public disclosure is required in the future, our reputation and our business may 23 Table of Contents be harmed.
We are dependent on our key executives for future success. If we lose the services of any of our key executives and we are unable to timely retain a qualified replacement, our business could be harmed. Our future success depends to a significant degree on the skills, experience and efforts of our key executives.
If we lose the services of any of our key executives and we are unable to timely retain a qualified replacement, our business could be harmed. Our future success depends to a significant degree on the skills, experience and efforts of our key executives. The loss of the services of any of these individuals could harm our business.
All of these actions and any future scrutiny of us or the direct selling industry could generate negative publicity or further regulatory actions that could result in fines, restrict our ability to conduct our business, enter into new markets, and ultimately attract customers.
Similarly, the FTC continues to scrutinize multi-level marketers. All of these actions and any future scrutiny of us or the direct selling industry could generate negative publicity or further regulatory actions that could result in fines, restrict our ability to conduct our business, enter into new markets, and ultimately attract customers.
Any negative publicity associated with these actions would adversely affect our brand and may result in decreased product sales and, as a result, lower revenue and profits. Risks Related to the Company’s Common Stock Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.
Any negative publicity associated with these actions would adversely affect our brand and may result in decreased product sales and, as a result, lower revenue and profits. General Risk Factors Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.
Through the Collaboration, failure to comply with the laws and regulations of these governmental agencies may result in legal or other enforcement actions, including orders to cease non-compliant activities.
Department of Health and Human Services (“HHS”), and the FTC. Through the Collaboration, failure to comply with the laws and regulations of these governmental agencies may result in legal or other enforcement actions, including orders to cease non-compliant activities.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in our Company and could result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. Our collaboration with LifeMD may not achieve the anticipated benefits.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in our Company and could result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future.
There can be no assurance that we will not be subject to state, federal or foreign government actions or class action lawsuits, which could harm our business, financial condition and results of operations.
There can be no assurance that we will not be subject to state, federal or foreign government actions or class action lawsuits, which could harm our business, financial condition and results of operations. We may not be able to successfully implement new strategic initiatives, which could adversely impact our business.
Any increased competition from new entrants into our industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations.
Some of our competitors are significantly larger than we are and have substantially greater resources. Any increased competition from new entrants into our industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations.
Additionally, the entrance into the market and growing acceptance of the favorably perceived and easier to use weight loss medications, such as GLP-1s, has reduced and may further reduce demand for our services and products. New weight loss medications, products or services may put us at a competitive disadvantage and our business may suffer.
Additionally, the entrance into the market and growing acceptance of the favorably perceived and easier to use weight loss medications, such as GLP-1s, has reduced and may further reduce demand for our services and products.
Our competitors include companies selling weight loss medications, pharmaceutical products and weight loss programs, digital tools, app-based health and wellness monitoring solutions and wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements. Some of our competitors are significantly larger than we are and have substantially greater resources.
Our competitors include companies selling weight loss medications, pharmaceutical products and weight loss programs, digital tools, app-based health and wellness monitoring solutions and 17 Table of Contents wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements.
The integrity of our technology may also be compromised as a result of third-party cyber-attacks, such as hacking, spear phishing campaigns and denial of service attacks, which are increasingly negatively impacting companies.
Our technology may malfunction or suffer from defects that become apparent only after extended use. The integrity of our technology may also be compromised as a result of third-party cyber-attacks, such as hacking, spear phishing campaigns and denial of service attacks, which are increasingly negatively impacting companies.
The weight management industry is subject to changing consumer demands based, in large part, on the efficacy and popular appeal of weight management programs.
Risks Related to Our Industry Changes in consumer preferences could negatively impact our operating results. The weight management industry is subject to changing consumer demands based, in large part, on the efficacy and popular appeal of weight management programs.
We may not be able to successfully implement new strategic initiatives, which could adversely impact our business. We are continuously evaluating changing consumer preferences and the competitive environment of our industry and seeking out opportunities to improve our performance through the implementation of selected strategic initiatives.
We are continuously evaluating changing consumer preferences and the competitive environment of our industry and seeking out opportunities to improve our performance through the implementation of selected strategic initiatives.
As of December 31, 2023, the Company had 41,100 total active earning OPTA VIA Coaches as compared to 60,900 as of December 31, 2022.
As of December 31, 2024, the Company had 27,100 total active earning OPTA VIA coaches as compared to 30,000 as of September 30, 2024 and 41,100 as of December 31, 2023.
Moreover, consumers can, and frequently do, change approaches easily. We anticipate competition from other companies that provide telehealth services associated with weight management, and certain of these competitors have greater financial and other resources than us and have operations in therapeutic or other areas where we may seek to expand in the future.
Additionally, we anticipate competition from other companies that provide telehealth services associated with weight management, and certain of these competitors have greater financial and other resources than us and have operations in therapeutic or other areas where we may seek to expand in the future. The weight loss industry is subject to adverse publicity, which could harm our business.
Congressional hearings about practices in the weight loss industry have also resulted in adverse publicity and a consequent decline in the revenue of weight loss businesses. Future research or investigative reports or publicity that is perceived as unfavorable or that question certain weight loss programs, products or methods could result in a decline in our revenue.
Future research or investigative reports or publicity that is perceived as unfavorable or that question certain weight loss programs, products or methods could result in a decline in our revenue.
Any adverse rulings or legal actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling companies.
These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions. Any adverse rulings or legal actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling companies.
The growing popularity of weight loss solutions, such as a drug therapy or GLP-1 medications, which may be perceived to be safe, effective and “easier” than a portion-controlled meal plan has affected the marketplace and could negatively impact our results of operations. 21 Table of Contents If we do not continue to develop innovative new products or if our products do not continue to appeal to the market, or if we are unable to successfully expand or respond to consumer trends, our business may suffer.
The growing popularity of weight loss solutions, such as a drug therapy or GLP-1 medications, which may be perceived to be safe, effective and “easier” than a portion-controlled meal plan has affected the marketplace and could negatively impact our results of operations.
Also, defending ourselves against such claims, regardless of their merit and ultimate outcome, may be lengthy and costly, and could adversely affect our brand image, customer loyalty and results of operations. The weight management industry is highly competitive.
Also, defending ourselves against such claims, regardless of their merit and ultimate outcome, may be lengthy and costly, and could adversely affect our brand image, customer loyalty and results of operations. We are dependent on our key executives for future success.
Additionally, a number of laws and regulations govern anti-kickbacks, physician self-referrals, and the business of advertising, promotion, dispensing, and marketing services, products, and pharmaceuticals. These regulatory regimes are overseen by state and federal level governmental bodies, including the FDA, the U.S. Department of Health and Human Services (“HHS”), and the FTC.
We could incur reputational harm or negative publicity in relation to an adverse event involving a LifeMD healthcare provider. Additionally, a number of laws and regulations govern anti-kickbacks, physician self-referrals, and the business of advertising, promotion, dispensing, and marketing services, products, and pharmaceuticals. These regulatory regimes are overseen by state and federal level governmental bodies, including the FDA, the U.S.
We could also be subject to challenges by private parties in civil actions. We are aware of recent civil actions against other companies in the United States that use a direct selling model, which have and may in the future result in significant legal costs.
We are aware of recent civil actions against other companies in the United States that use a direct selling model, which have and may in the future result in significant legal costs. Allegations against companies that use a multi-level marketing strategy in various markets have also created intense public scrutiny of companies in the direct selling industry.
Consequently, any future expansion of our international operations may require changes to the ways we collect and use consumer information. In the ordinary course of our business, we collect and utilize proprietary and customer information and 23 Table of Contents data.
Consequently, any future expansion of our international operations may require changes to the ways we collect and use consumer information. In the ordinary course of our business, we collect and utilize proprietary and customer information and data. As a result, we have developed systems that are designed to protect consumer information and prevent fraudulent transactions and other security breaches.
However, governmental regulations can delay or prevent the introduction, or require the reformulation or 18 Table of Contents withdrawal, of certain of our products. Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of OPTA VIA Coaches and, consequently, on sales.
Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of OPTA VIA coaches and, consequently, on sales. 20 Table of Contents We could also be subject to challenges by private parties in civil actions.
The loss of the services of any of these individuals could harm our business. We have not obtained life insurance on any key executives. If any key executives left us or were seriously injured and became unable to work, our business could be harmed.
We have not obtained life insurance on any key executives. If any key executives left us or were seriously injured and became unable to work, our business could be harmed. Information Technology and Cyber Security Risks Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our business.
The weight loss industry is subject to adverse publicity, which could harm our business. The weight loss industry receives adverse publicity from time to time, and the occurrence of such publicity could harm us, even if the adverse publicity is not directly related to us.
The weight loss industry receives adverse publicity from time to time, and the occurrence of such publicity could harm us, even if the adverse publicity is not directly related to us. Congressional hearings about practices in the weight loss industry have also resulted in adverse publicity and a consequent decline in the revenue of weight loss businesses.
Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. 17 Table of Contents Risks Related to Our Business Deterioration of economic conditions, an economic recession or slow growth, periods of inflation or economic uncertainty, could continue to adversely affect consumer spending as well as demand for our products.
Deterioration of economic conditions, an economic recession or slow growth, periods of inflation or economic uncertainty, could continue to adversely affect consumer spending as well as demand for our products.
Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change in control, even if an acquisition or a change of control would be beneficial to our stockholders.
Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating results. 26 Table of Contents Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change in control, even if an acquisition or a change of control would be beneficial to our stockholders.
As much of this technology is complex, there may be future errors, defects or performance problems, including when we update our technology or integrate new technology to expand and enhance our capabilities. Our technology may malfunction or suffer from defects that become apparent only after extended use.
We rely on software, hardware, network systems, including cloud-based technology, that is either developed by us or licensed from or maintained by third parties to operate our websites. As much of this technology is complex, there may be future errors, defects or performance problems, including when we update our technology or integrate new technology to expand and enhance our capabilities.
If any of our competitors or a new entrant into the market with significant resources pursues a weight management program similar to ours, our business could be significantly affected. Competition is intense in the weight management industry and we must remain competitive in the areas of program efficacy, price, taste, customer service and brand recognition.
Competition is intense in the weight management industry and we must remain competitive in the areas of program efficacy, price, taste, customer service and brand recognition.
Healthcare professionals providing telehealth services have become subject to a number of lawsuits alleging malpractice and some of these lawsuits may involve large claims and significant defense costs.
Healthcare professionals providing telehealth services have become subject to a number of lawsuits alleging malpractice and some of these lawsuits may involve large claims and significant defense costs. Through the Collaboration, it is possible that these claims could also be asserted against us or our independent OPTA VIA coaches and include us as an additional defendant.
Settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales. These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions.
If companies do not voluntarily modify practices identified by these reviewing entities, they may report the perceived violations to law enforcement agencies. Settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales.
We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating results.
We may be the target of similar litigation in the future.
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Allegations against companies that use a multi-level marketing strategy in various markets have also created intense public scrutiny of companies in the direct selling industry. Similarly, the FTC continues to scrutinize multi-level marketers.
Added
Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. Risks Related to Our Business The weight management industry is highly competitive and the development and acceptance of weight-loss medicines and other products could result in decreased demand for our services and products.
Removed
Information Technology and Cyber Security Risks Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our business. We rely on software, hardware, network systems, including cloud-based technology, that is either developed by us or licensed from or maintained by third parties to operate our websites.
Added
If we do not continue to develop innovative new products or if our products do not continue to appeal to the market, or if we are unable to successfully expand or respond to consumer trends, our business may suffer.
Removed
As a result, we have developed systems that are designed to protect consumer information and prevent fraudulent transactions and other security breaches.
Added
Our collaboration with LifeMD may not achieve the anticipated benefits.
Removed
Risks Related to Our Industry Changes in consumer preferences could negatively impact our operating results. Our program features pre-packaged food selections, which we believe offer convenience and value to our customers.
Added
Additionally, the direct selling industry is also under regular scrutiny by the Direct Selling Self-Regulatory Council, which is one of the Better Business Bureau's National Programs, and other non-profit organizations. These organizations identify perceived violations of laws and regulations by direct sellers in an effort to force companies to change their practices.
Removed
Our continued success depends, to a large degree, upon the continued popularity of our program versus various other weight loss, weight management and fitness regimens, such as low carbohydrate diets, appetite suppressants and medically supported weight loss initiatives, including weight loss medications, such as GLP-1s.
Added
However, governmental regulations can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products.
Removed
Consumer’s increased attention to recent developments, innovations, and FDA approvals of weight loss medications, and the perception of their safety, effectiveness, and ease of use, may also reduce consumer engagement in our offering.
Removed
Consumer’s purchasing decisions are highly subjective and can be influenced by many factors, such as perception of the ease of use and 24 Table of Contents efficacy of the service and product offerings as well as brand image or reputation, marketing programs, cost, social media presence and sentiment, consumer trends, personalization, the digital platform, and user experience.
Removed
If we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if we are unable to comply with these laws, regulations or interpretations, our business could be adversely affected.
Removed
Through the Collaboration, it is possible that these claims could also be asserted against us or our independent OPTA VIA Coaches and include us as an additional defendant. 27 Table of Contents We could incur reputational harm or negative publicity in relation to an adverse event involving a LifeMD healthcare provider.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−1 removed19 unchanged
Biggest changeOur cybersecurity processes to assess and identify cybersecurity risks includes periodic risk assessments, deployment of security monitoring tools for continuous monitoring of our information systems, periodic testing for vulnerabilities in our systems, periodic testing of employees’ cybersecurity awareness, receiving cybersecurity alerts, among other procedures.
Biggest changeIn the event of a cybersecurity incident, if a system does become non-operational, we maintain disaster recovery capabilities to return to normal operation in a timely manner. 27 Table of Contents Our cybersecurity processes to assess and identify cybersecurity risks includes periodic risk assessments, deployment of security monitoring tools for continuous monitoring of our information systems, periodic testing for vulnerabilities in our systems, periodic testing of employees’ cybersecurity awareness, receiving cybersecurity alerts, among other procedures.
Cybersecurity incidents are escalated to the cybersecurity incident response team ("CIRT") who is responsible for overseeing our incident response strategy, including remediation. Significant cybersecurity incidents are escalated to the Company’s Incident Response Materiality Assessment Committee (“IRMAC”) that assesses and evaluates whether the incident is material using criteria based on our enterprise risks.
Cybersecurity incidents are escalated to the cybersecurity incident response team ("CIRT") who is responsible for overseeing our incident response strategy, including remediation. Significant cybersecurity incidents are escalated to the Company’s Incident Response Materiality Assessment Committee (“IRMAC”) that assesses and evaluates whether the incident is material 28 Table of Contents using criteria based on our enterprise risks.
We utilize systems designed to protect customer information and prevent fraudulent transactions and other security breaches. We rely on third-party software products to secure our credit card transactions. 28 Table of Contents Furthermore, we maintain a process to evaluate and manage risks associated with third-party service providers.
We utilize systems designed to protect customer information and prevent fraudulent transactions and other security breaches. We rely on third-party software products to secure our credit card transactions. Furthermore, we maintain a process to evaluate and manage risks associated with third-party service providers.
Removed
In the event of a cybersecurity incident, if a system does become non-operational, we maintain disaster recovery capabilities to return to normal operation in a timely manner.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed1 unchanged
Biggest changeThe Company outsources a domestic distribution center in Haltom City, Texas. In April 2021, the Company entered into a lease for a distribution center in Havre De Grace, Maryland. The distribution center lease expires in August 2026.
Biggest changeThe Company has listed the Ridgely, Maryland building and land for sale, and expects to sell the land and building in 2025. The Company outsources a domestic distribution center in Haltom City, Texas and the facility lease expires January 2029. In April 2021, the Company entered into a lease for a distribution center in Havre De Grace, Maryland.
In May 2021, the Company entered into a lease for our product innovation research center in Owings Mills, Maryland. The product innovation research center lease expires in February 2029. The Company owns a 49,000 square-foot manufacturing facility in Owings Mills, Maryland, and a 119,000 square-foot distribution facility in Ridgley, Maryland.
In May 2021, the Company entered into a lease for our product innovation research center in Owings Mills, Maryland which expires in February 2029. The Company owns a 49,000 square-foot manufacturing facility in Owings Mills, Maryland, and a 100,000 square-foot distribution facility in Ridgley, Maryland.
Removed
In 2023, the Company exited it contracts and terminated its relationships with its outsourced distribution centers in Reno, Nevada and in Hong Kong. 29 Table of Contents
Added
The distribution center lease expires in August 2026.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−1 removed3 unchanged
Biggest changeThe 2022 Peer Group included 1-800-flowers.com Inc., Blue Apron Holdings Inc., Duluth Holdings Inc., Farmer Brothers Company, Herbalife Nutrition Ltd., Inter Parfums Inc., Nature’s Sunshine Products Inc., Nu Skin Enterprises Inc., Simply Good Foods Co., Tupperware Brands Corp., USANA Health 31 Table of Contents Sciences Inc., WW International, Inc., The Hain Celestial Group, Inc., and Edgewell Personal Care Company.
Biggest changePeer Group 1-800-flowers.com McCormick & Company, Inc. B&G Foods, Inc. Nu Skin Enterprises, Inc. BellRing Brands, Inc. Spectrum Brands Holdings, Inc. Duluth Holdings Inc. The Hain Celestial Group, Inc. Edgewell Personal Care Company The Simply Good Foods Co. Etsy, Inc. Tupperware Brands Corp. Herbalife Nutrition Ltd. USANA Health Sciences, Inc. Inter Parfums, Inc. WW International, Inc.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed and traded on the NYSE under the ticker symbol “MED.” Dividends While historically the Company has declared and paid dividends on the Company’s common stock, in December 2023, it announced the discontinuation of dividends to support investments in technology and future growth.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is listed and traded on the NYSE under the ticker symbol “MED.” Dividends While historically the Company declared and paid dividends on the Company’s common stock, in December 2023, it announced the discontinuation of dividends to support investments in technology and future growth.
(2) At the outset of the quarter ended December 31, 2023, there were 1,323,568 shares of the Company's common stock eligible for repurchase under the repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan"). As of December 31, 2023, there were 1,323,568 shares of the Company’s common stock eligible for repurchase under the Stock Repurchase Plan.
(2) At the outset of the quarter ended December 31, 2024, there were 1,323,568 shares of the Company's common stock eligible for repurchase under the repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan"). As of December 31, 2024, there were 1,323,568 shares of the Company’s common stock eligible for repurchase under the Stock Repurchase Plan.
Holders There were approximately 68 record holders of the Company’s common stock as of February 6, 2024. This number does not include beneficial owners of our securities held in the name of nominees.
Holders There were approximately 66 record holders of the Company’s common stock as of February 11, 2025. This number does not include beneficial owners of our securities held in the name of nominees.
Issuer Purchases of Equity Securities The following table provides information about the Company’s repurchases of common stock for the three months ended December 31, 2023: 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) October 1 - October 31 114 $ 74.19 — 1,323,568 November 1 - November 30 — — — 1,323,568 December 1 - December 31 — — — 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 previously granted to such employees and directors.
Issuer Purchases of Equity Securities The following table provides information about the Company’s repurchases of common stock for the three months ended December 31, 2024: 2024 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) October 1 - October 31 79 $ 19.22 — 1,323,568 November 1 - November 30 — — — 1,323,568 December 1 - December 31 — — — 1,323,568 ____________________ (1) All of the shares of the Company’s common stock reflected in this column were 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.
Performance Graph The following line graph compares the yearly percentage change in the Company’s cumulative total stockholder return (Common Stock price appreciation plus dividends, on a reinvested basis) for the last five fiscal years to that of the Standard & Poor’s 600 Consumer Staples Index and the Company’s selected peer group.
Performance Graph The following line graph compares the yearly percentage change in the Company’s cumulative total stockholder return (Common Stock price appreciation plus dividends, on a reinvested basis) for the last five fiscal years to that of the Standard & Poor’s 600 Consumer Staples Index and the Company’s selected peer group. 30 Table of Contents 2020 2021 2022 2023 2024 Medifast, Inc. $ 186.18 $ 203.61 $ 117.46 $ 72.43 $ 18.98 Benchmarking Peer Group 140.71 158.05 106.53 101.38 98.16 S&P 600 Consumer Staples 111.14 143.15 133.89 153.95 155.83 Medifast, Inc.
Removed
The 2023 Peer Group includes 1-800-flowers.com Inc., Duluth Holdings Inc., Herbalife Nutrition Ltd., Inter Parfums Inc., Nu Skin Enterprises Inc., Simply Good Foods Co., Tupperware Brands Corp., USANA Health Sciences Inc., WW International, Inc., The Hain Celestial Group, Inc., Edgewell Personal Care Company, B&G Foods, Inc., Etsy, Inc., McCormick & Company, Inc., and Spectrum Brand Holdings, Inc. 2019 2020 2021 2022 2023 Medifast, Inc. $ 90.27 $ 168.05 $ 183.79 $ 106.02 $ 65.38 Benchmarking Peer Group 102.27 145.68 161.75 108.46 103.06 S&P 600 Consumer Staples 116.90 129.93 167.35 156.52 179.98

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

40 edited+10 added−13 removed25 unchanged
Biggest changeThe following tables reconcile the non-GAAP financial measures included in this report (in thousands, except per share amounts): Year Ended December 31, 2023 GAAP IT and Supply Chain Optimization LifeMD Collaboration Costs (2) Non-GAAP Cost of sales $ 296,204 $ — $ — $ 296,204 Gross profit 775,850 — — 775,850 Selling, general, and administrative 649,448 (2,555) (5,000) 641,893 Income from operations 126,402 2,555 5,000 133,957 Other income 2,395 — — 2,395 Provision for income taxes 29,382 583 1,141 31,106 Net income 99,415 1,972 3,859 105,246 Diluted earnings per share (1) 9.10 0.18 0.35 9.64 Year Ended December 31, 2022 GAAP Donation Adjustments Restructuring of External Manufacturing Agreements Non-GAAP Cost of sales $ 458,163 $ — $ (12,195) $ 445,968 Gross profit 1,140,414 — 12,195 1,152,609 Selling, general, and administrative 955,608 (18,986) — 936,622 Income from operations 184,806 18,986 12,195 215,987 Other expense (747) — — (747) Provision for income taxes 40,491 8,544 2,744 51,779 Net income 143,568 10,442 9,451 163,461 Diluted earnings per share (1) 12.73 0.93 0.84 14.50 (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.
Biggest changeThe following tables reconcile the non-GAAP financial measures included in this report (in thousands, except per share amounts): Year Ended December 31, 2024 GAAP Supply Chain Optimization and Restructuring of External Manufacturing Agreements Unrealized Loss on Investment in LifeMD Common Stock LifeMD Collaboration Costs Non-GAAP Cost of sales $ 157,840 $ (2,579) $ — $ — $ 155,261 Gross profit 444,623 2,579 — — 447,202 Selling, general, and administrative 441,745 (12,502) — (5,000) 424,243 Income from operations 2,878 15,081 — 5,000 22,959 Other income 909 — 4,089 — 4,998 Provision for income taxes 1,696 3,770 1,022 1,250 7,738 Net income 2,091 11,311 3,067 3,750 20,219 Diluted earnings per share (1) 0.19 1.03 0.28 0.34 1.84 Year Ended December 31, 2023 GAAP IT and Supply Chain Optimization LifeMD Collaboration Costs Non-GAAP Cost of sales $ 296,204 $ — $ — $ 296,204 Gross profit 775,850 — — 775,850 Selling, general, and administrative 649,448 (2,555) (5,000) 641,893 Income from operations 126,402 2,555 5,000 133,957 Other income 2,395 — — 2,395 Provision for income taxes 29,382 583 1,141 31,106 Net income 99,415 1,972 3,859 105,246 Diluted earnings per share (1) 9.10 0.18 0.35 9.64 (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. 36 Table of Contents Liquidity and Capital Resources The Company had stockholders’ equity of $210.1 million and working capital of $150.2 million at December 31, 2024 compared with $201.5 million and $131.7 million at December 31, 2023.
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.
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.
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 OPTA VIA Coach compensation and credit card fees during the period in which the corresponding revenue is earned.
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 Operations. We expense OPTA VIA coach compensation and credit card fees during the period in which the corresponding revenue is earned.
Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2023, 2022, and 2021. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.
Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2024, 2023, and 2022. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.
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.
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 provided for a $225.0 million senior secured revolving credit facility with a $20.0 million letter of credit sublimit.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 32 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Our significant accounting policies are described in Note 2 to the consolidated financial statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Our significant accounting policies are described in Note 2 to the consolidated financial statements.
The following GAAP financial measures have been presented for 2023 on an as-adjusted basis: cost of sales, gross profit, SG&A expenses, income from operations, other income (expense), provision for income taxes, net income and diluted earnings per share.
The following GAAP financial measures have been presented on an as-adjusted basis: cost of sales, gross profit, SG&A expenses, income from operations, other income, provision for income taxes, net income, and diluted earnings per share.
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.
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 Operations upon fulfillment of the performance obligation.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the 32 Table of Contents asset.
These costs are recorded in selling, general and administrative expense in our Consolidated Statements of Income. 33 Table of Contents Long-lived Asset Impairment: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
These costs are recorded in selling, general and administrative expense in our Consolidated Statements of Operations. Long-lived Asset Impairment: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company’s cash, cash equivalents and investment securities increased to $150.0 million at December 31, 2023 from $87.7 million at December 31, 2022. In December 2023, the Company’s board of directors determined to change the Company’s capital allocation priorities and discontinued the Company’s quarterly cash dividend to support investments in technology and future growth.
The Company’s cash, cash equivalents and investment securities increased to $162.3 million at December 31, 2024 from $150.0 million at December 31, 2023. In December 2023, the Company’s board of directors determined to change the Company’s capital allocation priorities and discontinued the Company’s quarterly cash dividend to support investments in technology and future growth.
The year-over-year decline in revenue was primarily driven by a decrease in the number of active earning OPTA VIA Coaches and lower productivity per active earning OPTA VIA Coach, partially offset by a pricing adjustment in the fourth quarter of 2022 and a $9.1 million impact from a timing difference related to changes in the Company’s sales order terms and conditions with its customers in the first quarter.
The year-over-year decline in revenue was primarily driven by a decrease in the number of active earning OPTA VIA coaches and lower coach productivity, and a $9.1 million impact from a timing difference related to changes in the Company’s sales order terms and conditions with its customers realized in the first quarter of 2023.
Income from operations as a percentage of sales increased to 11.8% for 2023 as compared to 11.6% for 2022 due to the factors described above in the explanations from gross profit and SG&A expenses. Non-GAAP adjusted income from operations in 2023 decreased to $134.0 million from $216.0 million in 2022.
Income from operations as a percentage of sales decreased to 0.5% for 2024 as compared to 11.8% for 2023 due to the factors described above in the explanations for gross profit and SG&A expenses. Non-GAAP adjusted income from operations in 2024 decreased to $23.0 million from $134.0 million in 2023.
The period-over-period changes were driven by the factors described above in the explanations from operations. Non-GAAP adjusted net income was $105.2 million or $9.64 per diluted share for 2023 as compared to $163.5 million or $14.50 per diluted share for 2022. The period-over-period changes were driven by the factors described above in the Non-GAAP explanations from operations.
The period-over-period changes were driven by the factors described above in the explanations from operations. Non-GAAP adjusted net income was $20.2 million or $1.84 per diluted share for 2024 as compared to $105.2 million or $9.64 per diluted share for 2023. The period-over-period changes were driven by the factors described above in the Non-GAAP explanations from operations.
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. Net income: Net income was $99.4 million, or $9.10 per diluted share, in 2023 as compared to $143.6 million, or $12.73 per diluted share, in 2022.
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. Net income: Net income was $2.1 million, or $0.19 per diluted share, in 2024 as compared to $99.4 million, or $9.10 per diluted share, in 2023.
The average revenue per active earning OPTA VIA Coach decreased 16.1% to $4,648 for the three months ended December 31, 2023 from $5,538 for the three months ended December 31, 2022. Decrease in the revenue per active earning OPTA VIA Coach for the quarter was driven by continued pressure on customer acquisition rates through the fourth quarter.
The average revenue per active earning OPTA VIA coach decreased 5.5% to $4,391 for the three months ended December 31, 2024 from $4,648 for the three months ended December 31, 2023. The decrease in the revenue per active earning OPTA VIA coach for the quarter was driven by continued pressure on customer acquisition.
SG&A expenses included research and development costs of $4.6 million and $4.5 million for 2023 and 2022, respectively, in connection with the development of new products and programs and clinical research activities. Non-GAAP adjusted SG&A expenses were $641.9 million for 2023, a decrease of $294.7 million, or 31.5%, as compared to $936.6 million for 2022.
SG&A expenses included research and development costs of $4.6 million and $4.6 million for 2024 and 2023, respectively, in connection with the development of new products and programs and clinical research activities. Non-GAAP adjusted SG&A expenses were $424.2 million for 2024, a decrease of $217.7 million, or 33.9%, as compared to $641.9 million for 2023.
Our policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense. BACKGROUND Medifast is the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTA VIA, which provides people with a simple, yet comprehensive approach to help them achieve lasting optimal health and wellbeing.
Our policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense. BACKGROUND Medifast is the 40+ year old health and wellness company known for its habit-based and coach-guided lifestyle solution OPTA VIA which provides people with a simple, yet comprehensive approach to address obesity and support a healthy life.
Provision for income taxes: For 2023, the Company recorded $29.4 million in income tax expense, an effective tax rate of 22.8%, as compared to $40.5 million in income tax expense and an effective tax rate of 22.0%, for 2022.
Provision for income taxes: For 2024, the Company recorded $1.7 million in income tax expense, an effective tax rate of 44.8%, as compared to $29.4 million in income tax expense and an effective tax rate of 22.8%, for 2023.
The total number of active earning OPTA VIA Coaches for the three months ended December 31, 2023 decreased to 41,100 from 60,900 for the corresponding period in 2022, a decrease of 32.5%.
The total number of active earning OPTA VIA coaches for the three months ended December 31, 2024 decreased to 27,100 from 41,100 for the corresponding period in 2023, a decrease of 34.1%.
The number of active earning OPTA VIA Coaches decreased by approximately 32.5% to 41,100 as of December 31, 2023 from December 31, 2022, and the average revenue per active earning OPTA VIA Coach was $4,648 for the quarter ended December 31, 2023.
The number of active earning OPTA VIA coaches decreased by approximately 34.1% to 27,100 as of December 31, 2024 from December 31, 2023, and the average revenue per active earning OPTA VIA coach was $4,391 for the quarter ended December 31, 2024.
Non-GAAP adjusted cost of sales were $296.2 million for 2023, a decrease of $149.8 million, or 33.6%, as compared to $446.0 million for 2022. Non-GAAP adjusted cost of sales excludes expenses in connection with the restructuring of certain external manufacturing agreements of $12.2 million for 2022.
Non-GAAP adjusted cost of sales were $155.3 million for 2024, a decrease of $140.9 million, or 47.6%, as compared to $296.2 million for 2023. Non-GAAP adjusted cost of sales excludes expenses in connection with the restructuring of certain external manufacturing agreements.
Net cash provided by operating activities decreased $46.9 million to $147.7 million for 2023 from $194.6 million for 2022 primarily as a result of a $44.2 million decrease in net income and adjustments to reconcile net income to cash provided by operating activities.
Net cash provided by operating activities decreased $123.2 million to $24.5 million for 2024 from $147.7 million for 2023 primarily as a result of a $97.3 million decrease in net income and adjustments to reconcile net income to cash provided by operating activities.
Our OPTA VIA business unit accounted for approximately 100%, 100%, and 99.9% of our revenues in 2023, 2022 and 2021, respectively. We have operated and reported as a single sales segment, OPTA VIA, since 2018.
Our OPTA VIA business unit accounted for all of our revenues for each the years ended 2024, 2023 and 2022. We have operated and reported as a single sales segment, OPTA VIA, since 2018.
Net cash used in investing activities was $61.0 million for 2023 as compared to $11.4 million for 2022. This year-over-year change resulted primarily from a $54.6 million increase in cash used in the purchase of investment securities for 2023 as compared to 2022.
Net cash used in investing activities was $26.5 million for 2024 as compared to $61.0 million for 2023. This year-over-year change resulted primarily from a $22.3 million increase in proceeds from sale and maturities of investment securities and a $13.2 million decrease in cash used in the purchase of investment securities for 2024 as compared to 2023.
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. Gross Profit: In 2023, gross profit decreased $364.6 million, or 32.0%, to $775.9 million from $1.140 billion in 2022.
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. Gross Profit: In 2024, gross profit decreased $331.2 million, or 42.7%, to $444.6 million from $775.9 million in 2023. The decrease in gross profit was primarily attributable to lower revenue.
Each of these as-adjusted financial measures for 2023 excludes the impact of certain amounts related to the Company IT and supply chain optimization efforts and collaboration costs to stand up the LifeMD relationship, as further identified below and have not been calculated in accordance with GAAP.
Each of these as-adjusted financial measures excludes the impact of certain amounts related to supply chain optimization and restructuring of external manufacturing agreements, unrealized gains or losses on our investment in LifeMD common stock, and the LifeMD collaboration as further identified below and have not been calculated in accordance with GAAP.
By maintaining our commitment to building capabilities in the areas that matter most to our OPTA VIA Coaches and customers within the OPTA VIA channel, we believe our strong financial foundation, flexible model and variable cost structure coupled with disciplined growth initiatives position Medifast for the current environment and the future. 34 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS - 2023 COMPARED TO 2022 The following table reflects our consolidated statements of income for the years ended December 31, 2023 and 2022 (in thousands, except percentages): 2023 2022 $ Change % Change Revenue $ 1,072,054 $ 1,598,577 $ (526,523) (32.9)% Cost of sales 296,204 458,163 (161,959) (35.3)% Gross Profit 775,850 1,140,414 (364,564) (32.0)% Selling, general, and administrative 649,448 955,608 (306,160) (32.0)% Income from operations 126,402 184,806 (58,404) (31.6)% Other income (expense) Interest income (expense) 2,490 (701) 3,191 455.2 % Other (expense) income (95) (46) (49) 106.5% 2,395 (747) 3,142 420.6 % Income before provision for income taxes 128,797 184,059 (55,262) (30.0)% Provision for income taxes 29,382 40,491 (11,109) (27.4)% Net income $ 99,415 $ 143,568 $ (44,153) (30.8)% % of revenue Gross Profit 72.4% 71.3% Selling, general, and administrative 60.6% 59.8% Income from Operations 11.8% 11.6% Revenue: Revenue decreased $526.5 million, or 32.9%, to $1.072 billion in 2023 from $1.599 billion in 2022.
By maintaining our commitment to building capabilities in the areas that matter most to our OPTA VIA coaches and customers within the OPTA VIA channel, we believe our strong financial foundation, flexible model and variable cost structure coupled with disciplined growth initiatives position Medifast for the current environment and the future. 33 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS - 2024 COMPARED TO 2023 The following table reflects our Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 (in thousands, except percentages): 2024 2023 $ Change % Change Revenue $ 602,463 $ 1,072,054 $ (469,591) (43.8)% Cost of sales 157,840 296,204 (138,364) (46.7)% Gross Profit 444,623 775,850 (331,227) (42.7)% Selling, general, and administrative 441,745 649,448 (207,703) (32.0)% Income from operations 2,878 126,402 (123,524) (97.7)% Other income Interest income 4,804 2,490 2,314 92.9 % Other expense (3,895) (95) (3,800) (4,000.0)% 909 2,395 (1,486) 62.0 % Income before provision for income taxes 3,787 128,797 (125,010) (97.1)% Provision for income taxes 1,696 29,382 (27,686) (94.2)% Net income $ 2,091 $ 99,415 $ (97,324) (97.9)% % of revenue Gross Profit 73.8% 72.4% Selling, general, and administrative 73.3% 60.6% Income from Operations 0.5% 11.8% Revenue: Revenue decreased $469.6 million, or 43.8%, to $602.5 million in 2024 from $1.1 billion in 2023.
Non-GAAP adjusted income tax provision was $31.1 million for 2023, an effective tax rate of 22.8%, compared to $51.8 million in 2022, an effective tax rate of 24.1%, primarily due to the decrease in state taxes and the impact of charitable donations.
Non-GAAP adjusted income tax provision was $7.7 million for 2024, an effective tax rate of 27.7%, compared to $31.1 million in 2023, an effective tax rate of 22.8%.
The increase in the effective tax rate for 2023 as compared to 2022 was primarily driven by a decrease in the charitable contribution benefit and an increase in the limitation for executive compensation, partially offset by an increase in the research and development benefit and a decrease in state taxes.
The increase in the effective tax rate for 2024 as compared to 2023 was primarily driven by the 4.6% impact of state taxes and the 3.1% impact of the tax shortfall for stock compensation, partially offset by a 1.7% reduction from the impact of research and development tax credits and 1.2% from the impact of from the limitation for executive compensation.
Additionally, refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2022 compared to fiscal year 2021. 36 Table of Contents 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 our quarterly reports, our quarterly earnings press releases and other public disclosures.
Non-GAAP Financial Measures 35 Table of Contents 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 annual report, our quarterly earnings press release, and other public disclosures.
Contractual Obligations and Commercial Commitments The Company had the following contractual obligations with a remaining term in excess of one year as of December 31, 2023 (in thousands): 2024 2025 - 2026 2027 - 2028 Thereafter Total Operating leases (a) $ 6,312 $ 11,245 $ 5,171 $ 240 $ 22,968 Unconditional purchase obligations (b) 47,041 22,186 2,955 — 72,182 Total contractual obligations 53,353 33,431 8,126 240 95,150 ____________________ (a) The Company has operating leases in place for leased corporate offices, warehouses, and certain equipment.
Contractual Obligations and Commercial Commitments The Company had the following contractual obligations with a remaining term in excess of one year as of December 31, 2024 (in thousands): 2025 2026 - 2027 2028 - 2029 Thereafter Total Operating leases (a) $ 6,462 $ 7,336 $ 2,858 $ — $ 16,656 Unconditional purchase obligations (b) 4,458 5,784 579 — 10,821 Total contractual obligations 10,920 13,120 3,437 — 27,477 ____________________ 37 Table of Contents (a) The Company has operating leases in place for leased corporate offices, warehouses, and certain equipment.
The $46.4 million net increase in stockholders’ equity 37 Table of Contents reflects $99.4 million in net income for 2023 offset by $3.6 million spent on repurchases of common stock and $54.6 million for dividends paid to holders of the Company’s common stock as well as the other equity transactions described in the Consolidated Statements of Changes in Stockholders’ Equity included in our consolidated financial statements included in this report.
The $8.6 million net increase in stockholders’ equity reflects $2.1 million in net income for 2024 and $7.4 million for shared-based compensation offset by other equity transactions described in the Consolidated Statements of Changes in Stockholders’ Equity included in our consolidated financial statements included in this report.
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. Income from operations: Income from operations in 2023 decreased $58.4 million to $126.4 million from $184.8 million in 2022 primarily as a result of decreased gross profit, partially offset by decreased SG&A expenses.
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.
This decrease was primarily due to a $122.8 million decrease in stock repurchases, partially offset by a $1.8 million increase in net shares repurchased for employee taxes and a $1.4 million increase in cash dividends paid to stockholders. In pursuing its business strategy, the Company may require additional cash for operating and investing activities.
Net cash used in financing activities decreased $78.3 million to $1.5 million for 2024 from $79.8 million for 2023. This decrease was primarily due to a $72.3 million decrease in cash dividends paid to stockholders, a $3.6 million decrease in stock repurchases, and a $2.5 million decrease in net shares repurchased for employee taxes for 2024 as compared to 2023.
Non-GAAP adjusted SG&A expenses for 2023 exclude expenses in connection with the Company's IT and supply chain optimization and costs for the Collaboration. Non-GAAP adjusted SG&A expenses for 2022 exclude expenses in connection with donations made to support to Ukrainian relief effort of $19.0 million for 2022.
Non-GAAP adjusted SG&A expenses exclude expenses in connection with the Company's supply chain optimization and costs for the LifeMD Collaboration. 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.
(b) The Company has unconditional purchase obligations primarily for inventories, outsourced information technology and Coach events. INFLATION During 2023, the Company's business experienced a certain amount of inflation impact on raw ingredient, freight and supply chain labor.
(b) The Company has unconditional purchase obligations primarily for inventories and outsourced information technology.
Selling, General and Administrative: Selling, general and administrative (“SG&A”) expenses were $649.4 million in 2023, a decrease of $306.2 million, or 32.0%, as compared to $955.6 million in 2022, primarily due to decreased Coach compensation on lower volumes and fewer active earning Coaches, progress on several cost reduction and optimization initiatives, and charitable donations in 2022, partially offset by market research and investment costs related to medically supported weight loss activities.
Selling, General and Administrative: Selling, general and administrative (“SG&A”) expenses were $441.7 million in 2024, a decrease of $207.7 million, or 32.0%, as compared to $649.4 million in 2023, primarily due to a $188.7 million decrease in OPTA VIA coach compensation due to lower sales volumes, a $13.8 million decrease in employee compensation, a $9.7 million decrease in credit card fees, and a $7.1 million decrease in costs for coach-related events.
The Company is entering into the medically supported weight loss area and continues to innovate and build upon its scientific and clinical heritage to fulfill its mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.
The Company continues to innovate and build upon its scientific and clinical heritage to fulfill its mission of offering the world Lifelong Transformation, Making a Healthy Lifestyle Second Nature. Our product sales accounted for approximately 96.8%, 97.5% and 97.2% of our revenues in each of 2024, 2023, and 2022, respectively.
As of December 31, 2023, the Company had no borrowings under the credit facility and was in compliance with all of its debt covenants.
On October 30, 2024, the Company terminated its Amended Credit Agreement with Citibank, N.A. The Company had no borrowings under the Amended Credit Agreement, inclusive of the credit facility and letter of credit sublimit as of the termination date.
Removed
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.
Added
OPTA VIA provides unparalleled coaching support along with community, tailored nutrition and healthy habits and empowers people to master their weight loss journey through each stage of life. Through the company’s collaboration with national virtual primary care provider LifeMD® and its affiliated medical group, customers now have access to GLP-1 medications where clinically appropriate.
Removed
OPTA VIA's lifestyle plans deliver clinically proven health benefits, and our program includes evidence-based tools, including 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.
Added
Costs of Sales: Cost of sales decreased $138.4 million, or 46.7%, to $157.8 million in 2024 from $296.2 million in 2023. The decrease in cost of sales was primarily driven by an approximately $123.9 million decrease due to lower sales volumes, $5.3 million decrease in inventory donations, and $4.7 million of efficiencies in inventory management.
Removed
In early January 2024, through a collaboration with the national virtual primary care provider LifeMD, OPTA VIA customers will have access to board-certified affiliated clinicians and medications, such as GLP-1s, that support treatment plans for obesity and other health conditions.
Added
As a percentage of sales, gross profit increased 140 basis points to 73.8% for 2024 from 72.4% for 2023. 34 Table of Contents Non-GAAP adjusted gross profit was $447.2 million for 2024, a decrease of $328.6 million, or 42.4%, as compared to $775.9 million for 2023.
Removed
Medifast was recognized in 2023 by Financial Times as one of The Americas' Fastest Growing Companies and in 2022 as one of America's Best Mid-Sized Companies by Forbes. Our product sales accounted for approximately 97.5%, 97.2% and 98.0% of our revenues in each of 2023, 2022, and 2021, respectively.
Added
These decreases are partially offset by $22.9 million of customer led acquisition costs and $12.5 million of supply chain optimization costs.
Removed
Costs of Sales: Cost of sales decreased $162.0 million, or 35.3%, to $296.2 million in 2023 from $458.2 million in 2022.
Added
As a percentage of sales, SG&A expenses were 73.3% for 2024 as compared to 60.6% for 2023, primarily due to a 330 basis point increase for our company led acquisition efforts, a 330 basis point increase for loss of leverage on employee compensation, a 160 basis point increase due to loss of leverage on fixed costs, and a 200 basis point increase due to supply chain optimization efforts.
Removed
This decrease in cost of sales was primarily driven by decreased volumes and the restructuring of certain external manufacturing agreements in 2022, partially offset by higher product costs resulting from inflationary pressures on raw ingredient costs, shipping costs, and labor costs.
Added
Income from operations: Income from operations in 2024 decreased $123.5 million to $2.9 million from $126.4 million in 2023 primarily as a result of decreased gross profit, partially offset by decreased SG&A expenses.
Removed
The decrease in gross profit was primarily attributable to lower revenue as well as cost inflation from raw ingredient costs, shipping 35 Table of Contents costs, and labor costs, partially offset by restructuring costs of certain manufacturing agreements in 2022. As a percentage of sales, gross profit increased 110 basis points to 72.4% for 2023 from 71.3% for 2022.
Added
The increase in the effective tax rate for 2024 as compared to 2023 was primarily driven by the 18.3% impact of state taxes and the 23.3% impact of the tax shortfall for stock compensation, partially offset by the 17.9% reduction from the impact of research and development tax credits, all of which were magnified by the near break-even pre-tax income position in the current year.
Removed
The increase in gross margin percentage was primarily due to cost savings from the Company's Fuel for the Future program and restructuring costs of certain manufacturing agreements 2022. Non-GAAP adjusted gross profit was $775.9 million for 2023, a decrease of $376.8 million, or 32.7%, as compared to $1.153 billion for 2022.
Added
Additionally, refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2023 compared to fiscal year 2022.
Removed
As a percentage of sales, SG&A expenses were 60.6% for 2023 as compared to 59.8% for 2022, primarily due to the loss of leverage on fixed costs due to lower sales volumes when compared to 2022 and market research and investment costs related to medically supported weight loss activities, partially offset by progress on several cost reduction and optimization initiatives and charitable donations in 2022.
Added
The Company is currently investing in new growth initiatives which have the potential to impact liquidity in future periods. The Company’s current growth initiatives, which are primarily comprised of Company-led marketing activities, new product development and the Company’s Medically Supported Weight Loss collaboration with LifeMD, do not require any material contractual commitments or capital expenditures in future periods.
Removed
(2) We expect the remaining $5.0 million of LifeMD Collaboration Costs to be recorded in 2024. Liquidity and Capital Resources The Company had stockholders’ equity of $201.5 million and working capital of $131.7 million at December 31, 2023 compared with $155.0 million and $81.9 million at December 31, 2022.
Added
Since the future costs of these endeavors are variable in nature and will be scaled at the discretion of management, we do not believe there is any significant impact on our liquidity or capital resources In pursuing its business strategy, the Company may require additional cash for operating and investing activities.
Removed
Cash used in capital expenditures for 2023 expanded our technology and supply chain capabilities to support our planned growth. Net cash used in financing activities decreased $119.8 million to $79.8 million for 2023 from $199.6 million for 2022.
Removed
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.
Removed
The Company previously increased sales prices for most of its products in November 2022 by an average of approximately 4.5%. 38 Table of Contents

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−2 removed1 unchanged
Biggest changeOther than for strategic investments, its current investment policy is to maintain an investment portfolio consisting of corporate bonds and U.S. money market securities directly or through managed funds. Its cash is deposited in and invested through highly rated financial institutions in North America.
Biggest changeThe Company is exposed to market risk related to changes in interest rates and market pricing impacting our investment in money market securities, government and agency securities, and corporate bonds. Other than for strategic investments, its current investment policy is to maintain an investment portfolio consisting of corporate bonds and U.S. money market securities directly or through managed funds.
If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels at December 31, 2023, the Company estimates that the fair value of its investment portfolio would decline by an immaterial amount 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.
If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels at December 31, 2024, the Company estimates that the fair value of its investment portfolio would decline by an immaterial amount 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.
If equity prices were to decrease immediately and uniformly by 10% from levels at December 31, 2023, the Company estimates that the fair value of the Company investment would decline by an immaterial amount and therefore it would not expect its operating results or cash flows to be affected by any significant degree by the effect of a change in market conditions on our investment.
If equity prices were to decrease immediately and uniformly by 10% from levels at December 31, 2024, the Company estimates that the fair value of the Company investment would decline by an immaterial amount and therefore it would not expect its operating results or cash flows to be affected by any significant degree by the effect of a change in market conditions on our investment.
Its marketable securities, purchased during 2023, are subject to interest rate risk and market pricing risk and will fall in value if market interest rates increase or if market pricing decreases.
Its cash is deposited in and invested through highly rated financial institutions in North America. Its marketable securities are subject to interest rate risk and market pricing risk and will fall in value if market interest rates increase or if market pricing decreases.
The Company is exposed to market risk related to price fluctuations in equity markets related to its investment in LifeMD common stock, purchased in December of 2023.
There were no material changes in the Company's market risk exposure related to changes in interest rates and market pricing impacting our investments from the year ended December 31, 2023. The Company is exposed to market risk related to price fluctuations in equity markets related to its investment in LifeMD common stock, purchased in December of 2023.
Removed
The Company is exposed to market risk related to changes in interest rates and market pricing impacting our credit facility and investment in money market securities, government and agency securities, and corporate bonds.
Added
There were no material changes in the Company's market risk exposure related to the investment in LifeMD common stock from the year ended December 31, 2023. 38 Table of Contents
Removed
As of December 31, 2023, the Company did not have any outstanding borrowings. 39 Table of Contents

Other MED 10-K year-over-year comparisons