FITLIFE BRANDS, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Overall Company Performance: Full year 2024 total revenue increased 22% to $64.5 million, online sales 67% of total, gross profit +31%, net income +70%, adjusted EBITDA +39%. Fourth quarter 2024 total revenue +13% to $15 million, online revenue 67% of total, gross profit +16%, net income +40%. Balance sheet: $13.1 million in term loans, $4.5 million cash, net debt $8.6 million (0.6x LTM adjusted EBITDA).
• Legacy FitLife: Commercial dispute with GNC in Q4 affected results, but the team expects strong Q1 2025 with potential for overall growth despite slight Y/Y wholesale decline.
• MRC: Revenue down slightly Y/Y, but gross margin and contribution improved. Skin care brands were rationalized to address unprofitable revenue.
• MusclePharm: Fourth quarter was strongest since acquisition. New products launched, including ready-to-drink protein. Pilot with Vitamin Shoppe ongoing, rebranding efforts in progress.

Segment Performance

• Legacy FitLife: Fourth quarter 2024 revenue was $5.3 million, with 60% from wholesale and 40% from online sales. Y/Y total revenue declined 13%, gross margin dropped from 40.4% to 39.7%. A commercial dispute with GNC affected Q4 results but the team expects strong Q1 2025 for Legacy FitLife.
• MRC (Mimi's Rock transaction brands): Fourth quarter 2024 revenue was $6.9 million, down slightly 0.4% Y/Y. Gross margin increased from 40.4% to 48.7%, and contribution as a percentage of revenue rose from 28.2% to 37.1%. Skin care brands were rationalized due to unprofitable revenue.
• MusclePharm: Fourth quarter 2024 total revenue increased 14% Q/Q, driven by a 37% increase in wholesale revenue. Online revenue declined 8% Q/Q seasonally. New products launched, including the MusclePharm Pro Series pilot in Vitamin Shoppe stores, and rebranding is ongoing.

Guidance

• Consolidated Q1 2025: Revenue expected 4%-6% lower Y/Y, primarily due to MRC Y/Y comps, but rest of business flat or up. Adjusted EBITDA expected roughly flat in Q1 2025.
• MusclePharm: Expect growth with new products and Vitamin Shoppe pilot, though specifics on ramp not quantified yet.
• MRC: Facing tough Y/Y comps in Q1 2025, particularly due to lapping strong sales from Amazon subscription discounts in early 2024.

Risks

• Tariffs: Potential cost increases on ingredients sourced from China; efforts to source from India and other countries to mitigate impact.
• Commercial Disputes: Disputes with customers like GNC affecting revenue and margins, with potential long-term impacts on relationships.
• Dependence on Key Customers: Reliance on key customers like GNC, with potential changes in terms affecting sales and profitability.

Question and Answer

• Q: Ryan Meyers asks about tariff impact on products sourced from China.

A: Dayton Judd discusses sourcing from India, forward procurement of ingredients like glutamine, and potential cost increases if not sourced from other countries.

• Q: Samir Patel asks about MusclePharm ramp.

A: Dayton Judd talks about rebranding efforts, new products like ready-to-drink protein, and ongoing efforts to gain shelf space in stores like Vitamin Shoppe.

• Q: James Bogan asks about MusclePharm's historical peak and market reaction.

A: Dayton Judd discusses MusclePharm's historical peak over $175M in revenue, brand equity, and market dislocation potentially creating M&A opportunities.

• Q: Igor Novgorodtsev asks about international sales.

A: Dayton Judd states most revenue is domestic, with some Canada sales and international partners, but most revenue is U.S.-based.

• Q: Sean McGowan asks about GNC dispute impact.

A: Dayton Judd discusses catch-up sales as GNC restocks, and profitability differences between selling to GNC corporate vs. franchisees, noting ongoing efforts to balance direct sales and distribution center shipments.