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MED Medifast

Filed: 4 May 21, 4:30pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

OR

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)

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 No

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 No

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.

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

Yes No

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 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 April 26, 2021 was 11,761,104.

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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

Three months ended March 31,

2021

2020

Revenue

$

340,669

$

178,461

Cost of sales

92,122

43,221

Gross profit

248,547

135,240

Selling, general, and administrative

195,748

111,707

Income from operations

52,799

23,533

Other income

Interest income, net

23

110

Other income (expense)

19

(19)

42

91

Income from operations before income taxes

52,841

23,624

Provision for income taxes

11,778

5,147

Net income

$

41,063

$

18,477

Earnings per share - basic

$

3.49

$

1.57

Earnings per share - diluted

$

3.46

$

1.56

Weighted average shares outstanding

Basic

11,772

11,772

Diluted

11,881

11,824

Cash dividends declared per share

$

1.42

$

1.13

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 March 31,

2021

2020

Net income

$

41,063

$

18,477

Other comprehensive income, net of tax:

Foreign currency translation

78

(4)

Unrealized (losses) gains on investment securities

(16)

49

Other comprehensive income

62

45

Comprehensive income

$

41,125

$

18,522

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)

March 31,

December 31,

2021

2020

ASSETS

Current Assets

Cash and cash equivalents

$

206,031

$

163,723

Accounts receivable - net of doubtful accounts of $383 and $219 at

March 31, 2021 and December 31, 2020, respectively

88

584

Inventories

62,234

53,392

Investment securities

6,883

10,752

Prepaid expenses and other current assets

6,625

5,863

Total current assets

281,861

234,314

Property, plant and equipment - net of accumulated depreciation

31,107

27,633

Right-of-use assets

9,623

10,508

Other assets

3,112

2,937

Deferred tax assets

692

692

TOTAL ASSETS

$

326,395

$

276,084

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable and accrued expenses

$

141,250

$

107,677

Current lease obligations

3,651

3,673

Total current liabilities

144,901

111,350

Lease obligations, net of current lease obligations

6,603

7,488

Total liabilities

151,504

118,838

Stockholders' Equity

Common stock, par value $.001 per share: 20,000 shares authorized;

11,839 and 11,822 issued and 11,761 and 11,772 outstanding

at March 31, 2021 and December 31, 2020, respectively

12

12

Additional paid-in capital

8,714

7,842

Accumulated other comprehensive income

103

41

Retained earnings

178,562

154,351

Less: treasury stock at cost, 76 and 46 shares at March 31, 2021 and December 31, 2020, respectively

(12,500)

(5,000)

Total stockholders' equity

174,891

157,246

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

326,395

$

276,084

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)

Three months ended March 31,

2021

2020

Operating Activities

Net income

$

41,063

$

18,477

Adjustments to reconcile net income to cash provided by operating activities

Depreciation and amortization

2,013

1,659

Share-based compensation

2,198

981

Amortization of premium on investment securities

28

95

Deferred income taxes

-

37

Change in operating assets and liabilities:

Accounts receivable

496

1,047

Inventories

(8,842)

888

Income taxes, prepaid

-

4,976

Prepaid expenses and other current assets

(762)

(1,397)

Other assets

(70)

(1,764)

Accounts payable and accrued expenses

29,202

1,736

Net cash flow provided by operating activities

65,326

26,735

Investing Activities

Sale and maturities of investment securities

3,720

1,000

Purchase of property and equipment

(4,598)

(294)

Net cash flow (used in) provided by investing activities

(878)

706

Financing Activities

Options exercised by executives and directors

481

-

Net shares repurchased for employee taxes

(1,807)

(487)

Cash dividends paid to stockholders

(13,392)

(13,254)

Stock repurchases

(7,500)

-

Net cash flow used in financing activities

(22,218)

(13,741)

Foreign currency impact

78

(4)

Increase in cash and cash equivalents

42,308

13,696

Cash and cash equivalents - beginning of period

163,723

76,974

Cash and cash equivalents - end of period

$

206,031

$

90,670

Supplemental disclosure of cash flow information:

Income taxes paid

$

56

$

80

Dividends declared included in accounts payable

$

17,292

$

13,566

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)

Three months ended March 31, 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 employee 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

Three months ended March 31, 2020

Number of Shares Issued

Common Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

Total

Balance, December 31, 2019

12,272

$

12

$

-

$

25

$

168,788

$

(63,993)

$

104,832

Net income

-

-

-

-

18,477

-

18,477

Share-based compensation

7

-

981

-

-

-

981

Net shares repurchased for employee taxes

(5)

-

(487)

-

-

-

(487)

Treasury stock retired from stock repurchases

(489)

-

-

-

(63,993)

63,993

-

Other comprehensive income

-

-

-

45

-

-

45

Cash dividends declared to stockholders

-

-

-

-

(13,099)

-

(13,099)

Balance, March 31, 2020

11,785

$

12

$

494

$

70

$

110,173

$

-

$

110,749

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

6

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, 2020 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, 2020 (“2020 Form 10-K”).

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2021. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the 2020 audited consolidated financial statements and notes thereto, which are included in the 2020 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.

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 2021

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The standard also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. Upon adoption of the standard, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. On January 1, 2021, the Company adopted ASU 2019-12. There was no material impact on the Company’s condensed consolidated financial statements upon adoption. 

2. INVENTORIES

Inventories consist principally of raw materials 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.

7

Inventories consisted of the following (in thousands):

March 31, 2021

December 31, 2020

Raw materials

$

11,159

$

13,428

Packaging

2,510

4,071

Non-food finished goods

10,649

8,078

Finished goods

40,509

29,858

Reserve for obsolete inventory

(2,593)

(2,043)

Total

$

62,234

$

53,392

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 March 31,

2021

2020

Numerator:

Net income

$

41,063

$

18,477

Denominator:

Weighted average shares of common stock outstanding

11,772

11,772

Effect of dilutive common stock equivalents

109

52

Weighted average shares of common stock outstanding

11,881

11,824

Earnings per share - basic

$

3.49

$

1.57

Earnings per share - diluted

$

3.46

$

1.56

The calculation of diluted EPS excluded 0 and 1,413 antidilutive options outstanding for the three months ended March 31, 2021 and 2020, respectively. The calculation of diluted EPS also excluded 267 and 14,940 antidilutive restricted stock awards for the three months ended March 31, 2021 and 2020, respectively.  

4. SHARE-BASED COMPENSATION

Stock Options

The Company has issued non-qualified and incentive stock options to employees and nonemployee 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 March 31, 2021, 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 $171.68. 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 three

8

months ended March 31, 2021 and 2020, the Company did not grant stock options. The following table is a summary of our stock option activity:

Three months ended March 31,

2021

2020

Awards

Weighted-Average Exercise Price

Awards

Weighted-Average Exercise Price

(awards in thousands)

Outstanding at beginning of period

61

$

48.19

97

$

52.51

Exercised

(11)

42.62

-

-

Outstanding at end of the period

50

$

49.43

97

$

52.51

Exercisable at end of the period

41

$

44.93

72

$

46.86

As of March 31, 2021, the weighted-average remaining contractual life for outstanding stock options was 5.6 years with an aggregate intrinsic value of $8.3 million and the weighted-average remaining contractual life for exercisable stock options was 5.2 years with an aggregate intrinsic value of $6.8 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of March 31, 2021 was $0.2 million and is expected to be recognized over a weighted average period of 1.9 years. For the three months ended March 31, 2021, the Company received $0.5 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the three months ended March 31, 2021 was $2.3 million. For the three months ended March 31, 2020, there was 0 exercise activity of stock options.

Restricted Stock

The Company has issued restricted stock to employees and nonemployee 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:

Three months ended March 31,

2021

2020

Shares

Weighted-Average Grant Date Fair Value

Shares

Weighted-Average Grant Date Fair Value

(shares in thousands)

Outstanding at beginning of period

50

$

116.06

46

$

98.28

Granted

17

253.03

29

100.68

Vested

(14)

109.14

(21)

66.73

Forfeited

-

-

(3)

105.29

Outstanding at end of the period

53

$

157.80

51

$

112.43

The Company withheld 6,814 and 4,718 shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the three months ended March 31, 2021 and 2020, respectively. The total fair value of restricted stock awards vested during the three months ended March 31, 2021 and 2020 was $3.9 million and $2.2 million, respectively.

The total share-based compensation charged against income was $2.2 million and $1.0 million during the three months ended March 31, 2021 and 2020, respectively. The total costs of the options and restricted stock awards charged against income was $0.9 million and $0.7 million during the three months ended March 31, 2021 and 2020, respectively. Included for the three months ended March 31, 2021 and 2020 was $0.7 million and $0.2 million, respectively, for 16,637 performance-based contingent shares for certain key executives granted in 2019. Also included for the three months ended March 31, 2021 and 2020 was $0.5 million and $0.1 million, respectively, for 27,525 and 25,738 performance-based contingent shares for certain key executives granted in 2020, respectively. Additionally, included for the three months ended March 31, 2021 was $0.1 million for 14,232 performance-based contingent shares for certain key executives granted in 2021.

9

The total income tax benefit recognized in the Condensed Consolidated Statements of Income for restricted stock awards was $1.2 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

There was $6.8 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2021, which is expected to be recognized over a weighted-average period of 2.4 years. There was $8.3 million of unrecognized compensation cost related to the 58,394 performance-based shares discussed above as of March 31, 2021, which is expected to be recognized over 2.1 years.

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 0t have any finance leases as of March 31, 2021 and December 31, 2020, respectively, or for the three-month periods ended March 31, 2021 and 2020, respectively.

Our leases relating to office and warehouse space have lease terms of 19 to 122 months. Our leases relating to equipment have lease terms of 24 to 203 months, with certain leases having clauses relating to automatic renewal.  

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 will be recognized as expense when they are incurred.

The operating lease expense was $1.0 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.

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

Three months ended March 31,

2021

2020

Cash paid for amounts included in the measurements of lease liabilities

Operating cash flow used in operating leases

$

1,002

$

906

Right-of-use assets obtained in exchange for lease obligations

Operating leases

$

11

$

-

As of March 31, 2021, the weighted average remaining lease term was 3.5 years and the weighted average discount rate was 3.5%.

The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2021 (in thousands):

2021 (excluding the three months ended March 31, 2021)

$

2,998

2022

3,400

2023

1,851

2024

1,234

2025

1,248

Thereafter

203

Total lease payments

$

10,934

Less: imputed interest

(680)

Total

$

10,254

10

6. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

March 31, 2021

December 31, 2020

Foreign currency translation

$

56

$

(22)

Unrealized gains on investment securities

47

63

Accumulated other comprehensive income

$

103

$

41

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.

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):

March 31, 2021

Cost

Unrealized Gains

Accrued Interest

Estimated Fair Value

Cash & Cash Equivalents

Investment Securities

Cash

$

198,186

$

-

$

-

$

198,186

$

198,186

$

-

Level 1:

Money market accounts

7,845

-

-

7,845

7,845

-

Government & agency securities

2,828

36

11

2,875

-

2,875

10,673

36

11

10,720

7,845

2,875

Level 2:

Municipal bonds

3,942

35

31

4,008

-

4,008

Total

$

212,801

$

71

$

42

$

212,914

$

206,031

$

6,883

11

December 31, 2020

Cost

Unrealized Gains

Accrued Interest

Estimated Fair Value

Cash & Cash Equivalents

Investment Securities

Cash

$

159,754

$

-

$

-

$

159,754

$

159,754

$

-

Level 1:

Money market accounts

3,969

-

-

3,969

3,969

-

Government & agency securities

2,829

45

-

2,874

-

2,874

6,798

45

-

6,843

3,969

2,874

Level 2:

Municipal bonds

7,689

42

147

7,878

-

7,878

Total

$

174,241

$

87

$

147

$

174,475

$

163,723

$

10,752

The Company had 0 realized losses or gains for the three months ended March 31, 2021 and 2020, respectively. The maturities of the Company’s investment securities generally range up to 2 years for municipal bonds and for government and agency securities.

8. SUBSEQUENT EVENT

Credit Agreement

On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “Credit Agreement”; capitalized terms used herein and not otherwise defined are used as defined in the Credit Agreement) among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent. The Credit Agreement provides for a $125.0 million senior secured revolving credit facility with a $20.0 million letter of credit sublimit. The Credit Agreement also provides for an uncommitted incremental facility that permits the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $100.0 million. The Credit Agreement matures on April 13, 2026.

The Company’s obligations under the 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 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 Credit Agreement. The Company is also obligated to pay the administrative agent customary fees for credit facilities of this size and type.

 

Revolver borrowings under the Credit Agreement bear interest at a rate per annum equal to (i) the Adjusted LIBOR Rate for the Interest Period therefor plus the Applicable Rate based on the Company’s Total Net Leverage Ratio (with customary provisions under the Credit Agreement providing for the replacement of LIBOR with a successor rate) or (ii) the Alternate Base Rate as in effect from time to time plus the Applicable Rate based on the Company’s Total Net Leverage Ratio. As of the Effective Date, the Applicable Rate for Eurodollar Loans is 1.25% per annum and the Applicable Rate for ABR Loans is 0.25% per annum.

 

The 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

12

into transactions with affiliated persons, make investments and change the nature of their businesses. The 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 Credit Agreement requires the Company to maintain a Total Net Leverage Ratio of no more than 3.00 to 1.00 and an Interest Coverage Ratio of at least 3.50 to 1.00.

The Company has no borrowings under the Credit Agreement as of the date of this report.

Recently Issued Accounting Pronouncements – Pending Adoption

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide 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 are currently evaluating our contracts and the optional expedients provided by the new standard as it pertains to the Credit Agreement previously described.

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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 Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend," “anticipate,” “expects” 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 the management of Medifast 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 2020 Form 10-K, this Form 10-Q 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.

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 revenue over the past five years. Of equal importance, we expect our differentiated model to deliver long-term growth in the foreseeable future.

Medifast has created a new business model by combining the most powerful aspects of direct selling, while eliminating those dimensions that have typically challenged other companies. Medifast is often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different. We employ a differentiated direct-to-consumer sales model in which 91.0% of our revenue comes from subscription-based meal-plan orders.

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 clients 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 clients achieve their health goals through a network of more than 52,000 independent OPTAVIA Coaches, 90.0% of whom were clients first, and have impacted 2.0 million lives to date. OPTAVIA Coaches introduce clients to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTAVIA-branded nutritional products, or Fuelings. Fuelings 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 clients’ day-to-day lives.

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The OPTAVIA coaching model is client-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 clients and motivate them by sharing their passion for healthy living and lifestyle transformation. We believe this personal coaching is an essential factor in client success based on findings from a clinical study published in Obesity Science and Practice in 2018, which validated the OPTAVIA model when its meal plan was combined with education and support consistent with that 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 clients, 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 clients and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms. As entrepreneurs, OPTAVIA Coaches market our products to friends, family and other acquaintances. OPTAVIA products are shipped directly to OPTAVIA clients who are working with an OPTAVIA Coach. OPTAVIA Coaches do not handle or deliver merchandise to clients. 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. Our scalable coach-based approach drives both client success and growth. We believe our continued investment in fostering a robust community around our OPTAVIA brand and our OPTAVIA Coaching Model will continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.

Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTAVIA, LLC, Jason Enterprises, Inc., Jason Properties, LLC, Medifast Franchise Systems, Inc., 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. The Company outsources a distribution center in Hong Kong to give the Company adequate product distribution capacity for the foreseeable future in these markets.

COVID-19 Update

A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a worldwide pandemic. As of April 2021, the virus continues to spread and has had a significant impact on worldwide economic activity and on macroeconomic conditions.

In response to the pandemic, many governments implemented policies intended to stop or slow the further spread of the disease, such as social distancing guidelines, shelter-in-place orders and other measures in response to the COVID-19

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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pandemic. Nutritional supplements and health foods have been designated critical/essential infrastructure in the U.S.  As a manufacturer and distributer of these products our manufacturing and distribution facilities remain fully operational to date and we have not experienced any meaningful disruption to our worldwide supply chain.  The Company’s priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees and OPTAVIA Coaches, and their families and we have undertaken numerous steps and instituted additional precautions to protect their safety and well-being, including:

instituting enhanced safety protocols, limited visitation to our plant and distribution center and rolling out additional sick leave (crisis pay) for our onsite essential employees;
successfully implementing a work-from-home plan for all non-essential employees to comply with guidelines from government and health officials and also extended crisis pay;
changing the July 2020 OPTAVIA convention from a live event to a virtual event;
prioritizing production to our highest volume products limiting our stock keeping unit (“SKU”) assortment to ensure that we are able to meet anticipated product demand across core items;
providing additional health and safety precautions in our headquarters, manufacturing and distribution centers, including use of personal protective equipment and frequent hand sanitization; and
process controls in relation to social distancing, visitors, travel and quarantine.

Vaccines are available in various countries and distribution of the vaccine also varies by country and in the U.S. by state. The duration and severity of this COVID-19 pandemic is uncertain, and 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 estimates. Factors that could cause actual results to differ from management’s estimates include inherent uncertainties regarding the duration and further spread of the outbreak, its severity, 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 health and safety of its various constituencies, and will continue to proactively respond to the situation and communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels. 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 consumers.

These uncertainties make it challenging for our management to estimate our future business performance. However, we intend to continue to actively monitor the impact of COVID-19 and related developments on our business.

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 1 to the unaudited condensed consolidated financial statements included in this report. We consider all of our significant accounting policies and estimates to be critical.

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.

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Overview of Results of Operations

Our product sales accounted for approximately 98.0% of our revenues for each of the three months ended March 31, 2021 and 2020.

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

Three months ended March 31,

2021

2020

$ Change

% Change

Revenue

$

340,669

$

178,461

$

162,208

90.9%

Cost of sales

92,122

43,221

(48,901)

(113.1)%

Gross profit

248,547

135,240

113,307

83.8%

Selling, general, and administrative

195,748

111,707

(84,041)

(75.2)%

Income from operations

52,799

23,533

29,266

124.4%

Other income

Interest income, net

23

110

(87)

(79.1)%

Other income (expense)

19

(19)

38

(200.0)%

42

91

(49)

(53.8)%

Income from operations before income taxes

52,841

23,624

29,217

123.7%

Provision for income tax

11,778

5,147

(6,631)

(128.8)%

Net income

$

41,063

$

18,477

$

22,586

122.2%

% of revenue

Gross profit

73.0%

75.8%

Selling, general, and administrative

57.5%

62.6%

Income from operations

15.5%

13.2%

Income from operations before income taxes

15.5%

13.2%

Revenue:  Revenue increased $162.2 million, or 90.9%, to $340.7 million for the three months ended March 31, 2021 from $178.5 million for the three months ended March 31, 2020. The average revenue per active earning OPTAVIA Coach was $6,454 for the three months ended March 31, 2021 compared to $5,333 for the three months ended March 31, 2020. Increase in the productivity per active earning OPTAVIA Coach for the quarter was driven by an increase in both the number of clients supported by each Coach as well as an increase in average client spend. The year-over-year growth in revenue resulted from more clients participating in our Optimal Weight 5 & 1  Plan®OPTAVIA-branded products represented 88.9% of consumable units sold for the three months ended March 31, 2021 compared to 79.0% for the corresponding period in 2020. Consistent with business and brand strategy, the Company decided to sunset the Medifast-branded product line by the end of the second quarter of 2021.

Costs of sales:  Cost of sales increased $48.9 million, or 113.1%, to $92.1 million for the three months ended March 31, 2021 from the corresponding period in 2020. The increase in cost of sales was primarily driven by an increase in OPTAVIA product sales, higher product costs and shipping costs, as well as inventory write-offs related to the sunset of Medifast-branded product line. Acceleration of demand in OPTAVIA-branded products led to the increase in the Company’s use of co-manufacturers and the increased need to provide expedited shipments of our products to keep customer experience at acceptable levels in advance of our fulfillment capacity being fully on-line, both of these items increased costs.  

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Gross profit:  For the three months ended March 31, 2021, gross profit increased $113.3 million, or 83.8%, to $248.5 million from the corresponding period in 2020. As a percentage of revenue, gross profit decreased 280 basis points to 73.0% for 2021 from 75.8% for 2020. The decrease in gross profit as a percentage of revenue was primarily driven by higher product costs and shipping costs, as well as obsolescence costs associated with the sunset of Medifast-branded product line. 

Selling, general, and administrative:  Selling, general, and administrative (“SG&A”) expenses were $195.7 million for the three months ended March 31, 2021, an increase of $84.0 million, or 75.2%, as compared to $111.7 million from the corresponding period in 2020. As a percentage of revenue, SG&A expenses were 57.5% as compared to 62.6% for the three months ended March 31, 2021 and 2020, respectively. The $84.0 million increase in SG&A for the quarter was primarily due to higher OPTAVIA commission expense, increased salaries and benefits related expenses for employees and increased credit card fees resulting from higher sales. SG&A expenses included research and development (“R&D”) costs of $1.0 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

OPTAVIA commission expense, which is a variable expense, increased $71.9 million, or 96.7%, to $146.2 million for the three months ended March 31, 2021 from $74.3 million for the corresponding period in 2020. The increase was primarily the result of increased OPTAVIA product sales. As OPTAVIA revenue increased as a portion of the Company’s total sales mix, the commission rate as a percentage of revenue increased 130 basis points to 42.9% for the first quarter of 2021 compared to 41.6% for the corresponding quarter last year. This trend is the result of the success we are experiencing with our growing OPTAVIA Integrated Coach Model. The total number of active earning OPTAVIA Coaches for the three months ended March 31, 2021 increased to 52,500 from 32,600 for the corresponding period in 2020, an increase of 61.0%.

Income from operations:  For the three months ended March 31, 2021, income from operations increased $29.3 million to $52.8 million from $23.5 million for the corresponding period in 2020 primarily as a result of increased gross profit partially offset by increased SG&A expenses. Income from operations as a percentage of revenue was 15.5% and 13.2% for the three months ended March 31, 2021 and 2020, respectively.

Other income:  For the three months ended March 31, 2021 and 2020, other income (including interest income) was $0.0 million and $0.1 million, respectively.

Income from operations before income taxes:  Income from operations before income taxes was $52.8 million for the three months ended March 31, 2021 as compared to $23.6 million for the three months ended March 31, 2020, an increase of $29.2 million. Income from operations before income taxes as a percentage of revenue increased to 15.5% for the three months ended March 31, 2021 from 13.2% for the three months ended March 31, 2020.

Provision for income tax:  For the three months ended March 31, 2021, the Company recorded $11.8 million in income tax expense, an effective tax rate of 22.3%, as compared to $5.1 million in income tax expense, an effective tax rate of 21.8%, for the three months ended March 31, 2020. The slight increase in the effective tax rate was primarily driven by an increase in the state income tax rate and limitations on the deductibility of officer compensation offset by an increase in the tax benefit of stock compensation.

Net income: Net income was $41.1 million and $18.5 million, or $3.46 and $1.56 per diluted share, for the three months ended March 31, 2021 and 2020, respectively. The period-over-period changes were driven by the factors described above. 

Liquidity and Capital Resources

The Company had stockholders’ equity of $174.9 million and working capital of $137.0 million at March 31, 2021 as compared with $157.2 million and $123.0 million at December 31, 2020, respectively. The $17.7 million net increase in stockholders’ equity reflects $41.1 million in net income for the three months ended March 31, 2021 offset by $7.5 million spent on repurchases of the Company’s common stock and $16.9 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 our condensed consolidated financial statements included in this report. The Company declared a quarterly dividend of $1.42 per share on March 18, 2021, to stockholders of record as of March 30, 2021 that will be paid in the second quarter of 2021. While we intend to continue the dividend program and believe

18

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 increased from $174.5 million at December 31, 2020 to $212.9 million at March 31, 2021.  

Net cash provided by operating activities increased $38.6 million to $65.3 million for the three months ended March 31, 2021 from $26.7 million for the three months ended March 31, 2020 as a result of a $22.6 million increase in net income and $14.5 million increase in operating assets and liabilities.

Net cash used in investing activities was $0.9 million for the three months ended March 31, 2021 as compared to net cash provided by investing activities of $0.7 million for the three months ended March 31, 2020. This change resulted from a $4.3 million increase in cash used in capital expenditures for the three months ended March 31, 2021 from the corresponding period in 2020 partially offset by a $2.7 million increase in sale and maturities of investment securities.

Net cash used in financing activities increased $8.5 million to $22.2 million for the three months ended March 31, 2021 from $13.7 million for the three months ended March 31, 2020. This increase was due to a $7.5 million increase in stock repurchases and a $1.3 million increase in net shares repurchased for employee taxes.

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.

The Company evaluates acquisitions from time to time.

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 investment portfolio. Its current investment policy is to maintain an investment portfolio consisting of municipal bonds and U.S. money market securities directly or through managed funds. Its cash is deposited in and invested through highly rated financial institutions in North America. Its marketable securities are subject to interest rate risk and market pricing risk and will fall in value if market interest rates increase or if market pricing decreases. If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels at March 31, 2021, the Company estimates that the fair value of its investment portfolio 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, 2020.

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 Securities Exchange Act of 1934, as amended, as of March 31, 2021. 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 Exchange 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.

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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 March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 2020 Form 10-K.

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

Issuer Purchases of Equity Securities

2021

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)

January 1 - January 31

-

$

-

-

2,322,512

February 1 - February 28

6,814

265.25

-

2,322,512

March 1 - March 31

30,118

248.99

30,118

2,292,394

(1)Shares of common stock were surrendered by employees to the Company to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock previously granted to such employees.
(2)At the outset of the quarter ended March 31, 2021, there were 2,322,512 shares of the Company's common stock eligible for repurchase under the stock repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan").

As of March 31, 2021, there were 2,292,394 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.

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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).

10.1

Medifast, Inc. Directors’ Deferred Compensation Plan (filed herewith).

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 March 31, 2021 filed May 4, 2021, 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.

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:

 May 4, 2021

/s/ JAMES P. MALONEY

James P. Maloney

Chief Financial Officer

(Principal Financial Officer)

Dated:

 May 4, 2021

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