FitLife Brands(US:FTLF)2025-05-15 21:30Financial Data and Key Metrics Changes - Total revenue for Q1 2025 declined 4% year over year to $15.9 million, with online sales accounting for 67% of total revenue at $10.6 million [3][4] - Gross profit decreased by 6%, and gross margin fell from 44% in Q1 2024 to 43.1% in Q1 2025 [4] - Net income for Q1 2025 was $2 million, down from $2.2 million in Q1 2024, with basic earnings per share declining from 23¢ to 22¢ and diluted earnings per share from 21¢ to 20¢ [4][5] - Adjusted EBITDA for Q1 2025 was $3.4 million, a 6% decrease compared to the previous year [5] - The company ended the quarter with $12 million outstanding on term loans and no balance on its revolving line of credit, resulting in net debt of $6 million, approximately 0.4 times the company's adjusted EBITDA for the past twelve months [5][12] Business Line Data and Key Metrics Changes - Legacy FitLife revenue for Q1 2025 was $7.3 million, with wholesale customers contributing 63% and online sales 37%, representing a 5% increase in total revenue [6] - MRC revenue for Q1 2025 was $6.7 million, down 11% year over year, with gross margin declining to 45.4% [7] - Muscle Farm revenue declined 6% in Q1 2025, with wholesale revenue down 41% and online revenue up 33% [9][10] Market Data and Key Metrics Changes - The tariff environment remains uncertain, particularly concerning tariffs on ingredients from China, although a recent 90-day de-escalation was announced [11] - The company has increased inventory levels at pre-tariff prices, resulting in an all-time high inventory balance [11] Company Strategy and Development Direction - The company aims to continue investing in promotional support for Muscle Farm products to drive growth, despite the challenges faced [10][15] - Management believes there is significant opportunity for consolidation in the nutritional supplement space, indicating a focus on M&A activities [69] Management's Comments on Operating Environment and Future Outlook - Management expressed hope for organic revenue growth in 2025, despite not providing formal guidance [19] - April performance showed year-over-year increases in total revenue and adjusted EBITDA, although results may not be indicative of the entire second quarter [15] Other Important Information - The company has approximately 104,000 active subscribers, accounting for about 30% of online revenue [13] - FitLife is expected to be added to the Russell 2000 index, which could serve as a positive catalyst for the stock [14] Q&A Session Summary Question: Changes in revenue and EBITDA expectations - Management reiterated expectations for organic revenue growth in 2025, without providing specific numbers [19] Question: Margins outlook for the year - Margins are expected to fluctuate based on product mix, with Muscle Farm aiming for around 30% gross margin [21][22] Question: Performance of wholesale customers - Some customers are seeing increased end consumer demand, while others are not achieving desired results from promotional support [28][30] Question: Status of major customer GNC - The relationship with GNC is positive, with improved inventory levels compared to late last year [35] Question: New product launches - New products, including bars and ready-to-drink beverages, are performing well, with expectations for increased sales in Q2 [48] Question: Impact of tariffs on products - Some products benefit from tariff exclusions, while others do not, leading to a variable impact on costs [50][52] Question: Long-term prospects for Muscle Farm - Management is focused on rebuilding the Muscle Farm brand and sees potential for growth despite past challenges [62][64] Question: Valuation multiples for acquisitions - Valuation multiples for prospective deals remain consistent, typically around 6-7x for rapidly growing businesses [72]