Medifast Inc: Form 10-Q for the period ended Jun 30, 2025

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”). 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 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 2024 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. We undertake no obligation to update any information contained in this report or to publicly release the results of any revisions to forward-looking statements to reflect events or circumstances of which we may become aware after 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 health and wellness company known for its habit-based and coach-guided lifestyle solution, OPTAVIA®. The Company is currently executing a comprehensive business transformation that is expected to enable it to succeed in an environment that has been fundamentally impacted by rapid acceptance of GLP-11 weight loss medications.

We believe that we are a well-capitalized business with strong and effective leadership that has grown its lifestyle brand, OPTAVIA, into a significant health and wellness brand. We have a powerful business model, building a network of approximately 22,800 active earning OPTAVIA coaches and impacting more than 3 million lives. Backed by more than 40 years of experience, clinically proven plans, innovative products, and a powerful integrated coach model, Medifast stands at the forefront of evidence-based wellness solutions. This coach-first model creates an opportunity for coaches’ individual businesses, and has a flywheel effect as new clients join, which drives revenue and leads to new active earning coaches joining, which generates further revenue and leads to more new clients.

Medifast offers a simple, yet comprehensive approach to achieving optimal health and wellbeing. Our lifestyle program, OPTAVIA, empowers people to make lasting changes. Through the support of our independent OPTAVIA coaches, about 90% of whom were clients first, our clients are guided through every step of their wellness journey.

OPTAVIA's lifestyle plans deliver proven health benefits as well as evidence-based tools, including scientifically developed products and a framework for habit creation reinforced by independent coaches and community support. We continue to innovate and build upon our scientific and clinical heritage to fulfill our mission of offering Lifelong Transformation, Making a Healthy Lifestyle Second Nature™.

OPTAVIA coaches are people who are navigating weight loss at different moments in life, providing unparalleled coaching support along with community, nutrition, and healthy habits. In a world where health and wellbeing are often a difficult and solitary journey, OPTAVIA provides intensely personalized support to people who want to transform their health. We believe this holistic approach empowers people to master their weight loss journey through each stage of life and gives them the freedom to do it on their terms. The lifestyle solution is designed for real life and built around four key components:

• Independent OPTAVIA Coaches: Independent OPTAVIA coaches provide individualized support and guidance to clients on the path to optimal health and wellbeing.
• OPTAVIA Community: A Community of like-minded people provide real-time connection and support.
• The Habits of Health® Transformational System: A proprietary system that offers easy steps to a sustainable healthy lifestyle.
• Products & Plans: Clinically proven plans and scientifically developed products, backed by dietitians, scientists, and physicians.

To ensure that Medifast continues to thrive as a health and wellness business in the rapidly evolving weight-loss market, we have developed distinct coach-supported program offerings tailored to meet the unique needs of three specific client categories on their health and wellness journeys:

1. Those who have never used medications and want to use coach-supported habit-based programs as the core of their weight loss journey;

2. Individuals using GLP-1 medications as a core element of their weight loss program; and

3. People looking to manage weight loss and improved health when they come off GLP-1 medications for whatever reason, including cost, side effects, or any other cause.

For each of these client categories, we are taking an intentional and methodical approach to building out our offerings to ensure that we can provide compelling products and services to new, former, and current coaches and clients, regardless of where they are on their personal health and wellness journeys.

While the usage of GLP-1 medications continue to accelerate, recent research showed that about one-third of users quit taking the medication after six months, and that rose to as much as 74% after a year.2 Furthermore, research also shows that two-thirds of weight lost on GLP-1 medications is typically regained within 12 months of stopping treatment, with cardiometabolic

1 Medical advice, treatment, prescriptions, and the overall practice of medicine must be provided by a licensed healthcare professional. OPTAVIA and its coaches do not engage in or provide any medical services.

2 Grosicki et al. Diabetes Obes Metab. 2025; https://pubmed.ncbi.nlm.nih.gov/39743934/ benefits often reversing as well.3 The rapid adoption of GLP-1 medications has brought more attention to weight loss than ever before; however, there still is no magic solution. GLP-1 medications can be a powerful appetite suppressant, but the medication alone will not yield sustainable lifestyle change. Lifestyle change is required to maintain a healthy weight, muscle and metabolic health, but it’s not easy. It takes commitment, consistency, and support to achieve optimal health.

For audiences looking for a GLP-1 based solution, we have built a collaboration with national virtual primary care provider, LifeMD. Eligible OPTAVIA clients have access to board-certified affiliated clinicians and medications, where appropriate, such as GLP-1 medications, that support treatment plans for obesity. With the medications having been shown to be highly effective in conjunction with lifestyle changes, we believe there is strong compatibility with our experience of helping people achieve change through habit-based systems. In the second quarter of 2025 we made the decision to sell our investment in LifeMD, Inc (Nasdaq: LFMD) common stock; however, we continue to collaborate with LifeMD, Inc. and offer our clients access to clinicians and GLP-1 weight loss medications, where clinically appropriate.

Medifast is ensuring our OPTAVIA coaches are best positioned for success in the GLP-1 environment. Regardless of need state, our integrated coach-supported, lifestyle-based approach helps clients achieve their health goals. OPTAVIA coaches, about 90% of whom were clients first, introduce clients to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTAVIA-branded products. OPTAVIA products and plans are one component that support the Company’s mission, and our portfolio of products help make it easier for clients to create healthy habits in their lives.

Finding new clients and reactivating former clients who do not wish to use medications remains an important area of focus for our business. Our scientifically designed Fuelings, as well as innovative products like OPTAVIA ASCEND and OPTAVIA ACTIVE® continue to address the needs of these clients. We also continue to work on enhancing our digital tools and improving the client experience to help us achieve our goals. We believe our coach-based model is scalable and drives both client success and growth, and is a key competitive advantage.

In all cases, the OPTAVIA coaching model is heavily focused on clients’ needs, helping place them into supportive and energized health and wellness communities that share similar challenges and goals. With a coach, clients successfully lost 10 times more weight and 17 times more fat than those who tried to lose weight on their own4. OPTAVIA coaches provide highly tailored and personalized support to clients and motivate them by sharing their passion for healthy living and lifestyle transformation. Despite the vast geographies and backgrounds, our coaches are a tight-knit community that supports, encourages and inspires one another.

OPTAVIA coaches are central to everything that we do, helping to foster a continuous cycle of growth, and attracting and 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.5

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, X (formerly known as Twitter), and video conferencing platforms. As independent contractors, OPTAVIA coaches market our products to friends, family, and other people in their communities. OPTAVIA products are shipped directly to OPTAVIA clients. 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.

3 Wilding, et al; STEP 1 Study Group. Diabetes Obes Metab. 2022; https://pubmed.ncbi.nlm.nih.gov/35441470/

4 In a clinical study, the group on the OPTAVIA 5 & 1 Plan® lost 17x more fat than the self-directed control group.

5 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/ids**OPTA**VIA) for statistics on actual earnings of coaches.

Medifast supports coaches by providing tools and resources to help them build their business while incorporating the latest scientific research into innovations. This includes leveraging shared success stories, leadership development, and best practices from experienced coaches. Recently launched programs offer a clear roadmap, incentives, and recognition to help coaches grow their business. One such initiative is the new EDGE program, which emphasizes progressive business building behaviors and rewards, designed to be easily adoptable by new and experienced coaches alike. The behavior-designed system is focused on leading indicators of success, not just outcomes or ranking. While the main goals of the program are to provide a structured approach for coaches to maximize their potential, improve their leadership skills, expand their reach, and achieve recognition for their progress, the Company also expects that an outcome of the program will be increased client acquisition and conversion of clients into new coaches. We also rolled out Premier+ in early July, a refresh of OPTAVIA’s autoship program. Premier+ offers a new tiered pricing discount on monthly orders, reduces list pricing on some of the most popular products, and provides a more reliable and predictable compensation structure. These changes were implemented with the intent of making acquiring and retaining clients easier for our coaches. Medifast also remains focused on providing enhanced digital tools to support the management of the coach business to streamline administrative tasks, freeing up coaches to focus their efforts on what matters most: supporting their clients.

We believe the Company’s integrated approach that combines lifestyle coaching, community support, and where warranted, access to medical solutions through LifeMD, positions the business to meet the needs of a broader spectrum of clients. By focusing on innovative products, enhanced client experiences, and effective marketing strategies, Medifast has created and is continuing to enhance a differentiated and compelling offer. Its financial strength, operational flexibility, and client-centric philosophy equip the Company to navigate the changing weight loss market and drive sustainable growth.

Macroeconomic Conditions

Certain global economic challenges, including the impact of inflation or tariffs, have caused macroeconomic uncertainty and volatility in markets where we, our suppliers, and our OPTAVIA coaches operate.

Like many product-focused companies, we are exposed to market risks from changes in commodity or other raw material prices. An inflationary economy could impact our cost structure and put pressure on consumer spending. Increases in commodity prices or food costs, including as a result of inflation or tariffs, could affect the global and U.S. economies and could also adversely impact our business, financial condition, or results of operations. Additionally, changes in tariff regulations, particularly those involving trade between the United States and key global markets, may affect the cost and availability of certain raw materials. While the full impact of potential tariff policy changes remains uncertain, we remain attentive to policy developments, and we may reassess our supply chain and investment strategies in response to further volatility in the trade environment.

Our variable cost structure can be utilized to adapt to changing market conditions with potential actions including adjustments to our manufacturing, distribution, and client support infrastructure. As a response, we may periodically take incremental pricing actions to offset supply chain costs, increases in tariff related costs, and inflationary pressures. In addition, prolonged tariff uncertainty may influence consumer sentiment and purchasing behavior, particularly in discretionary spending categories. Fluctuations in consumer confidence, driven by economic concerns or anticipated price increases, could reduce demand for our products.

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 clients, and stockholders. Our ability to effectively navigate these developments is critical to maintaining operational resilience and achieving our long-term strategic objectives. 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 these developments on our business and will update our practices accordingly.

Competition

The weight loss industry is very competitive and encompasses a multitude of weight loss products and programs. These include a wide variety of commercial weight loss programs, pharmaceutical products, surgical interventions, books, self-help diets, dietary meal replacements, and appetite suppressants as well as digital tools, app-based health and wellness monitoring solutions, and wearable trackers. The weight loss market is served by a diverse array of competitors. Potential clients seeking to manage their weight can turn to traditional center-based competitors, online diet-oriented sites, self-directed dieting and self-administered products such as prescription medications, over-the-counter medications and supplements, as well as medically supervised programs. Recently, it became clear that medical weight loss solutions, such as GLP-1 medications, have become an increasingly key component of the overall health and wellness ecosystem, and the recent surging awareness and popularity of these weight loss medications serve as another major competitor, as these products have prompted a huge change in the way that consumers think about weight loss and lifestyle modification solutions in general. We recognize that these weight loss medications have attracted significant attention from the market and pose a threat to our interactions with our traditional client base. Importantly, the efficacy claims of GLP-1 medications for weight loss are based specifically on their incorporation of lifestyle changes that include a reduced calorie diet and increased physical activity. As a result, under Medifast’s OPTAVIA offering, weight loss medications can be an important element that fits into the overall tailored OPTAVIA lifestyle plans that also include coaching, community support, nutritionally balanced meals, and exercise.

We believe we have a competitive advantage over traditional diet companies. The OPTAVIA model:

• Offers a solution that focuses on holistic wellness; it views healthy weight as a catalyst to greater changes and has impacted more than 3 million lives.
• Provides personalized, empathetic support from coaches who have been in their clients’ shoes.
• Promotes lifelong habit development supported by a proprietary integrated approach to behavior change, the Habits of Health Transformational System.
• Encompasses a vibrant health and wellness community.

We also compete with other direct-selling organizations, some of which have a longer operating history and greater visibility, name recognition and financial resources than we do. We also believe we have advantages over traditional direct selling companies:

• OPTAVIA’s innovative model is client-centric, with one sales price for both OPTAVIA coaches and clients. There is no tiered pricing.
• OPTAVIA boasts a health and wellness community, which promotes a holistic health and wellness program and is not focused solely on product sales.
• OPTAVIA offers a differentiated direct-to-consumer model, with 100% of products shipped directly to clients.
• The field promotes a unified Habits of Health training system that aligns its leaders around a common mission of Lifelong Transformation, Making a Healthy Lifestyle Second Nature.

We believe our scientific and clinical heritage combined with our commitment to evaluating programs, plans, and products through clinical research are primary differentiators that allow us to compete in these markets. Our scientifically designed products were originally developed by a physician, and we have been on the cutting edge in the development of nutrition and weight-management products since our founding.

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

Critical Accounting Policies and Estimates

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. 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 2024 Form 10-K. There were no significant changes in our critical estimates or policies during the first six months of 2025.

Overview of Results of Operations

Our product sales accounted for approximately 96% and 97% of our revenues for the three months ended June 30, 2025 and 2024, respectively, and approximately 97% for each of the six months ended June 30, 2025 and 2024.

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

21

Revenue: Revenue decreased $63.0 million, or 37.4%, to $105.6 million for the three months ended June 30, 2025 from $168.6 million for the three months ended June 30, 2024. The decline in revenue for the three months ended June 30, 2025 was primarily driven by a decrease in the number of active earning OPTAVIA coaches to 22,800 as of June 30, 2025, a 32.7% decrease from 33,900 as of June 30, 2024. Revenue decreased $122.0 million, or 35.5%, to $221.3 million for the six months ended June 30, 2025 from $343.3 million for the six months ended June 30, 2024. The decline in revenue for the six months ended June 30, 2025 was driven by a decrease in the number of active earning OPTAVIA coaches. The number of active earning OPTAVIA coaches has been trending downward year-over-year since the first quarter of 2023. The decrease in active earning OPTAVIA coaches for the three and six months ended June 30, 2025 was driven by continued challenges with client acquisition. The average revenue per active earning OPTAVIA coach was $4,630 for the three months ended June 30, 2025, a 6.9% decrease compared to $4,972 for the three months ended June 30, 2024. Revenue per active earning OPTAVIA coach has been trending downward year-over-year since the third quarter of 2022 due to lower sales volumes. The decrease in productivity per active earning OPTAVIA coach for the three months ended June 30, 2025 was driven by continued pressure with client acquisition reflecting broader challenges in the operating environment, including rapid adoption of GLP-1 medications for weight loss.

Cost of sales: Cost of sales decreased $16.2 million, or 35.9%, to $28.9 million from $45.1 million for the three months ended June 30, 2025 from the corresponding period in 2024. The decrease in cost of sales for the three months ended June 30, 2025 was primarily driven by decreased volumes. Cost of sales decreased $32.2 million, or 34.8%, to $60.4 million from $92.6 million for the six months ended June 30, 2025. The decrease in cost of sales for the six months ended June 30, 2025 was primarily driven by decreased volumes.

Gross profit: Gross profit decreased $46.8 million, or 37.9%, to $76.6 million from $123.4 million for the three months ended June 30, 2025 from the corresponding period in 2024. The decrease in gross profit for the three months ended June 30, 2025 was due to lower revenue. As a percentage of revenue, gross profit decreased 60 basis points to 72.6% for the three months ended June 30, 2025 from 73.2% for the corresponding period in 2024. For the six months ended June 30, 2025, gross profit decreased $89.8 million, or 35.8%, to $160.9 million from $250.7 million for the six months ended June 30, 2024. The decrease in gross profit for the six months ended June 30, 2025 was due to lower revenue. As a percentage of revenue, gross profit decreased 30 basis points to 72.7% for the six months ended June 30, 2025 from 73.0% for the corresponding period in 2024.

Selling, general, and administrative (“SG&A”): SG&A expenses were $77.7 million for the three months ended June 30, 2025, a decrease of $53.6 million, or 40.8%, as compared to $131.3 million from the corresponding period in 2024. SG&A expenses decreased for the three months ended June 30, 2025 primarily due to a $24.3 million decrease in OPTAVIA coach compensation as a result of fewer active earning coaches and lower volumes. Additionally, the Company incurred costs in the second quarter of 2024 that did not recur in the second quarter of 2025, including $12.5 million for supply chain optimization, $3.0 million for cancellation of the OPTAVIA convention in future years, and $2.0 million for the Company’s collaboration with LifeMD. As a percentage of revenue, SG&A expenses were 73.6% for the three months ended June 30, 2025 as compared to 77.9% for the corresponding period in 2024. SG&A expenses as a percentage of revenue decreased for the three months ended June 30, 2025 primarily reflecting approximately 740 basis points for supply chain optimization initiatives and 180 basis points for cancellation of OPTAVIA convention incurred in the second quarter of 2024 that did not recur in the second quarter of 2025, partially offset by 440 basis points attributable to the loss of leverage on fixed costs due to lower sales volumes. SG&A expenses included research and development costs of $1.1 million for both the three months ended June 30, 2025 and 2024, in connection with the development of new products and plans, and clinical research activities. SG&A expenses were $163.2 million for the six months ended June 30, 2025, a decrease of $87.4 million, or 34.9%, as compared to $250.7 million from the corresponding period in 2024. SG&A expenses decreased for the six months ended June 30, 2025 primarily due to an approximately $46.8 million decrease in OPTAVIA coach compensation as a result of fewer active earning coaches and lower volumes. Additionally, the Company incurred costs during the six months ended June 30, 2024 that did not recur during the six months ended six months ended June 30, 2025, including $12.5 million for supply chain optimization, $5.2 million of market research and LifeMD collaboration costs related to medically support weight loss, and $3.0 million for cancellation of the OPTAVIA convention in future years. As a percentage of revenue, SG&A expenses were 73.8% for the six months ended June 30, 2025 as compared to 73.0% for the corresponding period in 2024 primarily reflecting 410 basis points attributable to the loss of leverage on fixed costs due to lower sales volumes and 130 basis points attributable to company led marketing efforts, partially offset by approximately 360 basis points for supply chain optimization initiatives and 150 basis points for market research and LifeMD collaborations costs incurred during the six months ended June 30, 2024 that that did not recur in the six months ended June 30, 2025. SG&A expenses included research and development costs of $2.2 million and $2.1 million for the six months ended June 30, 2025 and 2024, respectively, in connection with the development of new products and plans, and clinical research activities.

Income (loss) from operations: For the three months ended June 30, 2025, the Company’s loss from operations was $1.1 million, a $6.8 million improvement from the $7.9 million loss from operations for the corresponding period in 2024 primarily as a result of decreased SG&A expenses partially offset by decreased gross profit. For the three months ended June 30, 2025 the Company’s loss from operations as a percentage of revenue was 1.0% as compared to 4.7% for the corresponding period in 2024, due to the factors described above impacting SG&A expenses, partially offset by the factors impacting gross profit. For the six months ended June 30, 2025, the Company’s loss from operations was $2.3 million, a $2.4 million decrease as compared to the Company’s income from operations of less than $0.1 million for the corresponding period in 2024 primarily as a result of decreased gross profit, partially offset by the factors impacting SG&A expenses. Loss from operations as a percentage of revenue decreased to 1.1% for the six months ended June 30, 2025 from income from operations as a percentage of revenue of less than 0.1% for the corresponding period in 2024 due to the factors above impacting gross profit, partially offset by the factors impacting SG&A expenses.

Other income: Other income for the three months ended June 30, 2025 was $3.9 million, an increase of $6.7 million, or 242.1%, as compared to other expenses of $2.8 million for the corresponding period in 2024. The increase in other income for the three months ended June 30, 2025 was primarily due to a $2.6 million gain on our investment in LifeMD common stock, compared to a loss on investment of $4.2 million for the corresponding period in 2024. The Company sold its investment in LifeMD during the current quarter. Other income for the six months ended June 30, 2025 was $5.7 million, an increase of $4.9 million, or 557.1%, as compared to other income of $0.9 million for the corresponding period in 2024. The increase in other income for the six months ended June 30, 2025 was primarily due to a $3.2 million gain on our investment in LifeMD common stock, compared to a loss on investment of $1.8 million for the corresponding period in 2024.

Provision for income taxes: For the three months ended June 30, 2025, the Company recorded $0.4 million in income tax expense, an effective tax rate of 13.7%, as compared to an income tax benefit of $2.5 million, an effective tax rate of 23.4%, for the three months ended June 30, 2024. The decrease in the effective tax rate for the three months ended June 30, 2025 was primarily driven by the increase in the limitation for executive compensation, which was magnified by the near break-even pre-tax position in the current year. For the six months ended June 30, 2025, the Company recorded $1.7 million in income tax expense, an effective tax rate of 49.8%, as compared to $0.8 million, an effective tax rate of 82.6%, for the six months ended

June 30, 2024. The decrease in the effective tax rate for the six months ended June 30, 2025 was primarily driven by the change in a tax shortfall for stock compensation which represented 75.2% of the change and the change in the limitation for executive compensation, which represented 7.2% of the change partially offset by the aggregation of several smaller items, totaling 49.7%. These changes were magnified by the near break-even pre-tax position in both periods.

Net income (loss): Net income was $2.5 million, or $0.22 per diluted share for the three months ended June 30, 2025 as compared to a net loss of $8.2 million, or $0.75 per diluted share, for the three months ended June 30, 2024. Net income was $1.7 million, or $0.15 per diluted share for the six months ended June 30, 2025, as compared to $0.2 million, or $0.01 per diluted share for the six months ended June 30, 2024. The period-over-period changes were driven by the factors described above.

Liquidity and Capital Resources

The Company had stockholders’ equity of $216.0 million and working capital of $160.3 million at June 30, 2025 as compared with $210.1 million and $150.2 million at December 31, 2024, respectively. The $5.9 million net increase in stockholders’ equity was primarily driven by $4.6 million in share-based compensation and $1.7 million of net income for the period, partially offset by $0.4 million in net shares repurchased for employee taxes. The Company’s cash, cash equivalents and investment securities increased to $162.7 million at June 30, 2025 from $162.3 million at December 31, 2024 .

Net cash provided by operating activities decreased by $20.3 million to less than $0.1 million for the six months ended June 30, 2025 from $20.4 million for the six months ended June 30, 2024. This was primarily driven by a $12.5 million decrease in supply chain optimization non-cash charges, a $6.0 million decrease for prepaid income taxes, a $3.2 million realized gain on the sale of LifeMD common stock, a $2.8 million decrease related to a smaller inventory reduction in the period ending June 30, 2025 to align with sales demand, and a $0.5 million decrease resulting from changes in other assets, partially offset by a $2.4 million increase resulting from prepaid expenses and other current assets, and a $2.1 million increase from net income and other non-cash charges.

Net cash provided by investing activities was $11.3 million for the six months ended June 30, 2025 as compared to net cash used in investing activities of $5.3 million for the six months ended June 30, 2024. The increase was primarily driven by investments sold in excess of investments purchased during the six months ended June 30, 2024 resulting in a $15.7 million decrease of net purchases of investment securities during the six months ended June 30, 2025.

Net cash used in financing activities decreased by $0.9 million to $0.6 million for the six months ended June 30, 2025 from $1.5 million for the six months ended June 30, 2024. This decrease was primarily due to a $0.5 million decrease in cash dividends paid to stockholders, and a $0.5 million decrease 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 in both the short term and the long term, if any, to be funded from operating cash flow and financing activities.

The Company is currently investing in new growth initiatives which have the potential to impact liquidity in future periods. The Company’s current growth initiatives, focused on engaging, developing, and empowering new coaches, do not require any material contractual commitments or capital expenditures in future periods. Since the future costs of these endeavors are variable in nature and will be scaled at the discretion of management, we do not believe there is any significant impact on our liquidity or capital resources.

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 October 30, 2024, the Company terminated its Amended Credit Agreement with Citibank, N.A. The Company had no borrowings under the Amended Credit Agreement, inclusive of the credit facility and letter of credit sublimit as of the termination date.

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 other than strategic investments.

The Company is exposed to market risk related to changes in interest rates and market pricing impacting our investment in money market securities, government and agency securities, and corporate bonds. Other than for strategic investments, its current investment policy is to maintain an investment portfolio consisting of corporate 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 June 30, 2025, 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.

Prior to the quarter ended June 30, 2025, the Company was exposed to market risk related to price fluctuations in equity markets related to its investment in LifeMD common stock, purchased in December of 2023. The Company sold its investment in LifeMD during the quarter ended June 30, 2025.

Other than the sale of LifeMD common stock, there have been no other material changes to our market risk exposure since December 31, 2024.

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 June 30, 2025. 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 June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.