10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from________ to ________.

Commission File Number: 001-31573

Medifast, Inc.

(Exact name of registrant as specified in its charter)

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

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

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

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MED	New York Stock Exchange

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

Yes x No o

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

Yes x No o

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

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

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

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

Yes o No x

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

The number of shares of the registrant’s common stock outstanding at October 26, 2022 was 10,926,989.

Medifast, Inc. and Subsidiaries

Index

Part 1 – Financial Information
Item 1 – Financial Statements
Condensed Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	3
Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2022 and December 31, 2021	4
Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2022 and 2021	5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Nine Months Ended September 30, 2022 and 2021	6
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	23
Item 4 – Controls and Procedures	23
Part II – Other Information
Item 1 – Legal Proceedings	24
Item 1A – Risk Factors	24
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 6 – Exhibits	25

1

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenue	$	390,398	$	413,395	$	1,261,332	$	1,148,253
Cost of sales	107,549		106,338		354,515		298,942
Gross profit	282,849		307,057		906,817		849,311
Selling, general, and administrative	234,693		251,886		754,610		679,907
Income from operations	48,156		55,171		152,207		169,404
Other income (expense)
Interest expense	(261)		(94)		(519)		(138)
Other income (expense)	(17)		115		(37)		112
	(278)		21		(556)		(26)
Income from operations before income taxes	47,878		55,192		151,651		169,378
Provision for income taxes	11,723		13,210		34,601		39,370
Net income	$	36,155	$	41,982	$	117,050	$	130,008
Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07
Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98
Weighted average shares outstanding
Basic	10,964		11,692		11,290		11,739
Diluted	11,042		11,785		11,369		11,840
Cash dividends declared per share	$	1.64	$	1.42	$	4.92	$	4.26

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

2

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. dollars in thousands)

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income	$	36,155	$	41,982	$	117,050	$	130,008
Other comprehensive income (loss), net of tax:
Foreign currency translation	123		63		$	300	$	130
Unrealized losses on investment securities	—		(16)		$	(21)	$	(49)
	123		47		$	279	$	81
Comprehensive income	$	36,278	$	42,029	$	117,329	$	130,089

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

3

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

	September 30, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	69,710	$	104,183
Inventories	145,279		180,043
Investment securities	—		5,361
Income taxes, prepaid	150		945
Prepaid expenses and other current assets	14,445		16,334
Total current assets	229,584		306,866
Property, plant and equipment - net of accumulated depreciation	58,107		56,131
Right-of-use assets	19,819		24,457
Other assets	12,691		6,468
Deferred tax assets	6,150		4,404
TOTAL ASSETS	$	326,351	$	398,326
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	148,129	$	163,309
Revolving credit facility	—		—
Current lease obligations	6,126		6,523
Total current liabilities	154,255		169,832
Lease obligations, net of current lease obligations	21,574		26,020
Total liabilities	175,829		195,852
Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
10,929 and 11,594 issued and 10,928 and 11,593 outstanding
at September 30, 2022 and December 31, 2021, respectively	11		12
Additional paid-in capital	18,617		12,018
Accumulated other comprehensive income	391		111
Retained earnings	131,503		190,333
Total stockholders' equity	150,522		202,474
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	326,351	$	398,326

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

4

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollar in thousands)

	Nine months ended September 30,
	2022		2021
Operating Activities
Net income	$	117,050	$	130,008
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	8,026		3,767
Non-cash lease expense	4,740		3,508
Share-based compensation	8,103		6,613
Amortization of premium on investment securities	14		70
Deferred income taxes	(1,746)		—
Change in operating assets and liabilities:
Inventories	34,764		(76,222)
Income taxes, prepaid	795		—
Prepaid expenses and other current assets	1,889		(5,094)
Other assets	(8,545)		(3,393)
Accounts payable and accrued expenses	(22,259)		42,747
Net cash flow provided by operating activities	142,831		102,004
Investing Activities
Sale and maturities of investment securities	5,267		5,145
Purchase of property and equipment	(7,617)		(22,585)
Net cash flow used in investing activities	(2,350)		(17,440)
Financing Activities
Options exercised by executives and directors	—		811
Net shares repurchased for taxes	(1,504)		(1,867)
Cash dividends paid to stockholders	(53,698)		(46,845)
Stock repurchases	(120,048)		(46,000)
Net cash flow used in financing activities	(175,250)		(93,901)
Foreign currency impact	296		130
Decrease in cash and cash equivalents	(34,473)		(9,207)
Cash and cash equivalents - beginning of the period	104,183		163,723
Cash and cash equivalents - end of period	$	69,710	$	154,516
Supplemental disclosure of cash flow information:
Income taxes paid	$	33,906	$	41,302
Dividends declared included in accounts payable	$	19,395	$	17,351

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

5

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(U.S. dollars in thousands)

	Nine months ended September 30, 2022
	Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total
Balance, December 31, 2021	11,594	$	12	$	12,018	$	111	$	190,333	$	—	$	202,474
Net income	—	—		—		—		41,781		—		41,781
Share-based compensation	18	—		2,275		—		—		—		2,275
Net shares repurchased for taxes	(8)	—		(1,459)		—		—		—		(1,459)
Treasury stock from stock repurchases	—	—		—		—		—		(10,000)		(10,000)
Treasury stock retired from stock repurchases	(51)	—		—		—		(10,000)		10,000		—
Other comprehensive income	—	—		—		16		—		—		16
Cash dividends declared to stockholders	—	—		—		—		(19,063)		—		(19,063)
Balance, March 31, 2022	11,553	$	12	$	12,834	$	127	$	203,051	$	—	$	216,024
Net income	—	—		—		—		39,113		—		39,113
Share-based compensation	1	—		2,865		—		—		—		2,865
Net shares repurchased for taxes	—	—		(20)		—		—		—		(20)
Treasury stock from stock repurchases	—	—		—		—		—		(90,038)		(90,038)
Treasury stock retired from stock repurchases	(535)	(1)		—		—		(90,038)		90,038		(1)
Stock repurchases, not yet settled	—	—		(15,679)		—		(4,331)		—		(20,010)
Other comprehensive income	—	—		—		141		—		—		141
Cash dividends declared to stockholders	—	—		—		—		(18,598)		—		(18,598)
Balance, June 30, 2022	11,019	$	11	$	—	$	268	$	129,197	$	—	$	129,476
Net income	—	—		—		—		36,155		—		36,155
Share-based compensation	1	—		2,963		—		—		—		2,963
Net shares repurchased for taxes	—	—		(25)		—		—		—		(25)
Treasury stock from stock repurchases	—	—		—		—		—		(20,010)		(20,010)
Treasury stock retired from stock repurchases	(91)	—		—		—		(20,010)		20,010		—
Settlement of accelerated share repurchase agreement	—	—		15,679		—		4,331		—		20,010
Other comprehensive income	—	—		—		123		—		—		123
Cash dividends declared to stockholders	—	—		—		—		(18,170)		—		(18,170)
Balance, September 30, 2022	10,929	$	11	$	18,617	$	391	$	131,503	$	—	$	150,522

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

6

	Nine months ended September 30, 2021
	Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total
Balance, December 31, 2020	11,822	$	12	$	7,842	$	41	$	154,351	$	(5,000)	$	157,246
Net income	—	—		—		—		41,063		—		41,063
Share-based compensation	13	—		2,198		—		—		—		2,198
Options exercised by executives and directors	11	—		481		—		—		—		481
Net shares repurchased for taxes	(7)	—		(1,807)		—		—		—		(1,807)
Treasury stock from stock repurchases	—	—		—		—		—		(7,500)		(7,500)
Other comprehensive income	—	—		—		62		—		—		62
Cash dividends declared to stockholders	—	—		—		—		(16,852)		—		(16,852)
Balance, March 31, 2021	11,839	$	12	$	8,714	$	103	$	178,562	$	(12,500)	$	174,891
Net income	—	—		—		—		46,963		—		46,963
Share-based compensation	10	—		1,697		—		142		—		1,839
Options exercised by executives and directors	3	—		221		—		—		—		221
Net shares repurchased for taxes	—	—		(26)		—		—		—		(26)
Other comprehensive loss	—	—		—		(28)		—		—		(28)
Treasury stock from stock repurchases	—	—		—		—		—		(12,230)		(12,230)
Treasury stock retired from stock repurchases	(114)	—		—		—		(23,383)		23,383		—
Cash dividends declared to stockholders	—	—		—		—		(16,941)		—		(16,941)
Balance, June 30, 2021	11,738	$	12	$	10,606	$	75	$	185,343	$	(1,347)	$	194,689
Net income	—	—		—		—		41,982		—		41,982
Share-based compensation	1	—		2,269		—		—		—		2,269
Options exercised by executives and directors	3	—		109		—		—		—		109
Net shares repurchased for employee taxes	(1)	—		(34)		—		—		—		(34)
Other comprehensive Income	—	—		—		47		—		—		47
Treasury stock from stock repurchases	—	—		—		—		—		(26,270)		(26,270)
Treasury stock retired from stock repurchases	(123)	—		—		—		(27,617)		27,617		—
Cash dividends declared to stockholders	—	—		—		—		(16,553)		—		(16,553)
Balance, September 30, 2021	11,618	$	12	$	12,950	$	122	$	183,155	$	—	$	196,239

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

7

MEDIFAST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2022. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the 2021 Form 10-K.

Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated.

Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation.

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.

Accounting Pronouncements Adopted in 2022

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying accounting principles under GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change to the interest rates used for discounting, margining or contract price alignment. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material impact on the Company's financial position and results of operations.

2. INVENTORIES

Inventories consist principally of raw materials, non-food finished goods and packaged meal replacements held in the Company’s warehouses and outsourced distribution centers. 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. On a quarterly basis, management reviews inventories for unsalable or obsolete inventories.

The Company donated inventory with an aggregate cost of $1.1 million and $10.5 million to Ukrainian refugees and those in need in Ukraine, increasing selling, general and administrative (“SG&A”) expenses during the three and nine months ended

8

September 30, 2022. The donations were made to two 501(c)(3) organizations that are coordinating the distribution throughout refugee camps in Europe and in Ukraine.

Inventories consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Raw materials	$	11,989	$	15,196
Packaging	3,078		3,641
Non-food finished goods	10,455		15,991
Finished goods	122,227		152,687
Reserve for obsolete inventory	(2,470)		(7,472)
Total	$	145,279	$	180,043

3. EARNINGS PER SHARE

Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of shares of the Company’s common stock outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of shares of the Company’s common stock outstanding adjusted for the effect of dilutive common stock equivalents.

The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Numerator:
Net income	$	36,155	$	41,982	$	117,050	$	130,008
Denominator:
Weighted average shares of common stock outstanding	10,964		11,692		11,290		11,739
Effect of dilutive common stock equivalents	78		93		79		101
Weighted average shares of common stock outstanding	11,042		11,785		11,369		11,840
Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07
Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98

The calculation of diluted EPS excluded 10 thousand and 0 thousand antidilutive restricted stock awards for the three months ended September 30, 2022 and 2021, respectively, and 3 thousand and 0 thousand antidilutive restricted stock awards for the nine months ended September 30, 2022 and 2021, respectively. EPS is computed independently for each of the periods presented above, and accordingly, the sum of the quarterly earnings per common share may not equal the year-to-date total computed.

4. SHARE-BASED COMPENSATION

Stock Options

The Company has issued non-qualified and incentive stock options to employees and non-employee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires 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 September 30, 2022 generally vest 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 is calculated using the simplified method defined as the midpoint

9

between the vesting period and the contractual term of each option. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. The dividend yield is computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the nine months ended September 30, 2022 and 2021, the Company did not grant stock options.

The following table is a summary of our stock option activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
Outstanding at beginning of period	33	$	54.98	61	$	48.19
Exercised	—	—		(16)	49.69
Outstanding at end of the period	33	$	54.98	45	$	47.66
Exercisable at end of the period	28	$	52.76	35	$	42.00

As of September 30, 2022, the weighted-average remaining contractual life for outstanding stock options was 55 months with an aggregate intrinsic value of $1.8 million and the weighted-average remaining contractual life for exercisable stock options was 53 months with an aggregate intrinsic value of $1.5 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of September 30, 2022 was less than $0.1 million and is expected to be recognized over a weighted-average period of 4 months. For the nine months ended September 30, 2022, there was no exercise activity of stock options. For the nine months ended September 30, 2021, the Company received $0.8 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million.

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 fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period.

The following table summarizes our restricted stock activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	44	$	183.51	50	$	116.06
Granted	38	176.60		21	266.99
Vested	(19)	156.16		(26)	116.62
Forfeited	(1)	186.53		(3)	166.02
Outstanding at end of the period	62	$	187.83	42	$	183.04

The Company withheld approximately 8 thousand and 7 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the nine months ended September 30, 2022 and 2021, respectively. The total fair value of restricted stock awards vested during the nine months ended September 30, 2022 and 2021 was $3 million and $7 million, respectively.

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 total stockholder return

10

(“TSR”) 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 are 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.

Share-based compensation expense is recorded in selling, general, and administrative expense in the accompanying Condensed Consolidated Statements of Income. The total expenses during the three months ended September 30, 2022 and 2021 are as follows (in thousands):

	Three months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	1,392	89	$	1,116
Market and performance-based share awards granted in 2022	25	438		—	—
Performance-based share awards granted in 2021	15	654		14	309
Performance-based share awards granted in 2020	26	479		26	479
Performance-based share awards granted in 2019	—	—		16	365
Total share-based compensation	156	$	2,963	145	$	2,269

11

The total expenses during the nine months ended September 30, 2022 and 2021 are as follows (in thousands):

	Nine months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	3,789	89	$	3,175
Market and performance-based share awards granted in 2022	25	950		—	—
Performance-based share awards granted in 2021	15	1,941		14	666
Performance-based share awards granted in 2020	26	1,423		26	1,329
Performance-based share awards granted in 2019	—	—		16	1,443
Total share-based compensation	156	$	8,103	145	$	6,613

The total income tax benefit recognized in the accompanying Condensed Consolidated Statements of Income for restricted stock awards was $0.4 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $1.2 million and $2.3 million for the nine months ended September 30, 2022 and 2021, respectively.

There was $7.6 million of total unrecognized compensation cost related to restricted stock awards as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months. There was $7.9 million of unrecognized compensation costs related to the 66 thousand market and performance-based shares presented in the table above as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months.

5. LEASES

Operating Leases

The Company has operating leases for office and warehouse space and certain equipment. 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 September 30, 2022 and 2021, respectively, or for the nine-month periods then ended, respectively.

Our leases relating to office and warehouse space have lease 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 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. Such amounts are not included in the measurement of the lease liability but are. recognized as expenses when they are incurred.

The operating lease expense was $1.7 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $5.2 million and $3.8 million for the nine months ended September 30, 2022 and 2021, respectively.

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

	Nine months ended September 30,
	2022		2021
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow used in operating leases	$	5,413	$	3,175
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	103	$	9,745

As of September 30, 2022, the weighted average remaining lease term was 60 months and the weighted average discount rate was 2.1%.

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The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2022 (in thousands):

2022 (excluding the nine months ended September 30, 2022)	$	1,787
2023	6,241
2024	5,693
2025	5,825
2026	4,160
Thereafter	5,412
Total lease payments	$	29,118
Less: imputed interest	(1,418)
Total	$	27,700

6. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets forth the components of accumulated other comprehensive income, net of tax where applicable (in thousands):

	September 30, 2022		December 31, 2021
Foreign currency translation	$	391	$	90
Unrealized gains on investment securities	—		21
Accumulated other comprehensive income	$	391	$	111

7. FINANCIAL INSTRUMENTS

Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.

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The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands):

	September 30, 2022
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—
Level 1:
Money market accounts	—		—		—		—		—		—
Total	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—

	December 31, 2021
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	94,824	$	—	$	—	$	94,824	$	94,824	$	—
Level 1:
Money market accounts	9,359		—		—		9,359		9,359		—
Government & agency securities	1,401		12		—		1,413		—		1,413
	10,760		12		—		10,772		9,359		1,413
Level 2:
Municipal bonds	3,880		9		59		3,948		—		3,948
Total	$	109,464	$	21	$	59	$	109,544	$	104,183	$	5,361

The Company had no realized gain or loss for the three months ended September 30, 2022. The company had a realized loss of $0.2 million for the nine months ended September 30, 2022. There was no realized gain or losses for the three and nine months ended September 30, 2021.

8. DEBT

Credit Agreement

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “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 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 Amended 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.

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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 September 30, 2022, the Applicable Rate for Term 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 has no borrowings outstanding under the Amended Credit Agreement as of September 30, 2022.

9. ACCELERATED SHARE REPURCHASE (“ASR”) PROGRAM

In the second quarter of fiscal 2022, the Company entered into an ASR agreement with JPMorgan Chase, National Association ("JPMorgan Chase") to purchase shares of its common stock from JPMorgan Chase for an aggregate purchase price of $100.0 million. Pursuant to the ASR program, the Company received an initial delivery of approximately 480 thousand shares of common stock based on the closing price of the common stock on May 31, 2022. Approximately 91 thousand additional shares of the Company's common stock were delivered upon termination of the agreement on August 8, 2022. The final number of shares delivered to the Company under the ASR agreement was based on the average of the daily volume-weighted average trading prices of the Company’s common stock during the term of the ASR program, less a discount.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

Certain information in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”). These forward-looking statements generally can be identified by use of phrases or terminology such as “intend,” “anticipate,” “expect” or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of our management and are subject to certain events, risks, uncertainties and other factors. These risks and uncertainties include, but are not limited to, those described in our 2021 Form 10-K and those described from time to time in our future reports filed with the SEC. Although Medifast believes that the expectations, statements and assumptions reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this report. All of the forward-looking statements contained herein speak only as of the date of this report.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing elsewhere herein.

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Overview

Medifast is the global company behind one of the fastest-growing health and wellness communities, OPTAVIA®, which offers Lifelong Transformation, One Healthy Habit at a Time®. Reflecting the success of our holistic approach to health and wellness, we have consistently grown annual revenue over the past five years. Of equal importance, we expect our differentiated model to continue to deliver growth in the foreseeable future.

Our OPTAVIA brand offers a highly competitive and effective lifestyle solution centered on developing new healthy habits through smaller, foundational changes called micro-habits. The program is built around four key components:

•Independent OPTAVIA Coaches: Provide individualized support and guidance to customers on the path to optimal health and wellbeing.

•OPTAVIA Community: A Community of like-hearted people providing each other with real-time connection and support.

•The Habits of Health® Transformational System: A proprietary system which offers easy steps to a sustainably healthy lifestyle.

•Products & Plans: Clinically proven plans and scientifically developed products, called “Fuelings,” backed by dietitians, scientists and physicians.

We help customers achieve their health goals through a network of approximately 66,200 independent active earning OPTAVIA Coaches, about 90% of whom were customers first, and have impacted more than 2 million lives to date. OPTAVIA Coaches introduce customers to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive Fuelings, which are nutrient-dense, portion-controlled, nutritionally interchangeable and simple to use. They are formulated with high-quality ingredients and are fortified with probiotic 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.

The OPTAVIA coaching model is customer-centric and boasts an energized health and wellness community. It promotes holistic health and wellness and positions healthy weight as a catalyst to greater lifestyle changes. OPTAVIA Coaches provide personalized support to customers and motivate them by sharing their passion for healthy living and lifestyle transformation. We believe this personal coaching is an essential factor in customer success based on findings from a clinical study published in Obesity Science and Practice in 2018, which validated the effectiveness of combining the OPTAVIA meal plan with education and support consistent with that was provided by OPTAVIA Coaches.

The entrepreneurial spirit of our OPTAVIA 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 OPTAVIA Coaches. We offer economic incentives designed to support each OPTAVIA 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

OPTAVIA Coaches are independent contractors, not employees, who support customers and market our products and services primarily through word of mouth, email and social media channels such as Facebook, Instagram, Twitter and video conferencing platforms. As entrepreneurs, OPTAVIA Coaches market our products to friends, family and other acquaintances. OPTAVIA products are shipped directly to OPTAVIA customers who are working with an OPTAVIA Coach. OPTAVIA Coaches do not handle or deliver merchandise to customers. This arrangement frees our OPTAVIA 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 are one of the fastest growing health and wellness companies in the United States, with a large and growing market opportunity. 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 OPTAVIA brand and our OPTAVIA Coaching model will

1 OPTAVIA makes no guarantee of financial success. Success with OPTAVIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence, and leadership. Please see the OPTAVIA Income Disclosure Statement (http://bit.ly/idsOPTAVIA) for statistics on actual earnings of Coaches.

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continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.

Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTAVIA, LLC, Jason Enterprises, Inc., Jason Properties, LLC, Seven Crondall Associates, LLC, Corporate Events, Inc., OPTAVIA (Hong Kong) Limited, OPTAVIA (Singapore) PTE. LTD and OPTAVIA Health Consultation (Shanghai) Co., Ltd.

As we previously disclosed, global expansion is an important component of our long-term growth strategy. 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.

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 OPTAVIA Coaches operate.

We are exposed to market risks from changes in commodity or other raw material prices. Rising inflation could impact our cost structure and put pressure on consumer spending. Increases in commodity prices or food costs, including as a result of inflation, could affect the global and U.S. economies and could also adversely impact our business, financial condition or results of operations. Our variable cost structure can be utilized to adapt to changing market conditions with potential actions including adjustments to our manufacturing, distribution and customer support infrastructure. In addition, adverse labor market conditions could constrain our ability to manufacture and deliver products or increase the associated costs. We continue to take steps to attract, train, and develop personnel. 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, OPTAVIA 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 duration and further spread of the outbreak, its severity, the emergence of variant strains, 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, OPTAVIA 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.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the 2021 Form 10-K. We consider

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all of our significant accounting policies and estimates to be critical. There were no significant changes in our critical accounting policies during the first nine months of 2022.

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. There were no significant changes in our critical estimates during the first nine months of 2022.

Overview of Results of Operations

Our product sales accounted for approximately 98.0% of our revenues for each of the three and nine months ended September 30, 2022 and 2021.

The following tables reflect our income statements (in thousands, except percentages):

	Three months ended September 30,
	2022			2021			$ Change		% Change
Revenue	$	390,398		$	413,395		$	(22,997)	(5.6)	%
Cost of sales	107,549			106,338			1,211		1.1	%
Gross profit	282,849			307,057			(24,208)		(7.9)	%
Selling, general, and administrative	234,693			251,886			(17,193)		(6.8)	%
Income from operations	48,156			55,171			(7,015)		(12.7)	%
Other income (expense)
Interest expense	(261)			(94)			(167)		177.7	%
Other income (expense)	(17)			115			(132)		(114.8)	%
	(278)			21			(299)		(1423.8)	%
Income from operations before income taxes	47,878			55,192			(7,314)		(13.3)	%
Provision for income taxes	11,723			13,210			(1,487)		(11.3)	%
Net income	$	36,155		$	41,982		$	(5,827)	(13.9)	%
% of revenue
Gross profit	72.5		%	74.3		%
Selling, general, and administrative costs	60.1		%	60.9		%
Income from operations	12.3		%	13.3		%

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	Nine months ended September 30,
	2022			2021			$ Change		% Change
Revenue	$	1,261,332		$	1,148,253		$	113,079	9.8	%
Cost of sales	354,515			298,942			55,573		18.6	%
Gross profit	906,817			849,311			57,506		6.8	%
Selling, general, and administrative	754,610			679,907			74,703		11.0	%
Income from operations	152,207			169,404			(17,197)		(10.2)	%
Other income (expense)
Interest expense	(519)			(138)			(381)		276.1	%
Other income (expense)	(37)			112			(149)		(133.0)	%
	(556)			(26)			(530)		2038.5	%
Income from operations before income taxes	151,651			169,378			(17,727)		(10.5)	%
Provision for income taxes	34,601			39,370			(4,769)		(12.1)	%
Net income	$	117,050		$	130,008		$	(12,958)	(10.0)	%
% of revenue
Gross profit	71.9		%	74.0		%
Selling, general, and administrative costs	59.8		%	59.2		%
Income from operations	12.1		%	14.8		%

Revenue: Revenue decreased $23.0 million, or 5.6%, to $390.4 million for the three months ended September 30, 2022 from $413.4 million for the three months ended September 30, 2021. The average revenue per active earning OPTAVIA Coach was $5,897 for the three months ended September 30, 2022 compared to $6,773 for the three months ended September 30, 2021. The decline in revenue for the three months ended September 30, 2022 was primarily driven by the decline in the productivity per active earning OPTAVIA Coach partially offset by the increase in the number of active earning OPTAVIA Coaches to 66,200 as of September 30, 2022 from 61,000 as of September 30, 2021. The decrease in productivity per active earning OPTAVIA Coach for the quarter was driven by a decrease in the number of customers supported by each Coach. Revenue increased $113.1 million, or 9.8%, to $1,261.3 million for the nine months ended September 30, 2022 from $1,148.3 million for the nine months ended September 30, 2021. The average revenue per active earning OPTAVIA Coach was $6,367 for the nine months ended September 30, 2022 compared to $6,630 for the nine months ended September 30, 2021. The decrease in the productivity per active earning OPTAVIA Coach for the nine months ended September 30, 2022 was driven by an decrease in the number of customers supported by each Coach. The year-over-year growth in revenue was primarily driven by the increase in the number of active earning OPTAVIA Coaches partially offset by the decrease in productivity per active earning OPTAVIA Coach.

Cost of sales: Cost of sales increased $1.2 million, or 1.1%, to $107.5 million from $106.3 million for the three months ended September 30, 2022 from the corresponding period in 2021. The increase in cost of sales for the three months ended September 30, 2022 was primarily driven by higher product costs resulting from increases in raw ingredient costs, shipping costs, and labor costs. Cost of sales increased $55.6 million, or 18.6%, to $354.5 million from $298.9 million for the nine months ended September 30, 2022 from the corresponding period in 2021. The increase in cost of sales for the nine months ended September 30, 2022 was primarily driven by an increase in OPTAVIA product sales and higher product costs resulting from increases in raw ingredient costs, shipping costs, and labor costs.

Gross profit: For the three months ended September 30, 2022, gross profit decreased $24.2 million, or 7.9%, to $282.8 million from $307.1 million for the three months ended September 30, 2021. The decrease in gross profit for the three months ended September 30, 2022 was due to both a decrease in the number of customers supported by each Coach and higher products costs

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resulting from increases in raw ingredient costs, shipping costs, and labor costs. As a percentage of revenue, gross profit decreased 183 basis points to 72.5% for the three months ended September 30, 2022 from 74.3% for the corresponding period in 2021. The decrease in gross profit as a percentage of revenue for the three months ended September 30, 2022 is due to higher products costs resulting from increases in raw ingredient costs, shipping costs, and labor costs. For the nine months ended September 30, 2022, gross profit increased $57.5 million, or 6.8%, to $906.8 million from $849.3 million for the nine months ended September 30, 2021. The increase in gross profit for the nine-month period was primarily attributable to higher revenue partially offset by increased cost of sales. As a percentage of revenue, gross profit decreased 207 basis points to 71.9% for the nine months ended September 30, 2022 from 74.0% for the corresponding period in 2021. The decrease in gross margin percentage for the nine months ended September 30, 2022 was primarily due to a customer acquisition program, which ran from late March to early May in 2022, and higher product costs resulting from increases in raw ingredient costs, shipping costs, and labor costs.

Selling, general, and administrative: SG&A expenses were $234.7 million for the three months ended September 30, 2022, a decrease of $17.2 million, or 6.8%, as compared to $251.9 million from the corresponding period in 2021. As a percentage of revenue, SG&A expenses were 60.1% for the three months ended September 30, 2022 as compared to 60.9% for the corresponding period in 2021. SG&A expenses included research and development costs of $1.1 million and $1.2 million for the three months ended September 30, 2022 and 2021, respectively, in connection with the development of new products and programs and clinical research activities. The decrease in SG&A expenses for the three months ended September 30, 2022 was primarily due to lower OPTAVIA Coach compensation expense. SG&A expenses were $754.6 million for the nine months ended September 30, 2022, an increase of $74.7 million, or 11.0%, as compared to $679.9 million from the corresponding period in 2021. As a percentage of revenue, SG&A expenses were 59.8% for the nine months ended September 30, 2022 as compared to 59.2% for the corresponding period in 2021. SG&A expenses included research and development costs of $3.3 million and $3.3 million for the nine months ended September 30, 2022 and 2021, respectively, in connection with the development of new products and programs and clinical research activities. The increase in SG&A expenses for the nine months ended September 30, 2022 was primarily due to higher OPTAVIA Coach compensation expense, donations made to support the Ukraine relief effort, incremental costs related to continued investment in information technology and distribution infrastructure, as well as the increased credit card fees resulting from higher sales.

Non-GAAP adjusted SG&A expenses were $233.6 million for the three months ended September 30, 2022, a decrease of $18.3 million, or 7.3%, as compared to $251.9 million from the corresponding period in 2021. Non-GAAP adjusted SG&A expenses were $744.1 million for the nine months ended September 30, 2022, an increase of $64.2 million, or 9.4%, as compared to 679.9 million from the corresponding period in 2021. Non-GAAP adjusted SG&A excludes expenses in connection with donations made to support the Ukrainian relief effort of $1.1 million and $10.5 million for the three and nine months ended September 30, 2022, respectively. 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.

OPTAVIA Coach compensation expense, which is a variable expense, decreased $17.2 million, or 9.5%, to $164.8 million for the three months ended September 30, 2022 from $182.1 million for the corresponding period in 2021. The decrease was primarily the result of decreased OPTAVIA product sales. For the nine months ended September 30, 2022, OPTAVIA compensation expense increased $47.7 million, or 9.5%, to $548.4 million from $500.7 million for the corresponding period in 2021. The increase was primarily the result of increased OPTAVIA product sales in the first half of the year. The total number of active earning OPTAVIA Coaches as of September 30, 2022 increased to 66,200 from 61,000 for the corresponding date in 2021, an increase of 8.5%.

Income from operations: For the three months ended September 30, 2022, income from operations decreased $7.0 million to $48.2 million from $55.2 million for the corresponding period in 2021 primarily as a result of decreased gross profit partially offset by decreased SG&A expenses. Income from operations as a percentage of revenue decreased to 12.3% for the three months ended September 30, 2022 from 13.3% for the corresponding period in 2021 due to the factors described above impacting revenue and SG&A expenses. For the nine months ended September 30, 2022, income from operations decreased $17.2 million to $152.2 million from $169.4 million for the corresponding period in 2021 primarily as a result of increased SG&A expenses partially offset by increased gross profit. Income from operations as a percentage of revenue decreased to 12.1% for the nine months ended September 30, 2022 from 14.8% for the corresponding period in 2021 due to the factors described above impacting revenue, cost of sales and SG&A expenses.

Non-GAAP adjusted income from operations was $49.2 million for the three months ended September 30, 2022, a decrease of $5.9 million, or 10.7%, as compared to $55.2 million from the corresponding period in 2021. Non-GAAP adjusted income from operations was $162.7 million for the nine months ended September 30, 2022, a decrease of $6.7 million, or 3.9%, as compared

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to $169.4 million from the corresponding period in 2021. 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.

Provision for income taxes: For the three months ended September 30, 2022, the Company recorded $11.7 million in income tax expense, an effective tax rate of 24.5%, as compared to $13.2 million in income tax expense, an effective tax rate of 23.9%, for the three months ended September 30, 2021. The increase in the effective tax rate for the three months ended September 30, 2022 was primarily driven by an increase in state income taxes partially offset by increased tax benefits for inventory donations and research and development tax credits. For the nine months ended September 30, 2022, the Company recorded $34.6 million in income tax expense, an effective tax rate of 22.8%, as compared to $39.4 million in income tax expense, an effective tax rate of 23.2%, for the nine months ended September 30, 2021. The decrease in the effective tax rate for the nine months ended September 30, 2022 was primarily driven by the tax benefits for inventory donations and research and development tax credits partially offset by an increase in state income taxes and a decrease in the tax benefit of stock compensation.

Non-GAAP adjusted income tax provision was $12.2 million for the three months ended September 30, 2022, an effective tax rate of 24.9% as compared to 23.9% for the corresponding period in 2021. Non-GAAP adjusted income tax provision was $39.4 million for the nine months ended September 30, 2022, an effective tax rate of 24.3%, as compared to 23.2% for the corresponding period in 2021. 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: Net income was $36.2 million and $117.1 million, or $3.27 and $10.30 per diluted share, for the three and nine months ended September 30, 2022 as compared to $42.0 million and $130.0 million, or $3.56 and $10.98 per diluted share, for the three and nine months ended September 30, 2021. The period-over-period changes were driven by the factors described above in the section titled “Income from operations.”

Non-GAAP adjusted net income was $36.8 million or $3.32 per diluted share for the three months ended September 30, 2022 as compared to $3.56 per diluted share for the corresponding period in 2021. Non-GAAP adjusted net income was $122.8 million or $10.81 per diluted share for the nine months ended September 30, 2022 as compared to $10.98 per diluted share for the corresponding period in 2021. 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.

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in this quarterly report, our quarterly earnings press release and other public disclosures. The following GAAP financial measures have been presented on an as-adjusted basis: SG&A expenses, income from operations, 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 our donations to support the Ukrainian relief effort 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):

21

	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	GAAP		Donation Adjustments		Non-GAAP		GAAP		Donations Adjustments		Non-GAAP
Selling, general, and administrative	$	234,693	$	(1,087)	$	233,606	$	251,886	$	—	$	251,886
Income from operations	48,156		1,087		49,243		55,171		—		55,171
Provision for income taxes	11,723		491		12,214		13,210		—		13,210
Net income	36,155		596		36,751		41,982		—		41,982
Diluted earnings per share (1)	3.27		0.05		3.32		3.56		—		3.56

	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	GAAP		Donation Adjustments		Non-GAAP		GAAP		Donations Adjustments		Non-GAAP
Selling, general, and administrative	$	754,610	$	(10,513)	$	744,097	$	679,907	$	—	$	679,907
Income from operations	152,207		10,513		162,720		169,404		—		169,404
Provision for income taxes	34,601		4,752		39,353		39,370		—		39,370
Net income	117,050		5,761		122,811		130,008		—		130,008
Diluted earnings per share (1)	10.30		0.51		10.81		10.98		—		10.98

(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 $150.5 million and working capital of $75.3 million at September 30, 2022 as compared with $202.5 million and $137.0 million at December 31, 2021, respectively. The $52.0 million net decrease in stockholders’ equity reflects $117.1 million in net income for the nine months ended September 30, 2022 offset by $120.0 million used for repurchases of the Company’s common stock and $55.8 million for declared dividends paid to holders of the Company’s common stock as well as the other equity transactions described in the “Condensed Consolidated Statements of Changes in Stockholders’ Equity” included in this report. On September 8, 2022, the Company declared a quarterly dividend of $1.64 per share payable on November 8, 2022, to stockholders of record as of September 20, 2022. While we intend to continue the dividend program and believe we will have sufficient liquidity to do so, we can provide no assurance that we will be able to continue to declare and pay dividends. The Company’s cash, cash equivalents and investment securities decreased from $109.5 million at December 31, 2021 to $69.7 million at September 30, 2022.

Net cash provided by operating activities increased by $40.8 million to $142.8 million for the nine months ended September 30, 2022 from $102.0 million for the nine months ended September 30, 2021 primarily driven by a $111.0 million increase related to changes in inventory balances, a $7.0 million increase in prepaid expenses and other current assets partially offset by a reduction in net income, as well as decreases related to changes in certain balance sheet accounts, including $5.2 million in other assets and $65.0 million in accounts payable and accrued expenses. We continued to expand our cloud computing technology capabilities to support our planned growth during the nine months ended September 30, 2022.

Net cash used in investing activities was $2.4 million for the nine months ended September 30, 2022 as compared to $17.4 million for the nine months ended September 30, 2021.

Net cash used in financing activities increased by $81.3 million to $175.3 million for the nine months ended September 30, 2022 from $93.9 million for the nine months ended September 30, 2021. This increase was primarily due to $74 million used for repurchases of the Company's common stock under the accelerated share repurchase (“ASR”) program and $6.9 million in cash dividends paid to stockholders. Under the terms of the ASR agreement, approximately 480 thousand shares were delivered in the second quarter of 2022. A final delivery of approximately 91 thousand shares was received on August 8, 2022 to complete the ASR agreement.

In pursuing its business strategy, the Company may require additional cash for operating and investing activities. The Company expects future cash requirements, if any, to be funded from operating cash flow and financing activities.

22

From time to time the Company evaluates potential acquisitions that complement our business. If consummated, any such transactions may use a portion of our working capital or require the issuance of equity or debt. 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 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 Amended Credit Agreement contains affirmative and negative covenants customarily applicable to credit facilities. As of September 30, 2022, the Company had no borrowings under the credit facility and was in compliance with all of its debt covenants.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions or other financial instruments for trading or speculative purposes.

The Company is exposed to market risk related to changes in interest rates and market pricing impacting our credit facility. If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels at September 30, 2022, the Company estimates that the fair value of its borrowings under its credit facility would decline by an immaterial amount and therefore it would not expect its operating results or cash flows to be affected to any significant degree by the effect of a change in market conditions on our investments.

There have been no material changes to our market risk exposure since December 31, 2021.

Item 4. Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Act, as amended, as of September 30, 2022. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is recorded, processed, summarized and reported accurately and on a timely basis. Based on this evaluation performed in accordance with the criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23

Part II Other Information

Item 1. Legal Proceedings

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.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the 2021 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

2022	Total Number of Shares Purchased (1)(3)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 - July 31	120	$	174.16	—	1,499,197
August 1 - August 31	91,292	$	178.66	91,292	1,407,905
September 1 - September 30	52	$	115.09	—	1,407,905

(1)Also included are shares of common stock surrendered by employees and directors to the Company to cover minimum tax liability withholding obligations upon the exercise of stock options or the vesting of shares of restricted stock previously granted to such employees and directors.

(2)At the outset of the quarter ended September 30, 2022, there were 1,499,197 shares of the Company’s common stock eligible for repurchase under the stock repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan").

(3)In the second quarter of fiscal 2022, the Company paid $100 million under an Accelerated Share Repurchase (“ASR”) agreement and received an initial delivery of approximately 480 thousand shares. A final delivery of approximately 91 thousand shares was received on August 8, 2022 to complete the ASR agreement. See Note 9 to the Consolidated Financial Statements included in this report for further description of the ASR.

As of September 30, 2022, there were 1,407,905 shares of the Company’s common stock eligible for repurchase under the Stock Repurchase Plan. There can be no assurances as to the amount, timing or prices of repurchases, which may vary based on market conditions and other factors. The Stock Repurchase Plan does not have an expiration date and can be modified or terminated by the Board of Directors at any time.

24

Item 6. Exhibits

Exhibit Number	Description of Exhibit
3.1	Restated and Amended Certificate of Incorporation of Medifast, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 001-31573) filed February 27, 2015).
3.2	Amended and Restated Bylaws of Medifast, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 Current Report on Form 8-K (File No. 001-31573) filed on December 4, 2019).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from Medifast, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed November 3, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements (filed herewith).
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

In accordance with SEC Release No. 33-8238, Exhibit 32.1 is being furnished and not filed.

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Medifast, Inc.

By:	/s/ DANIEL R. CHARD
	Daniel R. Chard
	Chief Executive Officer
	(Principal Executive Officer)
Dated:	November 3, 2022
	/s/ JAMES P. MALONEY
	James P. Maloney
	Chief Financial Officer
	(Principal Financial Officer)
Dated:	November 3, 2022

26

EX-31.1

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION

I, Daniel R. Chard, certify that:

1.I have reviewed this report on Form 10-Q of Medifast, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 3, 2022	/s/    Daniel R. Chard
		Daniel R. Chard
		Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION

I, James P. Maloney, certify that:

1.I have reviewed this report on Form 10-Q of Medifast, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 3, 2022	/s/    James P. Maloney
		James P. Maloney
		Chief Financial Officer

EX-32.1

Exhibit 32.1

MEDIFAST, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q (the “Report”) for the quarter ended September 30, 2022 of Medifast, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel R. Chard, Chief Executive Officer and I, James P. Maloney, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Company.

By:	/s/ DANIEL R. CHARD
	Daniel R. Chard
	Chief Executive Officer
	November 3, 2022
	/s/ JAMES P. MALONEY
	James P. Maloney
	Chief Financial Officer
	November 3, 2022

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Oct. 26, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-31573
Entity Registrant Name	Medifast, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-3714405
Entity Address, Address Line One	100 International Drive
Entity Address, City or Town	Baltimore
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	21202
City Area Code	410
Local Phone Number	581-8042
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	MED
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		10,926,989
Entity Central Index Key	0000910329
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Revenue	$ 390,398	$ 413,395	$ 1,261,332	$ 1,148,253
Cost of sales	107,549	106,338	354,515	298,942
Gross profit	282,849	307,057	906,817	849,311
Selling, general, and administrative	234,693	251,886	754,610	679,907
Income from operations	48,156	55,171	152,207	169,404
Other income (expense)
Interest expense	(261)	(94)	(519)	(138)
Other income (expense)	(17)	115	(37)	112
Total other (expense) income	(278)	21	(556)	(26)
Income from operations before income taxes	47,878	55,192	151,651	169,378
Provision for income taxes	11,723	13,210	34,601	39,370
Net income	$ 36,155	$ 41,982	$ 117,050	$ 130,008
Basic earnings per share
Earnings per share - basic (in dollars per share)	$ 3.30	$ 3.59	$ 10.37	$ 11.07
Diluted earnings per share
Earnings per share - diluted (in dollars per share)	$ 3.27	$ 3.56	$ 10.30	$ 10.98
Weighted average shares outstanding -
Basic (in shares)	10,964	11,692	11,290	11,739
Diluted (in shares)	11,042	11,785	11,369	11,840
Cash dividends declared per share (in dollars per share)	$ 1.64	$ 1.42	$ 4.92	$ 4.26

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 36,155	$ 41,982	$ 117,050	$ 130,008
Other comprehensive income (loss), net of tax:
Foreign currency translation	123	63	300	130
Unrealized losses on investment securities	0	(16)	(21)	(49)
Other comprehensive income (loss), net of tax	123	47	279	81
Comprehensive income	$ 36,278	$ 42,029	$ 117,329	$ 130,089

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 69,710	$ 104,183
Inventories	145,279	180,043
Investment securities	0	5,361
Income taxes, prepaid	150	945
Prepaid expenses and other current assets	14,445	16,334
Total current assets	229,584	306,866
Property, plant and equipment - net of accumulated depreciation	58,107	56,131
Right-of-use assets	19,819	24,457
Other assets	12,691	6,468
Deferred tax assets	6,150	4,404
TOTAL ASSETS	326,351	398,326
Current Liabilities
Accounts payable and accrued expenses	148,129	163,309
Revolving credit facility	0	0
Current lease obligations	6,126	6,523
Total current liabilities	154,255	169,832
Lease obligations, net of current lease obligations	21,574	26,020
Total liabilities	175,829	195,852
Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized; 10,929 and 11,594 issued and 10,928 and 11,593 outstanding at September 30, 2022 and December 31, 2021, respectively	11	12
Additional paid-in capital	18,617	12,018
Accumulated other comprehensive income	391	111
Retained earnings	131,503	190,333
Total stockholders' equity	150,522	202,474
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 326,351	$ 398,326

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	20,000	20,000
Common stock, issued (in shares)	10,929	11,594
Common stock, outstanding (in shares)	10,928	11,593

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Operating Activities
Net income	$ 117,050	$ 130,008
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	8,026	3,767
Non-cash lease expense	4,740	3,508
Share-based compensation	8,103	6,613
Amortization of premium on investment securities	14	70
Deferred income taxes	(1,746)	0
Change in operating assets and liabilities:
Inventories	34,764	(76,222)
Income taxes, prepaid	795	0
Prepaid expenses and other current assets	1,889	(5,094)
Other assets	(8,545)	(3,393)
Accounts payable and accrued expenses	(22,259)	42,747
Net cash flow provided by operating activities	142,831	102,004
Investing Activities
Sale and maturities of investment securities	5,267	5,145
Purchase of property and equipment	(7,617)	(22,585)
Net cash flow used in investing activities	(2,350)	(17,440)
Financing Activities
Options exercised by executives and directors	0	811
Net shares repurchased for taxes	(1,504)	(1,867)
Cash dividends paid to stockholders	(53,698)	(46,845)
Stock repurchases	(120,048)	(46,000)
Net cash flow used in financing activities	(175,250)	(93,901)
Foreign currency impact	296	130
Decrease in cash and cash equivalents	(34,473)	(9,207)
Cash and cash equivalents - beginning of the period	104,183	163,723
Cash and cash equivalents - end of period	69,710	154,516
Supplemental disclosure of cash flow information:
Income taxes paid	33,906	41,302
Dividends declared included in accounts payable	$ 19,395	$ 17,351

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Retained Earnings	Treasury Stock
Balance (in shares) at Dec. 31, 2020		11,822
Balance at Dec. 31, 2020	$ 157,246	$ 12	$ 7,842	$ 41	$ 154,351	$ (5,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	41,063				41,063
Share-based compensation (in shares)		13
Share-based compensation	2,198		2,198
Options exercised by executives and directors (in shares)		11
Options exercised by executives and directors	481		481
Net shares repurchased for taxes (in shares)		(7)
Net shares repurchased for taxes	(1,807)		(1,807)
Treasury stock from stock repurchases	(7,500)					(7,500)
Other comprehensive Income (loss)	62			62
Cash dividends declared to stockholders	(16,852)				(16,852)
Balance (in shares) at Mar. 31, 2021		11,839
Balance at Mar. 31, 2021	174,891	$ 12	8,714	103	178,562	(12,500)
Balance (in shares) at Dec. 31, 2020		11,822
Balance at Dec. 31, 2020	157,246	$ 12	7,842	41	154,351	(5,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 130,008
Options exercised by executives and directors (in shares)	16
Net shares repurchased for taxes (in shares)	(7)
Other comprehensive Income (loss)	$ 81
Balance (in shares) at Sep. 30, 2021		11,618
Balance at Sep. 30, 2021	196,239	$ 12	12,950	122	183,155	0
Balance (in shares) at Mar. 31, 2021		11,839
Balance at Mar. 31, 2021	174,891	$ 12	8,714	103	178,562	(12,500)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	46,963				46,963
Share-based compensation (in shares)		10
Share-based compensation	1,839		1,697		142
Options exercised by executives and directors (in shares)		3
Options exercised by executives and directors	221		221
Net shares repurchased for taxes	(26)		(26)
Treasury stock from stock repurchases	(12,230)					(12,230)
Treasury stock retired from stock repurchases (in shares)		(114)
Treasury stock retired from stock repurchases	0				(23,383)	23,383
Other comprehensive Income (loss)	(28)			(28)
Cash dividends declared to stockholders	(16,941)				(16,941)
Balance (in shares) at Jun. 30, 2021		11,738
Balance at Jun. 30, 2021	194,689	$ 12	10,606	75	185,343	(1,347)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	41,982				41,982
Share-based compensation (in shares)		1
Share-based compensation	2,269		2,269
Options exercised by executives and directors (in shares)		3
Options exercised by executives and directors	109		109
Net shares repurchased for taxes (in shares)		(1)
Net shares repurchased for taxes	(34)		(34)
Treasury stock from stock repurchases	(26,270)					(26,270)
Treasury stock retired from stock repurchases (in shares)		(123)
Treasury stock retired from stock repurchases					(27,617)	27,617
Other comprehensive Income (loss)	47			47
Cash dividends declared to stockholders	(16,553)				(16,553)
Balance (in shares) at Sep. 30, 2021		11,618
Balance at Sep. 30, 2021	$ 196,239	$ 12	12,950	122	183,155	0
Balance (in shares) at Dec. 31, 2021	11,594	11,594
Balance at Dec. 31, 2021	$ 202,474	$ 12	12,018	111	190,333	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	41,781				41,781
Share-based compensation (in shares)		18
Share-based compensation	2,275		2,275
Net shares repurchased for taxes (in shares)		(8)
Net shares repurchased for taxes	(1,459)		(1,459)
Treasury stock from stock repurchases	(10,000)					(10,000)
Treasury stock retired from stock repurchases (in shares)		(51)
Treasury stock retired from stock repurchases	0				(10,000)	10,000
Other comprehensive Income (loss)	16			16
Cash dividends declared to stockholders	(19,063)				(19,063)
Balance (in shares) at Mar. 31, 2022		11,553
Balance at Mar. 31, 2022	$ 216,024	$ 12	12,834	127	203,051	0
Balance (in shares) at Dec. 31, 2021	11,594	11,594
Balance at Dec. 31, 2021	$ 202,474	$ 12	12,018	111	190,333	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 117,050
Options exercised by executives and directors (in shares)	0
Net shares repurchased for taxes (in shares)	(8)
Other comprehensive Income (loss)	$ 279
Balance (in shares) at Sep. 30, 2022	10,929	10,929
Balance at Sep. 30, 2022	$ 150,522	$ 11	18,617	391	131,503	0
Balance (in shares) at Mar. 31, 2022		11,553
Balance at Mar. 31, 2022	216,024	$ 12	12,834	127	203,051	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	39,113				39,113
Share-based compensation (in shares)		1
Share-based compensation	2,865		2,865
Net shares repurchased for taxes	(20)		(20)
Treasury stock from stock repurchases	(90,038)					(90,038)
Treasury stock retired from stock repurchases (in shares)		(535)
Treasury stock retired from stock repurchases	(1)	$ (1)			(90,038)	90,038
Stock repurchases, not yet settled	(20,010)		(15,679)		(4,331)
Other comprehensive Income (loss)	141			141
Cash dividends declared to stockholders	(18,598)				(18,598)
Balance (in shares) at Jun. 30, 2022		11,019
Balance at Jun. 30, 2022	129,476	$ 11	0	268	129,197	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	36,155				36,155
Share-based compensation (in shares)		1
Share-based compensation	2,963		2,963
Net shares repurchased for taxes	(25)		(25)			0
Treasury stock from stock repurchases	(20,010)					(20,010)
Treasury stock retired from stock repurchases (in shares)		(91)
Treasury stock retired from stock repurchases	0				(20,010)	20,010
Settlement of accelerated share repurchase agreement	20,010		15,679		4,331
Other comprehensive Income (loss)	123			123
Cash dividends declared to stockholders	$ (18,170)				(18,170)
Balance (in shares) at Sep. 30, 2022	10,929	10,929
Balance at Sep. 30, 2022	$ 150,522	$ 11	$ 18,617	$ 391	$ 131,503	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2022. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the 2021 Form 10-K.

Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated.

Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation.

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.

Accounting Pronouncements Adopted in 2022

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying accounting principles under GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change to the interest rates used for discounting, margining or contract price alignment. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material impact on the Company's financial position and results of operations.

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INVENTORIES

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories consist principally of raw materials, non-food finished goods and packaged meal replacements held in the Company’s warehouses and outsourced distribution centers. 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. On a quarterly basis, management reviews inventories for unsalable or obsolete inventories.

The Company donated inventory with an aggregate cost of $1.1 million and $10.5 million to Ukrainian refugees and those in need in Ukraine, increasing selling, general and administrative (“SG&A”) expenses during the three and nine months ended

September 30, 2022. The donations were made to two 501(c)(3) organizations that are coordinating the distribution throughout refugee camps in Europe and in Ukraine.

Inventories consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Raw materials	$	11,989	$	15,196
Packaging	3,078		3,641
Non-food finished goods	10,455		15,991
Finished goods	122,227		152,687
Reserve for obsolete inventory	(2,470)		(7,472)
Total	$	145,279	$	180,043

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of shares of the Company’s common stock outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of shares of the Company’s common stock outstanding adjusted for the effect of dilutive common stock equivalents.

The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Numerator:
Net income	$	36,155	$	41,982	$	117,050	$	130,008
Denominator:
Weighted average shares of common stock outstanding	10,964		11,692		11,290		11,739
Effect of dilutive common stock equivalents	78		93		79		101
Weighted average shares of common stock outstanding	11,042		11,785		11,369		11,840
Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07
Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98

The calculation of diluted EPS excluded 10 thousand and 0 thousand antidilutive restricted stock awards for the three months ended September 30, 2022 and 2021, respectively, and 3 thousand and 0 thousand antidilutive restricted stock awards for the nine months ended September 30, 2022 and 2021, respectively. EPS is computed independently for each of the periods presented above, and accordingly, the sum of the quarterly earnings per common share may not equal the year-to-date total computed.

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SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Stock Options

The Company has issued non-qualified and incentive stock options to employees and non-employee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires 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 September 30, 2022 generally vest 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 is 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 is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. The dividend yield is computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the nine months ended September 30, 2022 and 2021, the Company did not grant stock options.

The following table is a summary of our stock option activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
Outstanding at beginning of period	33	$	54.98	61	$	48.19
Exercised	—	—		(16)	49.69
Outstanding at end of the period	33	$	54.98	45	$	47.66
Exercisable at end of the period	28	$	52.76	35	$	42.00

As of September 30, 2022, the weighted-average remaining contractual life for outstanding stock options was 55 months with an aggregate intrinsic value of $1.8 million and the weighted-average remaining contractual life for exercisable stock options was 53 months with an aggregate intrinsic value of $1.5 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of September 30, 2022 was less than $0.1 million and is expected to be recognized over a weighted-average period of 4 months. For the nine months ended September 30, 2022, there was no exercise activity of stock options. For the nine months ended September 30, 2021, the Company received $0.8 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million.

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 fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period.

The following table summarizes our restricted stock activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	44	$	183.51	50	$	116.06
Granted	38	176.60		21	266.99
Vested	(19)	156.16		(26)	116.62
Forfeited	(1)	186.53		(3)	166.02
Outstanding at end of the period	62	$	187.83	42	$	183.04

The Company withheld approximately 8 thousand and 7 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the nine months ended September 30, 2022 and 2021, respectively. The total fair value of restricted stock awards vested during the nine months ended September 30, 2022 and 2021 was $3 million and $7 million, respectively.

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 total stockholder return

(“TSR”) 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 are 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.

Share-based compensation expense is recorded in selling, general, and administrative expense in the accompanying Condensed Consolidated Statements of Income. The total expenses during the three months ended September 30, 2022 and 2021 are as follows (in thousands):

	Three months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	1,392	89	$	1,116
Market and performance-based share awards granted in 2022	25	438		—	—
Performance-based share awards granted in 2021	15	654		14	309
Performance-based share awards granted in 2020	26	479		26	479
Performance-based share awards granted in 2019	—	—		16	365
Total share-based compensation	156	$	2,963	145	$	2,269

The total expenses during the nine months ended September 30, 2022 and 2021 are as follows (in thousands):

	Nine months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	3,789	89	$	3,175
Market and performance-based share awards granted in 2022	25	950		—	—
Performance-based share awards granted in 2021	15	1,941		14	666
Performance-based share awards granted in 2020	26	1,423		26	1,329
Performance-based share awards granted in 2019	—	—		16	1,443
Total share-based compensation	156	$	8,103	145	$	6,613

The total income tax benefit recognized in the accompanying Condensed Consolidated Statements of Income for restricted stock awards was $0.4 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $1.2 million and $2.3 million for the nine months ended September 30, 2022 and 2021, respectively.

There was $7.6 million of total unrecognized compensation cost related to restricted stock awards as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months. There was $7.9 million of unrecognized compensation costs related to the 66 thousand market and performance-based shares presented in the table above as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months.

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LEASES

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

LEASES

LEASES

Operating Leases

The Company has operating leases for office and warehouse space and certain equipment. 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 September 30, 2022 and 2021, respectively, or for the nine-month periods then ended, respectively.

Our leases relating to office and warehouse space have lease 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 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. Such amounts are not included in the measurement of the lease liability but are. recognized as expenses when they are incurred.

The operating lease expense was $1.7 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $5.2 million and $3.8 million for the nine months ended September 30, 2022 and 2021, respectively.

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

	Nine months ended September 30,
	2022		2021
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow used in operating leases	$	5,413	$	3,175
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	103	$	9,745

As of September 30, 2022, the weighted average remaining lease term was 60 months and the weighted average discount rate was 2.1%.

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2022 (in thousands):

2022 (excluding the nine months ended September 30, 2022)	$	1,787
2023	6,241
2024	5,693
2025	5,825
2026	4,160
Thereafter	5,412
Total lease payments	$	29,118
Less: imputed interest	(1,418)
Total	$	27,700

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ACCUMULATED OTHER COMPREHENSIVE INCOME

9 Months Ended

Sep. 30, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets forth the components of accumulated other comprehensive income, net of tax where applicable (in thousands):

	September 30, 2022		December 31, 2021
Foreign currency translation	$	391	$	90
Unrealized gains on investment securities	—		21
Accumulated other comprehensive income	$	391	$	111

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FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2022

Investments, All Other Investments [Abstract]

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.

The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands):

	September 30, 2022
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—
Level 1:
Money market accounts	—		—		—		—		—		—
Total	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—

	December 31, 2021
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	94,824	$	—	$	—	$	94,824	$	94,824	$	—
Level 1:
Money market accounts	9,359		—		—		9,359		9,359		—
Government & agency securities	1,401		12		—		1,413		—		1,413
	10,760		12		—		10,772		9,359		1,413
Level 2:
Municipal bonds	3,880		9		59		3,948		—		3,948
Total	$	109,464	$	21	$	59	$	109,544	$	104,183	$	5,361

The Company had no realized gain or loss for the three months ended September 30, 2022. The company had a realized loss of $0.2 million for the nine months ended September 30, 2022. There was no realized gain or losses for the three and nine months ended September 30, 2021.

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DEBT

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

DEBT

DEBT

Credit Agreement

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “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 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 Amended 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 September 30, 2022, the Applicable Rate for Term 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 has no borrowings outstanding under the Amended Credit Agreement as of September 30, 2022.

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ACCELERATED SHARE REPURCHASE ("ASR") PROGRAM	9 Months Ended
	Sep. 30, 2022
Equity [Abstract]
ACCELERATED SHARE REPURCHASE ("ASR") PROGRAM	ACCELERATED SHARE REPURCHASE (“ASR”) PROGRAMIn the second quarter of fiscal 2022, the Company entered into an ASR agreement with JPMorgan Chase, National Association ("JPMorgan Chase") to purchase shares of its common stock from JPMorgan Chase for an aggregate purchase price of $100.0 million. Pursuant to the ASR program, the Company received an initial delivery of approximately 480 thousand shares of common stock based on the closing price of the common stock on May 31, 2022. Approximately 91 thousand additional shares of the Company's common stock were delivered upon termination of the agreement on August 8, 2022. The final number of shares delivered to the Company under the ASR agreement was based on the average of the daily volume-weighted average trading prices of the Company’s common stock during the term of the ASR program, less a discount.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2022. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the 2021 Form 10-K.

Presentation of Financial Statements

Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated.

Reclassification

Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation.

Use of Estimates

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.

Accounting Pronouncements Adopted in 2022

Accounting Pronouncements Adopted in 2022 In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying accounting principles under GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change to the interest rates used for discounting, margining or contract price alignment. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material impact on the Company's financial position and results of operations.

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Raw materials	$	11,989	$	15,196
Packaging	3,078		3,641
Non-food finished goods	10,455		15,991
Finished goods	122,227		152,687
Reserve for obsolete inventory	(2,470)		(7,472)
Total	$	145,279	$	180,043

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Schedule of the Computation of Basic and Diluted EPS

The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Numerator:
Net income	$	36,155	$	41,982	$	117,050	$	130,008
Denominator:
Weighted average shares of common stock outstanding	10,964		11,692		11,290		11,739
Effect of dilutive common stock equivalents	78		93		79		101
Weighted average shares of common stock outstanding	11,042		11,785		11,369		11,840
Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07
Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98

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SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2022

Share-based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table is a summary of our stock option activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
Outstanding at beginning of period	33	$	54.98	61	$	48.19
Exercised	—	—		(16)	49.69
Outstanding at end of the period	33	$	54.98	45	$	47.66
Exercisable at end of the period	28	$	52.76	35	$	42.00

Summary of Restricted Stock Activity

The following table summarizes our restricted stock activity (in thousands, except per share data):

	Nine months ended September 30,
	2022			2021
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	44	$	183.51	50	$	116.06
Granted	38	176.60		21	266.99
Vested	(19)	156.16		(26)	116.62
Forfeited	(1)	186.53		(3)	166.02
Outstanding at end of the period	62	$	187.83	42	$	183.04

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award

The total expenses during the three months ended September 30, 2022 and 2021 are as follows (in thousands):

	Three months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	1,392	89	$	1,116
Market and performance-based share awards granted in 2022	25	438		—	—
Performance-based share awards granted in 2021	15	654		14	309
Performance-based share awards granted in 2020	26	479		26	479
Performance-based share awards granted in 2019	—	—		16	365
Total share-based compensation	156	$	2,963	145	$	2,269

The total expenses during the nine months ended September 30, 2022 and 2021 are as follows (in thousands):

	Nine months ended September 30,
	2022			2021
	Shares	Share-Based Compensation Expense		Shares	Share-Based Compensation Expense
Options and restricted stock	90	$	3,789	89	$	3,175
Market and performance-based share awards granted in 2022	25	950		—	—
Performance-based share awards granted in 2021	15	1,941		14	666
Performance-based share awards granted in 2020	26	1,423		26	1,329
Performance-based share awards granted in 2019	—	—		16	1,443
Total share-based compensation	156	$	8,103	145	$	6,613

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LEASES (Tables)

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Summary of Supplemental Cash Flow Information

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

	Nine months ended September 30,
	2022		2021
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow used in operating leases	$	5,413	$	3,175
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	103	$	9,745

Summary of Maturity of the Company's Operating Lease Liabilities

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2022 (in thousands):

2022 (excluding the nine months ended September 30, 2022)	$	1,787
2023	6,241
2024	5,693
2025	5,825
2026	4,160
Thereafter	5,412
Total lease payments	$	29,118
Less: imputed interest	(1,418)
Total	$	27,700

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

9 Months Ended

Sep. 30, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income

The following table sets forth the components of accumulated other comprehensive income, net of tax where applicable (in thousands):

	September 30, 2022		December 31, 2021
Foreign currency translation	$	391	$	90
Unrealized gains on investment securities	—		21
Accumulated other comprehensive income	$	391	$	111

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FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2022

Investments, All Other Investments [Abstract]

Schedule of Cash and Financial Assets that are Measured at Fair Value on a Recurring Basis for each of the Hierarchy Levels

The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands):

	September 30, 2022
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—
Level 1:
Money market accounts	—		—		—		—		—		—
Total	$	69,710	$	—	$	—	$	69,710	$	69,710	$	—

	December 31, 2021
	Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities
Cash	$	94,824	$	—	$	—	$	94,824	$	94,824	$	—
Level 1:
Money market accounts	9,359		—		—		9,359		9,359		—
Government & agency securities	1,401		12		—		1,413		—		1,413
	10,760		12		—		10,772		9,359		1,413
Level 2:
Municipal bonds	3,880		9		59		3,948		—		3,948
Total	$	109,464	$	21	$	59	$	109,544	$	104,183	$	5,361

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INVENTORIES (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Donated inventory	$ 1,100	$ 10,500
Raw materials	11,989	11,989	$ 15,196
Packaging	3,078	3,078	3,641
Non-food finished goods	10,455	10,455	15,991
Finished goods	122,227	122,227	152,687
Reserve for obsolete inventory	(2,470)	(2,470)	(7,472)
Total	$ 145,279	$ 145,279	$ 180,043

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EARNINGS PER SHARE - Computation of Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Numerator:
Net income	$ 36,155	$ 39,113	$ 41,781	$ 41,982	$ 46,963	$ 41,063	$ 117,050	$ 130,008
Denominator:
Weighted average shares of common stock outstanding (in shares)	10,964			11,692			11,290	11,739
Effect of dilutive common stock equivalents (in shares)	78			93			79	101
Weighted average shares of common stock outstanding (in shares)	11,042			11,785			11,369	11,840
Basic earnings per share
Earnings per share - basic (in dollars per share)	$ 3.30			$ 3.59			$ 10.37	$ 11.07
Diluted earnings per share
Earnings per share - diluted (in dollars per share)	$ 3.27			$ 3.56			$ 10.30	$ 10.98

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EARNINGS PER SHARE - Narrative (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Restricted Stock
Anti-dilutive awards	10	0	3	0

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SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, shares authorized under stock option plans, exercise price range, lower range limit (in dollars per share)			$ 26.52
Share-based compensation, shares authorized under stock option plans, exercise price range, upper range limit (in dollars per share)			$ 66.68
Share-based compensation arrangement by share-based payment award, options, grants in period, gross			0	0
Weighted-average remaining contractual life of options outstanding			55 months
Aggregate intrinsic value of options outstanding	$ 1,800		$ 1,800
Weighted-average remaining contractual life of options exercisable			53 months
Aggregate intrinsic value of options exercisable	1,500		$ 1,500
Proceeds from stock options exercised			$ 0	$ 811
Intrinsic value of options exercised				$ 3,300
Shares withheld for employee taxes			8,000	7,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			3 years
Award expiration period			10 years
Employee service share based compensation nonvested awards total compensation cost not yet recognized (less than)	100		$ 100
Compensation cost recognition weighted average period			4 months
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			5 years
Compensation cost recognition weighted average period			23 months
Share-based compensation arrangement, fair value of awards vested			$ 3,000	$ 7,000
Total income tax benefit recognized related to restricted stock awards	400	$ 100	1,200	$ 2,300
Unrecognized compensation costs	7,600		$ 7,600
Shares granted in period			38,000	21,000
Performance-Based Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost recognition weighted average period			23 months
Performance period			3 years
Unrecognized compensation costs	$ 7,900		$ 7,900
Shares granted in period			66,000
Performance-Based Shares | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional performance-based shares, percentage			0.00%
Performance-Based Shares | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional performance-based shares, percentage			250.00%

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SHARE-BASED COMPENSATION - Stock Options Activity (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2022 $ / shares shares	Sep. 30, 2021 $ / shares shares
Awards
Shares, Outstanding at beginning of period (in shares) | shares	33	61
Shares, Exercised (in shares) | shares	0	(16)
Shares, Outstanding at end of the period (in shares) | shares	33	45
Shares, Exercisable at end of the period (in shares) | shares	28	35
Weighted-Average Exercise Price
Weighted-Average Exercise Price, Outstanding at beginning of period (in dollars per share) | $ / shares	$ 54.98	$ 48.19
Weighted-Average Exercise Price, Exercised (in dollars per share) | $ / shares	0	49.69
Weighted-Average Exercise Price, Outstanding at end of the period (in dollars per share) | $ / shares	54.98	47.66
Weighted-Average Exercise Price, Exercisable at end of the period (in dollars per share) | $ / shares	$ 52.76	$ 42.00

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SHARE-BASED COMPENSATION - Restricted Stock Activity (Details) - Restricted Stock - $ / shares shares in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Shares
Outstanding at beginning of period (in shares)	44	50
Granted (in shares)	38	21
Vested (in shares)	(19)	(26)
Forfeited (in shares)	(1)	(3)
Outstanding at end of period (in shares)	62	42
Weighted-Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)	$ 183.51	$ 116.06
Granted (in dollars per share)	176.60	266.99
Vested (in dollars per share)	156.16	116.62
Forfeited (in dollars per share)	186.53	166.02
Outstanding at end of period (in dollars per share)	$ 187.83	$ 183.04

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SHARE-BASED COMPENSATION - Summary of Performance-based Share Awards (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	156	145	156	145
Share-Based Compensation Expense	$ 2,963	$ 2,269	$ 8,103	$ 6,613
Options And Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	90	89	90	89
Share-Based Compensation Expense	$ 1,392	$ 1,116	$ 3,789	$ 3,175
Market and Performance-Based Shares | Granted In 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	25	0	25	0
Share-Based Compensation Expense	$ 438	$ 0	$ 950	$ 0
Performance-Based Shares | Granted In 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	15	14	15	14
Share-Based Compensation Expense	$ 654	$ 309	$ 1,941	$ 666
Performance-Based Shares | Granted In 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	26	26	26	26
Share-Based Compensation Expense	$ 479	$ 479	$ 1,423	$ 1,329
Performance-Based Shares | Granted In 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares	0	16	0	16
Share-Based Compensation Expense	$ 0	$ 365	$ 0	$ 1,443

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LEASES - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 1.7	$ 1.4	$ 5.2	$ 3.8
Minimum | Operating Lease Arrangement for Real Estate
Lessee, Lease, Description [Line Items]
Lease term	18 months		18 months
Minimum | Operating Lease Arrangement for Equipment
Lessee, Lease, Description [Line Items]
Lease term	24 months		24 months
Maximum | Operating Lease Arrangement for Real Estate
Lessee, Lease, Description [Line Items]
Lease term	126 months		126 months
Maximum | Operating Lease Arrangement for Equipment
Lessee, Lease, Description [Line Items]
Lease term	203 months		203 months

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LEASES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Leases [Abstract]
Cash paid for amounts included in the measurements of lease liabilities - Operating cash flow used in operating leases	$ 5,413	$ 3,175
Right-of-use assets obtained in exchange for lease obligations - Operating leases	$ 103	$ 9,745
Weighted average remaining lease term	60 months
Weighted average discount rate	2.10%

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LEASES - Future Minimum Lease Commitments (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2022 (excluding the nine months ended September 30, 2022)	$ 1,787
2023	6,241
2024	5,693
2025	5,825
2026	4,160
Thereafter	5,412
Total lease payments	29,118
Less: imputed interest	(1,418)
Total	$ 27,700

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ACCUMULATED OTHER COMPREHENSIVE INCOME - Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	$ 150,522	$ 129,476	$ 216,024	$ 202,474	$ 196,239	$ 194,689	$ 174,891	$ 157,246
Foreign currency translation
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	391			90
Unrealized gains on investment securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	0			21
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	$ 391	$ 268	$ 127	$ 111	$ 122	$ 75	$ 103	$ 41

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FINANCIAL INSTRUMENTS - Cash and Financial Assets That are Measured at Fair Value on a Recurring Basis for Each of the Hierarchy Levels (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost	$ 69,710	$ 109,464
Unrealized Gains	0	21
Accrued Interest	0	59
Estimated Fair Value	69,710	109,544
Cash & Cash Equivalents	69,710	104,183
Investment Securities	0	5,361
Cash
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost	69,710	94,824
Estimated Fair Value	69,710	94,824
Cash & Cash Equivalents	69,710	94,824
Level 1:
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost		10,760
Unrealized Gains		12
Estimated Fair Value		10,772
Cash & Cash Equivalents		9,359
Investment Securities		1,413
Level 1: | Money market accounts
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost	0	9,359
Estimated Fair Value	0	9,359
Cash & Cash Equivalents	$ 0	9,359
Level 1: | Government & agency securities
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost		1,401
Unrealized Gains		12
Estimated Fair Value		1,413
Investment Securities		1,413
Level 2: | Municipal bonds
Cash And Cash Equivalents And Marketable securities [Line Items]
Cost		3,880
Unrealized Gains		9
Accrued Interest		59
Estimated Fair Value		3,948
Investment Securities		$ 3,948

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FINANCIAL INSTRUMENTS - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Investments, All Other Investments [Abstract]
Realized loss or gains	$ 0	$ 0	$ 200,000	$ 0

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DEBT - Narrative (Details) - Credit Agreement $ in Millions		9 Months Ended
	May 31, 2022 USD ($)	Sep. 30, 2022 USD ($)
Debt Instrument [Line Items]
Maximum Total Net Leverage Ratio	2.75
Minimum Interest Coverage Ratio	3.50
Borrowings		$ 0.0
Eurodollar
Debt Instrument [Line Items]
Applicable Rate		1.25%
Base Rate
Debt Instrument [Line Items]
Applicable Rate		0.25%
Minimum
Debt Instrument [Line Items]
Commitment fee percentage	0.20%
Maximum
Debt Instrument [Line Items]
Commitment fee percentage	0.40%
Senior Secured Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	$ 225.0
Letter of Credit
Debt Instrument [Line Items]
Credit facility maximum borrowing capacity	20.0
Accordion feature, increase limit	$ 100.0

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ACCELERATED SHARE REPURCHASE ("ASR") PROGRAM (Details) - USD ($) shares in Thousands, $ in Millions	Aug. 08, 2022	May 31, 2022	Jun. 30, 2022
Equity [Abstract]
Repurchase amount			$ 100.0
Initial amount received (in shares)	91	480