Highlights for the second quarter ended
- Total revenue was
$14.8 million , an increase of 89% compared to the second quarter of 2022. - Adjusted EBITDA was
$3.0 million , an increase of 35% compared to the second quarter of 2022, approximately half of which was contributed by MRC. - Net income for the second quarter of 2023 was
$2.0 million compared to$1.4 million during the same period last year, an increase of 36%. - Basic earnings per share increased from
$0.32 to$0.44 and fully diluted earnings per share increased from$0.29 to$0.40 , an increase of 38% for both measures. - Excluding the impact of the MRC acquisition (“Legacy FitLife”), Legacy FitLife revenue for the second quarter of 2023 was
$7.1 million , a decrease of 9% compared to the same period last year, driven by a 15% decrease in wholesale revenue and a 15% increase in online revenue. - Online revenue accounted for 67% of the Company’s total revenue during the second quarter of 2023 compared to 27% during the same period last year.
- Gross margin was 40.4% compared to 44.6% during the second quarter of 2022. Excluding the impact of the purchase accounting valuation step-up for MRC inventory, gross margin for the second quarter of 2023 would have been 41.9%.
- The Company ended the quarter with
$11.9 million outstanding on its term loan and cash of$9.8 million , or total net debt of$2.1 million .
Financial Performance
For the second quarter ended
Wholesale revenue for the quarter ended
Gross margin for the quarter ended
The Company receives periodic rebates from its manufacturers which are recorded as a reduction to cost of goods sold. As previously disclosed, the Company received a sizable rebate during the second quarter of 2022. Rebates recognized during the second quarter of 2023 were
The effective tax rate for the quarter ended
Net income for the second quarter of 2023 was
Basic earnings per share for the quarter ended
Adjusted EBITDA for the quarter ended
MRC Integration and Operational Improvements
The Company continues to focus on improving cash flow and profitability at MRC. Since acquiring MRC on
Separately, we are closely evaluating the effectiveness of MRC’s advertising spend. During the second quarter of 2023, we reduced MRC’s advertising expense by 20% compared to the second quarter of 2022 with no material impact on revenue. This advertising expense reduction amounted to approximately
In addition to reductions in SG&A, we are working to improve MRC’s gross margins. Although margins are strong in core markets, much of MRC’s sales into less developed markets are unprofitable, with many operating at negative gross margins. Late during the second quarter, we took steps to improve the profitability of these international markets. If we determine that we are unable to operate in these markets at an acceptable level of profitability given the complexity and risks, we intend to exit those markets. Although exiting these markets will reduce the Company’s reported revenue, we anticipate it will improve the gross margin and profitability of MRC as a whole.
Since the acquisition, we have invested approximately
We believe there are significant opportunities to optimize the tax structure of MRC and its international subsidiaries. We have been working with a global accounting firm since prior to the closing of the acquisition to design and implement an improved tax structure. In the short-term, MRC has goods and sales tax receivables of approximately
Although we have focused our initial efforts on
In short, while significant work remains, we are pleased with the progress we have made with MRC. As one indication of our progress, the EBITDA generated by MRC during our first full quarter of ownership materially exceeds any previous quarterly EBITDA generated by MRC as a standalone business, and exceeds the annual EBITDA generated by MRC as a standalone business in many previous years.
Balance Sheet
Subsequent to the end of the second quarter, the Company secured an increase in its money market rate, bringing the current rate to 4.85%. The Company pays interest of SOFR+275 on its term loan, or approximately 8.2% currently, resulting in a net cost of debt of approximately 3.35%. As previously disclosed, the Company intends to maintain a strong cash balance while it continues evaluating additional acquisition opportunities.
The Company ended the quarter with
Update on Nasdaq listing
On
We intend to continue to closely monitor the trading volume of the Company’s common stock. If the required ADV threshold is met, and the Company remains in compliance with all other initial listing standards at that point in time, we anticipate that Nasdaq will approve our application. If the ADV does not improve in the near future, we will consider implementing a forward stock split, which we anticipate would help the Company meet the ADV requirement.
There are no assurances that the Company will meet the required ADV threshold, that the Company will remain in compliance with Nasdaq’s other initial listing standards, that Nasdaq will approve the application, or relating to the timing of any such approval. Further, if the Company is approved for listing on Nasdaq, there are no assurances that the Company will be able to comply with Nasdaq’s continued listing requirements.
About
Forward-Looking Statements
Statements in this release that are forward looking involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to be materially different from any future performance that may be suggested in this news release. Such factors may include, but are not limited to, the ability of the Company to continue to grow revenue, and the Company's ability to continue to achieve positive cash flow given the Company's existing and anticipated operating and other costs. Many of these risks and uncertainties are beyond the Company's control. Reference is made to the discussion of risk factors detailed in the Company's filings with the
Non-GAAP Financial Measures
The financial presentation below contains certain financial measures defined as “non-GAAP financial measures” by the
As presented herein, non-GAAP EBITDA excludes interest, foreign exchange gains and losses, income taxes, and depreciation and amortization. Adjusted non-GAAP EBITDA excludes, in addition to interest, taxes, depreciation and amortization, equity-based compensation, M&A/integration activities, restatement related expense and non-recurring gains or losses. The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expense and other items that may not be indicative of its core operating results and business outlook. The Company believes that the inclusion of non-GAAP measures in the financial presentation herein allows investors to compare the Company’s financial results with the Company’s historical financial results and is an important measure of the Company’s comparative financial performance.
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(In thousands, except per share data) | |||||
2023 | 2022 | ||||
(Unaudited) | |||||
ASSETS: | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | $ | 8,882 | $ | 13,277 | |
Restricted cash | 951 | - | |||
Accounts receivable, net of allowance of doubtful accounts of | 1,575 | 705 | |||
Inventories, net of allowance for obsolescence of | 9,148 | 9,105 | |||
Sales tax receivable | 1,322 | - | |||
Prepaid expenses and other current assets | 569 | 116 | |||
Total current assets | 22,447 | 23,203 | |||
Property and equipment, net | 162 | 46 | |||
Right of use asset | 165 | 103 | |||
Intangibles, net of amortization of | 7,957 | 150 | |||
13,559 | 358 | ||||
Deferred tax asset | 1,344 | 1,847 | |||
TOTAL ASSETS | $ | 45,634 | $ | 25,707 | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||
CURRENT LIABILITIES: | |||||
Accounts payable | $ | 3,571 | $ | 2,995 | |
Accrued expense and other liabilities | 3,065 | 631 | |||
Product returns | 589 | 590 | |||
Term loan - current portion | 2,500 | - | |||
Lease liability - current portion | 92 | 54 | |||
Total current liabilities | 9,817 | 4,270 | |||
Term loan, net of current portion | 9,375 | - | |||
Long-term lease liability, net of current portion | 85 | 49 | |||
Deferred tax liability | 2,507 | - | |||
TOTAL LIABILITIES | 21,784 | 4,319 | |||
STOCKHOLDERS' EQUITY: | |||||
Preferred stock, | |||||
as of | |||||
Common stock, | |||||
issued and outstanding as of | 44 | 45 | |||
Additional paid-in capital | 30,130 | 30,056 | |||
Accumulated deficit | (6,593) | (8,713) | |||
Foreign currency translation adjustment | 269 | - | |||
TOTAL STOCKHOLDERS' EQUITY | 23,850 | 21,388 | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 45,634 | $ | 25,707 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
FOR THE SIX MONTHS ENDED | |||||||||||
(In thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Three months ended | Six months ended | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Revenue | $ | 14,760 | $ | 7,824 | $ | 25,498 | $ | 15,118 | |||
Cost of goods sold | 8,795 | 4,334 | 15,125 | 8,517 | |||||||
Gross profit | 5,965 | 3,490 | 10,373 | 6,601 | |||||||
OPERATING EXPENSES: | |||||||||||
Selling, general and administrative | 3,243 | 1,445 | 5,586 | 2,941 | |||||||
Merger and acquisition-related expenses | 115 | 203 | 1,487 | 208 | |||||||
Depreciation and amortization | 23 | 17 | 42 | 31 | |||||||
Total operating expenses | 3,381 | 1,665 | 7,115 | 3,180 | |||||||
OPERATING INCOME | 2,584 | 1,825 | 3,258 | 3,421 | |||||||
OTHER EXPENSES (INCOME) | |||||||||||
Interest income | (66) | (9) | (150) | (16) | |||||||
Interest expense | 251 | - | 349 | - | |||||||
Foreign exchange (gain) loss | (200) | - | (117) | - | |||||||
Total other (income) expense | (15) | (9) | 82 | (16) | |||||||
NET INCOME BEFORE INCOME TAX PROVISION | 2,599 | 1,834 | 3,176 | 3,437 | |||||||
PROVISION FOR INCOME TAXES | 635 | 388 | 1,056 | 701 | |||||||
NET INCOME | $ | 1,964 | $ | 1,446 | $ | 2,120 | $ | 2,736 | |||
NET INCOME PER SHARE | |||||||||||
Basic | $ | 0.44 | $ | 0.32 | $ | 0.47 | $ | 0.60 | |||
Diluted | $ | 0.40 | $ | 0.29 | $ | 0.43 | $ | 0.55 | |||
Basic weighted average common shares | 4,446 | 4,556 | 4,464 | 4,555 | |||||||
Diluted weighted average common shares | 4,887 | 4,960 | 4,906 | 4,971 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
FOR THE SIX MONTHS ENDED | |||||
(In thousands) | |||||
(Unaudited) | |||||
Six months ended | Six months ended | ||||
2023 | 2022 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ | 2,120 | $ | 2,736 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 42 | 31 | |||
Allowance for doubtful accounts | (17) | (5) | |||
Allowance for inventory obsolescence | 15 | 47 | |||
Stock compensation expense | 74 | 204 | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable - trade | (429) | (1,171) | |||
Inventories | 1,164 | 125 | |||
Deferred tax asset | 503 | 694 | |||
Prepaid expenses and other assets | (467) | (187) | |||
Right of use asset | 38 | 27 | |||
Accounts payable | (1,611) | (366) | |||
Lease liability | (39) | (27) | |||
Product returns | - | 4 | |||
Accrued liabilities and other liabilities | 401 | 266 | |||
Net cash provided by operating activities | 1,794 | 2,378 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Purchase of property and equipment | (54) | - | |||
Cash paid for acquistion | (17,099) | - | |||
Net cash used in investing activities | (17,153) | - | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Proceeds from exercise of stock options | - | 29 | |||
Borrowings on term loan | 12,500 | - | |||
Payments on term loan | (625) | - | |||
Net cash provided by financing activities | 11,875 | 29 | |||
Foreign currency impact on cash | 40 | - | |||
CHANGE IN CASH AND RESTRICTED CASH | (3,444) | 2,407 | |||
CASH, BEGINNING OF PERIOD | 13,277 | 9,897 | |||
CASH AND RESTRICTED CASH, END OF PERIOD | $ | 9,833 | $ | 12,304 | |
For the three months ended | For the six months ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
Net Income | $ | 1,964 | $ | 1,446 | $ | 2,120 | $ | 2,736 | ||||
Interest income | (66) | (9) | (150) | (16) | ||||||||
Foreign exchange (gain) loss | (200) | - | (117) | - | ||||||||
Provision for income taxes | 635 | 388 | 1,056 | 701 | ||||||||
Depreciation and amortization | 23 | 17 | 42 | 31 | ||||||||
EBITDA | 2,607 | 1,842 | 3,300 | 3,452 | ||||||||
Non-cash and non-recurring adjustments | ||||||||||||
Stock compensation expense | 31 | 97 | 74 | 204 | ||||||||
Merger and acquisition-related costs | 115 | 203 | 1,487 | 208 | ||||||||
Amortization of inventory step-up | 213 | - | 323 | - | ||||||||
Non-recurring loss on foreign currency forward | - | - | 112 | - | ||||||||
Restatement related costs | - | 55 | - | 55 | ||||||||
Adjusted EBITDA | $ | 2,966 | $ | 2,197 | $ | 5,296 | $ | 3,919 |
investor@fitlifebrands.com
Source:
2023 GlobeNewswire, Inc., source