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What changed in MEDIFAST INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MEDIFAST INC's 2022 and 2023 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 2023 report.

+342 added−329 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in MEDIFAST INC's 2023 10-K

342 paragraphs added · 329 removed · 224 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+71 added−52 removed35 unchanged
Biggest changeThe 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. 6 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. 9 Table of Contents INCENTIVES We believe our business is most successful when our Coaches can maintain a continuous cycle of growth: Coaches activate new and successful customers, many of whom go on to become OPTA VIA Coaches themselves, who activate new customers, and so on.
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.
With respect to the retail and direct marketing distribution of products produced by others, the Company’s principal form of insurance consists of arrangements with each of its suppliers of those products to name the Company a covered entity under each of such vendor’s product liability insurance policies.
With respect to the retail and direct marketing and distribution of products produced by others, the Company’s principal form of insurance consists of arrangements with each of its suppliers of those products to name the Company a covered entity under each of such vendor’s product liability insurance policies.
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.
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.
We are investing substantial time and resources in carefully learning from our existing and prospective customers, listening to what our Coaches are hearing and finding efficient solutions to challenges, along with building programs that deliver connection, engagement and retention. We’re consistently adapting and focusing our efforts on where we believe they will have the most impact.
We are investing substantial time and resources in carefully learning from our existing and prospective customers, listening to what our Coaches are hearing and finding efficient solutions to challenges, along with building programs that deliver connection, engagement and retention. We are consistently adapting and focusing our efforts on where we believe they will have the most impact.
January and February generally show 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 our sales pattern does not follow the seasonality of our industry, but rather is predicated on the growth of our OPTA VIA Coach network.
In addition, we are subject to other laws and regulations in the United States and internationally. The FTC has principal regulatory authority over the Company’s advertising and trade practices, its enforcement powers are aimed at protecting the consumer from being deceived by unfair marketing and trading practices.
In addition, we are subject to other laws and regulations in the United States. The FTC has principal regulatory authority over the Company’s advertising and trade practices, its enforcement powers are aimed at protecting the consumer from being deceived by unfair marketing and trading practices.
To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or competitive position. In this section, we describe the regulations that are applicable to our business. Direct Selling Regulations Direct selling is regulated by various national, state and local government agencies in the United States and foreign markets.
To date, compliance with federal, state and local environmental protection regulations has not had a material effect on our capital expenditures, earnings or competitive position. In this section, we describe the regulations that are applicable to our business. Direct Selling Regulations Direct selling is regulated by various national, state and local government agencies in the United States.
GOVERNMENTAL REGULATION We are subject to extensive foreign, federal, state, and local government laws and regulations, including those relating to the preparation and sale of food and beverages, in the various jurisdictions in which we operate, own, and lease properties, and market our offerings, including our OPTA VIA program, our products, and other aspects of our business.
GOVERNMENTAL REGULATION We are subject to extensive federal, state, and local government laws and regulations, including those relating to the preparation and sale of food and beverages, in the jurisdictions in which we operate, own, and lease properties, and market our offerings, including the OPTA VIA program, products, and other aspects of our business.
We are also subject to laws governing our relationships with employees, including minimum wage requirements, overtime, working conditions, hiring and firing, non-discrimination for disabilities and other individual characteristics, work permits, and benefit offerings. Further, we are subject to laws governing our relationships with our independent contractor OPTA VIA Coaches.
We are also subject to laws governing our relationships with employees, including minimum wage requirements, overtime, working conditions, hiring and firing, non-discrimination for disabilities and other protected characteristics, work permits, and benefit offerings. Further, we are subject to laws governing our relationships with our independent contractor OPTA VIA Coaches.
Under this plan, OPTA VIA Coaches counsel 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. • Optimal Health 3 & 3 Plan ® . The Optimal Health 3 & 3 Plan is designed for customers who want to sustain a healthy weight.
In almost all of our domestic markets, regulations are subject to discretionary interpretation by regulators and judicial authorities. There is often ambiguity and uncertainty with respect to the state of direct selling and anti-pyramiding laws and regulations.
In almost all of our domestic markets, regulations are subject to discretionary interpretation by regulators and judicial authorities. There is often ambiguity and uncertainty with respect to the state of direct selling and anti-pyramid laws and regulations.
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. 5 Table of Contents 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. These macroeconomic uncertainties make it challenging for our management to estimate our future business performance.
MANUFACTURING Jason Pharmaceuticals, Inc., our wholly-owned subsidiary with a manufacturing facility in Owings Mills, Maryland, is one of the primary manufacturers of our products, which account for approximately 20% of our total unit sales. We purchased the facility in July 2002 and have gradually increased production capacity and improved overall efficiencies with additional investments in blending and packaging equipment.
MANUFACTURING Jason Pharmaceuticals, Inc., our wholly-owned subsidiary with a manufacturing facility in Owings Mills, Maryland, is one of the manufacturers of our products, which account for approximately 25% of our total unit sales. We purchased the facility in July 2002 and have gradually increased production capacity and improved overall efficiencies with additional investments in blending and packaging equipment.
The Optimal Weight and Health plans 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 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.
Our Community (independent Coach Community and our team members) 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.
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.
Potential customers seeking to manage their weight can turn to other traditional center-based competitors, online diet-oriented sites, self-directed dieting and self-administered products such as prescription drugs, over-the-counter drugs and supplements, as well as medically supervised programs.
Potential customers seeking to manage their weight can turn to traditional center-based competitors, online diet-oriented sites, self-directed dieting and self-administered products such as prescription medications, over-the-counter medications and supplements as well as medically supervised programs.
The last time the FTC sought similar public comments led to a major revision of the Endorsement Guides. Consequently, the FTC could bring an enforcement action based on practices that are inconsistent with the current Endorsement Guides as it considers 12 Table of Contents revisions.
The last time the FTC sought similar public comments led to a major revision of the Endorsement Guides. Consequently, the FTC could bring an enforcement action based on practices that are inconsistent with the current Endorsement Guides as it considers revisions.
Our Owings Mills manufacturing facility is regulated and inspected by the United States Food and Drug Administration (the “FDA”), the United States Department of Agriculture (the “USDA”), the 11 Table of Contents Maryland State Department of Health and Mental Hygiene and Office of Food Protection.
Our Owings Mills manufacturing facility is regulated and inspected by the United States Food and Drug Administration (the “FDA”), the United States Department of Agriculture (the “USDA”), the Maryland State Department of Health and Mental Hygiene, and Office of Food Protection.
We also leverage our communication channels to remind team members of the significant impact they have on the Coach and customer experience, help them understand our business model, get them engaged in opportunities to learn and increase empathy across functional teams. Recognition is another key component of our culture.
We leverage our communication channels to remind team members of the significant impact they have on the Coach & customer experience, help them understand our business, get them engaged in learning and increase empathy across functional teams. Recognition is another key component of our culture.
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 approximately 42.4% were obese in 2017.
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 .
Our Fuelings contain high-quality protein which helps our customers retain lean muscle mass and each contains the patented probiotic BC30™ to support digestive health as part of a balanced diet and healthy lifestyle. Our OPTA VIA Coaches market OPTA VIA Essential Fuelings primarily through a suite of scientifically 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. Our OPTA VIA Coaches market OPTA VIA Fuelings primarily through clinically proven Optimal Weight Plans.
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 the customers.
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.
We understand that Customer acquisition is important to our growth as Customer cohorts going on the OPTA VIA program today form future Coach cohorts, which in turn drive optimization of the Customer and Coach tenure mix and the associated improvements in efficiency and productivity. Optimizing incentivization and compensation remains important to drive growth, retention, and engagement.
Customer acquisition is important to our growth as customer cohorts utilizing the OPTA VIA program today form future Coach cohorts, which in turn drive optimization of the customer and Coach tenure mix and the associated improvements in efficiency and productivity. Optimizing incentivization and compensation remains important to drive growth, retention, and engagement.
We offer customers incentives to join the OPTA VIA Community, including access to the corporate "Nutrition Support" team made up of subject matter experts that provide assistance to our Coaches and customers, and exclusive offers through our OPTA VIA Premier service that help our customers stay on plan, as well as qualifies them for discounts on purchased products and free or discounted shipping.
We offer customers incentives to join the OPTA VIA Community, including access to the corporate “Nutrition Support” team made up of subject matter experts that provide assistance to our Coaches and customers, and exclusive offers through OPTA VIA Premier, our auto-ship service that helps our customers stay on plan, as well as qualifies them for discounts on purchased products and free or discounted shipping.
It’s worth about $20 billion today with a growth rate of approximately 6% per annum. Additionally, roughly 75% of the U.S. population above 18 wants to lose weight and is open to dieting, and approximately 65% of overweight/obese population considers paid meal plans effective.
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 .
We help customers achieve their health goals through a network of approximately 60,900 active earning independent OPTA VIA Coaches, about 90% of whom were customers first, and have impacted more than 2 million lives to date.
We help customers achieve their health goals through a network of approximately 41,100 active earning independent OPTA VIA Coaches, about 90% of whom were customers first, and have impacted more than 3 million lives to date.
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 remaining 80% of our total unit sales are manufactured by third-party vendors 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 75% of our total unit sales are manufactured by co-manufacturers in accordance with Medifast proprietary formulas and manufacturing standards.
We can clearly see the growth potential outside the U.S. domestic market and this will be a foundational aspect of our long-term growth for many years to come, as we look to further our impact and advance the global health movement. PRODUCTS AND PROGRAMS We take pride in our scientific heritage.
We can clearly see the growth potential, and expansion will be a foundational aspect of our long-term growth strategy for many years to come, as we look to further our impact and advance the global health movement. PRODUCTS AND PROGRAMS We take pride in our scientific heritage.
Macroeconomic Conditions Global economic challenges including the impact of rising inflation, adverse labor market conditions, the war in Ukraine and the continuing impact of the COVID-19 pandemic have caused macroeconomic uncertainty and volatility in markets where we, our suppliers and our OPTA VIA Coaches operate. We are exposed to market risks from changes in commodity or other raw material prices.
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.
Lastly, within our Supply Chain we piloted a shadow program called Level Up to create 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 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.
OPTA VIA Coaches also counsel their customers 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. • Optimal Weight 4 & 2 & 1 Plan ® .
We believe our scientific and clinical heritage and commitment to evaluating programs, plans and products through clinical research are primary differentiators that allow us to compete in this market. Our products were originally developed by a physician, and we have been on the cutting edge in the development of nutritional and weight-management products since our founding.
We believe our scientific and clinical heritage combined with our commitment to evaluating programs, plans and products through clinical research are primary differentiators that allow us to compete in these markets. Our scientifically designed products were originally developed by a physician, and we have been on the cutting edge in the development of nutrition and weight-management products since our founding.
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 a MLM organization’s compensation structure, and how a MLM organization should approach representations to current and prospective participants. We believe our current business practices comply with the MLM Guidance.
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.
No single customer accounted for 10% or more of our consolidated revenue for the year ended December 31, 2022. 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, 2023. SEASONALITY Demand for weight management products and programs are typically seasonal.
The intensified interest in physical fitness, fitness center membership, increased public awareness and incidences of chronic diseases such as type 2 diabetes, heart disease, certain types of cancer, stroke, arthritis, sleep apnea and depression have increased demand for health and wellness products.
Industry growth is also being driven by growing consumer awareness and increasing demand for health and wellness products. The intensified interest in physical fitness, fitness center membership, increased public awareness and incidences of chronic diseases such as type 2 diabetes, heart disease, certain types of cancer, stroke, arthritis, sleep apnea and depression have increased demand for health and wellness products.
A variety of information security methods are used to protect confidential customer and corporate data against unauthorized access, including periodic network and website vulnerability/penetration testing. Network intrusion detection and prevention technologies are in use to alert and mitigate unauthorized access and distributed denial of service attacks.
Where applicable, we also review service provider PCI compliance annually. We use a variety of information security methods to protect confidential customer and corporate data against unauthorized access, including periodic network and website vulnerability/penetration testing. Network intrusion detection and prevention technologies are in use to alert and mitigate unauthorized access and distributed denial of service attacks.
Five daily meals are OPTA VIA Fuelings, offering customers a choice from more than 50 delicious, convenient, nutritionally interchangeable, scientifically-designed products, including shakes, soups, bars, hot beverages, hearty choices, pudding and brownies. OPTA VIA Coaches counsel their customers on which Fuelings to select.
Five daily meals are OPTA VIA Fuelings, offering customers a choice from more than 45 delicious, convenient, nutritionally interchangeable, scientifically-designed products, including shakes, soups, bars, hot beverages, hearty choices, pudding and brownies.
It promotes holistic health and wellness and positions healthy weight as a catalyst to greater lifestyle changes. OPTA VIA Coaches provide personalized support to customers and motivate them by sharing their passion for healthy living and lifestyle transformation.
The OPTA VIA Coaching Model is customer-centric and boasts an energized health and wellness community. It promotes holistic health and wellness and positions healthy weight as a catalyst to greater lifestyle changes. OPTA VIA Coaches provide personalized support to customers and motivate them by sharing their passion for healthy living and lifestyle transformation.
The program provides a more effective and satisfying alternative to outdated, quick fixes and is built around four key components: • 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 which offers easy steps to a sustainable healthy lifestyle. • Products & Plans: Clinically proven plans and scientifically developed nutritional products, called “Fuelings,” backed by dietitians, scientists and physicians.
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.
Lifestyle issues our customers often seek to address and resolve include: • physical limitations and debilitating medical conditions 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 how to balance different food groups; • the need for a convenient and simple, healthy lifestyle solution or program to accommodate demands on their time; and • the need for a community of like-minded people for support to achieve their goals.
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.
They promote a holistic health and wellness program and are not focused on product sales. • OPTA VIA Coaches promote a unified training system that aligns its leaders around a common mission. • OPTA VIA offers a differentiated direct-to-consumer model, with 100% of products shipped directly to customers.
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.
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.
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.
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.
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.
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.
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 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, reflecting and learning, conflict and resilience practices, activities to inspire creativity and innovation and much more.
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.
As an organization, we are committed to generating an open dialog with our team members as well as improving our learning on how we can foster a more inclusive work environment that enables all our team members to have a voice.
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.
OPTA VIA Coaches introduce customers to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTA VIA-branded Fuelings. Fuelings are nutrient-dense, portion-controlled, nutritionally interchangeable and simple to use.
OPTA VIA Coaches introduce customers to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTA VIA-branded products, including Fuelings as well as OPTA VIA ACTIVE, a new line of essential amino acid supplements and protein powders. Fuelings are nutrient-dense, portion-controlled, nutritionally interchangeable and simple to use.
Our OPTA VIA Integrated Coaching Model offers the personal support of an OPTA VIA Coach, who is often a person who has achieved success with OPTA VIA and has turned their success into a business opportunity. MARKETING We continue to build and leverage our brands through multiple marketing strategies.
Our OPTA VIA Coaching Model offers the personal support of an OPTA VIA Coach, who is often a person who has achieved success with OPTA VIA and has turned their success into a business opportunity.
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.
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.
Most recently, we conducted a double-blind study that shows the effects that OPTA VIA Coaching has on the program; the results suggested that speaking with their OPTA VIA Coach more often may help customers lose up to twice as much weight. 5 Our clinically proven plans and our scientifically developed products were developed by physicians, dietitians, and scientists to help customers achieve a healthy weight.
Most prominently, we conducted a double-blind study that shows the effects that Coaching has on the OPTA VIA program; the results suggested that speaking with their OPTA VIA Coach more often may help customers lose up to twice as much weight. 11 Our clinically proven plans and our scientifically designed products were developed by physicians, dietitians, and have impacted more than 3 million lives and been recommended by thousands of healthcare providers.
For more information about our OPTA VIA Coaches, see the Summary section of Item 1. Business. INFORMATION SYSTEMS & TECHNOLOGY Our websites use commercially developed software which are hosted by data center colocation and cloud service providers. The hosting facilities provide carrier-diverse network connectivity, information security technologies, redundant and emergency power, fire prevention and control, and physical security.
Our websites use commercially developed software which are hosted by data center colocation and cloud service providers. The hosting facilities provide carrier-diverse network connectivity, information security technologies, redundant and emergency power, fire prevention and control, and physical security.
Traditionally, the predisposition of customers not to initiate a weight loss or management program during the holiday season impacts the fourth quarter with fewer sales of weight management products and services during these months.
Traditionally, the predisposition of customers refraining from initiating weight loss or management programs during the holiday season typically impacts the fourth quarter with fewer sales of weight management products and services during these months.
Success with OPTA VIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence and leadership.
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.
This plan focuses on nutritionally balanced, small meals eaten every two or three hours, similar to our Optimal Weight plans, while integrating more food choices in the right portions. Customers are counseled by their OPTA VIA Coaches to eat three Optimal Health Fuelings and three balanced meals they prepare themselves daily.
This plan focuses on nutritionally balanced, small meals eaten every two or three hours, similar to our Optimal Weight plans, while integrating more food choices in the right portions.
We expect our continued investment in fostering a robust community around our OPTA VIA brand and our OPTA VIA Coaching Model will continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.
We expect our continued investment in fostering a robust community around our OPTA VIA brand and our OPTA VIA Coaching Model will continue to drive a sustainable, repeatable business rhythm.
Our Culture Contract lays out the explicit behaviors that underly our Core Values. It details the commitments we make to one another when we join Medifast and the commitments the Company makes to deliver an excellent work experience to all our team members.
It details the commitments we make to one another when we join Medifast and the commitments the Company makes to ensure an excellent work experience for all our team members.
Our products are individually portioned, calorie and carbohydrate-controlled meal replacements that share a similar nutritional “footprint” and provide a balance of protein and good carbohydrates, including fiber and are fortified with vitamins, minerals and probiotics.
Our products are individually portioned, calorie and carbohydrate-controlled meal replacements that share a similar nutritional “footprint” provide a balance of protein and good carbohydrates, including fiber, and are fortified with vitamins, minerals and probiotics. These products are scientifically designed to deliver proper nutrition at every stage of a person’s health journey toward a sustainable, healthy lifestyle.
(formerly Weight Watchers International, Inc.), Herbalife Nutrition Ltd., The Simply Good Foods Co., The Hain Celestial Group, Inc., BellRing Brands, Inc., and Beyond Meat, Inc. We have a competitive advantage over traditional diet companies.
Medifast’s identified publicly traded peers and competitors in the general health and wellness diet industry include USANA Health Sciences Inc., WW International, Inc. (formerly Weight Watchers International, Inc.), Herbalife Nutrition Ltd., The Simply Good Foods Co., The Hain Celestial Group, Inc., and BellRing Brands, Inc. We believe we have a competitive advantage over traditional diet companies.
We work closely with our cross-disciplinary Scientific Advisory Board comprised of physicians and scientists who help guide and provide valuable input into the development of our comprehensive portfolio of offerings. Our products are scientifically designed to deliver proper nutrition at every stage of a person’s health journey toward a sustainable, healthy lifestyle.
We work closely with our cross-disciplinary Scientific Advisory Board comprised of physicians and scientists who help guide and provide valuable input into the development of our comprehensive portfolio of offerings.
OPTA VIA- BRANDED PLANS Our OPTA VIA-branded health and wellness plans help customers enter a gentle, but efficient fat-burning state. Their success is enhanced by the personal attention, counseling, education, advice and motivation they receive from our OPTA VIA Coaches.
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.
Consumer Motivation Our core customers are highly motivated to adopt a healthy lifestyle that is transformative and sustainable. 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 maintaining a healthy weight and embracing healthy habits for the long-term.
We say to our team members, wellness is not just what we do, it’s who we are. Our commitment to being a best-in-class wellness company starts with providing team members equal access to all our programs. It also means ensuring that the programs we are providing truly work for our team members.
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.
Many of these programs are also utilized to reactivate, encourage and support existing customers and OPTA VIA Coaches. We are constantly working to enhance all of our Company materials and websites.
These mediums are used to target new customers by stressing OPTA VIA’s simple and effective approach to weight loss and management and long-term health. Many of these programs are also utilized to reactivate, encourage and support existing 12 Table of Contents customers and OPTA VIA Coaches. We are constantly working to enhance all of our Company materials and websites.
This arrangement frees our OPTA VIA Coaches from having to manage inventory and allows them to maintain an arms-length transactional relationship while focusing their attention on support and encouragement. We measure our success by the results our customers are able to achieve. The more OPTA VIA Coaches we have, the more customers we can serve.
This arrangement frees our OPTA VIA Coaches from having to manage inventory and allows them to maintain an arms-length transactional relationship while focusing their attention on support and encouragement. We believe our coach-based model is scalable and drives both customer success and growth.
The OPTA VIA model: • Promotes a program that focuses on holistic wellness; it views healthy weight as a catalyst to greater changes. • Offers personalized, empathetic support from Coaches that have been in their customers’ shoes. • Offers lifelong habit development supported by a proprietary integrated system, the Habits of Health Transformational System. • Has a vibrant health and wellness community that has impacted more than 2 million lives.
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.
Our Culture Club program, established in 2020, gives team members from any part of our company, whether onsite, hybrid or fully remote, the opportunity to come together to connect, build bonds and learn together in a virtual environment.
In 2023, we welcomed 22 senior leaders to this training to build their leadership toolkits as they foster diversity and inclusion among their teams. Our Culture Club program, established in 2020, gives all of our team members, whether onsite, hybrid or fully remote, the opportunity to come together to connect, build bonds and learn together in a virtual environment.
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. 7 Table of Contents As we previously disclosed, global expansion is an important component of our long-term growth strategy and our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.
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.
Culture Club covers a learning topic typically related to our culture or ways of working, and always includes a fun element to give team members a moment to relax and deepen bonds. Nurturing growth and learning are also key elements of our culture.
Culture Club covers a learning topic related to our culture or ways of working, and always includes a fun element to give team members a moment to relax and deepen bonds. For the past two years, we have also hosted a Culture Week to celebrate the differences that make our Community special.
Our #AcedIt program provides team members and people leaders a platform to recognize excellent work that supports our business strategy and applaud behaviors that reinforce our cultural values. We believe fostering a sense of gratitude is a key component to nurturing strong relationships and building tight-knit communities.
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 telephone number at this office is (410) 581-8042. Our corporate website is http://www.medifastinc.com.
AVAILABLE INFORMATION Our principal office is located at 100 International Drive, 18 th Floor, Baltimore, Maryland 21202. Our telephone number at this office is (410) 581-8042. Our corporate website is http://www.medifastinc.com.
Medifast's Scientific Advisory Board is now comprised of seven internationally recognized experts who provide objective insights to guide the Company in making informed decisions based on the latest scientific developments in health and wellness.
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.
The cross-disciplinary panel was established in 2008 in service of the Company's commitment to providing an evidence-based, safe and effective health and wellness program that meets consumer needs.
Its mission is to help guide us in making informed decisions regarding medical, nutritional, food service and scientific matters by providing expertise and information on research and emerging trends. The cross-disciplinary panel was established in 2008 in service of the Company's commitment to providing an evidence-based, safe and effective health and wellness program that meets consumer needs.
We continuously monitor our information systems and infrastructure. Redundant carrier-diverse networks are also used to interconnect our corporate locations. SSAE 18 compliance of key service organizations is evaluated annually by reviewing relevant System and Organization Controls (SOC) reports. Where applicable, service provider PCI-DSS compliance is also reviewed annually.
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.
Our policy is to protect our products and programs through trademark registrations both in the United States and in significant international markets. The Company carefully monitors trademark use and strongly promotes enforcement and protection of all of its trademarks. AVAILABLE INFORMATION Our principal office is located at 100 International Drive, 18 th Floor, Baltimore, Maryland 21202.
INTELLECTUAL PROPERTY Products manufactured by and programs marketed by the Company are sold under their own trademarks and trade names. Our policy is to protect our products and programs through trademark registrations both in the United States and in significant international markets. The Company carefully monitors trademark use and strongly promotes enforcement and protection of all of its trademarks.
As a response, we may periodically take incremental pricing actions to offset supply chain costs, inflationary pressures, and adverse labor market conditions. In addition, beginning in February 2022, the war in Ukraine and corresponding events have had, and could continue to have, adverse effects on regional and global markets.
As a response, we may periodically take incremental pricing actions to offset supply chain costs, inflationary pressures, and adverse labor market conditions.
However, we intend to continue to actively monitor the impact of the pandemic and related developments on our business and will update our practices accordingly. 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.
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.
We also have an advantage 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 and has one sales price for both OPTA VIA Coaches and customers.
They are formulated with high-quality ingredients and are fortified with the patented probiotic BC 30 ™ cultures, vitamins and minerals, as well as other nutrients essential for good health. Our products support the process of integrating healthy habits into our customer’s day-to-day lives. The OPTA VIA coaching model is customer-centric and boasts an energized health and wellness community.
They are formulated with high-quality ingredients and contain probiotic BC 30 ™ cultures, which help support digestive health, as part of a balanced diet and healthy lifestyle, vitamins and minerals, as well as other nutrients essential for good health. Our products are used as tools and support the process of integrating healthy habits into our customers' daily life.
The aim is not just to encourage first-time OPTA VIA customers to sign up, but also to reactivate lapsed Customers who have already had a positive experience with the brand.
Programs like these are an important driver of our ongoing customer acquisition efforts, focusing on fostering alignment of the Coach network around customer acquisition. The aim is not just to acquire first-time OPTA VIA customers, but also to reactivate lapsed customers who have already had a positive experience with the brand.
Substantial inventories are required to meet the needs of our dual role as manufacturer and distributor. 13 Table of Contents HUMAN CAPITAL MANAGEMENT As of December 31, 2022, the Company employed 874 team members, of whom 507 were engaged in manufacturing, logistics and supply chain support, and 367 in marketing, administrative and corporate support functions.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may also be subject to claims that our OPTA VIA Coaches have provided inappropriate advice or have inappropriately referred or failed to refer customers to health care providers for matters other than weight loss. Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business.
Biggest changeSuch 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.
The 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 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 competitors include companies selling 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 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.
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 us, our business could be harmed. In addition, the FTC has increased its scrutiny of the use of testimonials, which we also utilize, as well as the role of endorsers.
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 us, our business could be harmed. The FTC has also increased its scrutiny of the use of testimonials, which we also utilize, as well as the role of endorsers.
Adverse publicity could arise even if the unfavorable effects associated with weight loss products or services resulted from the user’s failure to use such products or services appropriately. Our industry is subject to governmental regulation that could increase in severity and hurt results of operations. Our industry is subject to federal, state and other governmental regulation.
Adverse publicity could arise even if the unfavorable effects associated with weight loss products or services resulted from the user’s failure to use such products or services appropriately. Our industry is subject to governmental regulation that could increase in severity and hurt results of operations. Our industry is subject to federal, state and other governmental regulations.
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. These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions.
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 we fail to successfully enforce our intellectual property rights, the value of our brand, services and products could be diminished and our business may suffer. Additionally, failure to protect our intellectual property could result in the entry of a competitor to the market.
If we fail to successfully enforce our intellectual property rights, the value of our brand, services and products could be diminished and our business may suffer. Additionally, failure to protect our intellectual property could result in the entry of a competitor into the market.
These factors include: quarterly variations in operating results; changes in accounting treatments or principles; announcements by us or our competitors of new products and services offerings; significant contracts, acquisitions, or strategic relationships; additions or departures of key personnel; any future sales of our common stock or other securities; stock market price and volume fluctuations of publicly-traded companies; and general political, economic and market conditions.
These factors include: quarterly variations in operating results; changes in accounting treatments or principles; announcements by us or our competitors of new products and services offerings; significant contracts, acquisitions, or strategic relationships; additions or departures of key personnel; any future sales of the Company’s common stock or other securities; stock market price and volume fluctuations of publicly-traded companies; and general political, economic and market conditions.
The services we require from these parties may be disrupted due to a number of factors associated with their businesses, including the following: • public health crises, such as pandemics and epidemics, including the COVID-19 pandemic; • labor disruptions; • delivery and transportation problems; • financial condition or results of operations; • internal inefficiencies; • power failures; • equipment failure; • severe weather, climate and other adverse environmental conditions; • fire; • natural or man-made disasters, war, terrorism, or political instability; • adverse changes in third-party contract terms; • shortages or increases in prices of ingredients; and • USDA or FDA compliance issues.
The services we require from these parties may be disrupted due to a number of factors associated with their businesses, including the following: • public health crises, such as pandemics and epidemics; • labor disruptions; • delivery and transportation problems; • financial condition or results of operations; • internal inefficiencies; • power failures; • equipment failure; • severe weather, climate and other adverse environmental conditions; • fire; • natural or man-made disasters, war, terrorism, or political instability; • adverse changes in third-party contract terms; • shortages or increases in prices of ingredients; and • USDA or FDA compliance issues.
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 Our 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. 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.
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 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 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.
The market price of our common stock may fluctuate significantly in response to a number of factors, many of which are out of our control.
The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, many of which are out of our control.
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, Twitter 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 channels such as Facebook, Instagram, X, and video conferencing platforms.
Changes in consumer tastes and preferences away from our pre-packaged food and support and counseling services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects.
Changes in consumer tastes and preferences away from our pre-packaged food and support and coaching services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects.
The operations at this facility may be disrupted by a number of factors, including the following: • public health crises, such as pandemics and epidemics, including the COVID-19 pandemic; • labor disruptions; • power failures; • equipment failure; • internal inefficiencies; • severe weather, climate and other adverse environmental conditions; • fire; • natural or man-made disasters, war, terrorism, or political instability; and • USDA or FDA compliance issues.
The operations at this facility may be disrupted by a number of factors, including the following: • public health crises, such as pandemics and epidemics; • labor disruptions; • power failures; • equipment failure; • internal inefficiencies; • severe weather, climate and other adverse environmental conditions; • fire; • natural or man-made disasters, war, terrorism, or political instability; and • USDA or FDA compliance issues.
We manufacture and produce a portion of our products, which account for approximately 20% 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 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.
Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and require us to refund amounts paid by all affected customers or pays other damages, which could be substantial.
Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and require us to refund amounts paid by all affected customers or pay other damages, which could be substantial.
The issuance of preferred stock could have the effect of making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of our outstanding common stock. The issuance of a substantial number of preferred shares could adversely affect the price of our common stock.
The issuance of preferred stock could have the effect of making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of the Company's outstanding common stock. The issuance of a substantial number of preferred shares could adversely affect the price of the Company’s common stock.
We 25 Table of Contents may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances. Additionally, the manufacture and sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
We may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances. Additionally, the manufacture and sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
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.
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.
In addition, if we choose to continue expanding our business internationally in the future we may be subject to international privacy, data protection, consumer protection and other laws and regulations, which in some cases are more restrictive than those in the United States. For example, the European Union traditionally has imposed stricter obligations under such laws than the United States.
In addition, if we choose to expand our business internationally in the future, we may be subject to international privacy, data protection, consumer protection and other laws and regulations, which in some cases are more restrictive than those in the United States. For example, the European Union traditionally has imposed stricter obligations under such laws than the United States.
We currently face certain legal obligations regarding the manner in which we treat such information and data. Businesses have been criticized by privacy groups and governmental bodies for their use and handling of such information 22 Table of Contents and data. We rely on third-party software products to secure our credit card transactions.
We currently face certain legal obligations regarding the manner in which we treat such information and data. Businesses have been criticized by privacy groups and governmental bodies for their use and handling of such information and data. We rely on third-party software products to secure our credit card transactions.
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. The manufacture and sale of ingested products are subject to product liability claims and other risks.
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. 25 Table of Contents The manufacture and sale of ingested products are subject to product liability claims and other risks.
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.
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.
Further, customers who allege that they were deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under consumer protection laws. From time-to-time we are subject to such allegations and have 19 Table of Contents been involved in such litigation. We may ultimately be unsuccessful in defending ourselves against such claims.
Further, customers who allege that they were deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under consumer protection laws. From time-to-time we are subject to such allegations and have been involved in such litigation. We may ultimately be unsuccessful in defending ourselves against such claims.
Use of social media may 20 Table of Contents materially and adversely affect our reputation or subject us to fines or other penalties, and restrictions on the use of or access to social media may adversely impact sales of our products and services. Our business success depends on our ability to attract and retain customers.
Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties, and restrictions on the use of or access to social media may adversely impact sales of our products and services. Our business success depends on our ability to attract and retain customers.
The rights of the holders of our common stock will be junior to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.
The rights of the holders of the Company’s common stock will be junior to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.
In some 26 Table of Contents future quarter our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of our common stock. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.
In some future quarter our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of the Company’s common stock. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.
The availability of such ingredients and other products at competitive prices 18 Table of Contents depends on many factors beyond our control, including the number and size of the suppliers that provide the raw materials that meet our quality and production standards.
The availability of such ingredients and other products at competitive prices depends on many factors beyond our control, including the number and size of the suppliers that provide the raw materials that meet our quality and production standards.
General Risk Factors Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors, and could subject us to litigation, which may result in you suffering a loss on your investment.
Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors, and could subject us to litigation, which may result in you suffering a loss on your investment.
Similarly, in 2019, the FTC took aggressive actions against a multi-level marketing company, which ultimately led to the company being permanently prohibited from using a multilevel compensation plan in the United States.
For example, in 2019, the FTC took aggressive actions against a multi-level marketing company, which ultimately led to the company being permanently prohibited from using a multilevel compensation plan in the United States.
As a result, regulators and courts have discretion in their application of 16 Table of Contents these laws and regulations, and the enforcement or interpretation of these laws and regulations by government agencies or courts can change.
As a result, regulators and courts have discretion in their application of these laws and regulations, and the enforcement or interpretation of these laws and regulations by government agencies or courts can change.
Our direct selling model may be challenged both domestically and abroad which could harm our business. In both domestic and foreign markets, we may be subject to challenges by government regulators regarding our direct selling model. Legal and regulatory requirements concerning the direct selling industry generally do not include “bright line” rules and are inherently fact-based and subject to interpretation.
Our direct selling model may be challenged, which could harm our business. We may be subject to challenges by government regulators regarding our direct selling model. Legal and regulatory requirements concerning the direct selling industry generally do not include “bright line” rules and are inherently fact-based and subject to interpretation.
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.
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.
Our Board of Directors periodically reviews our quarterly dividend to ensure that it is in the best interest of our stockholders and is in compliance with all applicable laws and agreements.
Our Board of Directors periodically reviews our capital allocation strategy to ensure that it is in the best interest of our stockholders and is in compliance with all applicable laws and agreements.
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.
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.
These include: • potential misconduct or improper claims by OPTA VIA Coaches; • negative public perceptions of multi-level marketing; • general economic conditions; • failure to develop innovative products to meet consumer demands; • adverse opinions of our products, services, or industry; and • regulatory actions against our Company, competitors in our industry, or other direct selling companies. 21 Table of Contents We are dependent on our key executives for future success.
These include: potential misconduct or improper claims by OPTA VIA Coaches; negative public perceptions of multi-level marketing; general economic conditions; failure to develop innovative products to meet consumer demands; adverse opinions of our products, services, or industry; and regulatory actions against our Company, competitors in our industry, or other direct selling companies.
Our dividend payments may change from time to time, and we cannot provide any assurance that we will continue to declare dividends at all or in any particular amounts. A reduction in 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 discontinuation of our dividend payments could have a negative effect on our stock price.
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 diets featured in the published media.
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.
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. New weight loss products or services may put us at a competitive disadvantage and our business may suffer.
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.
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 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.
Some of our suppliers may depend on a variety of other local, regional, national and international suppliers to fulfill the purchase orders we place with them.
We depend on frequent deliveries of ingredients and other products from domestic and foreign suppliers, especially for our non-powder products. Some of our suppliers may depend on a variety of other local, regional, national and international suppliers to fulfill the purchase orders we place with them.
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. If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately.
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 not be successful in developing, introducing on a timely basis or marketing any new or enhanced products, and we cannot assure you that any new or enhanced products will appeal to the market.
We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced products, and we cannot assure you that any new or enhanced products will appeal to the market. Our results of operations are highly dependent on the number of product sales generated by our OPTA VIA Coaches.
Human Capital Risks The success of our business is dependent on our ability to maintain and grow our network of OPTA VIA Coaches . OPTA VIA Coaches are subject to high turnover and we depend on our network of OPTA VIA Coaches to continually grow their businesses by attracting, training and motivating new OPTA VIA Coaches.
Additionally, OPTA VIA Coaches are subject to high turnover and we depend on our network of OPTA VIA Coaches to continually grow their businesses by supporting customers and attracting, training and motivating new OPTA VIA Coaches.
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.
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.
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.
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.
Our growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and incur debt. We rely on third parties to provide us with a majority of the products we sell and we manufacture the remaining portion. We also rely on third parties to distribute and deliver our products.
We rely on third parties to provide us with a majority of the products we sell and we manufacture the remaining portion. We also rely on third parties to distribute and deliver our products.
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.
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.
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.
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.
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 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.
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.
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.
We consider our number of active earning OPTA VIA Coaches and average quarterly revenue per active earning OPTA VIA Coach to be key indicators of our financial performance and condition. As of December 31, 2022, the Company had 60,900 total active earning OPTA VIA Coaches.
The success of our business is dependent on our ability to maintain and grow our network of OPTA VIA Coaches . We consider our number of active earning OPTA VIA Coaches and average quarterly revenue per active earning OPTA VIA Coach to be key indicators of our financial performance and condition.
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. We could also be subject to challenges by private parties in civil actions.
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.
We may be subject to health or advertising related claims from our customers. Our weight loss and weight management programs do not include medical treatment or medical advice, and we do not engage physicians or nurses to monitor the progress of our customers.
While we collaborate with LifeMD healthcare providers, our businesses are separate, and our weight loss and weight management programs do not include medical treatment or medical advice, and we do not engage physicians or nurses, with LifeMD or otherwise, to monitor the progress of our customers.
Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. Risks Related to Our Business Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.
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.
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.
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.
If we do not continually expand our food items or provide customers with items that are desirable in taste and quality, our business could be harmed. 24 Table of Contents The weight loss industry is subject to adverse publicity, which could harm our business.
Our success is also dependent on our food innovation including maintaining a robust array of food items and improving the quality of existing items. If we do not continually expand our food items or provide customers with items that are desirable in taste and quality, our business could be harmed.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports.
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.
We cannot be sure that the FTC will not challenge our advertising or other operations in the future, which could have a material adverse effect on our business. Governmental regulations in countries where we plan to commence or expand operations may prevent or delay entry into those markets.
We cannot be sure that the FTC will not challenge our advertising or other operations in the future, which could have a material adverse effect on our business. In addition, our ability to sustain satisfactory levels of sales is dependent in significant part on our ability to introduce innovative products.
Many people who are overweight suffer from other physical conditions, and our target consumers could be considered a high-risk population. A customer who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our programs.
Many people who are overweight suffer from other physical conditions, and our target consumers could be considered a high-risk population.
Our failure to comply with these laws could result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition .
Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues generated by the Collaboration and diversion of management’s attention and energy away from ongoing business operations, which could have a material adverse effect on our business or financial results.
There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts. The Company declared a dividend of $1.64 per share on December 8, 2022, to stockholders of record as of December 20, 2022, that was paid on February 7, 2023.
There can be no assurance that we will declare cash dividends in the future or in any particular amounts. On December 13, 2023, we announced that the Company updated its capital allocation priorities following a thorough review, and decided to discontinue the Company’s quarterly cash dividend.
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. 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.
Removed
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2022 and inflation rates in the U.S., as well as in other countries in which we operate, are currently expected to continue at elevated levels for the near-term.
Added
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.
Removed
In addition, the Federal Reserve in the U.S. and other central banks in various countries have raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.
Added
If we are unable to reverse the downtrend of the number of active earning Coaches, which has been declining since Q3 2022, or revenue per active earning Coach, which has been declining since Q2 2023, our future revenue and operating results will continue to be adversely affected, as we believe that the success of the Company depends on the success of our OPTA VIA Coaches.
Removed
Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world. Our sales may be adversely impacted by the health and stability of the general economy. Our results of operation are highly dependent on the number of product sales and program fees generated by our OPTA VIA Coaches.
Added
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.
Removed
A downturn in general economic conditions, such as a recession or prolonged economic slowdown, may reduce the demand for our products and otherwise adversely affect our sales.
Added
We may also be subject to claims that our OPTA VIA Coaches have provided inappropriate advice or have failed to recommend customers consult with their health care providers during the course of the customers’ weight loss journey, as recommended in the Company’s Medical Disclaimer.
Removed
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.
Added
A customer who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our programs, including outcomes based on interactions with our independent OPTA VIA Coaches or healthcare providers associated with LifeMD.
Removed
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.
Added
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.
Removed
In addition, our ability to sustain satisfactory levels of sales in our markets is dependent in significant part on our ability to introduce innovative products into such markets. However, governmental regulations in our markets, both domestic and international, can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products.
Added
Additionally, we commit and invest substantial time and resources into developing innovative new products. There is no assurance that any new products will be successfully adopted by our customer base, or that we will be able promote such new products without taking steps such as reducing pricing or incurring acquisition costs that would affect our revenues and/or profitability.
Removed
Similarly, the FTC continues to scrutinize multi-level marketers. In 2020, the FTC sent out letters warning multi-level marketing companies to remove and address claims that they or their participants made about their products' ability to treat or prevent COVID-19 or provide earnings for people who have recently lost income.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company outsources domestic distribution centers in Reno, Nevada, and 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. In addition, the Company outsources an international distribution center in Hong Kong.
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.
ITEM 2. PROPERTIES The Company leases office space in Baltimore, Maryland which serves as our corporate headquarters. The corporate headquarters’ lease expires in February 2026. In January 2020, the Company entered into a lease for a satellite office in Lehi, Utah. The satellite office lease expires in October 2023.
ITEM 2. PROPERTIES The Company leases office space in Baltimore, Maryland which serves as our corporate headquarters. The corporate headquarters’ lease expires in February 2026. In January 2020, the Company entered into a lease for a satellite office in Lehi, Utah, which expires in December 2026.
Added
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−1 removed3 unchanged
Biggest changeITEM 5. 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.” Holders There were approximately 76 record holders of the Company’s common stock as of February 13, 2023.
Biggest changeMARKET 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.
The 2021 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 Sciences Inc., WW International, Inc., The Hain Celestial Group, Inc., Edgewell Personal Care Company, Belling Brands, Inc. and Beyond Meat, Inc.
The 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.
(2) At the outset of the quarter ended December 31, 2022, there were 1,407,905 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, 2022, there were 1,353,833 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, 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.
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, 2022: 2022 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 94 $ 110.98 — 1,407,905 November 1 - November 30 18,283 120.26 18,283 1,389,622 December 1 - December 31 35,789 117.30 35,789 1,353,833 ____________________ (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, 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.
This number does not include beneficial owners of our securities held in the name of nominees.
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.
Removed
The 2022 Peer Group includes the 2021 Peer Group with the exception of Belling Brands, Inc. and Beyond Meat. 28 Table of Contents 2018 2019 2020 2021 2022 Medifast, Inc. $ 182.11 $ 164.38 $ 306.04 $ 334.69 $ 193.08 Benchmarking Peer Group 110.77 111.40 128.69 134.66 98.44 S&P 600 Consumer Staples 95.14 111.22 123.61 159.21 148.91
Added
Declaration and payment of dividends on the Company’s common stock are subject to the discretion of our board of directors and compliance with applicable laws. The decision to declare and pay dividends in the future will depend on general business conditions, the effect of such payments on our financial condition and other factors the Company’s board of directors consider relevant.
Added
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

47 edited+16 added−15 removed15 unchanged
Biggest changeBy 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 we will enhance our ability to further grow our business over the next several years, enabling robust revenue growth while also maintaining our profitability in the long-term. 31 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS - 2022 COMPARED TO 2021 The following table reflects our consolidated statements of income for the years ended December 31, 2022 and 2022 (in thousands, except percentages): 2022 2021 $ Change % Change Revenue $ 1,598,577 $ 1,526,087 $ 72,490 4.8% Cost of sales 458,163 398,490 (59,673) (15.0)% Gross Profit 1,140,414 1,127,597 12,817 1.1% Selling, general, and administrative 955,608 911,356 (44,252) (4.9)% Income from operations 184,806 216,241 (31,435) (14.5)% Other (expense) income Interest (expense) income (701) (231) (470) (203.7)% Other (expense) income (46) 119 (165) (139.0)% (747) (112) (635) (566.7)% Income before provision for income taxes 184,059 216,129 (32,070) (14.8)% Provision for income taxes 40,491 52,098 11,607 22.3% Net income $ 143,568 $ 164,031 $ (20,463) (12.5)% % of revenue Gross Profit 71.3% 73.9% Selling, general, and administrative 59.8% 59.7% Income from Operations 11.6% 14.2% Revenue: Revenue increased $72.5 million, or 4.8%, to $1.599 billion in 2022 from $1.526 billion in 2021.
Biggest changeBy 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.
Amounts billed to customers for shipping and handling activities are treated as a promised service performance obligation and are recorded in 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 Income upon fulfillment of the performance obligation.
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 expense, provision for income taxes, net income and diluted earnings per share.
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.
Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2022, 2021 and 2020. 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, 2023, 2022, and 2021. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.
These critical accounting policies have been discussed with our Audit Committee, as appropriate. 29 Table of Contents Revenue Recognition: Our revenue is derived primarily from point of sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products.
These critical accounting policies have been discussed with our Audit Committee, as appropriate. Revenue Recognition: Our revenue is derived primarily from point of sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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.
As of December 31, 2022, the Company had no borrowings under the credit facility and was in compliance with all of its debt covenants.
As of December 31, 2023, the Company had no borrowings under the credit facility and was in compliance with all of its debt covenants.
This increase was primarily due to a $70.4 million increase in stock repurchases and a $7.8 million increase in cash dividends paid to stockholders, partially offset by a $4.6 million decrease in net shares repurchased for taxes. In pursuing its business strategy, the Company may require additional cash for operating and investing activities.
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.
The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.
The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Income from operations as a percentage of sales decreased to 11.6% for 2022 as compared to 14.2% for 2021 due to the factors described above in the explanations from gross profit and SG&A expenses. Non-GAAP adjusted income from operations in 2022 decreased to $216.0 million from $216.2 million in 2021.
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.
Tax positions taken are not offset or aggregated with other 30 Table of Contents positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.
Provision for income taxes: For 2022, the Company recorded $40.5 million in income tax expense, an effective tax rate of 22.0%, as compared to $52.1 million in income tax expense and an effective tax rate of 24.1%, for 2021.
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.
The average revenue per active earning OPTA VIA Coach decreased 12.4% to $5,538 for the three months ended December 31, 2022 from $6,321 for the three months ended December 31, 2021. Decrease in the revenue per active earning OPTA VIA Coach for the quarter was driven by headwinds in customer acquisition rates through the fourth quarter.
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.
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 2022, gross profit increased $12.8 million, or 1.1%, to $1.140 billion from $1.128 billion in 2021.
Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure. Gross Profit: In 2023, gross profit decreased $364.6 million, or 32.0%, to $775.9 million from $1.140 billion in 2022.
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. Our contracts have performance obligations to fulfill and deliver products from the point of sale transaction along with the related customer reward programs. Our performance obligations are satisfied at a point in time.
Our contracts have performance obligations to fulfill and deliver products from the point of sale transaction along with the related customer reward programs. Our performance obligations are satisfied at a point in time.
Cash used in capital expenditures for 2022 expanded our technology and supply chain capabilities to support our planned growth. Net cash used in financing activities increased $74.4 million to $199.6 million for 2022 from $125.1 million for 2021.
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.
The $47.4 million net decrease in stockholders’ equity reflects $143.6 million in net income for 2022 offset by $126.4 million spent on repurchases of common stock and $74.0 million for dividends paid to holders of our 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 $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.
We review and analyze a number of key operating and financial metrics to manage our business, including the number of active earning OPTA VIA Coaches and average quarterly revenue generated per active earning OPTA VIA Coach. As we previously disclosed, global expansion is an important component of our long-term growth strategy.
We review and analyze a number of key operating and financial metrics to manage our business, including the number of active earning OPTA VIA Coaches and average quarterly revenue generated per active earning OPTA VIA Coach.
Non-GAAP adjusted net income was $163.4 million or $14.49 per diluted share for 2022 as compared to $13.89 per diluted share for 2021. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.
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.
(b) The Company has unconditional purchase obligations primarily for inventories, outsourced information technology and Coach events. INFLATION During 2022, the Company's business experienced a certain amount of inflation impact on raw ingredient, freight and supply chain labor. As a result, the Company increased prices for most of its products by an average of approximately 4.5% in November 2022.
(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.
The decrease in the effective tax rate for 2022 as compared to 2021 was primarily driven by an increase in the charitable contribution benefit of 2.3% and a reduction in the limitation for executive compensation of 0.4%, partially offset by a decrease in the stock compensation benefit of 0.8%.
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 following tables reconcile the non-GAAP financial measures included in this report (in thousands, except per share amounts): 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 Year Ended December 31, 2021 GAAP Donation Adjustments Restructuring of External Manufacturing Agreements Non-GAAP Cost of sales $ 398,490 $ — $ — $ 398,490 Gross profit 1,127,597 — — 1,127,597 Selling, general, and administrative 911,356 — — 911,356 Income from operations 216,241 — — 216,241 Other expense (112) — — (112) Provision for income taxes 52,098 — — 52,098 Net income 164,031 — — 164,031 Diluted earnings per share (1) 13.89 — — 13.89 (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.
The 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.
Non-GAAP adjusted cost of sales were $446.0 million for 2022, an increase of $47.5 million, or 11.9%, as compared to $398.5 million for 2021. 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 $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.
As a percentage of sales, SG&A expenses were 59.8% for 2022 as compared to 59.7% for 2021. SG&A expenses included research and development costs of $4.5 million and $4.4 million for 2022 and 2021, respectively, in connection with the development of new products and programs and clinical research activities.
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.
Options to acquire additional products at a discount can come in many forms, such as customer reward programs and incentive offerings including pricing arrangements, and promotions. We reduce the transaction price for certain customer reward programs and incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations.
We reduce the transaction price for customer reward programs and certain incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations.
When determining whether the customer has obtained control of the products, we consider any future performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers .
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied.
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. 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 asset.
The total number of active earning OPTA VIA Coaches for the three months ended December 31, 2022 increased to 60,900 from 59,800 for the corresponding period in 2021, an increase of 1.8%.
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 Company previously increased sales prices in December 2021 by an average of approximately 3.5%. 35 Table of Contents
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
Non-GAAP adjusted SG&A expenses exclude expenses in connection with donations made to support to Ukrainian relief effort of $19.0 million for 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.
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.
Liquidity and Capital Resources The Company had stockholders’ equity of $155.0 million and working capital of $81.9 million at December 31, 2022 compared with $202.5 million and $137.0 million at December 31, 2021.
(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.
Net income: Net income was $143.6 million, or $12.73 per diluted share, in 2022 as compared to $164.0 million, or $13.89 per diluted share, in 2021. The period-over-period changes were driven by the factors described above in the 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 $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.
Revenue is recognized upon receipt by customer and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns. Revenue is recognized when control of the promised products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products.
Revenue is recognized when control of the promised products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products. When determining whether the customer has obtained control of the products, we consider any future performance obligations.
We adjust revenues for the products expected to be returned and a liability is recognized for expected refunds to customers. We estimate expected returns based on historical levels and project this experience into the future. Our sales contracts may give customers the option to purchase additional products priced at a discount.
We estimate expected returns based on historical levels and project this experience into the future. Our sales contracts may give customers the option to purchase additional products priced at a discount. Options to acquire additional products at a discount can come in many forms, such as customer reward programs and incentive offerings including pricing arrangements, and promotions.
Net cash provided by operating activities increased $100.0 million to $194.6 million for 2022 from $94.5 million for 2021 primarily as a result of a net $109.3 million of changes in operating assets and liabilities partially offset by a $9.3 million decrease in net income and adjustment to reconcile net income to cash provided by operating activities.
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.
Each of these as- 33 Table of Contents adjusted financial measures excludes the impact of certain amounts related to our donations to support the Ukrainian relief effort and costs of restructuring of certain external manufacturing agreements, as further identified below and have not been calculated in accordance with GAAP.
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.
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, 2021 for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2021 compared to fiscal year 2020.
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.
This increase in cost of sales was primarily driven by an increase in OPTA VIA product sales, higher product costs and shipping costs resulting from inflation in raw materials, freight and labor costs, and the restructuring of certain external manufacturing agreements to optimize our supply chain for 2023.
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.
Accounts payable and accrued expenses decreased due to the timing of payments. Net cash used in investing activities was $11.4 million for 2022 as compared to $29.1 million for 2021. This year-over-year change resulted primarily from a $17.5 million decrease in cash used in capital expenditures for 2022 as compared to 2021.
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.
Income from operations: Income from operations in 2022 decreased $31.4 million to $184.8 million from $216.2 million in 2021 primarily as a result of increased SG&A expenses partially offset by increased gross profit.
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.
Contractual Obligations and Commercial Commitments The Company had the following contractual obligations as of December 31, 2022 (in thousands): 2023 2024 - 2025 2026 - 2027 Thereafter Total Operating leases (a) $ 6,243 $ 11,518 $ 6,713 $ 2,858 $ 27,332 Unconditional purchase obligations (b) 121,710 91,670 2,141 129 215,650 Total contractual obligations 127,953 103,188 8,854 2,987 242,982 ____________________ (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, 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.
The increase in gross profit was primarily attributable to higher revenue partially offset by increased cost of sales. As a percentage of sales, gross profit decreased 2.6% to 71.3% for 2022 from 73.9% for 2021.
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.
We have operated and reported as a single sales segment, OPTA VIA, since 2018. The Company completed the sunset of the Medifast Direct channel and Medifast-branded product line in 2021.
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.
Generally, this occurs with the transfer of control upon receipt of products by our customers. Any consideration received prior to the fulfillment of the Company’s performance obligation is deferred and recognized as a liability. Our return policy allows for customer returns of consumable products within 30 days of purchase and upon our authorization.
Our return policy allows for customer returns of consumable products from the time of order until 30 days following the date of receipt, and upon our authorization. We adjust revenues for the products expected to be returned and a liability is recognized for expected refunds to customers.
Non-GAAP adjusted income tax provision was $51.8 million for 2022, an effective tax rate of 24.1% for both 2022 and 2021. Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.
Non-GAAP 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.
The Company’s cash, cash equivalents and investment securities decreased to $87.7 million at December 31, 2022 from $109.5 million at December 31, 2021.
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.
These costs are deferred along with the revenues for goods that are in transit and not received by customers by period end. These costs are recorded in selling, general and administrative expense in our Consolidated Statements of Income.
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.
Removed
Our policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense. We evaluated our tax positions and determined that we did not have any material uncertain tax positions.
Added
Prior to a change in our Customer Terms & Conditions (Customer T&Cs) in the first quarter of 2023, revenue was recognized upon receipt by the customer and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.
Removed
BACKGROUND Medifast is the global company behind one of the fastest-growing health and wellness communities, OPTA VIA, which offers Lifelong Transformation, One Healthy Habit at a Time. Reflecting the success of our holistic approach to health and wellness, we have consistently grown revenue over the past five years.
Added
Upon the change of our Customer T&Cs, revenue is now recognized upon delivery to the shipping carrier and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.
Removed
Of equal importance, we expect our differentiated direct-to-consumer business model to continue to deliver growth in the long-term. Medifast has redefined direct selling by combining the best aspects of the model, while eliminating those dimensions that have typically challenged other companies.
Added
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.
Removed
Medifast is often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is very different. The Company supports customers through independent OPTA VIA Coaches, the majority of whom were customers first. Our product sales accounted for approximately 97.2%, 98.0% and 98.0% of our revenues in each of 2022, 2021, and 2020, respectively.
Added
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.
Removed
In July 2019, we commenced our international operations, entering into the Asia Pacific markets of Hong Kong and Singapore. We outsource a distribution center in Hong Kong to provide adequate product distribution capacity for the foreseeable future.
Added
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.
Removed
Our decision to enter these markets was based on industry market research that reflects a dynamic shift in how health care is being prioritized and consumed in those countries. Our OPTA VIA business unit accounted for approximately 100%, 99.9%, and 98% of our revenues in 2022, 2021 and 2020, respectively.
Added
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.
Removed
The year-over-year growth in revenue was primarily driven by an increase in the number of active earning OPTA VIA Coach count and higher productivity per active earning OPTA VIA Coach through the first two quarters of the year, as well as a pricing adjustment in December 2021 in which the Company increased prices for most of its products by an average of 3.5%.
Added
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.
Removed
This is partially a result of the changing economic environment as customers continue to recalibrate spending in the current inflationary environment. Costs of Sales: Cost of sales increased $59.7 million, or 15.0%, to $458.2 million in 2022 from $398.5 million in 2021.
Added
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.
Removed
The decrease in gross margin percentage was primarily due to expenses in connection with the restructuring of certain external manufacturing agreements, a customer 32 Table of Contents acquisition program, which ran from late March to early May in 2022, and the result of higher product and shipping costs resulting from inflation in raw ingredient, freight and labor costs outpacing pricing adjustments.
Added
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.
Removed
Non-GAAP adjusted gross profit was $1.153 billion for 2022, an increase of $25.0 million, or 2.2%, as compared to $1.128 billion for 2021. Selling, General and Administrative: Selling, general and administrative (“SG&A”) expenses were $955.6 million in 2022, an increase of $44.2 million, or 4.9%, as compared to $911.4 million in 2021.
Added
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.
Removed
The increase in cost also included donations made to support the Ukraine relief effort, incremental costs related to OPTA VIA Coach compensation expense and credit card fees resulting from higher sales, and continued investment in information technology. Non-GAAP adjusted SG&A expenses were $936.6 million for 2022, an increase of $25.2 million, or 2.8%, as compared to $911.4 million for 2021.
Added
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.
Removed
Non-GAAP Financial Measures In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in this quarterly report, our quarterly earnings press release and other public disclosures.
Added
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.
Removed
The Company declared a quarterly dividend of $1.64 per share on December 8, 2022, to stockholders of record as of December 20, 2022 that was paid on February 7, 2023.
Added
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.
Removed
While we intend to continue the dividend program and believe we will have sufficient liquidity 34 Table of Contents to do so, we can provide no assurance we will be able to continue the declaration and payment of dividends.
Added
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.
Removed
The increase from changes in operating assets and liabilities was primarily due to a $187.8 increase in the change in inventories partially offset by a $91.9 million decrease in the change in accounts payable and accrued expenses. We decreased our inventory purchases in 2022 to align with sales demand in the latter part of 2022.
Added
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.
Added
The decision to declare and pay dividends in the future will depend on general business conditions, the effect of such payments on our financial condition and other factors the Company’s board of directors consider relevant.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+6 added−0 removed0 unchanged
Biggest changeThe Company does not hold any municipal bonds or United States money market securities as of December 31, 2022. 36 Table of Contents
Biggest changeAs of December 31, 2023, the Company did not have any outstanding borrowings. 39 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions or other financial instruments for trading or speculative purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions or other financial instruments for trading or speculative purposes other than strategic investments.
Added
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
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. Its cash is deposited in and invested through highly rated financial institutions in North America.
Added
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.
Added
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.
Added
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.
Added
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.

Other MED 10-K year-over-year comparisons