What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-18 compared with 2024-02-20 · 209 added, 131 removed, 536 unchanged (39% of the section changed)

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Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Income

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements of the Company and our report dated February 20, 2024 expressed an unqualified opinion.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements of the Company and our report dated February 18, 2025, expressed an unqualified opinion.

Basis for Opinion

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We have audited the accompanying consolidated balance sheets of Medifast, Inc.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements).

(the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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As described in Notes 2 and 11 of the financial statements, the Company operates in multiple markets in the U.S.

and internationally using an e‑commerce platform and a direct selling network of OPTA VIA Coaches.

using an e‑commerce platform and a direct selling network of OPTA VIA coaches.

The Company’s provision for income taxes is impacted based on interpretations of U.S.

federal and various state and local income tax laws.

Management prepared the Company’s provision for income taxes using significant judgment when interpreting the provisions of Treasury and state and local tax regulations and assessing the positions taken as a result of these considerations as to whether or not the amount of benefit recorded would be more‑likely‑than‑not to be sustained upon examination.

Management prepared the Company’s provision for income taxes using significant judgment when interpreting the provisions of federal, state and local tax regulations and assessed the positions taken as a result of these considerations as to whether or not the amount of benefit recorded would be more likely than not to be sustained upon examination.

We identified the evaluation of the Company’s provision for income taxes as a critical audit matter due to the significant judgments made by management when assessing the complex provisions of the tax laws and regulations.

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• We obtained an understanding of the relevant controls related to the determination of current and deferred taxes and tested such controls for design and operating effectiveness, including controls related to the interpretation and application of tax laws.

• We involved our specialized tax professionals to assist in evaluating the application of Treasury regulations and state and local tax regulations.

Our specialists considered the interpretations of Treasury regulations, state and local tax positions, and other tax positions requiring significant judgement, made an independent assessment of such positions and related calculations and then compared them to the Company’s recorded positions.

• We tested the accuracy and completeness of the data and inputs used to calculate the effective federal and state tax rate, current provision calculations and deferred tax assets/liabilities.

• We involved our specialized tax professionals to assist in evaluating the application of federal regulations and state and local tax positions.

Our specialists considered the interpretations of federal regulations, state and local tax positions, and other tax positions requiring significant judgment, made an independent assessment of such positions and related calculations and then compared them to the Company’s recorded positions.

• We tested the accuracy and completeness of the data and inputs used to calculate the effective federal and state tax rates, current provision calculations and deferred tax assets/liabilities.

/s/ RSM US LLP

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2024, 2023 and 2022

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4,804 2,490 ( 701 )

Other (expense) income ( 95 ) ( 46 ) 119

Other expense

( 3,895 ) ( 95 ) ( 46 )

909 2,395 ( 747 )

Income before provision for income taxes 3,787 128,797 184,059

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Net income $ 2,091 $ 99,415 $ 143,568

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation 47 ( 72 ) ( 67 )

Unrealized gains (losses) on investment securities

Unrealized (losses) gains on investment securities

( 115 ) 296 ( 20 )

Other comprehensive income (loss)

Other comprehensive (loss) income

( 68 ) 224 ( 87 )

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Cash and cash equivalents $ 90,928 $ 94,440

Inventories 54,591 118,856

Inventories, net

42,421 54,591

71,416 55,601

Income taxes, prepaid — 8,727

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Other assets 9,667 14,650

Deferred tax assets 4,117 5,328

Deferred tax assets, net

TOTAL ASSETS $ 284,213 $ 309,908

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20,000 shares authorized;

10,896 and 10,928 issued and 10,896 and 10,873 outstanding

at December 31, 2023 and December 31, 2022, respectively

10,938 and 10,896 issued and outstanding

at December 31, 2024 and December 31, 2023

Additional paid-in capital 33,136 26,573

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Retained earnings 176,782 174,649

treasury stock at cost, 0 and 54 shares at December 31, 2023 and December 31, 2022, respectively

Total stockholders' equity 210,109 201,481

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Share-based compensation 7,363 8,188 11,053

Loss on sale or disposal of property, plant and equipment 1,172 2,130 2

Loss on sale of disposal of property, plant and equipment

89 1,172 2,130

Realized gain on sale of investment securities ( 95 ) — —

Amortization of (discount) premium on investment securities

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Deferred income taxes ( 7,403 ) 1,211 ( 924 )

Unrealized gain on equity investment securities

Unrealized loss (gain) on equity investment securities

4,089 ( 150 ) —

Non-cash charges for supply chain optimization

Change in operating assets and liabilities:

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Purchase of investment securities ( 46,595 ) ( 59,756 ) —

Sale and maturities of investment securities — 5,267 5,145

Proceeds from sale and maturities of investment securities 27,529 5,192 5,267

Purchase of property and equipment ( 7,454 ) ( 6,483 ) ( 16,681 )

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Supplemental disclosure of cash flow information

Income taxes paid $ 34,255 $ 37,212 $ 56,758

Dividends declared included in accounts payable $ 1,407 $ 19,641 $ 17,186

Income taxes (refunded) paid

$ ( 1,617 ) $ 34,255 $ 37,212

Dividends included in accounts payable and accrued expenses

$ 648 $ 1,407 $ 19,641

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

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Share-based compensation 20 — 11,053 — — — 11,053

Options exercised by executives and directors 29 — 811 — — — 811

Net shares repurchased for taxes ( 9 ) — ( 1,516 ) — — — ( 1,516 )

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Treasury stock retired from stock repurchases ( 677 ) ( 1 ) — — ( 120,047 ) 120,047 ( 1 )

Other comprehensive income — — — 70 — — 70

Other comprehensive loss

— — — ( 87 ) — — ( 87 )

Cash dividends declared to stockholders — — — — ( 74,002 ) — ( 74,002 )

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Share-based compensation 76 — 8,188 — — — 8,188

Options exercised by executives and directors 7 — 188 — — — 188

Net shares repurchased for taxes ( 31 ) — ( 3,358 ) — — — ( 3,358 )

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Share-based compensation 60 — 7,363 — — — 7,363

Options exercised by executives and directors 7 — 188 — — — 188

Options exercised by directors

1 — 36 — — — 36

Net shares repurchased for taxes ( 19 ) — ( 836 ) — — — ( 836 )

Treasury stock from stock repurchases — — — — — ( 3,602 ) ( 3,602 )

Treasury stock retired from stock repurchases ( 84 ) — — — ( 10,000 ) 10,000 —

Other comprehensive income — — — 224 — — 224

Cash dividends declared to stockholders — — — — ( 54,618 ) — ( 54,618 )

Other comprehensive loss

— — — ( 68 ) — — ( 68 )

Forfeiture of dividends on unvested awards — — — — 42 — 42

Balance, December 31, 2024

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(the “Company” or “Medifast”) is a Delaware corporation, incorporated in 1989.

The Company’s operations are primarily conducted through its 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.

The Company’s operations are primarily conducted through its wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, OPTA VIA (Hong Kong) Limited, and OPTA VIA Health Consultation (Shanghai) Co., Ltd.

Medifast is the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTA VIA.

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Medifast sells a variety of weight loss, weight management and healthy living products all based on our proprietary formulas under the OPTA VIA, OPTA VIA ACTIVE, and Optimal Health brands.

The Company’s product line includes more than 65 consumable options, including, but not limited to, bars, puffs, cereal, crunchers, drinks, hearty choices, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups.

The Company’s product line includes approximately 79 consumable options, including, but not limited to, bars, puffs, cereal, crunchers, drinks, hearty choices, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups.

Medifast’s nutritional products are formulated with high-quality ingredients.

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The Company’s fiscal year ends on December 31.

Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation.

No reclassification in the consolidated financial statements had a material impact on the presentation.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period.

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period.

Actual results could differ materially from those estimates.

The Company is, from time to time, subject to a variety of litigation and similar proceedings that arise out of the ordinary course of its business.

Based upon the Company’s experience, current information and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its results of operations, financial position or liquidity.

However, the results of legal actions cannot be predicted with certainty.

Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions.

Cash and Cash Equivalents - Cash and cash equivalents consist of cash on deposit in financial institutions, institutional money funds and other short-term investments with a maturity of 90 days or less at the time of purchase.

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Inventories are stated at the lower of cost or net realizable value, utilizing the first-in, first-out method.

The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect

labor, and other indirect manufacturing costs.

The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor, and other indirect manufacturing costs.

On a quarterly basis, management reviews inventories for unsalable or obsolete inventories.

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The securities are stated at fair value based on a quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs (Level 1).

Gains and losses are recorded in other income (expense), net on the consolidated statement of operations.

Gains and losses are recorded in other income (expense), net on the accompanying Consolidated Statements of Operations.

Property, Plant, and Equipment - Property, plant and equipment are stated at cost less accumulated depreciation and amortization.

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Vehicles 5 years

(1) The depreciation life for leasehold improvements is the lesser of the estimated useful life of the addition or the term of the related lease.

(1) The depreciation life for leasehold improvements is the lesser of the estimated useful life or the term of the related lease.

(2) Capitalized costs of cloud software are reported in Other assets on the balance sheet and are amortized over an estimated useful life of 2 to 5 years.

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Shipping and handling costs

Amounts billed to customers for shipping and handling activities are treated as a promised service performance obligation and are recorded in revenue in the accompanying Consolidated Statements of Income upon fulfillment of the performance obligation.

Shipping and handling costs incurred by the Company for the delivery of products to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying Consolidated Statements of Income.

Amounts billed to customers for shipping and handling activities are treated as a promised service performance obligation and are recorded in revenue in the accompanying Consolidated Statements of Operations upon fulfillment of the performance obligation.

Contract costs

We expense OPTA VIA coach compensation and credit card fees during the period in which the corresponding revenue is earned.

These costs are recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Income.

These costs are recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Operations.

Leases - The Company determines if an arrangement is a lease at inception and categorizes leases with contractual terms longer than twelve months as either operating or finance.

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Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense.

Advertising Costs - Advertising costs are expensed as incurred, except for the preparation, layout, design and production of advertising costs which are expensed when the advertisement is first used.

They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Income.

Advertising expense, excluding broker fees, for the years ended December 31, 2023, 2022 and 2021, amounted to $ 3.4 million, $ 1.7 million and $ 1.6 million, respectively.

Advertising Costs - Advertising costs are expensed as incurred.

They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

Advertising expense, excluding agency fees, for the years ended December 31, 2024, 2023 and 2022, amounted to $ 14.1 million, $ 3.4 million and $ 1.7 million, respectively.

Research and Development - The Company incurs research and development costs in connection with the development of new products and programs and clinical research activities, which are expensed as incurred.

They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Income.

They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

The Company incurred $ 4.6 million, $ 4.6 million, $ 4.5 million in research and development expense for the years ended December 31, 2024, 2023 and 2022, respectively.

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Market and performance-based share awards that are tied to the Company's total stockholder return ("TSR") are valued using the Monte Carlo method.

The fair value of the incentive stock options and non-qualified stock options is calculated using the Black-Scholes option pricing model as of the grant date and recognized over the service period.

The fair value of the incentive stock

options and non-qualified stock options is calculated using the Black-Scholes option pricing model as of the grant date and recognized over the service period.

Income Taxes - Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of

management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

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Accounting Pronouncements - Adopted in 2024

The Company has not adopted any new accounting standards during the year ended December 31, 2023.

Recently Issued Accounting Pronouncements - Pending Adoption

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") 2022-03—Fair Value Measurement (Topic 820):

In June 2022, the FASB issued Accounting Standards Update ("ASU") 2022-03—Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Company did not early adopt the standard, but is in compliance with the provisions as of December 31, 2023.

Early adoption was permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Company adopted the standard during the quarter ended March 31, 2024.

The adoption of the standard had no material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued Accounting Standards Update 2023-07—Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses.

ASU 2023-07 is effective for public business entities for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company adopted the standard during the quarter ended December 31, 2024.

The Company's segment disclosures are reported in Footnote 15.

Recently Issued Accounting Pronouncements - Pending Adoption

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09—Income Taxes (Topic 740):

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Building and improvements and leasehold improvements 21,348 24,499

24,499 25,905

Equipment and fixtures 44,907 50,344

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Depreciation expense for the years ended December 31, 2024, 2023 and 2022 was $ 17.4 million, $ 10.0 million and $ 7.9 million, respectively.

Refer to Footnote 16.

Supply Chain Optimization for information on assets held for sale and accelerated depreciation charges.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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OPTA VIA coach compensation payable

13,277 23,633

Gross unrecognized tax liability, including interest and penalties

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Earnings per share - diluted $ 0.19 $ 9.10 $ 12.73

The calculation of diluted earnings per share for the years ended December 31, 2023, 2022 and 2021 excluded 24 thousand, 5 thousand and less than 1 thousand antidilutive restricted stock awards, respectively.

The calculation of diluted earnings per share for the years ended December 31, 2024, 2023 and 2022 excluded 223 thousand, 24 thousand and no antidilutive restricted stock awards, respectively.

Authorized Shares

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Issuance of Additional Common Stock

On May 18, 2017, the stockholders of the Company approved the Medifast, Inc.

On June 19, 2024, the stockholders of the Company approved the Medifast, Inc.

Amended and Restated 2012 Share Incentive Plan (the “Amended and Restated 2012 Plan”) that increased the number of shares of the Company’s common stock that may be awarded under the Amended and Restated 2012 Plan by 0.5 million, to an aggregate of 2.1 million.

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On September 12, 2019, the Company's Board of Directors authorized an additional 2.0 million shares for repurchase under the Stock Repurchase Plan.

The Company repurchased approximately 31 thousand and 739 thousand shares during the years ended December 31, 2023 and 2022, respectively.

The Company repurchased approximately 0 and 31 thousand shares during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, there were approximately 1.3 million shares of common stock remaining under the Company’s Stock Repurchase Plan.

There is no guarantee as to the exact number of shares of the Company’s common stock, if any, that will be repurchased under the Stock Repurchase Plan.

Th ere is no guarantee as to the exact number of shares of the Company’s common stock, if any, that will be repurchased under the Stock Repurchase Plan.

SHARE-BASED COMPENSATION

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The fair value of these options were estimated on the date of grant using the Black-Scholes option pricing model, which required estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield.

Options outstanding as of December 31, 2023 generally vested over a period of three years and expire ten years from the date of grant.

The exercise price of these options ranges from $ 26.52 to $ 66.68 .

Due to the Company’s lack of option

exercise history on the date of grant, the expected term was calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option.

Options outstanding as of December 31, 2024 generally vested over a period of 3 years and expire 10 years from the date of grant.

The exercise price of these options is $ 66.68 .

Due to the Company’s lack of option exercise history on

the date of grant, the expected term was calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option.

The risk-free interest rate was based on the U.S.

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Exercisable at end of the period 22 $ 66.68 25 $ 62.20

As of December 31, 2023, the weighted-average remaining contractual life was 45 months with an aggregate intrinsic value of $ 0.1 million for both outstanding and exercisable stock options.

The compensation expense calculated under the fair value method as of December 31, 2023 was less than $ 0.1 million and was fully recognized during the period.

The Company received $ 0.2 million, $ 0.0 million , and $ 0.8 million in cash proceeds from the exercise of stock options during the years ended December 31, 2023, 2022, and 2021, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2023, 2022, and 2021 was $ 0.4 million, $ 0.0 million , and $ 5.9 million, respectively.

As of December 31, 2024, the weighted-average remaining contractual life for both outstanding and exercisable stock options was 3.1 years with an aggregate intrinsic value of $ 0 .

There was no unrecognized compensation on the awards for the period ended December 31, 2024 .

The Company received $ 36 thousand, $ 188 thousand, and $ 0 thousand in cash proceeds from the exercise of stock options during the years ended December 31, 2024, 2023, and 2022, respectively.

The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023, and 2022 was $ 15 thousand, $ 440 thousand, and $ 0 thousand, respectively.

Restricted Stock:

The Company has issued restricted stock to employees and non-employee directors generally with vesting terms up to five years after the date of grant.

The Company has issued restricted stock to employees and non-employee directors generally with vesting terms up to 3 years after the date of grant.

The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant.

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Market and Performance-based Share Awards:

The Company has issued market and performance-based share awards to certain key executives who were granted deferred shares and may earn between 0 % and 250 % of the target number depending upon both the Company's TSR and the Company's performance against predetermined performance goals over a three-year performance period after the date of grant.

performance-based share awards that are tied to the Company's TSR are valued using the Monte Carlo method and recognized ratably as expense over the award's performance period.

The Company has issued market and performance-based share awards in 2022 and 2023 and performance-based share awards in 2020, 2021, and 2024 to certain key executives who were granted deferred shares and may earn between 0 % and 250 % of the target number depending upon both the Company's total stockholder return ("TSR"), for those with market conditions, and the

Company's performance against predetermined performance goals over a three-year performance period after the date of grant.

Market and performance-based share awards that are tied to the Company's TSR are valued using the Monte Carlo method and recognized ratably as expense over the award's performance period.

The fair value of the performance-based share awards is equal to the market price of the Company’s common stock on the date of grant adjusted by expected level of achievement over the performance period.

Expense for performance-based share awards is amortized ratably over the performance period.

In the event that management determines that the Company will not reach the lower threshold of the predetermined performance goals established in the grant agreement, any previously recognized expense is reversed in the period in which such a determination is made.

Management determined that the market and performance-based share awards granted in 2022 would not reach the lower threshold of the predetermined performance goal resulting in a $ 1.4 million decrease in the Company’s share-based compensation expense for the year ended December 31, 2023.

Share-based compensation expense is recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Income.

In the event that management determines that the Company will not reach the previously estimated achievement of the predetermined performance goals established in the grant agreement, any previously recognized expense is reversed in the period in which such a determination is made.

Management determined that the market and performance-based share awards granted in March of 2022 would not reach the previously estimated achievement of the predetermined performance goals resulting in a reversal of previously recorded share-based compensation expense of $ 1.4 million for the year ended December 31, 2023.

Management also determined that the market and performance-based share awards granted in March of 2023 would not reach the previously estimated achievement of the predetermined performance goals.

The Company reversed $ 1.4 million of previously recorded share-based compensation expense during the quarter ended September 30, 2024.

The Company continues to record stock-based compensation expense on the performance-based share awards granted in March of 2023 at the revised performance factor over the life of the awards.

The Company withheld approximately 8 thousand, 22 thousand, and 0 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of performance-based share awards for the years ended December 31, 2024, 2023, and 2022, respectively.

The total fair value of performance-based share awards issued for the years ended December 31, 2024, 2023, and 2022 was $ 1.3 million, $ 5.7 million, and $ 0.0 million respectively.

Share-based compensation expense for all types of awards is recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations.

The total expenses during the years ended December 31, 2024, 2023, and 2022 are as follows (in thousands):

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Options and restricted stock 301 $ 6,521 139 $ 5,926 92 $ 5,167

Performance-based share awards granted in 2024 117 1,198 — — — —

Market and performance-based share awards granted in 2023 47 ( 252 ) 47 1,536 — —

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Performance-based share awards granted in 2020 — — — 109 52 1,902

Performance-based share awards granted in 2019 — — — — — 1,808

Total share-based compensation 465 $ 7,363 224 $ 8,188 184 $ 11,053

The total income tax benefit recognized in the accompanying Consolidated Statements of Income for restricted stock awards was $ 0.6 million, $ 1.2 million and $ 2.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

There was $ 7.5 million of total unrecognized compensation cost related to restricted stock awards as of December 31, 2023, which is expected to be recognized over a weighted-average period of 21 months.

There was $ 4.0 million of unrecognized compensation cost related to th e 85 thousand p erformance-based shares discussed above as of December 31, 2023, which is expected to be recognized ove r 20 months .

The total income tax benefit recognized in the accompanying Consolidated Statements of Operations for stock awards was $ 1.0 million, $ 0.6 million and $ 1.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.

There was $ 7.2 million of total unrecognized compensation expense related to restricted stock awards as of December 31, 2024, which is expected to be recognized over a weighted-average period of 20 months .

There was $ 3.7 million of unrecognized compensation expense related to th e 47 thousand market and performance-based shares and 117 thousand performance-based shares presented in the table above as of December 31, 2024, which is expected to be recognized ove r a weighted-average period of 19 months .

ACCUMULATED OTHER COMPREHENSIVE INCOME

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Cost Unrealized

Gains Accrued

Gains (Losses)

Interest Estimated

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Cost Unrealized

Gains Accrued

Gains (Losses)

Interest Estimated

1 unchanged sentence

Equivalents Investment

Cash and cash equivalents $ 87,691 $ — $ — $ 87,691 $ 87,691 $ —

Cash and cash equivalents, excluding money market accounts

$ 88,778 $ — $ — $ 88,778 $ 88,778 $ —

Money market accounts 5,662 — — 5,662 5,662 —

Government & agency securities 15,282 126 40 15,448 — 15,448

Equity securities

10,000 150 — 10,150 — 10,150

30,944 276 40 31,260 5,662 25,598

Corporate bonds

29,440 293 270 30,003 — 30,003

Total $ 149,162 $ 569 $ 310 $ 150,041 $ 94,440 $ 55,601

The Company had no realized losses or gains for the years ended December 31, 2023, 2022 and 2021.

During the fourth quarter of 2023, the Company entered into an agreement to purchase common stock of LifeMD (Nasdaq:

LFMD), a leading provider of virtual primary care.

The securities are subject to a registration rights agreement which stipulates that the registration of the securities is to be made as soon as practicable, but not later than 90 days, following written demand

by the Company.

Written notice of demand for registration was submitted to LifeMD on December 12, 2023.

In addition, the shares are subject to a 180-day lock-up period from the closing date of the agreement, December 11, 2023.

The fair value of the investment is recorded within the investment securities of the consolidated balance sheet.

The gains related to the Company's LifeMD investment for the year ended December 31, 2023, 2022 and 2021 are summarized in the table below (in thousands):

December 31, 2023 December 31, 2022 December 31, 2021

Net gains recognized during the period on equity securities

The Company had $ 95 thousand in realized gains for the year ended December 31, 2024, and no realized gains or losses for the years ended December 31, 2023, and 2022.

During the fourth quarter of 2023, the Company entered into an agreement with LifeMD (Nasdaq:

LFMD), a leading provider of virtual primary care, to purchase shares of common stock of LifeMD for $ 10 million.

The 180-day lock-up period expired on June 8, 2024, and the registration process was completed, effective July 18, 2024.

The fair value of the investment is recorded within the investment securities of the accompanying Consolidated Balance Sheets.

The losses related to the Company’s LifeMD investment for the year ended December 31, 2024, 2023, and 2022 are summarized in the table below (in thousands):

Twelve months ended December 31,

2024 2023 2022

Net gains recognized on equity securities sold

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date

Net (losses) gains recognized during the period on equity securities

$ ( 4,089 ) $ 150 $ —

Net gains (losses) recognized on equity securities sold

Unrealized (losses) gains recognized during the reporting period on equity securities still held at the reporting date

$ ( 4,089 ) $ 150 $ —

The Company concurrently entered into an agreement in which LifeMD would provide services to stand-up the collaboration between LifeMD and the Company.

The agreement stipulated an initial milestone payment of $ 5 million due upon execution of the agreement for these services.

The services under the initial milestone were completed prior to December 31, 2023, and this amount was included in the Company's selling, general, and administrative expenses on the consolidated statement of income.

The agreement between the Company and LifeMD has two additional milestones aggregating to $ 5.0 million for which work began in 2024, and that will be recognized in the consolidated statement of income as the services are rendered.

The Company made payments of $ 5 million in each of the years ended December 31, 2024 and 2023.

This amount was included in the Company's selling, general, and administrative expenses on the accompanying Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, respectively.

Income tax expense for the years ended December 31, 2024, 2023, and 2022 consisted of the following (in thousands):

5 unchanged sentences

State ( 1,078 ) ( 312 ) ( 186 )

Foreign — — —

Total deferred ( 7,403 ) 1,211 ( 924 )

1 unchanged sentence

The total provision for income taxes for the years ended December 31, 2024, 2023, and 2022 was $ 1.6 million, $ 29.5 million, and $ 40.5 million, respectively.

Those amounts have been allocated to the following financial statement items:

Those amounts have been allocated to the following financial statement items (in thousands):

2024 2023 2022

Income before provision for income taxes $ 29,382 $ 40,491 $ 52,098

Provision for income taxes

$ 1,696 $ 29,382 $ 40,491

Stockholders' equity, unrealized (losses) gains on investment securities & foreign currency ( 52 ) 112 ( 27 )

27 unchanged sentences

State taxes 1,594 1,520

Unrealized loss on investment

Other 183 164

4 unchanged sentences

Depreciation ( 4,628 ) ( 10,321 )

Other — ( 23 )

Total deferred tax liabilities ( 9,018 ) ( 16,343 )

2 unchanged sentences

The two primary tax implications for corporations are a 15% alternative minimum tax (“AMT”) that applies to corporations with at least one billion of pretax income and a one percent surtax on share buybacks.

The AMT will not apply to the Company in 2023 since the Company’s 2023 pretax income does not exceed the threshold.

The share buyback surtax will not apply to the Company as its share issuances exceed its share buybacks in 2023.

The AMT will not apply to the Company for the years ended December 31, 2024 and 2023 since the Company’s pretax income does not exceed the threshold.

The share buyback surtax will not apply to the Company as its share issuances exceed its share buybacks for the years ended December 31, 2024 and 2023.

The Inflation Reduction Act did not have a material impact on the Company’s tax provision for the years ended December 31, 2024 and 2023.

4 unchanged sentences

As of December 31, 2023, the Company had $ 7.5 million of gross unrecognized tax benefits, which would have a net $ 6.2 million impact on the effective tax rate, if recognized.

The change for both 2023 and 2022 primarily relates to additional gross unrecognized benefits for current and prior year tax positions.

The amounts of unrecognized tax benefits were as follows:

The change for both 2024 and 2023 primarily relates to additional gross unrecognized benefits for current tax positions and reductions of gross unrecognized benefits for prior year tax positions and lapses in statute of limitations.

The amounts of unrecognized tax benefits were as follows (in thousands):

December 31, 2024 December 31, 2023

2 unchanged sentences

Increase for current year tax positions

Increase for prior period tax positions 38 2,487

(Decrease) increase for prior period tax positions

Reduction due to lapse in statute of limitations ( 135 ) ( 291 )

3 unchanged sentences

As of December 31, 2024, and 2023, interest and penalties accrued were $ 1.7 million and $ 1.3 million, respectively.

For 2023 and 2022, the Company recorded expenses (benefits) related to interest and penalties of $ 0.3 million and $ 0.2 million, respectively.

For 2024 and 2023, the Company recorded expenses related to interest and penalties of $ 0.4 million and $ 0.3 million, respectively.

As of December 31, 2024, the current year reduction primarily relates to the expiration of federal, state, and foreign statutes of limitation.

4 unchanged sentences

Pending the resolution of one examination, and specific to jurisdictions where the Company has filed tax returns and examination of such returns is constrained by a statute of limitations, we are no longer subject to United States federal, state, and local income tax examinations by tax authorities for years prior to 2021.

LEASES AND COMMITMENTS

Unconditional purchase obligations:

At December 31, 2024, the Company had $ 10.8 million in unconditional purchase obligations with a remaining term in excess of one year primarily for inventories and outsourced information technology.

Operating Leases:

1 unchanged sentence

In certain of the Company’s lease agreements, the rental payments are adjusted periodically based on defined terms within the lease.

The Company did not have any finance leases as of December 31, 2023 and 2022, respectively, or for the years then ended.

Our leases relating to office and warehouse space have terms of 18 months to 126 months.

Our leases relating to equipment have lease terms of 24 months to 203 months, with certain of them having clauses relating to automatic renewal.

The Company did not have any finance leases for the years ended December 31, 2024 and 2023.

Our leases relating to office and warehouse space have lease terms of 65 months to 102 months.

Our leases relating to equipment have lease terms of 36 months, with certain of them having clauses relating to automatic renewal clauses.

The Company’s warehouse agreements also contain non-lease components, in the form of payments towards variable logistics services and labor charges, which the Company is obligated to pay based on the services consumed by it.

2 unchanged sentences

Supplemental cash flow information related to the Company’s operating leases were as follows (in thousands):

2024 2023 2022

Cash paid for amounts included in the measurements of lease liabilities

2 unchanged sentences

Operating leases $ — $ 1,785 $ 101

As of December 31, 2023, the weighted average remaining lease term was 48 months and the weighted average discount rate was 2.3 %.

As of December 31, 2024, the weighted average remaining lease term was 3 years, 1 month and the weighted average discount rate was 2.2 %.

The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2024 (in thousands):

Thereafter 240

Total lease payments $ 16,656

1 unchanged sentence

Total $ 16,125

Unconditional purchase obligations:

At December 31, 2023, the Company had $ 72.2 million in unconditional purchase obligations with a remaining term in excess of one year primarily for inventories, outsourced information technology and Coach events.

Credit Agreement

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On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on Secured Overnight Financing Rate ("SOFR"), from London Inter-Bank Offered Rate (LIBOR) ("the "Amended Credit Agreement").

The Amended Credit Agreement provides for a $ 225.0 million senior secured revolving credit facility with a $ 20.0 million letter of credit sublimit.

The Amended Credit Agreement also provides for an uncommitted incremental facility that permits the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $ 100.0 million.

The Credit Agreement matures on April 13, 2026.

The Company’s obligations under the Amended Credit Agreement are guaranteed by the Guarantors.

The obligations of the Company and the Guarantors are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

Under the Amended Credit Agreement, the Company will pay to the administrative agent for the account of each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the revolving facility from 0.20 to 0.40 % per annum depending on the Company’s Total Net Leverage Ratio (as defined in the Amended Credit Agreement).

The Company is also obligated to pay the administrative agent customary fees for credit facilities of this size and type.

Revolving borrowings under the Amended Credit Agreement bear interest at a rate per annum equal to (i) the Term SOFR Rate for the interest period plus the Applicable Rate (as defined in the Amended Credit Agreement) based on the Company’s Total Net Leverage Ratio or (ii) the Alternate Base Rate (as defined in the Amended Credit Agreement) as in effect from time to time

plus the Applicable Rate based on the Company’s Total Net Leverage Ratio.

As of December 31, 2023, the Applicable Rate for SOFR Loans is 1.25 % per annum and the Applicable Rate for ABR Loans is 0.25 % per annum.

SOFR based loans also include a Credit Spread Adjustment based on the duration of the borrowing.

The Amended Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments and change the nature of their businesses.

The Amended Credit Agreement also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness and judgment default.

In addition, the Amended Credit Agreement requires the Company to maintain a Total Net Leverage Ratio of no more than 2.75 to 1.00 and an Interest Coverage Ratio of at least 3.50 to 1.00.

The Company had no borrowings under the Amended Credit Agreement as of December 31, 2023 and December 31, 2022.

The Amended Credit Agreement provided for a $ 225.0 million senior secured revolving credit facility with a $ 20.0 million letter of credit sublimit.

The Amended Credit Agreement also provided for an uncommitted incremental facility that permitted the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $ 100.0 million.

The Credit Agreement otherwise would have matured on April 13, 2026.

The Company had no borrowings under the Amended Credit Agreement as of December 31, 2023.

On October 30, 2024, the Company terminated its Amended Credit Agreement with Citibank, N.A.

The Company had no borrowings under the Amended Credit Agreement, inclusive of the credit facility and letter of credit sublimit as of the termination date.

SEGMENT REPORTING

The Company's OPTA VIA segment derives revenues from customers through the sale of OPTA VIA products which are shipped directly to customers.

Our OPTA VIA coaches help customers adopt healthy habits and learn the benefits of our products.

The accounting policies of the Company's single segment are the same as those described in the Company's Significant Accounting Policies.

The Company’s chief operating decision maker (“CODM”) is the chief executive officer.

The CODM assesses performance for the segment and decides how to allocate resources based on net income that also is reported on the accompanying Consolidated Statements of Operations as net income.

The measure of segment assets is reported on the Consolidated Balance Sheets as total assets.

The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity, such as for share buybacks.

Net income is used to monitor budget versus actual results.

The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors.

The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

The Company does not have significant intra-entity sales or transfers.

The Company has one reportable segment:

The OPTA VIA segment recognizes revenue when control of the products is transferred to the customer.

The segment pays commissions on the sale of products to OPTA VIA coaches.

The Company derives all of its revenue from sales within the United States and manages the business activities on a consolidated basis.

The following table presents the OPTA VIA segment's revenue, significant segment expenses, and segment net income for the years ended December 31, 2024, 2023, and 2022 (in thousands):

602,463 1,072,054 1,598,577

Cost of sales

157,840 296,204 458,163

Selling, marketing, and after sales support

304,481 501,188 766,331

37,710 40,534 61,899

49,939 56,595 54,736

Administrative and corporate support functions

42,252 42,943 61,589

Equity compensation

7,363 8,188 11,053

Other (income) expense (1)

( 909 ) ( 2,395 ) 747

Provision for income taxes

1,696 29,382 40,491

Segment net income

$ 2,091 $ 99,415 $ 143,568

Reconciliation of profit or loss

Adjustments and reconciling items

Consolidated net income

$ 2,091 $ 99,415 $ 143,568

(1) Other (income) expense included within Segment net income includes interest income, interest expense, and unrealized gains and losses on LifeMD common stock .

Segment depreciation expense for the years ended December 31, 2024, 2023, and 2022 was $ 17.4 million, $ 10.0 million and $ 7.9 million, respectively.

Segment additions of property, plant, and equipment for the years ended December 31, 2024, 2023, and 2022 were $ 7.5 million, $ 6.5 million, and $ 16.7 million, respectively.

SUPPLY CHAIN OPTIMIZATION

During the year ended December 31, 2024, the Company completed a supply chain optimization initiative with the goal of aligning the Company’s distribution footprint with current demand levels.

On June 28, 2024, the Company closed its Maryland Distribution Center located in Ridgely, Maryland.

The assets within the facility were sold during the year ended December 31, 2024, with the impact reflected below as the loss of impairment of equipment held for sale.

The Company identified certain other supply chain assets at other locations within its distribution network that will no longer be utilized and are no longer useful to the Company’s operations, and adjusted their respective useful lives accordingly, with the impact reflected below in the accelerated depreciation charges.

For the year ended December 31, 2024, the components of the Company’s supply chain optimization charges were as follows:

Twelve Months Ended December 31, 2024

Loss on impairment of equipment held for sale

Accelerated depreciation charges 9,190

Non-cash charges for supply chain optimization 11,689

One-time severance costs 813

Total supply chain optimization

For the year ended December 31, 2024, the supply chain optimization charges were recorded in the Company’s accompanying Consolidated Statements of Operations as follows:

Twelve Months Ended December 31, 2024

Selling, general, and administrative $ 12,502

Total supply chain optimization

During the three months ended December 31, 2024, the Company readied and listed the Maryland Distribution Center building and land for sale.

The Company expects to sell the land and building in 2025.

The net book value of the building and land is $ 1.4 million.

The fair value of assets exceed their carrying value and no impairment was recognized.

The assets are recorded within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data