med-20230630

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 June 30, 2023

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

For the transition period from________ to ________.

Commission File Number: 001-31573

Medifast, Inc.

(Exact name of registrant as specified in its charter)


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

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MED

New York Stock Exchange

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

Yes x No o

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

Yes x No o

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


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

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

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

Yes o No x

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

The number of shares of the registrant’s common stock outstanding at July 24, 2023 was 10,889,368.


Part 1 – Financial Information



Item 1 – Financial Statements


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

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

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

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

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

Notes to Condensed Consolidated Financial Statements (unaudited)			8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			13

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			20

Item 4 – Controls and Procedures			20

Part II – Other Information

Item 1 – Legal Proceedings			22

Item 1A – Risk Factors			22

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			22

Item 6 – Exhibits			23


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Revenue	$	296,188	$	453,333	$	645,170	$	870,933
Cost of sales	85,473		131,651		188,065		246,965
Gross profit	210,715		321,682		457,105		623,968

Selling, general, and administrative	172,009		272,718		364,887		519,917

Income from operations	38,706		48,964		92,218		104,051

Other income (expense)
Interest income (expense)	462		(164)		281		(259)
Other expense	(51)		(4)		(53)		(20)
	411		(168)		228		(279)

Income from operations before income taxes	39,117		48,796		92,446		103,772

Provision for income taxes	8,837		9,683		22,198		22,878

Net income	$	30,280	$	39,113	$	70,248	$	80,894

Earnings per share - basic	$	2.78	$	3.44	$	6.46	$	7.06

Earnings per share - diluted	$	2.77	$	3.42	$	6.43	$	7.01

Weighted average shares outstanding
Basic	10,888		11,354		10,876		11,455
Diluted	10,917		11,435		10,923		11,534

Cash dividends declared per share	$	1.65	$	1.64	$	3.30	$	3.28


	June 30, 2023		December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents	$	147,405	$	87,691
Inventories	68,896		118,856


Prepaid expenses and other current assets	12,516		16,237
Total current assets	228,817		222,784

Property, plant and equipment - net of accumulated depreciation	54,412		57,185
Right-of-use assets	16,699		18,460
Other assets	14,269		12,456
Deferred tax assets	4,528		5,328


TOTAL ASSETS	$	318,725	$	316,213

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	105,188	$	134,690
Income taxes payable	4,302		428
Current lease obligations	5,405		5,776
Total current liabilities	114,895		140,894

Lease obligations, net of current lease obligations	18,269		20,275


Total liabilities	133,164		161,169

Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
10,889 and 10,928 issued and 10,889 and 10,873 outstanding
at June 30, 2023 and December 31, 2022, respectively	11		11
Additional paid-in capital	21,542		21,555
Accumulated other comprehensive income	123		24
Retained earnings	163,885		139,852
Less: treasury stock at cost, 0 and 54 shares at June 30, 2023 and December 31, 2022, respectively	—		(6,398)
Total stockholders' equity	185,561		155,044

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


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

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


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

Balance, December 31, 2021	11,594	$	12	$	12,018	$	111	$	190,333	$	—	$	202,474
Net income	—	—		—		—		41,781		—		41,781
Share-based compensation	18	—		2,275		—		—		—		2,275
Net shares repurchased for employee taxes	(8)	—		(1,459)		—		—		—		(1,459)
Treasury stock from stock repurchases	—	—		—		—		—		(10,000)		(10,000)
Treasury stock retired from stock repurchases	(51)	—		—		—		(10,000)		10,000		—
Other comprehensive income	—	—		—		16		—		—		16
Cash dividends declared to stockholders	—	—		—		—		(19,063)		—		(19,063)

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

Balance, June 30, 2022	11,019	$	11	$	—	$	268	$	129,197	$	—	$	129,476


	June 30, 2023		December 31, 2022

Raw materials	$	10,286	$	12,670
Packaging	2,933		3,611
Non-food finished goods	5,622		8,738
Finished goods	58,770		97,675
Reserve for obsolete inventory	(8,715)		(3,838)
Total	$	68,896	$	118,856


2023 (excluding the six months ended June 30, 2023)	$	2,888
2024	5,955
2025	6,095
2026	4,438
2027	2,553
Thereafter	2,858
Total lease payments	$	24,787
Less: imputed interest	(1,113)
Total	$	23,674


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


Exhibit Number						Description of Exhibit

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

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

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

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

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



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


	Six months ended June 30,
	2023		2022

Operating Activities
Net income	$	70,248	$	80,894
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	6,342		5,176
Non-cash lease expense	2,514		3,211
Share-based compensation	3,120		5,140

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

Change in operating assets and liabilities:
Inventories	49,960		23,069

Prepaid expenses and other current assets	3,721		(376)
Other assets	(2,142)		(8,169)
Accounts payable and accrued expenses	(31,851)		(13,922)
Income taxes payable	3,874		(7,602)
Net cash flow provided by operating activities	107,205		87,435

Investing Activities
Sale and maturities of investment securities	—		5,267
Purchase of property and equipment	(3,859)		(5,849)
Net cash flow used in investing activities	(3,859)		(582)

Financing Activities

Borrowing under revolving credit facility	—		27,000
Options exercised by directors	105		—
Net shares repurchased for employee taxes	(3,238)		(1,479)
Cash dividends paid to stockholders	(36,996)		(35,617)
Stock repurchases	(3,602)		(120,048)
Net cash flow used in financing activities	(43,731)		(130,144)

Foreign currency impact	99		177


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

Outstanding at beginning of period	33	$	54.98	33	$	54.98
Exercised	(4)	27.18		—	—
Outstanding at end of the period	29	$	58.65	33	$	54.98
Exercisable at end of the period	29	$	58.65	28	$	52.76


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

Outstanding at beginning of period	60	$	188.11	44	$	183.51
Granted	85	98.17		38	176.81
Vested	(24)	169.42		(19)	155.57
Forfeited	(3)	156.26		(1)	186.53
Outstanding at end of the period	118	$	127.93	62	$	187.80


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