Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2024

MEDIFAST, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)			001-31573 (Commission File Number)			13-3714405 (I.R.S. Employer Identification No.)

100 International Drive, Baltimore, Maryland 21202

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: [phone]

N/A

(Former Name or Former Address, if Changed Since Last Report)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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

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Item 2.02.    Results of Operations and Financial Condition.

On February 20, 2024, Medifast, Inc. (the "Company") issued a press release announcing its earnings for the fourth quarter and fiscal year ended December 31, 2023.

A copy of the Press Release is being furnished as Exhibit 99.1 attached hereto and is incorporated by reference herein. This information is being furnished in this report and shall not be deemed to be "filed" for any purpose, including for the purpose of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1993, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.    Financial Statements and Exhibits.

(d)			Exhibits.
			99.1			Medifast Announces Fourth Quarter and Full Year 2023 Financial Results
			104.1			Cover Page Interactive Data File (embedded within the Inline XBRL Document)

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			MEDIFAST, INC.
			By:			/s/ James P. Maloney
						James P. Maloney
						Chief Financial Officer
Dated: February 20, 2024

Medifast Announces Fourth Quarter and Full Year 2023 Financial Results

February 20, 2024

BALTIMORE--(BUSINESS WIRE)--Medifast (NYSE: MED), the health and wellness company known for its habit-based and Coach-guided lifestyle solution, OPTAVIA®, today reported results for the fourth quarter and full year ended December 31, 2023.

Fourth Quarter 2023

•Revenue of $191.0 million, with revenue per active earning Coach of $4,648

•Independent active earning OPTAVIA Coaches of 41,100

•Net income of $6.0 million (non-GAAP adjusted net income of $11.9 million)

•Earnings per diluted share ("EPS") of $0.55 (non-GAAP adjusted EPS of $1.09)

Full Year 2023

•Revenue of $1.1 billion

•Net income of $99.4 million (non-GAAP adjusted net income of $105.2 million)

•EPS of $9.10 (non-GAAP adjusted EPS of $9.64)

•Cash, Cash Equivalents, and Investments of $150.0 million and no interest-bearing debt

“We are realigning our business to respond to the evolving dynamics of the weight loss industry and to aggressively execute on bold initiatives to transform our business model,” said Dan Chard, Chairman & CEO of Medifast. “We are broadening our customer acquisition activities significantly, launching a broad-based national marketing effort and leaning into the medically-supported weight loss market through our collaboration with LifeMD.” Chard continued, “This remains a challenging market, and it will take time to navigate the transformational path that we are on. However, I believe that the investments we’re making in our business will broaden our addressable market and strengthen our ability to drive future growth.”

Fourth Quarter 2023 Results

Fourth quarter 2023 revenue decreased 43.4% to $191.0 million from $337.2 million for the fourth quarter of 2022, primarily driven by a decrease in the number of active earning OPTAVIA Coaches and the decline in the productivity per active earning OPTAVIA Coach. The average revenue per active earning OPTAVIA Coach was $4,648, compared to $5,538 for the fourth quarter last year, a decline of 16.1%, primarily driven by continued pressure on customer acquisition. The total number of active earning OPTAVIA Coaches decreased 32.5% to 41,100 compared to 60,900 for the fourth quarter of 2022.

Gross profit decreased 39.5% to $141.4 million from $233.6 million for the fourth quarter of 2022. The decrease in gross profit was primarily attributable to lower revenue, partially offset by the absence of restructuring costs of certain manufacturing agreements that occurred in the fourth quarter of 2022. The company’s gross profit as a percentage of revenue was 74.0% compared to 69.3% in the fourth quarter of 2022. The increase in gross margin percentage was primarily due to cost savings from the company's Fuel for the Future program as well as the absence of the restructuring costs that occurred in the prior year period. On a non-GAAP adjusted gross profit basis, excluding one-time expenses related to the 2022 restructuring, gross profit decreased 42.5% to $141.4 million and gross profit as a percentage of revenue increased 110 basis points to 74.0%.

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Selling, general, and administrative expenses (“SG&A”) decreased 34.0% to $132.7 million compared to $201.0 million for the fourth quarter of 2022. The decrease in SG&A was 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 the fourth quarter of 2022, partially offset by market research and investment costs related to medically supported weight loss activities. As a percentage of revenue, SG&A increased 990 basis points year-over-year to 69.5% of revenue, as compared to 59.6% for the fourth quarter of 2022. The increase in SG&A as a percentage of revenue was primarily due to the loss of leverage on fixed costs due to lower sales volumes 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 the charitable donations in 2022. On a non-GAAP adjusted basis, which excludes one-time costs to initiate the LifeMD collaboration and reorganize the IT and supply chain functions, SG&A decreased 35.0% to $125.1 million and as a percentage of revenue increased 840 basis points year-over-year to 65.5%.

Income from operations decreased 73.4% to $8.7 million from $32.6 million in the prior-year period, primarily as a result of decreased gross profit, partially offset by decreased SG&A. As a percentage of revenue, income from operations was 4.5% for the fourth quarter of 2023 compared to 9.7% in the prior-year period due to the factors described above impacting SG&A, partially offset by the factors impacting gross profit. On a non-GAAP adjusted basis, which excludes one-time expenses described previously, income from operations decreased 69.5% to $16.2 million. As a percentage of revenue, non-GAAP adjusted income from operations was 8.5%, a decrease of 730 basis points from the year-ago period.

The effective tax rate for the fourth quarter of 2023 was 38.4%, which was higher than expected and higher than the 18.2% recorded in the prior year’s fourth quarter, due to inventory overhead adjustments for tax reporting purposes, which reduced the expected tax benefit for charitable donations of inventory in the current period. On a non-GAAP adjusted basis, the effective tax rate in the fourth quarter of 2023 was 31.6%.

In the fourth quarter of 2023, net income was $6.0 million, or $0.55 per diluted share, based on approximately 10.9 million shares of common stock outstanding. In the fourth quarter of 2022, net income was $26.5 million, or $2.41 per diluted share, based on approximately 11.0 million shares of common stock outstanding. On a non-GAAP adjusted basis, net income in the fourth quarter of 2023 was $11.9 million, or $1.09 per diluted share.

Full Year Fiscal 2023 Results

For the fiscal year ended December 31, 2023, revenue decreased 32.9% to $1.1 billion compared to revenue of $1.6 billion in 2022.

Net income for 2023 was $99.4 million, or $9.10 per diluted share, based on approximately 10.9 million shares outstanding. This compares to 2022 net income of $143.6 million, or $12.73 per diluted share, based on approximately 11.3 million shares outstanding. On a non-GAAP adjusted basis, net income decreased 35.6% to $105.2 million and EPS decreased 33.5% to $9.64 per diluted share compared to the prior year period’s adjusted EPS of $14.50 per diluted share.

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Capital Allocation and Balance Sheet

The company’s balance sheet remains strong with cash, cash equivalents, and investments of $150.0 million and no interest-bearing debt as of December 31, 2023, compared to $87.7 million in cash, cash equivalents, and investments and no interest-bearing debt as of December 31, 2022.

Outlook

The company expects first quarter 2024 revenue to be in the range of $155 million to $175 million and first quarter 2024 diluted EPS to be in the range of $0.25 to $0.95. The EPS range excludes the costs related to the initiation of the LifeMD collaboration and any gains or losses from changes in the market price of the company’s LifeMD common stock investment.

Conference Call Information

The conference call is scheduled for today, Tuesday, February 20, 2024 at 4:30 p.m. ET. The call will be broadcast live over the Internet, hosted on the Investor Relations section of Medifast’s website at www.MedifastInc.com or directly at

https://viavid.webcasts.com/starthere.jsp?ei=1652383&tp_key=34080c5b97 and will be archived online and available through May 20, 2024. In addition, listeners may dial [phone] to join via telephone. A telephonic playback will be available from 8:30 p.m. ET, February 20, 2024, through February 27, 2024. Participants can dial [phone] and enter access code 13743876 to hear the playback.

About Medifast®:

Medifast (NYSE: MED) is the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTAVIA®, which provides people with a simple, yet comprehensive approach to help them achieve lasting optimal health and wellbeing. OPTAVIA's lifestyle plans deliver clinically proven health benefits as well as 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. Through a collaboration with the national virtual primary care provider LifeMD, OPTAVIA customers have access to board-certified affiliated clinicians and medications, such as GLP-1s, that support treatment plans for obesity and other health conditions. The company 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®. 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. For more information, visit MedifastInc.com and OPTAVIA.com and follow @Medifast on X.

MED-F

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Forward Looking Statements

Please Note: This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend," "anticipate," "expect" or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals, outlook or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of the management of Medifast and are subject to certain events, risks, uncertainties and other factors. Some of these factors include, among others, Medifast's inability to maintain and grow the network of independent OPTAVIA Coaches; Industry competition and new weight loss products, including weight loss medications, or services; Medifast’s health or advertising related claims by our OPTAVIA customers; Medifast's inability to continue to develop new products; effectiveness of Medifast's advertising and marketing programs, including use of social media by OPTAVIA Coaches; the departure of one or more key personnel; Medifast's inability to protect against online security risks and cyberattacks; risks associated with Medifast's direct-to-consumer business model; disruptions in Medifast's supply chain; product liability claims; Medifast's planned growth into domestic markets including through its collaboration with LifeMD, Inc.; adverse publicity associated with Medifast's products; the impact of existing and future laws and regulations on Medifast’s business; fluctuations of Medifast's common stock market price; increases in litigation; actions of activist investors; the consequences of other geopolitical events, overall economic and market conditions and the resulting impact on consumer sentiment and spending patterns; and Medifast's ability to prevent or detect a failure of internal control over financial reporting. Although Medifast believes that the expectations, statements and assumptions reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this release, as well as those set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and other filings filed with the United States Securities and Exchange Commission, including its quarterly reports on Form 10-Q and current reports on Form 8-K. All of the forward-looking statements contained herein speak only as of the date of this release.

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MEDIFAST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (THREE MONTHS ENDED - UNAUDITED)

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

			Three months ended December 31,												Year ended December 31,
			2023						2022						2023						2022
Revenue			$ 191,01						$ 337,24						$ 1,072,05						$ 1,598,57
Cost of sales			49,646						103,649						296,204						458,163
Gross profit			141,369						233,596						775,850						1,140,414
Selling, general, and administrative			132,693						200,998						649,448						955,608
Income from operations			8,676						32,598						126,402						184,806
Other income (expense)
Interest income (expense)			1,176						(181)						2,490						(701)
Other expense			(50)						(9)						(95)						(46)
			1,126						(190)						2,395						(747)
Income from operations before income taxes			9,802						32,408						128,797						184,059
Provision for income taxes			3,766						5,890						29,382						40,491
Net income			$ 6,03						$ 26,51						$ 99,41						$ 143,56
Earnings per share - basic			$ 0.5						$ 2.4						$ 9.1						$ 12.8
Earnings per share - diluted			$ 0.5						$ 2.4						$ 9.1						$ 12.7
Weighted average shares outstanding
Basic			10,893						10,913						10,884						11,195
Diluted			10,935						10,993						10,921						11,276
Cash dividends declared per share			$						$ 1.6						$ 4.9						$ 6.5

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MEDIFAST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

			December 31, 202						December 31, 202
ASSETS
Current Assets
Cash and cash equivalents			$ 94,44						$ 87,69
Inventories			54,591						118,856
Investments			55,601						—
Income taxes, prepaid			8,727						—
Prepaid expenses and other current assets			10,670						16,237
Total current assets			224,029						222,784
Property, plant and equipment - net of accumulated depreciation			51,467						57,185
Right-of-use assets			15,645						18,460
Other assets			14,650						12,456
Deferred tax assets			4,117						5,328
TOTAL ASSETS			$ 309,90						$ 316,21
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses			$ 86,41						$ 134,69
Income taxes payable			—						428
Current lease obligations			5,885						5,776
Total current liabilities			92,300						140,894
Lease obligations, net of current lease obligations			16,127						20,275
Total liabilities			108,427						161,169
Stockholders' Equity
Common stock, par value 0.001 per share: 20,000 shares authorized;
10,896 and 10,928 issued and 10,896 and 10,873 outstanding
at December 31, 2023 and December 31, 2022, respectively			11						11
Additional paid-in capital			26,573						21,555
Accumulated other comprehensive income			248						24
Retained earnings			174,649						139,852
Less: treasury stock at cost, 0 and 54 shares at December 31, 2023 and December 31, 2022, respectively			—						(6,398)
Total stockholders' equity			201,481						155,044
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$ 309,90						$ 316,21

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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 earnings press release, our annual report, and other public disclosures. The following GAAP financial measures have been presented on an as adjusted basis: cost of sales, gross profit, SG&A expenses, income from operations, other income (expense), provision for income taxes, net income, and diluted earnings per share. Each of these as adjusted financial measures excludes the impact of certain amounts identified below and have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below. These non-GAAP financial measures are not intended to replace GAAP financial measures.

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

The following tables reconcile the non-GAAP financial measures included in this release:

			Three months ended December 31, 2023
			GAAP						IT and Supply Chain Optimization						LifeMD Collaboration Costs(2)						Non-GAAP
Cost of sales			$ 49,64						$						$						$ 49,64
Gross profit			141,369						—						—						141,369
Selling, general, and administrative			132,693						(2,555)						(5,000)						125,138
Income from operations			8,676						2,555						5,000						16,231
Other income			1,126						—						—						1,126
Provision for income taxes			3,766						583						1,141						5,490
Net income			6,036						1,972						3,859						11,867
Diluted earnings per share (1)			0.55						0.18						0.35						1.09

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			Three months ended December 31, 2022
			GAAP						Donation Adjustments						Restructuring of External Manufacturing Agreements						Non-GAAP
Cost of sales			$ 103,64						$						$ (12,195						$ 91,45
Gross profit			233,596						—						12,195						245,791
Selling, general, and administrative			200,998						(8,473)						—						192,525
Income from operations			32,598						8,473						12,195						53,266
Other expense			(190)						—						—						(190)
Provision for income taxes			5,890						3,813						2,744						12,447
Net income			26,518						4,660						9,451						40,629
Diluted earnings per share (1)			2.41						0.42						0.86						3.70

			Year ended December 31, 2023
			GAAP						IT and Supply Chain Optimization						LifeMD Collaboration Costs(2)						Non-GAAP
Cost of sales			$ 296,20						$						$						$ 296,20
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			$ 458,16						$						$ (12,195						$ 445,96
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

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(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.

(2) It is expected that the remaining $5.0 million of LifeMD Collaboration Costs will be recorded in 2024.

Investor Contact:

Medifast, Inc.

Steven Zenker

[e-mail]

[phone]

Cover	Feb. 20, 2024
Entity Information [Line Items]
Document Type	8-K
Document Period End Date	Feb. 20, 2024
Entity Registrant Name	MEDIFAST, INC.
Entity Address, Address Line One	100 International Drive
Entity Address, City or Town	Baltimore
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	21202
City Area Code	410
Local Phone Number	581-8042
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	MED
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000910329
Amendment Flag	false
Entity Tax Identification Number	13-3714405
Entity File Number	001-31573
Entity Incorporation, State or Country Code	DE
NEW YORK STOCK EXCHANGE, INC.
Entity Information [Line Items]
Security Exchange Name	NYSE

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