FitLife Brands(FTLF) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Q1 2024 financial statements show significant growth, with revenue up 54% to $16.5 million and net income at $2.16 million Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $55.5 million, with liabilities decreasing and equity increasing Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $14,992 | $14,693 | | TOTAL ASSETS | $55,486 | $55,346 | | Total current liabilities | $11,828 | $10,337 | | TOTAL LIABILITIES | $26,109 | $28,310 | | TOTAL STOCKHOLDERS' EQUITY | $29,377 | $27,036 | Condensed Consolidated Statements of Income and Comprehensive Income Q1 2024 revenue increased 54% to $16.5 million, with gross profit up 65% and net income surging to $2.16 million Q1 2024 vs Q1 2023 Income Statement (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $16,549 | $10,738 | | Gross Profit | $7,287 | $4,408 | | Operating Income | $3,381 | $673 | | Net Income | $2,160 | $156 | | Diluted EPS | $0.43 | $0.03 | Condensed Consolidated Statements of Cash Flows Q1 2024 operating cash flow significantly increased to $5.0 million, with minimal investing and $3.6 million used in financing Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,036 | $232 | | Net cash used in investing activities | $(10) | $(17,099) | | Net cash provided by (used in) financing activities | $(3,625) | $12,500 | | Change in Cash and Restricted Cash | $1,392 | $(4,350) | Notes to Condensed Consolidated Financial Statements Notes detail the company's nutritional supplement business, key accounting policies, GNC customer concentration, and recent acquisitions - The company operates as a provider of nutritional supplements and wellness products under various brand names, including NDS, iSatori, MRC Products, and MusclePharm[22] - Online revenue grew to 65% of net revenue in Q1 2024, up from 47% in Q1 2023, while wholesale revenue decreased to 35% from 53%[35] - Net sales to GNC represented 25% of total net revenue for Q1 2024, a decrease from 49% in Q1 2023, indicating a diversification of revenue streams[40] - The company acquired Mimi's Rock Corp. (MRC) on February 28, 2023, for $17.1 million and substantially all assets of MusclePharm on October 10, 2023, for $18.8 million[79][86] Management's Discussion & Analysis of Financial Condition and Results of Operations Management attributes Q1 2024's 54% revenue growth and improved gross margin to acquisitions, leading to a net income surge and strong liquidity Q1 2024 vs Q1 2023 Performance Summary (in thousands) | Metric | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $16,549 | $10,738 | $5,811 | 54% | | Gross Profit | $7,287 | $4,408 | $2,879 | 65% | | Operating Income | $3,381 | $673 | $2,708 | 402% | | Net Income | $2,160 | $156 | $2,004 | 1,258% | - Revenue growth was driven by the acquisitions of MRC and MusclePharm. Legacy FitLife revenue decreased by 14% YoY, while MRC contributed $7.5 million and MusclePharm contributed $2.1 million in revenue for Q1 2024[99][100][101] - Gross margin increased to 44.0% in Q1 2024 from 41.1% in Q1 2023, primarily due to higher margins from the MRC sales mix and the non-recurrence of a fair value inventory step-up amortization from the prior year[105] Adjusted EBITDA Reconciliation (Non-GAAP, in thousands) | | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $2,160 | $156 | | EBITDA | $3,412 | $610 | | Adjusted EBITDA | $3,648 | $2,246 | - As of March 31, 2024, the company had positive working capital of $3.2 million and liquidity sources including $3.3 million in cash and an undrawn $3.5 million revolving line of credit[112][113] Quantitative and Qualitative Disclosures About Market Risk Market risk increased due to the MRC acquisition, creating foreign currency exposure and interest rate risk from $16.5 million in variable-rate loans - The acquisition of MRC in 2023 has increased the company's exposure to foreign currency exchange rate fluctuations, particularly the USD/CAD rate[143] - The company is exposed to interest rate risk on its borrowings under the Amended Credit Agreement, which includes variable-rate term loans. As of March 31, 2024, $16.5 million was outstanding on these loans[145] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective[147] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, these controls[148] PART II - OTHER INFORMATION Legal Proceedings The company reports that it is not currently involved in any litigation that is expected to have a material adverse effect on its financial condition or results of operations - The company is not involved in any litigation that it believes could have a material adverse effect on its financial condition or operations[153] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - Management is not aware of any material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2023[154] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[155] Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the three-month period ended March 31, 2024 - There were no defaults upon senior securities during the quarter[156] Other Information During the first quarter of 2024, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" in the three months ended March 31, 2024[157] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, along with various Inline XBRL documents[158]