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Item 1. Business

2024-02-20 compared with 2023-02-21 · 267 added, 244 removed, 187 unchanged (73% of the section changed)

SUMMARY Medifast, Inc.

(“Medifast,” the “Company,” “we” or “us”) 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 ® .

The Company’s growth over the past few years is a reflection of its unique Coach-driven approach, which stands out in a world where health and wellbeing is too often a difficult and lonely journey .

Medifast is often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different.

This year, we announced that Medifast's OPTA VIA program was named the #1 weight loss program in the U.S.

by revenue for 2021 1 .

Our growth is demonstrated by strong financial performance over the last several years.

We generated revenue of $1.599 billion in 2022, $1.526 billion in 2021 and $934.8 million in 2020, representing year-over-year increases of 4.8% in 2022 and 63.2% in 2021.

Income from operations was $184.8 million in 2022, $216.2 million in 2021 and $134.2 million in 2020, representing a year-over-year decrease of 14.5% in 2022 and increase of 61.2% in 2021.

Our OPTA VIA brand offers a highly competitive and effective lifestyle solution centered on developing new healthy habits through smaller, foundational changes called micro-habits.

The program provides a more effective and satisfying alternative to outdated, quick fixes and is built around four key components: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.

Medifast, Inc.

(“Medifast,” the “Company,” “we” or “us”) is the health and wellness company known for its habit-based and coach-guided lifestyle solution, OPTA VIA ® .

The Company has initiated its business transformation by expanding into the medically supported weight loss and sports nutrition markets, reflecting its commitment to providing comprehensive health and wellness solutions to customers as both their needs and the industry evolve .

Medifast has created a well-capitalized business and OPTA VIA has grown into a billion-dollar brand under current leadership.

It has a powerful business model, building a network of more than 41,100 active earning Coaches and impacting more than 3 million customers.

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.

As a physician-founded company with a 40+ year history, Medifast is a leader in the U.S.

weight management industry.

OPTA VIA'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.

The Company continues to innovate and build upon its scientific and clinical heritage to fulfill its mission of offering Lifelong Transformation, One Healthy Habit at a Time ® .

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:

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• The Habits of Health ® Transformational System:

A proprietary system which offers easy steps to a sustainable healthy lifestyle.

A proprietary system that 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.

Clinically proven plans and scientifically developed products, backed by dietitians, scientists and physicians.

OPTA VIA's collaboration with LifeMD, Inc.

LFMD) (“LifeMD”) offers access to a new resource for eligible customers:

• Clinicians as Partners:

Through a collaboration with the national virtual primary care provider LifeMD, OPTA VIA customers have access to board-certified affiliated clinicians and medication, such as GLP-1s, that support treatment plans for obesity and other health conditions.

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.

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.

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.

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.

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 OPTA VIA Coaching Model is customer-centric and boasts an energized health and wellness community.

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The entrepreneurial spirit of our OPTA VIA Coaches is another key to our success, as they create a continuous cycle of growth, activating new customers, many of whom go on to become OPTA VIA Coaches.

We offer economic incentives designed to support each OPTA VIA Coach’s long-term success, which we believe plays an important role in their financial wellness, providing the opportunity to improve their finances while changing the health trajectory of families, communities and generations.

1 Source Euromonitor International Limited;

based on custom research conducted in Q2 2022;

value sales for structured weight loss and meal replacement programs in 2021.

2 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.

Please see the OPTA VIA Income Disclosure Statement (http://bit.ly/ids OPTA VIA) for statistics on actual earnings of Coaches.

OPTA VIA Coaches are independent contractors, not employees, who support 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.

We offer economic incentives designed to support each OPTA VIA Coach’s long-term success, which we believe plays an important role in their financial wellness,

providing the opportunity to improve their finances while changing the health trajectory of families, communities and generations.

As entrepreneurs, OPTA VIA Coaches market our products to friends, family and other acquaintances.

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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.

The total number of active earning OPTA VIA Coaches as of December 31, 2022 was 60,900.

We believe our coach-based model is scalable and drives both customer success and growth.

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 operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, Seven Crondall Associates, LLC, Corporate Events, Inc., OPTA VIA (Hong Kong) Limited, OPTA VIA (Singapore) PTE.

LTD and OPTA VIA Health Consultation (Shanghai) Co., Ltd.

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.

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.

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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.

While our operations are not directly impacted by the war in Ukraine, the duration of hostilities and the vast array of sanctions and related events (including cyberattacks) cannot be predicted.

As a result, those events present uncertainty and risk.

To date, the war in Ukraine has had no material impact on our business.

Throughout the COVID-19 pandemic, we took and continue to take significant measures to protect our employees, OPTA VIA Coaches and business, while remaining in compliance with local and national guidelines.

Our manufacturing and distribution facilities remained fully operational during the pandemic, and we have not experienced any meaningful disruption to our worldwide supply chain due to the pandemic.

It is possible the COVID-19 pandemic could negatively impact our operations and the operations of our suppliers and vendors.

Should that occur, the extent to which the pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current expectations.

Factors that could cause actual results to differ from management’s expectations include inherent uncertainties regarding the continued impact of pandemic, the emergence of variant strains, the resumption of government actions taken to contain the virus or treat its impact, changes in consumer behavior resulting from the pandemic and how quickly and to what extent normal economic and operating conditions can resume.

The senior management team meets regularly to review and assess the status of the Company’s operations and the health and safety of its various constituencies, and will continue to communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels.

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.

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.

However, we intend to continue to actively monitor the impact of these developments on our business and will update our practices accordingly.

The weight loss industry is very competitive and encompasses a diverse array of weight loss products and programs.

These include a wide variety of commercial weight loss programs, pharmaceutical products, surgical interventions, books, self-help diets, dietary meal replacements, and appetite suppressants as well as digital tools, app-based health and wellness monitoring solutions, and wearable trackers.

The weight loss market is served by a diverse array of competitors.

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.

Recently, it became clear that medical weight loss solutions, such as GLP-1 medications, have become an increasingly key component of the overall health and wellness ecosystem, and the recent surging awareness and popularity of these weight loss medications serve as another major competitor, as these products have prompted a huge change in the way that consumers think about weight loss and lifestyle modification solutions in general.

We recognize that these weight loss medications have attracted significant attention from the market and pose a threat to our interactions with our customer base.

Importantly, the efficacy claims of GLP-1 medications for weight loss are based specifically on their incorporation of lifestyle changes that include a reduced calorie diet and increased physical activity.

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.

Please see the OPTA VIA Income Disclosure Statement (http://bit.ly/ids OPTA VIA) for statistics on actual earnings of Coaches.

Medifast’s offering, weight loss medications become one important element in an overall tailored lifestyle plan that also includes Coaching, community support, nutritionally balanced meals, and exercise.

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.

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.

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.

There is no tiered pricing.

• OPTA VIA boasts a health and wellness community, where about 90% of OPTA VIA Coaches come from the customer base and have been in their customers’ shoes.

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.

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.

Medifast has perfected our model over the last 40 years, with habits, Coaches and community at the core, and we will continue to innovate as the industry evolves.

Recent Initiatives

In response to the competitive landscape, in which acquiring customers has become more difficult due to competitive pressures from GLP-1 medications being sought after by our potential customers, the Company is focusing on a number of new initiatives to aid in increasing revenue and profit growth in the years ahead.

Some of these started in 2023 with others expected to begin in 2024.

These initiatives are expected to be funded internally by the Company’s existing cash position, capital previously utilized for dividends, as well as savings from the Company’s expense reduction efforts.

At the core of the Company’s initiatives is its desire to grow its business by broadening its customer base through increased brand visibility and recognition, and by significantly expanding its total addressable market.

Areas of investment anticipated for the year include instituting a new marketing campaign and upgrading customers’ digital experience to increase brand awareness and drive customer adoption, as well as cultivating new customers through the Company’s collaboration with LifeMD.

In September of 2023, the Company entered the $30 billion sports nutrition market, launching its OPTA VIA ACTIVE line of products.

The initial products consist of essential amino acids and whey protein powders, to aid in supporting healthy muscle in conjunction with both exercise and everyday activities.

In the second half of 2023, the Company conducted pilot programs with several telehealth companies, focused on providing personalized care to support holistic health rather than weight loss alone.

In December of 2023, the Company entered into a collaboration agreement with LifeMD, a leading provider of virtual primary care.

In January of 2024, the Company expanded into the medically supported weight loss market by operationalizing the collaboration with the goal of creating a comprehensive and seamless solution for customers who desire to use medications and OPTA VIA’s lifestyle enhancement program.

This collaboration brings together OPTA VIA’s personalized habit-based, coach-guided approach with medical expertise from board-certified affiliated LifeMD clinicians and access to weight loss medications, including GLP-1s.

GLP-1 medications that meet the FDA weight loss mandate are prescribed along with the recommendation to make lifestyle modifications, such as through a structured program like OPTA VIA, that encourages a reduced-calorie diet and increased physical activity.

Our research shows that most of those who are interested in weight loss medication are also looking for support beyond a prescription, including clarity on how to incorporate healthy eating and exercise into their lifestyles while using these medical solutions.

While medically supported weight loss can be effective, long-term success is dependent on the nutrition and lifestyle changes individuals make in combination with taking medication.

Additionally, loss of lean muscle mass and maintaining proper nutrition while on a reduced-calorie diet are two main areas of concern for patients on medically supported weight loss, with evidence suggesting that the loss of lean body mass can range from 20% to 50% of total weight loss.

Late in the fourth quarter, the Company introduced two new bundles, the OPTA VIA Nutrition Kit for Medically Supported Weight Loss and the OPTA VIA Muscle Health Kit for Medically Supported Weight Loss.

These new bundles include OPTA VIA ACTIVE products, which enable the Company to fill out its product line, making for more comprehensive offerings for those seeking medically-supported weight loss solutions with lifestyle modifications, and offer the opportunity to extend the lifetime value of all OPTA VIA customers, as they transition their lifestyles for sustainable improvement.

In connection with this collaboration the Company purchased 1,224,425 shares of LifeMD’s common stock for $10.0 million and has committed to invest up to an additional $10.0 million to support the collaboration (comprised of $5.0 million paid in December of 2023 and two $2.5 million payments expected in 2024), for enhancements to LifeMD’s platform, operations and supporting infrastructure to bring together customers, coaches, and clinicians, offering personalized care and support.

In addition, the Company plans to undertake a significant program to market and build its brand at the corporate level via a comprehensive Company-led marketing campaign, by utilizing digital advertising and other methods, to aid in bringing in new customers.

In conjunction with these growth initiatives, The Company discontinued its dividend payments effective December 7, 2023, in order to redirect capital to these growth initiatives as it seeks to deliver a superior return to stockholders in the years ahead.

It is expected that much of the funds previously earmarked for dividends will be utilized to grow the business through marketing and technology initiatives that are expected to increase customer acquisition and the lifetime value of customers.

2024 will likely be one of the most pivotal years in Medifast’s history, as we adjust to the paradigm change in the weight loss industry and aggressively execute on bold initiatives to grow our business.

We believe by significantly broadening our customer acquisition activities, through launching our new marketing campaign, upgrading customers' digital experience, and leaning into the medically supported weight loss market through our collaboration with LifeMD, we will be positioned for future success.

The moves we are making don’t come without risks, but we believe a greater risk is not taking action in a rapidly evolving marketplace.

These changes mean that 2024 will be an investment year, one in which we lay the foundation for this future growth.

As such, we don’t expect to see a significant impact, on our operations or revenue, from these actions until late in the year and into 2025 and beyond.

And while we enter 2024 facing similar challenges to 2023, we do expect to exit 2024 well-equipped to seize the opportunities available for growth in the years ahead, supported by a strong balance sheet with no debt and a solid plan for capitalizing on the opportunities we are addressing.

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.

According to the most recently published data by the Center for Disease Control and Prevention (“CDC”), over 70% of all adults in the U.S.

aged 20 and above were overweight or obese in 2017-2018, and is growing at approximately 2% per annum.

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 2 .

2 CDC BRFSS Prevalence & Trends Data 2022

According to a proprietary analysis, the addressable market for weight loss is large and growing.

It’s worth about $20 billion today with a growth rate of approximately 6% per annum.

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.

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there are about 200 million people in the United States looking to lose weight and willing to consider dieting 5 .

While 81% of U.S.

adults have cut spending in the last six months according to the survey, 70% say they don't plan on letting their health and wellbeing falter.

In fact, 57% saying they would spend more time on their health and wellbeing in the coming year 4 .

We offer customers a radically different approach to health, with weight loss and weight management serving as a catalyst to an overall improvement in health, confidence, vitality and general well-being.

Additionally, in 2023, Medifast entered the $30 billion sports nutrition market and the medically supported weight loss market, which is expected to reach up to $100 billion by 2030 6 .

We offer customers a radically different approach to health, with weight loss and weight management serving as a catalyst for an overall improvement in health, confidence, vitality and general well-being.

Consumer Motivation

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Lifestyle issues our customers often seek to address and resolve include:

• physical limitations and debilitating medical conditions linked to an unhealthy weight;

• physical limitations and chronic diseases linked to an unhealthy weight;

• the desire for more energy to meet physical demands and aspirations (e.g.

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• 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;

• 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;

• the need for a community of like-minded people for support to achieve their goals.

Weight management is a challenge for a significant portion of the U.S.

population, as well as the global population.

According to the U.S.

Department of Health and Human Services, overweight and obese individuals are increasingly at risk for diseases such as type 2 diabetes, heart disease, certain types of cancer, stroke, arthritis, sleep apnea and depression.

In 2013, The American Medical Association declared obesity a disease and the American Heart Association, the American College of Cardiology, and the Obesity Society jointly issued treatment guidelines recommending obesity be managed as a chronic disease.

In 2016, the World Health Organization estimated that approximately 1.9 billion people 18 years and older were overweight worldwide, triple the rate since 1975.

Experts agree that lifestyle change remains foundational to long-term health and wellbeing, even for those utilizing weight loss medications.

In fact, independent research commissioned by Medifast revealed 96% of people recognized that lifestyle changes are needed for weight loss and maintenance, yet only 17% are confident they can manage on their own.

Findings also showed most individuals interested in weight loss medications are looking for support beyond prescriptions, including clarity on how to incorporate components of healthy living, such as proper nutrition and exercise, into their lifestyles while utilizing these medical solutions 7 .

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.

By 2017, only two states and the District of Columbia had an obesity

3 Consumer and OPTA VIA Customer surveys February 2020, NCHS (National Center for Health Statistics), team analysis

4 This random double-opt-in online survey of 2,000 nationally representative U.S.

Adults was commissioned by Medifast and conducted by a market research company, OnePoll, between October 20 and October 24, 2022.

All participants are paid an amount depending on the length and complexity of the survey.

The survey was overseen and edited by the OnePoll research team, who are members of the MRS (Market Research Society) and have corporate membership to ESOMAR (European Society for Opinion and Market Research) and AAPOR (American Association of Public Opinion Research).

rate that was less than 25%;

twenty-nine states had an adult obesity rate of 30% or higher.

In fact, the 2020 National Diabetes Statistics Report from CDC estimated approximately 89% of people with diabetes were overweight or had obesity.

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 .

In 2022, only the District of Columbia had an obesity rate that was less than 25% and forty-one states had an adult obesity rate of 30% or higher 9 .

Direct Sellers

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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.

Rather, OPTA VIA Coaches help customers adopt healthy habits and learn the benefits of OPTA VIA products, which are shipped directly to customers.

The more OPTA VIA Coaches we have, the more customers we can serve.

We are often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different.

We support customers through independent OPTA VIA Coaches, about 90% of whom were customers first.

3 Internal estimate based on March 2020 McKinsey study, updated for public & syndicated information where available

4 Consumer and OPTA VIA Customer surveys, April 2023

5 Consumer and OPTA VIA Customer surveys, April 2023

6 Terence Flynn, Framing the Mounjaro bull case in diabesity, Morgan Stanley Research, September 14, 2023

Independent IPSOS research commissioned by Medifast, June 2023

8 CDC BRFSS Prevalence & Trends Data 2022

9 CDC Adult Obesity Prevalence Maps, September 21, 2023

Our competitive advantages:

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• the opportunity to complement other business pursuits.

United States

is our principal market and continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, where over 70% of adults aged 20 and over were considered overweight or obese in 2017-2018.

Sales of weight loss and health and wellness products and services was projected to grow at a compound average growth rate (“CAGR”) of approximately 7% in the United States through 2022, according to industry research and analysis.

market continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, more than two-thirds of the adult population fall within the overweight or obese categories and more than 30% were obese in 2022 10 .

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.

The nutrition and weight management segment of the industry continued to dominate the health and wellness market in 2022.

With its recent expansion into medically supported weight loss, Medifast can support even more customers on their health and wellness journeys.

Additionally, the Company also tripled its addressable market by entering the sports nutrition category and is fostering an engaged U.S.

Hispanic Coach Community within the OPTA VIA ecosystem.

OPTA VIA Coaches are focusing on word of mouth and social media marketing toward increasingly younger demographics, reaching out to important and increasingly diverse communities of health and wellness consumers, and identifying and marketing to consumers who are in varying stages of optimal well-being.

International Expansion Efforts

We are the publicly traded market leader by revenue in the weight management industry in the U.S., and are looking to build on this position.

We have seen significant advancement within the current segments of our business, but know there are new segments, markets, and communities where we have opportunities for growth.

In addition, the Company plans to invest in technology and growth initiatives intended to improve customer acquisition and customer experience, including a new marketing campaign designed to increase brand awareness and drive customer adoption.

We have seen advancement within our current business model, but know there are new initiatives, markets, and communities where we have opportunities for growth.

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.

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.

In July 2019, we commenced our international operations, entering into the Asia Pacific markets of Hong Kong and Singapore.

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.

We outsource a distribution center in Hong Kong to provide adequate product distribution capacity for the foreseeable future in these markets.

Like the U.S., we believe healthy lifestyles have increasingly become a priority to consumers around the world, but particularly in the Asia Pacific markets as disposable income grows.

Our research has found that while traditional remedies are still essential, consumers are increasingly incorporating healthy living products into their daily lives.

In-market testing of our products and programs evoked strong consumer response and acceptance.

Asia Pacific is the largest health and wellness marketplace in the world, in terms of revenue share, with robust growth projected over the next several years.

The region also is a leading direct selling marketplace, with China representing the second largest market for direct selling retail sales as of 2020.

The Company’s 2022 OPTA VIA Convention offered a Coach-led educational session in Spanish, marked by a 100% increase in the number of participants in the session, compared to the prior year.

To support our growing Hispanic Coach community, our customer support call-center network has a global footprint with infrastructure providing multi-lingual support from the United States, Guatemala, and Colombia.

This has set the groundwork for both our expansion into other Spanish-speaking communities and our aspirations of developing other markets around the world.

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.

In July 2019, we entered into the Asia Pacific markets of Hong Kong and Singapore.

As of June 2023, as part of the Company’s Fuel for the Future program, the Company ceased operations in these markets in order to optimize the Company’s spending and investments to prepare for and catalyze sustainable future domestic growth.

This decision was made for the Company to better prioritize resources that were previously dedicated to the Asia Pacific markets, in order to support initiatives that the Company anticipates will have a greater impact on revenues and profitability.

This includes investing in technology and digital capabilities as well as rolling out product offerings that are complementary to existing programs, entering new areas such as sports nutrition and medically supported weight loss, and bringing OPTA VIA to new customer demographics domestically which should all aid in considerably expanding the

10 CDC BRFSS Prevalence & Trends Data 2022

Company’s total addressable market.

We plan to continue to monitor and look for opportunities to expand into other geographic markets in the future.

The Company’s 2023 OPTA VIA Convention offered a Coach-led educational session in Spanish for the third straight year.

To support our growing Hispanic Coach community, our customer support call-center network has a global footprint with infrastructure providing multilingual support from the United States, Guatemala, and Colombia.

This sets the groundwork for both our expansion into other Spanish-speaking communities and our aspirations of eventually developing other markets around the world.

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.

We have authored 19 peer-reviewed publications over the past 10 years.

Most recently, we conducted a double-blind study that shows the effects that OPTA VIA Coaching has on the program;

We have authored over 66 peer-reviewed scientific abstracts and publications, 33 scientific journal publications and 28 completed research studies.

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.

Our clinically proven plans and our scientifically developed products were developed by physicians, dietitians, and scientists to help customers achieve a healthy weight.

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.

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.

OPTA VIA- BRANDED COACH SUPPORT

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.

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.

The majority of our OPTA VIA Coaches began as customers and became OPTA VIA Coaches for a number of reasons, including to pay it forward and help others through their transformation journey.

COACH SUPPORT

• OPTA VIA Coach Business Kit .

Coaches are required to purchase a business kit to join our network.

The kits provide new OPTA VIA Coaches with business essentials to successfully start their independent business, including plan and product information and 12 months of free access to a personalized OPTA VIA replicated website.

OPTA VIA- BRANDED PRODUCTS :

• OPTA VIA Essential Fuelings .

OPTA VIA Essential Fuelings contain 24 vitamins and minerals, high quality, complete protein, and no colors, flavors or sweeteners from artificial sources.

Each OPTA VIA Essential Fueling is scientifically formulated with the right balance of carbohydrates, protein and fat which helps promote a gentle, but efficient fat-burning state.

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.

Customers purchase kits tailored to their individual needs on the advice and counsel of their OPTA VIA Coach.

Kits, ranging in price from approximately $395.25 to $511.50, include up to a

The kits provide new OPTA VIA Coaches with business essentials to successfully start their independent business, including plan and product information and 12 months of access to a personalized OPTA VIA replicated website.

• OPTA VIA Fuelings .

OPTA VIA Fuelings contain 24 vitamins and minerals, high quality, complete protein, and no colors, flavors or sweeteners from artificial sources.

Each OPTA VIA Fueling is scientifically formulated with the right balance of carbohydrates, protein, and fat which help promote a gentle, but efficient fat-burning state when on one of our Optimal Weight Plans.

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.

Customers purchase kits tailored to their individual needs on the advice and guidance of their OPTA VIA Coach.

• OPTA VIA ACTIVE .

OPTA VIA Essential Amino Acid (EAAs) Blend and OPTA VIA ACTIVE Whey Protein are designed to help new and existing customers of all fitness levels optimize their motion habits.

Led by the Company’s team of researchers, food scientists, nutritionists, and other scientific experts, OPTA VIA ACTIVE Essential Amino Acid (EAAs) Blend and OPTA VIA ACTIVE Whey Protein are designed to address age-related muscle mass decline and support overall muscle health.

Formulated to work with or without OPTA VIA nutrition plans and guided by Coach support, OPTA VIA ACTIVE is backed by science, made with no colors, flavors or sweeteners from artificial

11 Based on the results of a 16-week clinical study, those who participated in at least 75% of their 23 assigned OPTA VIA Coaching calls lost 15.2 lbs.

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for those participating in fewer calls.

30-day supply of Fuelings and are purchased by our customers through our e-commerce website, their OPTA VIA Coach’s personalized replicated website, or our call center.

• OPTA VIA Select Fuelings .

OPTA VIA Select Fuelings represent our Non-GMO line of products.

These products have unique flavor profiles, work with the same suite of Optimal Weight Plans described below.

As the Company continues to optimize and enhance its product offerings, OPTA VIA Select Fuelings will be discontinued in 2023.

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.

sources and is Informed Sport certified, a global standard in sports nutrition quality control that ensures its certified products contain no banned substances.

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.

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.

We encourage our customers to embrace our Six Steps to Optimal Health:

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• Optimize health for your age.

• the potential to live a longer healthier life.

The majority of our OPTA VIA Coaches began as customers and became OPTA VIA Coaches for a number of reasons, including to pay it forward and help others through their transformation journey.

The Optimal Weight and Health plans we market to customers are:

• Realize the potential to live a longer healthier life.

In addition, the Company offers product bundles as a complement to balanced nutrition specifically designed to support customers on the medically supported weight loss journey.

The Optimal Weight and Health plans and product bundles we market to customers are:

• Optimal Weight 5 & 1 Plan ® .

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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.

OPTA VIA Coaches counsel their customers on which Fuelings to select.

OPTA VIA Coaches also counsel their customers on how to develop healthy habits, such as preparing lean and green meals and choosing healthy snacks.

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 ® .

The Optimal Weight 4 & 2 & 1 Plan is designed for customers who want to continue eating all food groups or want a flexible meal plan to help them achieve a healthy weight.

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.

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 ® .

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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.

No matter what plan a customer is on, they learn the Habits of Health 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.

The Habits of Health Transformational System is an innovative, mind and body lifestyle approach that encourages and educates customers to replace unhealthy habits with healthy ones that contribute to their long-term success.

Customers are guided by their OPTA VIA Coaches to eat three Optimal Health Fuelings and three balanced meals they prepare themselves daily.

• OPTAVIA Nutrition Kit for Medically Supported Weight Loss :

As customers lose weight, getting adequate nutrition and retaining lean muscle is critical.

OPTA VIA’s Nutrition Kit for Medically Supported Weight Loss includes nutrient dense, portion controlled Fuelings and OPTA VIA ACTIVE Whey Protein to help retain lean muscle mass as weight is lost.

Each day, customers will enjoy 2 OPTA VIA Fuelings and 2 servings of OPTA VIA ACTIVE Whey Protein in addition to healthy meals.

• OPTAVIA Muscle Health Kit for Medically Supported Weight Loss:

Evidence suggests that the loss of lean body mass can range from 20% to 50% of total weight loss for those on weight loss medications.

As customers lose weight, getting adequate nutrition and retaining lean muscle is critical.

The OPTA VIA Muscle Health Kit for Medically Supported Weight Loss aids in the retention of lean muscle mass during weight loss.

Each day, customers consume up to three OPTA VIA ACTIVE Whey Protein shakes in addition to healthy meals.

High-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.

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.

We offer economic incentives designed to support each OPTA VIA Coach’s and customer’s success.

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.

We offer economic incentives designed to support each OPTA VIA Coach’s and Customer’s success.

Once a Coach has successfully attracted a new customer, the Coach uses personalized coaching, enhanced health and wellness education and effective digital tools to drive engagement.

As part of this work, in the fourth quarter of 2022, the Company established a “Commit To Health” program, which started on December 26, 2022 and ran through January 31, 2023, and was aimed to encourage and incentivize each new OPTA VIA customer to make a second order.

Programs like these are an important driver of our ongoing customer acquisition efforts, focusing on fostering alignment of the Coach network around customer sponsoring through the creation of attractive price points for both first and second food orders.

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.

Keeping customers engaged for longer and ensuring that OPTA VIA becomes a part of each customer’s every day life is a primary focus for the team right now, as the catalyst for reestablishing our customer and Coach tenure and enhancing future revenue growth.

Additionally, at the end of 2022, the Company established an “Accelerator For All” compensation plan bonus, which offered an incentive for Coaches to bring new Customers into OPTA VIA.

This bonus is now a part of the 2023 new Coach compensation structure reflecting our ongoing focus on new Customer acquisition in addition to other important business building initiatives.

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.

Once a Coach has successfully attracted a new customer, the Coach uses personalized coaching and effective digital tools to drive engagement.

As part of this work, beginning in March 2023, the Company introduced a "Client Support Bonus+" incentive for Coaches that was aimed to encourage and incentivize each independent OPTA VIA Coach to acquire new and reactivated customers.

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.

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 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.

All of this work is aimed at building important momentum in both acquisition and tenure.

The programs that we are putting in place in the first half of 2023 will be important drivers of reestablishing our repeatable business rhythm.

We are consistently adapting and focusing our efforts on where we believe they will have the most impact.

Sales are made to individual customers.

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Demand for weight management products and programs are typically seasonal.

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.

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.

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.

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.

SCIENTIFIC ADVISORY BOARD

Our Scientific Advisory Board consists of a group of multi-disciplinary, internationally recognized scientific experts that serves as the foundation for scientifically valid, evidence based, customer-centric, high quality innovations for lasting health.

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.

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.

In 2022, the Company announced the addition of three new members to its long-standing Scientific Advisory Board:

Nikhil Dhurandhar, Dr.

Graham Thomas and Dr.

Jessica Unick.

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.

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.

The work of this cross-disciplinary group builds on our scientific heritage and incorporates leading-edge clinical research into the development of our products, plans and programs.

The weight-loss industry is very competitive and encompasses various weight loss products and programs.

These include a wide variety of commercial weight-loss programs, pharmaceutical products, surgical interventions, books, self-help diets, dietary meal replacements, and appetite suppressants, as well as, digital tools, app-based health and wellness monitoring solutions and wearable trackers.

The weight loss market is served by a diverse array of competitors.

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.

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.

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., BellRing Brands, Inc., and Beyond Meat, Inc.

We have a competitive advantage over traditional diet companies.

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.

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.

There is no tiered pricing.

• OPTA VIA boasts a health and wellness community, where about 90% of OPTA VIA Coaches come from the customer base and have been in their customers’ shoes.

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.

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.

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 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.

We continue to build and leverage our brands through multiple marketing strategies.

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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 customers and OPTA VIA Coaches.

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.

The Company plans to invest in technology and growth initiatives intended to improve customer acquisition and customer experience, including a new Company-led marketing campaign designed to increase brand awareness and drive customer adoption in 2024.

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.

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.

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.

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.

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.

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.

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.

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.

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 protected characteristics, work permits, and benefit offerings.

Further, we are subject to laws governing our relationships with our independent contractor OPTA VIA Coaches.

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Direct Selling Regulations

Direct selling is regulated by various national, state and local government agencies in the United States and foreign markets.

Direct selling is regulated by various national, state and local government agencies in the United States.

These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, including “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales to consumers.

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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.

There is often ambiguity and uncertainty with respect to the state of direct selling and anti-pyramid laws and regulations.

In the United States, for example, federal law provides law enforcement agencies, such as the Federal Trade Commission (the “FTC”), broad latitude in policing unfair or deceptive trade practices, but does not provide a bright-line test for identifying a pyramid scheme.

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In 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing (“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 a MLM organization’s compensation structure, and how a MLM organization should approach representations to current and prospective participants.

The MLM Guidance explains, among other things, the FTC’s views concerning lawful and unlawful compensation structures, whether personal consumption by participants can be used in determining an MLM organization’s compensation structure, and how an MLM organization should approach representations to current and prospective participants.

We believe our current business practices comply with the MLM Guidance.

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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

Consequently, the FTC could bring an enforcement action based on practices that are inconsistent with the current Endorsement Guides as it considers revisions.

Under the current Endorsement Guides, advertisements that feature a consumer and convey his or her atypical experience with a product or service are required to clearly disclose the typical results that consumers can generally expect.

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Our operations are subject to these laws and regulations, and we continue to monitor their development and our compliance.

In addition, we are subject to other laws and regulations in the United States and internationally.

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.

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The consent decree requires us to comply with certain procedures and disclosures in connection with our advertisements of products and services.

If our collaboration and relationship with LifeMD grows, in the future, we may become subject to the same government regulators that regulate LifeMD’s business operations.

These include federal and state healthcare regulatory laws which include,

but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

For additional information, see Item 1A.

Risk Factors.

PRODUCT LIABILITY AND INSURANCE

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The Company maintains insurance against product liability claims with respect to the products it manufactures.

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.

The Company does not buy products from suppliers who do not maintain such coverage.

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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.

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.

We actively foster an organizational culture centered on strong cross-functional relationships and collaborating as one team to support the transformation journey of our customers.

As we continue to grow as a company, ensuring that our cultural tenets are consistently understood and practiced will be important in enabling our talent strategy and delivering an excellent employee experience.

Of our total team members, 867 are employed in the United States and 7 are employed in Asia Pacific.

At Medifast, we nurture a one team mindset that celebrates strong cross-functional teaming and partnering.

We believe as one team, we are transforming together, leveraging our Community and strong relationships to facilitate trust, understanding and empathy.

We also emphasize the importance of learning and supporting our team members’ growth and development which is critical to moving our business strategy forward.

As part of reinforcing our culture we have several resources we use to frame what is most important.

We have a Culture Compass that expresses:

• Our Mission … why we exist

• Our Vision…what we aspire to achieve

• Our Focus … on Coaches and customers

• Our Core Values … what we believe

• Our Success Drivers … how we lead

• Our Operating Principles … how we make choices

In 2022, we released our Culture Contract and Culture Contract Toolkit.

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.

The Culture Contract enables new team members to quickly understand who we are as a company and what’s most important in how we show up for each other.

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 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 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.

At Medifast, we actively foster an organizational culture centered on strong cross-functional relationships and collaborating as one team to support our customers in their health and wellness journey.

2023 has been a year of significant transformation for our company, and now more than ever, we are focused on nurturing a strong community - independent Coaches and corporate team members together - enabling our customers to achieve Lifelong Transformation, One Healthy Habit at a Time.

Internally, this starts with a clear and transparent communication cadence reinforced by the culture tenets that make us a strong team.

To support this significant transformation period, and to reinforce our Success Driver, Innovate, we launched a virtual Innovation Box in 2023 to give team members the opportunity to submit new ideas that support our business strategy with a focus on productivity and customer acquisition.

The Innovation Box is another channel for our team members to participate in influencing the Company’s strategic plan.

As a cross-functional team, we believe our ability to effectively collaborate will be a key enabler to successfully navigate the business transformation ahead of us.

Together, we are building relationships of trust dedicated to lifelong transformation, together we care for each other, prioritizing the mental and physical wellbeing of our people, together we continually improve the ways we work and together we help each other grow, investing in training, encouraging feedback and embracing challenges along the way.

We have several resources and tools that help us nurture a “One Team” mindset centered around strong cross-functional teaming and partnering.

Our north star is our Culture Compass that helps us understand the behaviors, values, and ways of working that define our culture today, identifying gaps, areas of growth and where we need to adjust in order to deliver on our strategy more effectively moving forward.

Our Culture Contract lays out the explicit behaviors that underlie our Core Values.

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 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.

In 2023, we released phase one of our Culture Contract training aimed at giving team members an opportunity to apply our Core Values or Success Drivers to real world business scenarios and discuss how they can use the Culture Contract to help bring desired behaviors to life.

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.

Each year we host a program called Coach Encounters, which gives our team members an opportunity to hear directly from our amazing Coaches about their personal journey and how the Company supports their work in seeking positive health outcomes for our customers.

In 2023, we were recognized by U.S.

News & Reports as a Best Place to Work in the Food & Drink Industry, a reflection of the work we have done to nurture our culture and support a strong employee experience.

Building transparency and developing communication channels that allow us to cascade information and connect our teams are critical components of our people strategy.

We leverage our Workplace from Meta platform to connect, collaborate, and incite conversations around topics that matter to us (like wellness), foster greater comradery, celebrate our successes and build trust among peers.

We also have a weekly Pulse newsletter to ensure important initiatives or events are communicated to our team members in a timely matter.

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.

We leverage our Workplace by Meta platform to connect, collaborate and incite conversations around topics that matter to us (like wellness).

We also have a weekly Pulse newsletter to ensure important initiatives and events are communicated in a timely matter.

We leverage Slack, our internal messaging platform, to drive company and senior leadership communications.

We also launched a quarterly video series from our CEO to ensure team members hear directly from him about Company performance and updates on key initiatives.

We 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.

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 allows for both social and point-based recognition as well as celebrates team members for achieving important milestones in service.

Our #AcedIt program provides team members with a platform to recognize excellent work that supports our business strategy, applauds behaviors that reinforce our cultural values, and fosters a sense of gratitude — 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.

In 2022, we tied our #AcedIt platform to our wellness platform, LiveWell, to incentivize greater focus on health and wellness.

In 2023, we saw strong engagement with LiveWell with over 70% of employees leveraging the tool.

Diversity is one of Medifast’s Core Values and an important part of our culture.

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.

On a regular basis, we deploy pulse surveys after significant events or programs so that we can gain a deeper understanding of how we can better serve our team members’ needs, ensure we are staying aligned with our mission and gauge our team members’ understanding of our company strategy and goals.

In 2022, we launched a listening initiative, “The Loop”, which is enabled by a technology platform that allows us to promote communication transparency and monitor and improve our organizational health.

This tool empowers our team leaders to review their employee engagement results and facilitate candid conversations to shape and improve the work experience of their teams.

Annually we repeat leadership training for our senior leaders to foster inclusive leadership and build their leadership toolkits as they foster diversity and inclusion among their teams.

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.

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.

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.

In 2023, we conducted two cycles of our listening initiative, The Loop, which promotes communication transparency, empowers our team leaders to review their employee engagement results and facilitates candid conversations to shape and improve the work experience.

Biannually, we repeat training for our senior leaders to foster inclusive leadership.

In 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.

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.

Nurturing growth and learning are also key elements of our culture.

In 2022, we began to pilot a new learning management system to provide team members access to online courses aligned to their development plans.

In progress is a Culture Journey learning path to further integrate an understanding of our culture journey for new team members.

We also revamped our Mentoring program which is open to all employees.

The Mentoring program gives team members an opportunity to learn, reflect and build connections with other leaders in the organization.

It also provides an opportunity for peer mentoring through a cohort model.

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.

In 2023, we enhanced our performance management process (called PEAK) by introducing an improved technology platform which delivered a superior user experience as our team members engage in quarterly conversations on performance and development.

The tool automates 360 feedback which reinforces the role of feedback in developing strong relationships.

Through our Optimal Learning platform, team members have access to online courses.

In 2023, we launched a Culture Journey learning path to further integrate an understanding of our culture for new team members.

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.

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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 the pay of our team members to ensure we are paying competitively, applying a consistent market pricing approach and ensure we are considering internal equity.

Annually, we review our market reference ranges and pay to ensure we remain competitive, consistent, and equitable.

Our variable pay targets are performance based and tied to organizational results.

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.

To support health and wellness among our employee population, we established a Wellness Committee that oversees a host of programming throughout the year to integrate healthy habits into the lives of our team members.

We offer incentives through our newly launched Wellness platform, LiveWell, for taking on a step challenge, doing a biometric screening or attending a wellness event among a host of other activities.

As our team members earn points in LiveWell, they can be transferred and redeemed through our #AcedIt recognition program each year.

By leveraging LiveWell, all our team members can take advantage of not only our wellness incentives, but also helpful resources to aid in their personal health journey.

In 2022, we have also updated our Hybrid Playbook and now call it our Work Playbook.

Our Work Playbook enables our team members to integrate work principles aligned to our culture that will help us optimize, productivity, accountability, flexibility and wellbeing.

The Work Playbook is a tool used to empower our team members to do their best work while sustaining strong collaboration, trust and effectiveness.

We will continue to listen and adjust our plans as we continue on our hybrid work journey.

In addition to our team members, our business also depends on our independent contractor OPTA VIA Coaches.

They support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms.

Our OPTA VIA Coaches help customers adopt healthy habits and learn the benefits of OPTAVIA products, which are shipped directly to customers.

For more information about our OPTA VIA Coaches, see the Summary section of Item 1.

Wellness is not just what we do, it’s who we are, and our commitment to being a best-in-class wellness company starts with providing team members equal access to all our programs and products.

Our Employees on Plan program allows our team members to experience the support of a Coach, as they tackle their own weight loss journey.

Our Wellness Committee oversees a host of programming throughout the year to integrate healthy habits into the lives of our team members, such as incentives through LiveWell, for taking on a step challenge, doing a biometric screening or attending a wellness event among other activities.

In 2023, aligned with the launch of our OPTA VIA ACTIVE products, we challenged our Coaches and team members to get in motion.

Medifast team members took the challenge and the company sponsored special contests and activities related to this event.

To continue to support the adoption of our Work Playbook and further evaluate the effectiveness of our work strategy principles, we conducted several ad-hoc pulse surveys of our senior leaders in 2023.

The Playbook is a tool used to empower our team members to do their best work while sustaining strong collaboration, trust, and effectiveness.

Our surveys continue to show strong support for our work strategies while also highlighting room for improvement in cross-functional teaming.

We are continuing to listen and adjust our plans throughout our work journey.

In addition to our team members, our Human Capital also includes our independent contractor OPTA VIA Coaches.

They support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, X, and video conferencing platforms.

The more OPTA VIA Coaches we have, the more customers we can serve.

The total number of active earning OPTA VIA Coaches as of December 31, 2023 was 41,100.

For information about our OPTA VIA Coaches, see Item 1.

INFORMATION SYSTEMS & TECHNOLOGY

We have adopted a cybersecurity framework that, where appropriate, aligns with the National Institute of Standards and Technology's ("NIST") Cybersecurity Framework, and we have maintained systems that, where appropriate, are Payment Card Industry Data Security Standard compliant ("PCI") under current standards.

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.

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.

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.

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.

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.

Industry standard multi-factor authentication solutions and encryption methods are used to protect customer and corporate data in transit and at rest.

As our operations grow in both size and scope, we will continue to improve and upgrade our information systems and infrastructure while maintaining their reliability and integrity.

Industry standard multi-factor authentication solutions and encryption methods are used for data protection.

As our operations evolve, we will continue to improve and upgrade our information systems and infrastructure while maintaining their reliability and integrity.

For additional information about our cybersecurity processes and risks, see Item 1C.

Cybersecurity.

INTELLECTUAL PROPERTY

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What changed 10-K

Item 1. Business