What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-17 compared with 2025-02-18 · 52 added, 102 removed, 85 unchanged (64% of the section changed)

10 unchanged sentences

Our revenue is derived primarily from point of sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products.

Prior to a change in our Customer Terms & Conditions (Customer T&Cs) in the first quarter of 2023, revenue was recognized upon receipt by the customer and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.

Upon the change of our Customer T&Cs, revenue is now recognized upon delivery to the shipping carrier and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.

Revenue is recognized when control of the promised products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products.

When determining whether the customer has obtained control of the products, we consider any future performance obligations.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied.

Our contracts have performance obligations to fulfill and deliver products from the point of sale transaction along with the related customer reward programs.

Revenue is recognized upon delivery to the shipping carrier and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.

Our performance obligations are satisfied at a point in time.

Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2025, 2024, and 2023.

Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.

Our return policy allows for customer returns of consumable products from the time of order until 30 days following the date of receipt, and upon our authorization.

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We reduce the transaction price for customer reward programs and certain incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations.

The Company accounts for sales rewards that provide the customer with a material right as a separate performance obligation of the transactions, and therefore allocates consideration between the initial sale of products and the customer reward program and incentive offering.

The Company allocates consideration between the initial sale of products and the customer reward program and incentive offering.

The Company discontinued its reward program in July 2025.

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

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

We expense 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 our Consolidated Statements of Operations.

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Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

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Our policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense.

Medifast is the 40+ year old health and wellness company known for its habit-based and coach-guided lifestyle solution OPTA VIA which provides people with a simple, yet comprehensive approach to address obesity and support a healthy life.

OPTA VIA provides unparalleled coaching support along with community, tailored nutrition and healthy habits and empowers people to master their weight loss journey through each stage of life.

Through the company’s collaboration with national virtual primary care provider LifeMD® and its affiliated medical group, customers now have access to GLP-1 medications where clinically appropriate.

The Company continues to innovate and build upon its scientific and clinical heritage to fulfill its mission of offering the world Lifelong Transformation, Making a Healthy Lifestyle Second Nature.

Medifast (NYSE:

MED) is the health and wellness company known for its science-backed, coach-guided lifestyle system.

Designed to help address the challenges of metabolic dysfunction, the Company’s holistic approach integrates personalized plans, scientifically developed products and a framework for habit creation — all supported by a dedicated network of independent coaches.

Driven to improve metabolic health through advanced science and comprehensive behavioral support, Medifast has introduced Metabolic Synchronization™, a breakthrough science that reverses metabolic dysfunction through a targeted reset of the body’s metabolism.

Research shows the Company’s comprehensive system activates strong and targeted fat burn to enhance metabolic health and body composition by reducing visceral fat, preserving lean mass and protecting muscle.

Backed by more than 40 years of clinical heritage, Medifast continues to advance its mission of Lifelong Transformation, Making Healthy Lifestyle Second Nature.

Our product sales accounted for approximately 96.4%, 96.8% and 97.5% of our revenues in each of 2025, 2024, and 2023, respectively.

We review and analyze a number of key operating and financial metrics to manage our business, including the number of active earning OPTA VIA coaches and average quarterly revenue generated per active earning OPTA VIA coach.

The number of active earning OPTA VIA coaches decreased by approximately 34.1% to 27,100 as of December 31, 2024 from December 31, 2023, and the average revenue per active earning OPTA VIA coach was $4,391 for the quarter ended December 31, 2024.

We review and analyze a number of key operating and financial metrics to manage our business, including the number of active earning coaches and average quarterly revenue generated per active earning coach.

The number of active earning coaches decreased by approximately 40.6% to 16,100 for the quarter ended December 31, 2025 from the quarter ended December 31, 2024, and the average revenue per active earning coach was increased 6.2% to $4,664 for the quarter ended December 31, 2025 from the quarter ended December 31, 2024.

Our OPTA VIA business unit accounted for all of our revenues for each the years ended 2025, 2024 and 2023.

We have operated and reported as a single sales segment, OPTA VIA, since 2018.

By maintaining our commitment to building capabilities in the areas that matter most to our OPTA VIA coaches and customers within the OPTA VIA channel, we believe our strong financial foundation, flexible model and variable cost structure coupled with disciplined growth initiatives position Medifast for the current environment and the future.

By maintaining our commitment to building capabilities in the areas that matter most to our coaches and clients within the OPTA VIA channel, we believe our strong financial foundation, flexible model and variable cost structure coupled with disciplined growth initiatives position Medifast for the current environment and the future.

CONSOLIDATED RESULTS OF OPERATIONS - 2025 COMPARED TO 2024

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Cost of sales 110,601 157,840 (47,239) (29.9)%

Gross Profit 444,623 775,850 (331,227) (42.7)%

275,187 444,623 (169,436) (38.1)%

Selling, general, and administrative 289,400 441,745 (152,345) (34.5)%

Income from operations 2,878 126,402 (123,524) (97.7)%

Income (loss) from operations

(14,213) 2,878 (17,091) (593.8)%

Interest income

5,516 4,804 712 14.8 %

Other expense (3,895) (95) (3,800) (4,000.0)%

Other income (expense) 3,058 (3,895) 6,953 178.5%

8,574 909 7,665 843.2 %

Income before provision for income taxes 3,787 128,797 (125,010) (97.1)%

Income (loss) before provision for income taxes

(5,639) 3,787 (9,426) (248.9)%

Provision for income taxes 13,033 1,696 11,337 668.5%

Net income $ 2,091 $ 99,415 $ (97,324) (97.9)%

Gross Profit 73.8% 72.4%

Net income (loss)

$ (18,672) $ 2,091 $ (20,763) (993.0)%

Selling, general, and administrative 75.0% 73.3%

Income from Operations 0.5% 11.8%

Revenue decreased $469.6 million, or 43.8%, to $602.5 million in 2024 from $1.1 billion in 2023.

The year-over-year decline in revenue was primarily driven by a decrease in the number of active earning OPTA VIA coaches and lower coach productivity, and a $9.1 million impact from a timing difference related to changes in the Company’s sales order terms and conditions with its customers realized in the first quarter of 2023.

The total number of active earning OPTA VIA coaches for the three months ended December 31, 2024 decreased to 27,100 from 41,100 for the corresponding period in 2023, a decrease of 34.1%.

The average revenue per active earning OPTA VIA coach decreased 5.5% to $4,391 for the three months ended December 31, 2024 from $4,648 for the three months ended December 31, 2023.

The decrease in the revenue per active earning OPTA VIA coach for the quarter was driven by continued pressure on customer acquisition.

Income (loss) from operations

Revenue decreased $216.7 million, or 36.0%, to $385.8 million in 2025 from $602.5 million in 2024.

The year-over-year decline in revenue was primarily driven by a decrease in the number of active earning coaches.

The total number of active earning coaches for the three months ended December 31, 2025 decreased to 16,100 from 27,100 for the corresponding period in 2024, a decrease of 40.6%.

The number of active earning coaches has been trending downward year-over-year since the first quarter of 2023.

The decrease in the number of active earning coaches was driven by continued pressure with client acquisition reflecting broader challenges in the operating environment, including rapid adoption of GLP-1 medications for weight loss.

The average revenue per active earning coach increased 6.2% to $4,664 for the three months ended December 31, 2025 from $4,391 for the three months ended December 31, 2024.

The increase in the revenue per active earning coach for the quarter was driven by greater alignment of our network of coaches, prioritizing productive coaches and efficient coach network structures.

Costs of sales:

Cost of sales decreased $47.2 million, or 29.9%, to $110.6 million in 2025 from $157.8 million in 2024.

The decrease in cost of sales was primarily driven by an approximately $123.9 million decrease due to lower sales volumes, $5.3 million decrease in inventory donations, and $4.7 million of efficiencies in inventory management.

Non-GAAP adjusted cost of sales were $155.3 million for 2024, a decrease of $140.9 million, or 47.6%, as compared to $296.2 million for 2023.

Non-GAAP adjusted cost of sales excludes expenses in connection with the restructuring of certain external manufacturing agreements.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

The decrease in cost of sales was primarily driven by an approximately $54.9 million decrease due to lower sales volumes and a $2.6 million decrease due to restructuring of external manufacturing agreements that did not recur in 2025, partially offset by $8.0 million of loss of leverage on fixed costs and $3.0 million of inventory reserves which are primarily related to the reformulation of the Essential product line.

Gross profit:

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The decrease in gross profit was primarily attributable to lower revenue.

As a percentage of sales, gross profit increased 140 basis points to 73.8% for 2024 from 72.4% for 2023.

Non-GAAP adjusted gross profit was $447.2 million for 2024, a decrease of $328.6 million, or 42.4%, as compared to $775.9 million for 2023.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

As a percentage of sales, gross profit decreased 250 basis points to 71.3% for 2025 from 73.8% for 2024 primarily driven by the loss of leverage on fixed costs.

Selling, general and administrative:

Selling, general and administrative (“SG&A”) expenses were $441.7 million in 2024, a decrease of $207.7 million, or 32.0%, as compared to $649.4 million in 2023, primarily due to a $188.7 million decrease in OPTA VIA coach compensation due to lower sales volumes, a $13.8 million decrease in employee compensation, a $9.7 million decrease in credit card fees, and a $7.1 million decrease in costs for coach-related events.

These decreases are partially offset by $22.9 million of customer led acquisition costs and $12.5 million of supply chain optimization costs.

As a percentage of sales, SG&A expenses were 73.3% for 2024 as compared to 60.6% for 2023, primarily due to a 330 basis point increase for our company led acquisition efforts, a 330 basis point increase for loss of leverage on employee compensation, a 160 basis point increase due to loss of leverage on fixed costs, and a 200 basis point increase due to supply chain optimization efforts.

Selling, general and administrative (“SG&A”) expenses were $289.4 million in 2025, a decrease of $152.3 million, or 34.5%, as compared to $441.7 million in 2024, primarily due to a $85.1 million decrease in

coach compensation due to lower sales volumes and a decrease in the number of active earning coaches, a $13.4 million decrease in company-led marketing related expenses, a $12.5 million decrease for supply chain optimization that did not recur in 2025, a $9.3 million net decrease in employee compensation resulting from the realignment of the employee base to lower revenue levels partially offset by one-time restructuring charges, a $7.5 million decrease for medically supported weight loss expenses that did not recur in 2025, and a $5.7 million decrease in coach event costs.

As a percentage of sales, SG&A expenses were 75.0% for 2025 as compared to 73.3% for 2024, primarily due to 340 basis points of loss of leverage on fixed costs and 300 basis points of loss of leverage on employee compensation, partially offset by a 200 basis point decrease due to supply chain optimization that did not recur in 2025, 130 basis points of reduced company-led marketing related expenses, and 120 basis points of medically supported weight loss expenses that did not recur in 2025.

SG&A expenses included research and development costs of $4.3 million and $4.6 million for 2025 and 2024, respectively, in connection with the development of new products and programs and clinical research activities.

Non-GAAP adjusted SG&A expenses were $424.2 million for 2024, a decrease of $217.7 million, or 33.9%, as compared to $641.9 million for 2023.

Non-GAAP adjusted SG&A expenses exclude expenses in connection with the Company's supply chain optimization and costs for the LifeMD Collaboration.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

Income from operations:

Income from operations in 2024 decreased $123.5 million to $2.9 million from $126.4 million in 2023 primarily as a result of decreased gross profit, partially offset by decreased SG&A expenses.

Income from operations as a percentage of sales decreased to 0.5% for 2024 as compared to 11.8% for 2023 due to the factors described above in the explanations for gross profit and SG&A expenses.

Non-GAAP adjusted income from operations in 2024 decreased to $23.0 million from $134.0 million in 2023.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

Income (loss) from operations:

Income (loss) from operations in 2025 decreased $17.1 million to a $14.2 million loss from operations, compared to income from operations of $2.9 million in 2024 primarily as a result of decreased gross profit, partially offset by decreased SG&A expenses.

Income (loss) from operations as a percentage of sales decreased to a 3.7% loss from operations as a percentage of revenue for 2025 as compared to 0.5% income from operations as a percentage of revenue for 2024 due to the factors described above in the explanations for gross profit and SG&A expenses.

Other income:

Other income was $8.6 million in 2025, an increase of $7.7 million, as compared to other income of $0.9 million for the corresponding period in 2024 primarily attributable to the change in the market value of the Company's investment in LifeMD common stock.

The Company sold its investment in LifeMD during the quarter ended June 30, 2025.

Provision for income taxes:

For 2024, the Company recorded $1.7 million in income tax expense, an effective tax rate of 44.8%, as compared to $29.4 million in income tax expense and an effective tax rate of 22.8%, for 2023.

The increase in the effective tax rate for 2024 as compared to 2023 was primarily driven by the 18.3% impact of state taxes and the 23.3% impact of the tax shortfall for stock compensation, partially offset by the 17.9% reduction from the impact of research and development tax credits, all of which were magnified by the near break-even pre-tax income position in the current year.

Non-GAAP adjusted income tax provision was $7.7 million for 2024, an effective tax rate of 27.7%, compared to $31.1 million in 2023, an effective tax rate of 22.8%.

The increase in the effective tax rate for 2024 as compared to 2023 was primarily driven by the 4.6% impact of state taxes and the 3.1% impact of the tax shortfall for stock compensation, partially offset by a 1.7% reduction from the impact of research and development tax credits and 1.2% from the impact of from the limitation for executive compensation.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

Net income was $2.1 million, or $0.19 per diluted share, in 2024 as compared to $99.4 million, or $9.10 per diluted share, in 2023.

The period-over-period changes were driven by the factors described above in the explanations from operations.

Non-GAAP adjusted net income was $20.2 million or $1.84 per diluted share for 2024 as compared to $105.2 million or $9.64 per diluted share for 2023.

The period-over-period changes were driven by the factors described above in the Non-GAAP explanations from operations.

Refer to the section titled “Non-GAAP Financial Measures” below for a reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.

For 2025, the Company recorded $13.0 million in income tax expense, an effective tax rate of negative 231.1%, as compared to $1.7 million in income tax expense and an effective tax rate of 44.8%, for 2024.

The decrease in the effective tax rate for 2025 as compared to 2024 was primarily driven by the 214.0% impact of a valuation allowance on the net deferred tax asset balance, the 34.5% impact of the tax shortfall from stock compensation, and the 23.5% impact of state taxes, partially offset by the 26.2% increase from the impact of research and development tax credits, all of which were magnified by the loss position in the current period versus the near breakeven income position in the prior year.

Net income (loss):

Net loss was $18.7 million, or a loss of $1.70 per diluted share, in 2025 as compared to income of $2.1 million, or $0.19 per diluted share, in 2024.

The period-over-period changes were driven by the factors described above in the explanations from operations, other income, and provision for income taxes.

Additionally, refer to Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2024 compared to fiscal year 2023.

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in this annual report, our quarterly earnings press release, and other public disclosures.

The following GAAP financial measures have been presented on an as-adjusted basis:

cost of sales, gross profit, SG&A expenses, income from operations, other income, provision for income taxes, net income, and diluted earnings per share.

Each of these as-adjusted financial measures excludes the impact of certain amounts related to supply chain optimization and restructuring of external manufacturing agreements, unrealized gains or losses on our investment in LifeMD common stock, and the LifeMD collaboration as further identified below and have not been calculated in accordance with GAAP.

A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below.

These non-GAAP financial measures are not intended to replace GAAP financial measures.

We use these non-GAAP financial measures internally to evaluate and manage the Company’s operations because we believe they provide useful supplemental information regarding the Company’s on-going economic performance.

We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

The following tables reconcile the non-GAAP financial measures included in this report (in thousands, except per share amounts):

Year Ended December 31, 2024

GAAP Supply Chain Optimization and Restructuring of External Manufacturing Agreements

Unrealized Loss on Investment in LifeMD Common Stock LifeMD Collaboration Costs

Cost of sales $ 157,840 $ (2,579) $ — $ — $ 155,261

Gross profit 444,623 2,579 — — 447,202

Selling, general, and administrative 441,745 (12,502) — (5,000) 424,243

Income from operations 2,878 15,081 — 5,000 22,959

909 — 4,089 — 4,998

Provision for income taxes 1,696 3,770 1,022 1,250 7,738

Net income 2,091 11,311 3,067 3,750 20,219

Diluted earnings per share (1)

0.19 1.03 0.28 0.34 1.84

Year Ended December 31, 2023

GAAP IT and Supply Chain Optimization

LifeMD Collaboration Costs

Cost of sales $ 296,204 $ — $ — $ 296,204

Gross profit 775,850 — — 775,850

Selling, general, and administrative 649,448 (2,555) (5,000) 641,893

Income from operations 126,402 2,555 5,000 133,957

2,395 — — 2,395

Provision for income taxes 29,382 583 1,141 31,106

Net income 99,415 1,972 3,859 105,246

Diluted earnings per share (1)

9.10 0.18 0.35 9.64

(1) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

Liquidity and Capital Resources

The Company had stockholders’ equity of $198.9 million and working capital of $158.7 million at December 31, 2025 compared with $210.1 million and $150.2 million at December 31, 2024.

The $8.6 million net increase in stockholders’ equity reflects $2.1 million in net income for 2024 and $7.4 million for shared-based compensation offset by other equity transactions described in the Consolidated Statements of Changes in Stockholders’ Equity included in our consolidated financial statements included in this report.

The $11.2 million net decrease in stockholders’ equity reflects the $18.7 million net loss for 2025 and $7.6 million for shared-based compensation offset by other equity transactions described in the Consolidated Statements of Changes in Stockholders’ Equity included in our consolidated financial statements included in this report.

The Company’s cash, cash equivalents and investment securities increased to $167.3 million at December 31, 2025 from $162.3 million at December 31, 2024.

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Net cash used in investing activities was $7.9 million for 2025 as compared to $26.5 million for 2024.

This year-over-year change resulted primarily from a $22.3 million increase in proceeds from sale and maturities of investment securities and a $13.2 million decrease in cash used in the purchase of investment securities for 2024 as compared to 2023.

This year-over-year change resulted primarily from a $54.6 million increase in proceeds from sale and maturities of investment securities partially offset by a $37.8 million increase in purchases of investment securities for 2025 as compared to 2024.

Net cash used in financing activities decreased $1.0 million to $0.6 million for 2025 from $1.5 million for 2024.

This decrease was primarily due to a $72.3 million decrease in cash dividends paid to stockholders, a $3.6 million decrease in stock repurchases, and a $2.5 million decrease in net shares repurchased for employee taxes for 2024 as compared to 2023.

This decrease was primarily due to $0.5 million decrease in cash dividends paid to stockholders and a $0.5 million decrease in net shares repurchased for employee taxes for 2025 as compared to 2024.

The Company is currently investing in new growth initiatives which have the potential to impact liquidity in future periods.

The Company’s current growth initiatives, which are primarily comprised of Company-led marketing activities, new product development and the Company’s Medically Supported Weight Loss collaboration with LifeMD, do not require any material contractual commitments or capital expenditures in future periods.

Since the future costs of these endeavors are variable in nature and will be scaled at the discretion of management, we do not believe there is any significant impact on our liquidity or capital resources

The Company’s current growth initiatives, which are focused on advancing its breakthrough science and product offerings that reverses metabolic dysfunction, are variable in nature and will be scaled at the discretion of management.

We do not believe there is any significant impact on our liquidity or capital resources.

In pursuing its business strategy, the Company may require additional cash for operating and investing activities.

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We have no present understandings, commitments or agreements with respect to any material acquisitions.

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent.

On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on SOFR, from LIBOR (the “Amended Credit Agreement”).

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

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

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(a) The Company has operating leases in place for leased corporate offices, warehouses, and certain equipment.

(b) The Company has unconditional purchase obligations primarily for inventories and outsourced information technology.

(b) The Company has unconditional purchase obligations primarily for inventories, consulting services, insurance, and outsourced information technology.

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 7. Management’s Discussion and Analysis