med-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________ to ________.

Commission File Number: 001-31573

Medifast, Inc.

(Exact name of registrant as specified in its charter)


Delaware						13-3714405
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MED

New York Stock Exchange

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

Yes x No o

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

Yes x No o

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


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

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

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

Yes o No x

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

The number of shares of the registrant’s common stock outstanding at October 28, 2024 was 10,937,830.

Table of Contents

Medifast, Inc. and Subsidiaries

Index


Part 1 – Financial Information



Item 1 – Financial Statements


Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023			2

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023			3

Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2024 and December 31, 2023			4

Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2024 and 2023			5

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023			6

Notes to Condensed Consolidated Financial Statements (unaudited)			8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			17

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			28

Item 4 – Controls and Procedures			29

Part II – Other Information

Item 1 – Legal Proceedings			30

Item 1A – Risk Factors			30

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			30

Item 6 – Exhibits			31

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Revenue	$	140,163	$	235,869	$	483,460	$	881,039
Cost of sales	34,489		58,492		127,056		246,558
Gross profit	105,674		177,377		356,404		634,481

Selling, general, and administrative	103,568		151,868		354,235		516,755

Income from operations	2,106		25,509		2,169		117,726

Other (expense) income
Interest income	1,333		1,033		3,851		1,314
Other (expense) income	(1,861)		7		(3,508)		(45)
	(528)		1,040		343		1,269

Income before provision for income taxes	1,578		26,549		2,512		118,995

Provision for income taxes	449		3,418		1,222		25,615

Net income	$	1,129	$	23,131	$	1,290	$	93,380

Earnings per share - basic	$	0.10	$	2.12	$	0.12	$	8.58

Earnings per share - diluted	$	0.10	$	2.12	$	0.12	$	8.55

Weighted average shares outstanding
Basic	10,937		10,892		10,928		10,881
Diluted	10,971		10,933		10,959		10,925

Cash dividends declared per share	$	—	$	1.65	$	—	$	4.95

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

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. dollars in thousands)


	Three months ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Net income	$	1,129	$	23,131	$	1,290	$	93,380

Other comprehensive income, net of tax:
Foreign currency translation	4		27		47		125
Unrealized net gains (losses) on investment securities	319		(9)		54		(9)
	323		18		101		116

Comprehensive income	$	1,452	$	23,149	$	1,391	$	93,496

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

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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


	September 30, 2024		December 31, 2023

ASSETS
Current Assets
Cash and cash equivalents	$	115,307	$	94,440
Inventories, net	40,095		54,591
Investments	54,648		55,601
Income taxes, prepaid	8,229		8,727
Prepaid expenses and other current assets	6,696		10,670
Total current assets	224,975		224,029

Property, plant and equipment - net of accumulated depreciation	39,003		51,467
Right-of-use assets	12,290		15,645
Other assets	10,967		14,650
Deferred tax assets, net	4,002		4,117


TOTAL ASSETS	$	291,237	$	309,908

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	66,270	$	86,415
Current lease obligations	6,106		5,885
Total current liabilities	72,376		92,300

Lease obligations, net of current lease obligations	11,519		16,127


Total liabilities	83,895		108,427

Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
10,937 and 10,896 issued and outstanding
at September 30, 2024 and December 31, 2023, respectively	11		11
Additional paid-in capital	31,005		26,573
Accumulated other comprehensive income	349		248
Retained earnings	175,977		174,649

Total stockholders' equity	207,342		201,481

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	291,237	$	309,908

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

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MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollar in thousands)


	Nine months ended September 30,
	2024		2023

Operating Activities
Net income	$	1,290	$	93,380
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	9,522		9,754
Non-cash lease expense	3,352		3,532
Share-based compensation	5,231		5,795
Loss on sale or disposal of property, plant and equipment	51		622
Realized gain on sale of investment securities	(82)		—
Amortization of discount on investment securities	(610)		—
Deferred income taxes	115		(5,497)
Unrealized loss on equity investment securities	3,734		—
Non-cash charges for supply chain optimization	11,689		—
Change in operating assets and liabilities:
Inventories	14,496		60,629
Prepaid expenses and other current assets	3,974		7,948
Other assets	(62)		(4,674)
Accounts payable and accrued expenses	(23,775)		(35,343)
Income taxes payable	498		989
Net cash flow provided by operating activities	29,423		137,135

Investing Activities
Purchase of investment securities	(24,351)		(44,779)
Proceeds from sale and maturities of investment securities	22,431		—
Purchase of property and equipment	(5,169)		(5,537)
Net cash flow used in investing activities	(7,089)		(50,316)

Financing Activities


Options exercised by directors	36		105
Net shares repurchased for employee taxes	(835)		(3,348)
Cash dividends paid to stockholders	(715)		(55,039)
Stock repurchases	—		(3,602)
Net cash flow used in financing activities	(1,514)		(61,884)

Foreign currency impact	47		125

Increase in cash and cash equivalents	20,867		25,060
Cash and cash equivalents - beginning of the period	94,440		87,691
Cash and cash equivalents - end of period	$	115,307	$	112,751

Supplemental disclosure of cash flow information:
Income taxes paid	$	449	$	30,169
Dividends included in accounts payable and accrued expenses	$	655	$	19,184

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

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MEDIFAST, INC. AND SUBSIDIARIES

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

(U.S. dollars in thousands)


	Nine months ended September 30, 2024
	Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2023	10,896	$	11	$	26,573	$	248	$	174,649	$	—	$	201,481
Net income	—	—		—		—		8,316		—		8,316
Share-based compensation	59	—		2,171		—		—		—		2,171
Options exercised by directors	1	—		36		—		—		—		36
Net shares repurchased for employee taxes	(19)	—		(817)		—		—		—		(817)


Other comprehensive loss	—	—		—		(226)		—		—		(226)


Balance, March 31, 2024	10,937	$	11	$	27,963	$	22	$	182,965	$	—	$	210,961
Net loss	—	—		—		—		(8,154)		—		(8,154)
Share-based compensation	—	—		2,454		—		—		—		2,454
Net shares repurchased for employee taxes	—	—		(16)		—		—		—		(16)
Other comprehensive income	—	—		—		4		—		—		4
Forfeiture of dividends on unvested awards	—	—		—		—		34		—		34

Balance, June 30, 2024	10,937	$	11	$	30,401	$	26	$	174,845	$	—	$	205,283
Net income	—	—		—		—		1,129		—		1,129
Share-based compensation	—	—		606		—		—		—		606
Net shares repurchased for employee taxes	—	—		(2)		—		—		—		(2)
Other comprehensive income	—	—		—		323		—		—		323
Forfeiture of dividends on unvested awards	—	—		—		—		3		—		3

Balance, September 30, 2024	10,937	$	11	$	31,005	$	349	$	175,977	$	—	$	207,342

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

Table of Contents


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

Balance, December 31, 2022	10,928	$	11	$	21,555	$	24	$	139,852	$	(6,398)	$	155,044
Net income	—	—		—		—		39,968		—		39,968
Share-based compensation	69	—		606		—		—		—		606
Options exercised by directors	4	—		105		—		—		—		105
Net shares repurchased for employee taxes	(30)	—		(3,236)		—		—		—		(3,236)
Treasury stock from stock repurchases	—	—		—		—		—		(3,602)		(3,602)
Treasury stock retired from stock repurchases	(84)	—		—		—		(10,000)		10,000		—
Other comprehensive income	—	—		—		9		—		—		9
Cash dividends declared to stockholders	—	—		—		—		(17,994)		—		(17,994)

Balance, March 31, 2023	10,887	$	11	$	19,030	$	33	$	151,826	$	—	$	170,900
Net income	—	—		—		—		30,280		—		30,280
Share-based compensation	2	—		2,514		—		—		—		2,514
Net shares repurchased for employee taxes	—	—		(2)		—		—		—		(2)



Other comprehensive income	—	—		—		90		—		—		90
Cash dividends declared to stockholders	—	—		—		—		(18,221)		—		(18,221)

Balance, June 30, 2023	10,889	$	11	$	21,542	$	123	$	163,885	$	—	$	185,561
Net income	—	—		—		—		23,131		—		23,131
Share-based compensation	4	—		2,675		—		—		—		2,675
Net shares repurchased for employee taxes	(1)	—		(110)		—		—		—		(110)
Other comprehensive income	—	—		—		18		—		—		18
Cash dividends declared to stockholders	—	—		—		—		(18,240)		—		(18,240)

Balance, September 30, 2023	10,892	$	11	$	24,107	$	141	$	168,776	$	—	$	193,035

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

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES