Medifast Inc: Form 10-Q for the period ended Sep 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 40+ year old health and wellness company known for its science-backed, coach-guided lifestyle system. The Company is currently executing a strategic transformation focused on metabolic health and a return to growth strategy by fueling coach productivity and coach growth. We operate a well-capitalized business with strong and effective leadership that has a powerful lifestyle brand and business model that boasts a network of approximately 19,500 active earning independent coaches that has impacted more than 3 million lives. Medifast stands at the forefront of evidence-based wellness solutions and its 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 leads to more new clients and generates further revenue.

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

Our lifestyle plans deliver proven health benefits as well as evidence-based tools, including scientifically developed products and a framework for habit creation reinforced by 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.

Coaches provide unparalleled coaching support along with community, nutrition, and healthy habits. In a world where health and wellbeing are often a difficult and solitary journey, our comprehensive system 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 Coaches: Coaches provide individualized support and guidance to clients on the path to optimal health and wellbeing.
• 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.

Science has been part of Medifast’s DNA for more than 40 years. With our ongoing research and compelling data elevating the science behind the flagship 5 & 1 plan and innovative products, the company is energizing the coach community to do what they do best, empowering people to take control of their metabolic health. Medifast's weight loss and metabolic health experts unveiled Metabolic Synchronization, a breakthrough approach that reverses metabolic dysfunction through a targeted reset, and is aimed to drive future innovation. Research shows that the Company’s comprehensive plan activated strong and targeted fat burn to enhance metabolic health and body composition by reducing visceral fat, preserving lean mass and protecting muscle, ultimately empowering individuals to reach their health goals. Looking ahead, we plan to launch significant product innovations, incorporating next-generation ingredients for metabolic enhancement. We expect to bring this new product line to market next year.

As part of our strategy to remain competitive 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. Individuals who 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 improve health when they come off GLP-1 medications for whatever reason, including cost, side effects, or any other cause.

We are taking an intentional and methodical approach to tailoring our offerings for each of these groups, 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 GLP-1 medication usage, which can be powerful appetite suppressants, continues to accelerate, medication alone does not produce sustainable lifestyle change. Recent research indicated that approximately one-third of users discontinue taking the medication after six months, and as many as 74% stop after a year.1 Furthermore, research also shows that two-thirds of weight

1 Grosicki et al. Diabetes Obes Metab. 2025; https://pubmed.ncbi.nlm.nih.gov/39743934/ lost on GLP-1 medications is typically regained within 12 months of stopping treatment, with cardiometabolic benefits often reversing as well.2 The takeaway is clear: GLP-1 medications can be effective tools, but lasting results require more than medication—they require holistic behavior change. The need extends beyond the obesity epidemic, as over 90% of Americans are metabolically unhealthy3, affecting blood sugar regulation, energy production, and weight management. Healthy weight loss that focuses on burning fat while preserving muscle is essential to improving metabolic health, but it demands commitment, consistency and support - not quick fixes. Because GLP-1 medications are shown to be most effective when paired with lifestyle changes, we see strong alignment with our expertise helping people create durable habits through coach-supported, behavior-based systems.

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, supported by a coach.

Coaches remain central to everything that we do. They aim to foster a continuous cycle of growth by attracting and activating new clients, some of whom go on to become coaches. We provide economic incentives designed to support long-term coach success, which we believe contributes to their financial wellness, and offers the opportunity to improve their personal finances while elevating the health trajectories of their families, communities, and future generations.4

Medifast is ensuring our coaches are positioned to succeed in the GLP-1 environment. Regardless of their need states, our integrated, coach-supported, lifestyle-based approach helps clients achieve their health goals. Coaches introduce clients to a set of healthy habits, often beginning with healthy eating, alongside exclusive products and plans. These offerings are one component that support the Company’s mission, and help make it easier for clients to build and sustain 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 and our coaches. Our scientifically designed Fuelings, as well as innovative product lines 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 coaching model is anchored 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 attempting to lose weight on their own.5 Coaches deliver highly tailored and personalized support and motivation, sharing their passion for healthy living and lifestyle transformation. Despite their diverse geographies and backgrounds, our coaches form a tight-knit community that supports, encourages and inspires one another.

Our coaches are independent contractors, not employees, who support clients and market our products and services to friends, family, and other people in their communities, primarily through word of mouth, email, and via social media channels including Facebook, Instagram, X (formerly known as Twitter), and video conferencing platforms. Products are shipped directly to clients; coaches do not handle or deliver products. This model enables our coaches to focus on client support and encouragement without having to manage inventory and allows them to maintain an arms-length transactional relationship.

Medifast continues to invest strategically in tools, programs, and digital resources to support our coaches - the Company’s most effective client acquisition engine. We incorporate the latest scientific research into our innovations, including 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, a behavior-designed program that emphasizes progressive business building behaviors and rewards, designed to be easily adoptable by new and experienced coaches alike. It prioritizes 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, we also expect it to increase client acquisition and the conversion of clients into new coaches. We also rolled out Premier+, a refreshed auto-ship program, launched in July 2025, that offers a new tiered pricing discount on monthly orders, reduces list pricing on several popular products, and provides a more reliable and predictable compensation structure for coaches. These enhancements were designed to make client

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

3 O’Hearn M et al. Trends and Disparities in Cardiometabolic Health Among U.S. Adults, 1999-2018. J Am Coll Cardiol. 2022; 80(2):138-151. doi:10.1016/j.jacc.2022.04.046

4 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/4lFIPRP) for statistics on actual earnings of Coaches.

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

acquisition and retention easier for our coaches. Medifast also remains focused on providing enhanced digital tools to support the business management of the coaches to help streamline administrative tasks, allowing coaches to focus their efforts on what matters most: supporting their clients.

We believe Medifast is uniquely positioned to serve a broader range of clients and lead the advancement of metabolic health through its personalized coaching, community support, and science-backed nutrition solutions. By addressing the silent crisis of metabolic dysfunction with our innovative products, enhanced client experiences, and unmatched support system, we have created and are continuing to enhance a differentiated and compelling offer. Our financial strength, operational flexibility, and client-centric philosophy position us 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, 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 offerings, 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 metabolic health powered by a breakthrough apporach and human coaching 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. The OPTAVIA model:

• Is client-centric, with one sales price for both OPTAVIA coaches and clients. There is no tiered pricing.
• Boasts a health and wellness community, which promotes a holistic health and wellness program and is not focused solely on product sales.
• Offers a differentiated direct-to-consumer model, with 100% of products shipped directly to clients.
• Promotes a unified Habits of Health training system that aligns its coach 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 nine 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 September 30, 2025 and 2024, respectively, and approximately 96% and 97% for the nine months ended September 30, 2025 and 2024.

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

23

Revenue: Revenue decreased $50.8 million, or 36.2%, to $89.4 million for the three months ended September 30, 2025 from $140.2 million for the three months ended September 30, 2024. The decline in revenue for the three months ended September 30, 2025 was primarily driven by a decrease in the number of active earning OPTAVIA coaches to 19,500 as of September 30, 2025, a 35.0% decrease from 30,000 as of September 30, 2024. Revenue decreased $172.8 million, or 35.7%, to $310.7 million for the nine months ended September 30, 2025 from $483.5 million for the nine months ended September 30, 2024. The decline in revenue for the nine months ended September 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 nine months ended September 30, 2025 was driven by continued challenges with client acquisition. The average revenue per active earning OPTAVIA coach was $4,585 for the three months ended September 30, 2025, a 1.9% decrease compared to $4,672 for the three months ended September 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 September 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. We continue to see moderating year-over-year declines in this key metric.

Cost of sales: Cost of sales decreased $7.2 million, or 21.0%, to $27.3 million from $34.5 million for the three months ended September 30, 2025 from the corresponding period in 2024. The decrease in cost of sales for the three months ended September 30, 2025 was primarily driven by a $12.2 million decrease attributable to lower volumes, partially offset by $4.0 million attributable to loss of leverage on fixed costs and a $1.6 million reserve for the reformulation of the Essential product line. Cost of sales decreased $39.4 million, or 31.0%, to $87.6 million from $127.1 million for the nine months ended September 30, 2025. The decrease in cost of sales for the nine months ended September 30, 2025 was primarily driven by a $43.9 million decrease attributable to lower volumes, partially offset by $4.9 million attributable to loss of leverage on fixed costs.

Gross profit: Gross profit decreased $43.5 million, or 41.2%, to $62.2 million from $105.7 million for the three months ended September 30, 2025 from the corresponding period in 2024. The decrease in gross profit for the three months ended September

30, 2025 was due to lower revenue, partially offset by lower cost of sales. As a percentage of revenue, gross profit decreased 590 basis points to 69.5% for the three months ended September 30, 2025 from 75.4% for the corresponding period in 2024 primarily due to 450 basis points attributable to loss of leverage on fixed costs and 180 basis points of reserve for the reformulation of the Essential product line. Gross profit decreased $133.4 million, or 37.4%, to $223.0 million from $356.4 million for the nine months ended September 30, 2024. The decrease in gross profit for the nine months ended September 30, 2025 was due to lower revenue, partially offset by lower cost of sales. As a percentage of revenue, gross profit decreased 190 basis points to 71.8% for the nine months ended September 30, 2025 from 73.7% for the corresponding period in 2024 primarily due to 160 basis points attributable to loss of leverage on fixed costs.

Selling, general, and administrative (“SG&A”): SG&A expenses were $66.2 million for the three months ended September 30, 2025, a decrease of $37.3 million, or 36.0%, as compared to $103.6 million from the corresponding period in 2024. SG&A expenses decreased for the three months ended September 30, 2025 primarily due to a $19.7 million decrease in coach compensation as a result of fewer active earning coaches and lower volumes. Additionally, SG&A expenses in the third quarter of 2025 reflected decreases of $5.6 million related to Company-led marketing compared to 2024, as well as $2.9 million for the Company’s convention costs, and $2.0 million for the Company’s collaboration with LifeMD that did not recur. As a percentage of revenue, SG&A expenses were 74.1% for the three months ended September 30, 2025 as compared to 73.9% for the corresponding period in 2024. SG&A expenses as a percentage of revenue increased for the three months ended September 30, 2025 primarily reflecting approximately 520 basis points associated to loss of leverage on fixed costs and other smaller increases, partially offset by a 360 basis point reduction related to Company-led marketing, and 210 basis points for the Company’s convention costs during the three months ended September 30, 2024, that did not recur. SG&A expenses included research and development costs of $1.1 million for both the three months ended September 30, 2025 and 2024, in connection with the development of new products and plans, and clinical research activities. SG&A expenses were $229.5 million for the nine months ended September 30, 2025, a decrease of $124.8 million, or 35.2%, as compared to $354.2 million from the corresponding period in 2024. SG&A expenses decreased for the nine months ended September 30, 2025 primarily due to a $66.5 million decrease in coach compensation as a result of fewer active earning coaches and lower volumes. Additionally, SG&A expenses for the nine months ended September 30, 2025 reflected decreases of $7.4 million related to Company-led marketing compared to the same period in 2024, as well as $12.5 million for supply chain optimization, $7.2 million of market research and LifeMD collaboration costs related to medically support weight loss, and $7.3 million related to the Company’s convention and other coach incentives that did not recur. As a percentage of revenue, SG&A expenses were 73.9% for the nine months ended September 30, 2025 as compared to 73.3% for the corresponding period in 2024 primarily reflecting 480 basis points associated to loss of leverage on fixed costs, partially offset by 260 basis points for supply chain optimization and 150 basis points of market research and LifeMD collaborations costs incurred during the nine months ended September 30, 2024 that that did not recur in the nine months ended September 30, 2025. SG&A expenses included research and development costs of $3.3 million for both the nine months ended September 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 September 30, 2025, the Company’s loss from operations was $4.1 million, a $6.2 million decrease from the $2.1 million income from operations for the corresponding period in 2024 primarily as a result of decreased gross profit partially offset by decreased SG&A expenses. For the three months ended September 30, 2025 the Company’s loss from operations as a percentage of revenue was 4.6% as compared to 1.5% income from operations as a percentage of revenue for the corresponding period in 2024, due to the factors described above impacting gross profit and the factors impacting SG&A expenses. For the nine months ended September 30, 2025, the Company’s loss from operations was $6.4 million, an $8.6 million decrease as compared to the Company’s income from operations of $2.2 million for the corresponding period in 2024 primarily as a result of decreased gross profit and the factors impacting SG&A expenses. Loss from operations as a percentage of revenue decreased to 2.1% for the nine months ended September 30, 2025 from income from operations as a percentage of revenue of 0.4% for the corresponding period in 2024 due to the factors above impacting gross profit and the factors impacting SG&A expenses.

Other income: Other income for the three months ended September 30, 2025 was $1.4 million, an increase of $2.0 million, or 369.7%, as compared to other expenses of $0.5 million for the corresponding period in 2024. The increase in other income for the three months ended September 30, 2025 was primarily due to the absence of a loss on our investment in LifeMD common stock that occurred during the corresponding period in 2024. The Company sold its investment in LifeMD during the six months ended June 30, 2025. Other income for the nine months ended September 30, 2025 was $7.2 million, an increase of $6.8 million, or 1,985.4%, as compared to other income of $0.3 million for the corresponding period in 2024. The increase in other income for the nine months ended September 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 $3.7 million for the corresponding period in 2024.

Provision for income taxes: For the three months ended September 30, 2025, the Company recorded $0.4 million in income tax benefit, an effective tax rate of 14.9%, as compared to an income tax expense of $0.4 million, an effective tax rate of 28.5%, for the three months ended September 30, 2024. The decrease in the effective tax rate for the three months ended September 30, 2025 was primarily driven by the decrease in the tax benefit of research and development tax credits, which represented 115.3% of the change, partially offset by an increase in the impact of states taxes of 85.6%. These changes were magnified by the near break-even pre-tax position in both periods. For the nine months ended September 30, 2025, the Company recorded $1.3 million in income tax expense, an effective tax rate of 174.4%, as compared to $1.2 million, an effective tax rate of 48.6%, for the nine months ended September 30, 2024. The increase in the effective tax rate for the nine months ended September 30, 2025 was primarily driven the impact of state taxes, which represented 85.6% of the change, a change in unrecognized tax benefits which represented 62.0% of the change, a change in the tax shortfall for stock compensation which represented 49.4% of the change, partially offset by the tax benefit of research and development tax credits of 115.3%. These changes were magnified by the near break-even pre-tax position in both periods.

Net income (loss): Net loss was $2.3 million, or $0.21 loss per diluted share for the three months ended September 30, 2025 as compared to a net income of $1.1 million, or $0.10 per diluted share, for the three months ended September 30, 2024. Net loss was $0.6 million, or $(0.05) per diluted share for the nine months ended September 30, 2025, as compared to net income of $1.3 million, or $0.12 per diluted share for the nine months ended September 30, 2024. The period-over-period changes were driven by the factors described above.

Liquidity and Capital Resources

The Company had stockholders’ equity of $214.7 million and working capital of $161.1 million at September 30, 2025 as compared with $210.1 million and $150.2 million at December 31, 2024, respectively. The $4.6 million net increase in stockholders’ equity was primarily driven by $5.5 million in share-based compensation, partially offset by $0.6 million of net loss for the period and $0.4 million in net shares repurchased for employee taxes. The Company’s cash, cash equivalents and investment securities increased to $173.5 million at September 30, 2025 from $162.3 million at December 31, 2024 .

Net cash provided by operating activities decreased by $17.3 million to $12.1 million for the nine months ended September 30, 2025 from $29.4 million for the nine months ended September 30, 2024. This was primarily driven by a decrease in net income after adding back non-cash items of $18.6 million, partially offset by net changes in operating assets and liabilities of $1.3 million. The increase from changes in operating assets and liabilities was primarily driven by $4.7 million from changes in inventory and $4.2 million from changes in accounts payable and accrued expenses, partially offset by $6.3 million from changes in prepaid income taxes and $1.2 million from changes in prepaid expenses and other current assets.

Net cash used in investing activities was $3.0 million for the nine months ended September 30, 2025 as compared to net cash used in investing activities of $7.1 million for the nine months ended September 30, 2024. The decrease was primarily driven by investments purchased in excess of investments sold during the nine months ended September 30, 2024 resulting in a $3.2 million decrease of net purchases of investment securities during the nine months ended September 30, 2025.

Net cash used in financing activities decreased by $0.9 million to $0.6 million for the nine months ended September 30, 2025 from $1.5 million for the nine months ended September 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 as warranted by management’s investment and leverage strategies.

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