FitLife Brands Announces Second Quarter 2023 Results
Omaha, Aug. 14, 2023 (GLOBE NEWSWIRE) -- FitLife Brands, Inc. (“FitLife” or the “Company”) (OTC Pink: FTLF), a provider of innovative and proprietary nutritional supplements and wellness products, today announced financial results for the second quarter ended June 30, 2023, the first full quarter following the acquisition of Mimi’s Rock Corp (“MRC”) on February 28, 2023.
Highlights for the second quarter ended June 30, 2023 include:
- Total revenue was
$14.8 million , an increase of89% compared to the second quarter of 2022. - Adjusted EBITDA was
$3.0 million , an increase of35% 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 of36% . - Basic earnings per share increased from
$0.32 t o$0.44 and fully diluted earnings per share increased from$0.29 t o$0.40 , an increase of38% 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 of9% compared to the same period last year, driven by a15% decrease in wholesale revenue and a15% increase in online revenue. - Online revenue accounted for
67% of the Company’s total revenue during the second quarter of 2023 compared to27% during the same period last year. - Gross margin was
40.4% compared to44.6% 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 been41.9% . - 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 June 30, 2023, total revenue was
Wholesale revenue for the quarter ended June 30, 2023 was
Gross margin for the quarter ended June 30, 2023 was
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 June 30, 2023 was
Net income for the second quarter of 2023 was
Basic earnings per share for the quarter ended June 30, 2023 was
Adjusted EBITDA for the quarter ended June 30, 2023 was
MRC Integration and Operational Improvements
The Company continues to focus on improving cash flow and profitability at MRC. Since acquiring MRC on February 28, 2023, we have focused primarily on improving profitability through cost reduction. More specifically, we have eliminated approximately
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
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 Dr. Tobias, MRC’s largest brand, we believe there is additional opportunity with MRC’s two skin-care brands—All Natural Advice and Maritime Naturals. After declining for the past couple of years, All-Natural Advice returned to year-over-year growth in the second quarter of 2023, and Maritime Naturals appears to have stabilized. We recently completed a redesign of the All-Natural Advice branding and packaging, which we anticipate launching during the fourth quarter of 2023. In addition, we intend to launch new products across all three of the MRC brands.
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
The Company ended the quarter with
Update on Nasdaq listing
On June 20, 2023, the Company announced that it had submitted an application for the listing of its common stock on the Nasdaq Capital Market (“Nasdaq”). Based on preliminary feedback from Nasdaq, the Company is in compliance with all of the initial listing standards except for the requirement to have an average daily trading volume (“ADV”) of 2,000 or more shares over the previous 30 trading days.
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.
Dayton Judd, the Company’s Chairman and CEO, commented, “I am pleased with the Company’s performance. In particular, the integration of MRC has been encouraging and we are quickly achieving the anticipated benefits of the acquisition. With regard to the Legacy FitLife business, although wholesale traffic is down, we remain encouraged by the continued growth of our online business. And given the success of our acquisition strategy thus far, we continue to pursue other possible transactions that we believe will be materially accretive to our shareholders.”
About FitLife Brands
FitLife Brands is a developer and marketer of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers. FitLife markets over 150 different products primarily online, but also through domestic and international GNC® franchise locations as well as through more than 17,000 additional domestic retail locations. FitLife is headquartered in Omaha, Nebraska. For more information, please visit our website at www.fitlifebrands.com.
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 Securities and Exchange Commission including its reports on Form 10-K and 10-Q. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.
Non-GAAP Financial Measures
The financial presentation below contains certain financial measures defined as “non-GAAP financial measures” by the SEC, including non-GAAP EBITDA and adjusted non-GAAP EBITDA. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
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.
FITLIFE BRANDS, INC. | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(In thousands, except per share data) | |||||
June 30, | December 31, | ||||
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 | |||
Goodwill (provisional) | 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 June 30, 2023 and December 31, 2022 | |||||
Common stock, | |||||
issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 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 | |
FITLIFE BRANDS, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 | |||||||||||
(In thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Three months ended | Six months ended | ||||||||||
June 30, | June 30, | ||||||||||
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 | |||||||
FITLIFE BRANDS, INC. | |||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 | |||||
(In thousands) | |||||
(Unaudited) | |||||
Six months ended June 30, | Six months ended June 30, | ||||
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 June 30, | For the six months ended June 30, | |||||||||||
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 |