Highlights for the third quarter ended
- Total revenue was
$13.9 million , an increase of 67% compared to the third quarter of 2022. - Adjusted EBITDA was
$2.5 million , an increase of 36% compared to the third quarter of 2022. - Net income for the third quarter of 2023 was
$1.7 million compared to$1.2 million during the same period last year, an increase of 39%. - Basic earnings per share increased from
$0.27 to$0.38 and fully diluted earnings per share increased from$0.24 to$0.35 , an increase of 41% and 46%, respectively. - Online revenue accounted for 68% of the Company’s total revenue during the third quarter of 2023 compared to 26% during the same period last year.
- Gross margin was 41.0% compared to 39.0% during the third quarter of 2022.
- The Company ended the quarter with
$11.3 million outstanding on its term loan and cash of$8.3 million , or total net debt of$3.0 million .
Financial Performance
For the third quarter ended
Gross margin for the quarter ended
The effective tax rate for the quarter ended
Net income for the third quarter of 2023 was
Adjusted EBITDA for the quarter ended
MRC Integration and Operational Improvements
The Company continues to focus on improving cash flow and profitability at Mimi’s
Separately, we continue to evaluate the effectiveness of MRC’s advertising spend. As previously reported, 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.
We experimented with further reductions during the third quarter of 2023, reducing advertising expense by approximately 30% compared to the same quarter in 2022. Although the additional reduction in advertising expenditure resulted in approximately 8% lower revenue, it increased contribution (defined as gross profit minus advertising expense) by approximately 15%. In other words, through these actions, the Company is increasing its profitability by eliminating unprofitable revenue.
As a result of our efforts, MRC advertising expense during the third quarter of 2023 was 16.6% of MRC revenue, compared to 21.9% during the same quarter in the prior year, a quarterly impact of over
Going forward, we intend to continue to closely monitor and optimize advertising expenditures, increasing spending on effective campaigns while reducing spending on ineffective campaigns. As a result, advertising expense may increase or decrease in the future.
Legacy FitLife Performance
During the third quarter of 2023, legacy FitLife revenue declined 19%, driven by a 27% decline in wholesale revenue partially offset by an 8% increase in online revenue.
Due to the size and timing of wholesale orders, wholesale revenue recognized by the Company during a quarter is not necessarily reflective of the retail demand for the Company’s products. During the quarter ended
While still positive, the growth rate for legacy FitLife’s online revenue declined over the first eight months of the year. The declines were driven primarily by a combination of fewer consumer sessions as well as underperformance of certain brands and products. Although session counts have declined, indicating lower traffic on our online listings, conversion rates have generally increased during the year, partially offsetting the decline in sessions.
The year-over-year growth rate was lowest during August before improving sequentially in September and again in October. Thus far in November, the year-over-year growth rate has continued to show sequential improvement. During the third quarter of 2023, subscriptions accounted for approximately 23% of legacy FitLife’s online sales volumes.
Acquisition of MusclePharm Assets
As previously reported, the Company successfully closed the acquisition of substantially all of the assets of MusclePharm Corporation (“MusclePharm”), which primarily consisted of intangible assets. None of the liabilities of MusclePharm were assumed other than de minimus cure costs relating to certain assumed contracts. Total consideration for the acquisition was approximately $18.5 million cash. Of this amount, $10.0 million was funded using proceeds from a new term loan provided by First Citizens Bank, with the remainder funded from FitLife’s available cash balances.
Since closing the acquisition, management has begun engaging in discussions with several of MusclePharm’s previous customers in an effort to restore wholesale distribution of the brand. The Company is also in the process of re-launching some historically successful MusclePharm products.
Online sales of MusclePharm products are expected to be limited in the fourth quarter while third-party resellers deplete their inventory. As these resellers run out of product, the Company will become the primary seller of MusclePharm products online. We expect online revenue from MusclePharm products to exceed
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, the Company’s ability to successfully integrate acquisitions, 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 | $ | 7,343 | $ | 13,277 | ||
Restricted cash | 969 | - | ||||
Accounts receivable, net of allowance of doubtful accounts of | 1,428 | 705 | ||||
Inventories, net of allowance for obsolescence of | 7,724 | 9,105 | ||||
Sales tax receivable | 1,276 | - | ||||
Prepaid expenses and other current assets | 787 | 116 | ||||
Total current assets | 19,527 | 23,203 | ||||
Deposit for MusclePharm asset acquisition | 1,825 | - | ||||
Property and equipment, net | 199 | 46 | ||||
Right of use asset | 141 | 103 | ||||
Intangibles, net of amortization of | 7,746 | 150 | ||||
13,321 | 358 | |||||
Deferred tax asset | 1,213 | 1,847 | ||||
TOTAL ASSETS | $ | 43,972 | $ | 25,707 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | 2,379 | $ | 2,995 | ||
Accrued expense and other liabilities | 1,828 | 631 | ||||
Product returns | 587 | 590 | ||||
Term loan - current portion | 2,500 | - | ||||
Lease liability - current portion | 94 | 54 | ||||
Total current liabilities | 7,388 | 4,270 | ||||
Term loan, net of current portion | 8,750 | - | ||||
Long-term lease liability, net of current portion | 59 | 49 | ||||
Deferred tax liability | 2,526 | - | ||||
TOTAL LIABILITIES | 18,723 | 4,319 | ||||
STOCKHOLDERS' EQUITY: | ||||||
Preferred stock, | ||||||
as of | - | - | ||||
Common stock, | ||||||
issued and outstanding as of | 44 | 45 | ||||
Additional paid-in capital | 30,151 | 30,056 | ||||
Accumulated deficit | (4,897) | (8,713) | ||||
Foreign currency translation adjustment | (49) | - | ||||
TOTAL STOCKHOLDERS' EQUITY | 25,249 | 21,388 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 43,972 | $ | 25,707 | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
FOR THE NINE MONTHS ENDED | ||||||||||||
(In thousands, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | Nine months ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Revenue | $ | 13,902 | $ | 8,314 | $ | 39,401 | $ | 23,433 | ||||
Cost of goods sold | 8,206 | 5,070 | 23,332 | 13,587 | ||||||||
Gross profit | 5,696 | 3,244 | 16,069 | 9,846 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Selling, general and administrative | 3,172 | 1,680 | 8,758 | 4,620 | ||||||||
Merger and acquisition related expense | 32 | 6 | 1,519 | 214 | ||||||||
Depreciation and amortization | 22 | 17 | 64 | 49 | ||||||||
Total operating expenses | 3,226 | 1,703 | 10,341 | 4,883 | ||||||||
OPERATING INCOME | 2,470 | 1,541 | 5,728 | 4,963 | ||||||||
OTHER EXPENSES (INCOME) | ||||||||||||
Interest income | (119) | (43) | (269) | (59) | ||||||||
Interest expense | 249 | - | 598 | - | ||||||||
Foreign exchange loss | 210 | - | 93 | - | ||||||||
Total other (income) expense | 340 | (43) | 422 | (59) | ||||||||
NET INCOME BEFORE INCOME TAX PROVISION | 2,130 | 1,584 | 5,306 | 5,022 | ||||||||
PROVISION FOR INCOME TAXES | 434 | 364 | 1,490 | 1,066 | ||||||||
NET INCOME | $ | 1,696 | $ | 1,220 | $ | 3,816 | $ | 3,956 | ||||
NET INCOME PER SHARE | ||||||||||||
Basic | $ | 0.38 | $ | 0.27 | $ | 0.86 | $ | 0.87 | ||||
Diluted | $ | 0.35 | $ | 0.24 | $ | 0.78 | $ | 0.79 | ||||
Basic weighted average common shares | 4,446 | 4,556 | 4,458 | 4,555 | ||||||||
Diluted weighted average common shares | 4,891 | 4,988 | 4,901 | 4,979 | ||||||||
FITLIFE BRANDS, INC. | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
FOR THE NINE MONTHS ENDED | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
Nine months ended | Nine months ended | |||||
2023 | 2022 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 3,816 | $ | 3,956 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 64 | 49 | ||||
Allowance for doubtful accounts | (17) | (5) | ||||
Allowance for inventory obsolescence | 35 | 147 | ||||
Stock compensation expense | 94 | 295 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable - trade | (498) | (585) | ||||
Inventories | 2,534 | (1,205) | ||||
Deferred tax asset | 709 | 1,053 | ||||
Prepaid expenses and other assets | (463) | 93 | ||||
Right of use asset | 60 | 41 | ||||
Accounts payable | (3,570) | 1,086 | ||||
Lease liability | (60) | (41) | ||||
Product returns | (3) | (15) | ||||
Accrued liabilities and other liabilities | 71 | 134 | ||||
Net cash provided by operating activities | 2,772 | 5,003 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchase of property and equipment | (60) | - | ||||
Cash paid for acquisition of Mimi's | (17,099) | - | ||||
Cash deposit paid for the acquisition of assets | (1,825) | - | ||||
Net cash used in investing activities | (18,984) | - | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Proceeds from exercise of stock options | - | 29 | ||||
Borrowings on term loan | 12,500 | - | ||||
Payments on term loan | (1,250) | - | ||||
Net cash provided by financing activities | 11,250 | 29 | ||||
Foreign currency impact on cash | (3) | - | ||||
CHANGE IN CASH AND RESTRICTED CASH | (4,965) | 5,032 | ||||
CASH, BEGINNING OF PERIOD | 13,277 | 9,897 | ||||
CASH AND RESTRICTED CASH, END OF PERIOD | $ | 8,312 | $ | 14,929 | ||
For the three months ended | For the nine months ended | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
Net Income | $ | 1,696 | $ | 1,220 | $ | 3,816 | $ | 3,956 | ||||
Interest expense | 249 | - | 598 | - | ||||||||
Interest income | (119) | (43) | (269) | (59) | ||||||||
Foreign exchange loss | 210 | - | 93 | - | ||||||||
Provision for income taxes | 434 | 364 | 1,490 | 1,066 | ||||||||
Depreciation and amortization | 22 | 17 | 64 | 49 | ||||||||
EBITDA | 2,492 | 1,558 | 5,792 | 5,012 | ||||||||
Non-cash and non-recurring adjustments | ||||||||||||
Stock compensation expense | 21 | 91 | 94 | 295 | ||||||||
Merger and acquisition related costs | 32 | 6 | 1,519 | 214 | ||||||||
Amortization of inventory step-up | - | - | 323 | - | ||||||||
Non-recurring loss on foreign currency forward | - | - | 112 | - | ||||||||
Restatement related costs | - | 220 | - | 275 | ||||||||
Adjusted EBITDA | $ | 2,545 | $ | 1,875 | $ | 7,840 | $ | 5,796 | ||||
investor@fitlifebrands.com
Source:
2023 GlobeNewswire, Inc., source