FitLife Brands, Inc. (FTLF) Earnings

Management highlights

Overall Sequential Progress - Total company revenue increased 4.8% sequentially from Q1 2026, with wholesale revenue up 3.7% and online revenue up 6.3%. - Diluted earnings per share has increased sequentially for three consecutive quarters. - Legacy FitLife total revenue declined less than 0.5% sequentially, showing stabilization after large YoY declines. Five Core Strategic Initiatives Progress - Irwin Supply Chain Improvement: 85% of Irwin products have received approved 3-year shelf-life formulas (up from the 2-year dating at acquisition), which will cut annual inventory obsolescence (previously ~$2 million per year). 12% of on-hand inventory already uses 3-year dating, with 22% more outstanding in purchase orders. Lost revenue from out-of-stocks declined over 50% sequentially QoQ. Additional logistics cost management initiatives are ongoing to improve cost of goods sold and future margins. - Irwin New Product Development: When acquired, Irwin had almost no new product pipeline and was heavily focused on two declining categories (weight loss, men's health). Three new products are in production for Q3 2026/early Q4 2026 launch, most in the legacy categories. A robust pipeline of new products focused on growing categories is in development, with a target of at least four new launches per quarter starting in 2027. - Off-Amazon Brand Awareness: In response to Amazon algorithm changes, the company shifted ad spend to increase off-Amazon marketing. Ad spend increased 16.4% sequentially QoQ, with off-Amazon spend representing a larger share of total ad spend than ever before. Early metrics are positive, with higher average weekly Amazon sessions across the company's brand portfolio in the five weeks after Prime Day compared to the 13-week pre-Prime Day period. - Wholesale Cross-Selling: Leveraging Irwin's existing wholesale sales team to place other FitLife products into retail channels. Two MusclePharm SKUs launched in over 700 Kroger locations in late Q2 2026; six additional MusclePharm SKUs planned for Q2 placement at a regional grocery chain have been delayed to later in 2026. Productive discussions with other retailers are ongoing. - SG&A Efficiency: Q2 2026 SG&A was ~$4.8 million, down 3.8% sequentially from ~$5.0 million in Q1 2026, equal to ~$0.8 million in annualized savings. Additional SG&A reduction measures have been implemented after quarter-end, with more planned for the rest of 2026; individual cuts are not material, but aggregate savings are expected to be meaningful. Other Operational Updates - Total Amazon active subscriber counts across all brands bottomed out at just over 90,000 in mid-April 2026 after the Amazon default purchase option change, and have grown almost every week since to ~94,000 currently. - The company paid down $8.6 million in total debt since closing the Irwin acquisition through end-Q2 2026, plus $2.0 million in transaction-related expenses. Debt reduction saves ~$0.6 million in annual interest expense at the current 6.5% weighted average rate, and the company will continue using excess free cash flow for further debt paydown.

Guidance

Management did not provide formal full-year or quarterly financial guidance in this call. The company provided forward-looking directional guidance for strategic initiatives, which includes: - Supply chain improvements for Irwin are expected to deliver improved margins in coming quarters, with full completion of the shelf-life transition expected to take several more months. - The company targets launching at least four new products focused on growing supplement categories per quarter starting in 2027. - Additional SG&A reduction initiatives will be implemented over the remainder of 2026, with aggregate expected savings that management describes as compelling. - The company will continue to deploy excess free cash flow to reduce outstanding debt, leading to higher annual interest savings over time.

Segment performance

FitLife Brands operates two core segments: Legacy FitLife and Irwin. For Q2 2026, total company revenue was $26.5 million, representing a 65% year-over-year increase. Wholesale revenue totaled $14.6 million (55% of total revenue), up 156% YoY, while online revenue totaled $11.9 million (45% of total revenue), up 14% YoY. Gross margin for the company was 37.0%, down from 42.8% YoY due to Irwin's lower historic margins. Net income was $2.0 million, up from $1.7 million YoY, and adjusted EBITDA was $3.7 million, a 10% YoY increase. Legacy FitLife: Total Q2 2026 revenue was $12.4 million, a 23% YoY decrease. Online sales contributed 68% of segment revenue ($8.43 million, down 19% YoY), and wholesale sales contributed 32% of segment revenue ($3.97 million, down 31% YoY). Gross margin was 41.7%, down from 42.8% YoY but up 50 basis points sequentially from Q1 2026, marking the third consecutive sequential quarterly increase. Contribution margin was 34.1% of revenue, down from 35.4% YoY, with total contribution of $4.2 million, a 25.9% YoY decrease. Contribution was flat sequentially quarter-over-quarter. Irwin: Total Q2 2026 revenue was $14.1 million. Wholesale sales contributed 76% of segment revenue ($10.7 million), and online sales contributed 24% of segment revenue ($3.4 million). Gross margin for the segment was 32.8%, and contribution as a percentage of revenue was 29.2%.

Risks & headwinds

- Legacy FitLife is facing large year-over-year revenue declines, driven by reduced online sales to MRC and reduced wholesale sales to GNC, a trend that is expected to continue as specialty retail faces broad structural challenges. - Irwin's legacy focus is on two declining supplement categories (weight loss and men's health), which creates long-term revenue pressure until the new, growth-focused product pipeline launches at scale. - Amazon algorithm changes and the shift to default one-time purchases have created headwinds for the company's core Amazon business, requiring a strategic shift in marketing that has not yet delivered full results. - Irwin continues to face residual supply chain challenges including product out-of-stocks, which have reduced revenue even after sequential improvement. - Wholesale cross-selling initiatives face long sales cycles due to annual or semi-annual retail planogram resets, leading to delayed revenue visibility from this strategy. - General consumer weakness in the retail supplement market creates broader macro headwinds for the business that are outside of management's control.

Analyst Q&A

• Q: Has the growth of Irwin's online sales met management expectations, and has this growth cannibalized Irwin's existing wholesale sales?

  A: Irwin's Amazon online sales growth has exceeded management expectations. After taking over the Amazon business from a third-party seller that generated $2-$3 million in annual Irwin sales, the company has grown revenue significantly, with one SKU alone pacing $1.5-$2 million in annual revenue. While some cannibalization of wholesale sales is likely unavoidable, management notes that direct online sales deliver higher revenue and gross margin per unit than wholesale, so any tradeoff is acceptable. The company's goal is to grow both channels incrementally rather than shifting volume between them.

• Q: How is the GNC wholesale sales situation evolving relative to management expectations?

  A: GNC sales are coming in lower than management expectations. U.S. specialty retail is broadly challenged right now, with significant store closures and declining comp sales and foot traffic for remaining locations, and Legacy FitLife's GNC sales declines outpace this broader industry trend. The YoY comparison is also skewed by strong Q1/Q2 2025 GNC results driven by restocking after a 2024 supply dispute. GNC challenges are the primary driver of Legacy FitLife's wholesale revenue declines, and management notes there is little it can do to reverse broader struggles at key retail partners.

• Q: What is the current performance of the MusclePharm business, which was not mentioned in the opening remarks?

  A: Headline MusclePharm revenue is down slightly YoY, as the business has walked away from low-margin volume from price-sensitive international bulk customers. Excluding this unprofitable volume, underlying revenue is growing nicely, and gross margins are up several hundred basis points compared to recent quarters. Two new MusclePharm SKUs launched in late Q2 at Kroger, and early sales trends are positive. On Amazon, MusclePharm is currently the company's best-performing brand, with double-digit growth in late Q2, July, and early August 2026 after a period of decline.