Omaha, March 27, 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 year ended December 31, 2022.
Highlights for the year ended December 31, 2022 include:
- Total revenue was $28.8 million, an increase of 3.2% compared to $27.9 million in the prior year. Revenue for the fourth quarter was adversely affected by the timing of wholesale shipments, as explained further below.
- Online sales for the full year increased 23.2% to $8.2 million, representing 28% of total revenue compared to 24% in the prior year. For the fourth quarter, online sales increased 22.2% and accounted for 37% of total revenue compared to 23% during the same period in 2021.
- Gross profit declined 3.8% to $12.0 million as higher product costs due to supply chain disruptions were partially offset by an increase in higher-margin online sales.
- Net income declined 18.1% to $4.4 million. Approximately 80% of the decline in net income was due to non-recurring items, specifically the forgiveness of the Company's PPP loan during 2021 with no similar transaction in 2022, and expenses incurred in 2022 related to the Company's restatement of its prior years' financial statements.
- Adjusted EBITDA declined 4.1% to $6.7 million.
- During the fourth quarter, the Company repurchased 48,596 shares of its common stock for total consideration of $0.8 million. The Company ended the year with no debt and $13.3 million of cash. Subsequent to the fiscal year end, there was an additional reduction in the number of outstanding shares of common stock, as explained further below.
Financial Performance
For the fiscal year ended December 31, 2022, total revenue was $28.8 million, an increase of 3.2% compared to $27.9 million during fiscal 2021. Online revenue for the full year was $8.2 million, an increase of 23.2% compared to fiscal 2021. Wholesale revenue for the full year was $20.6 million, a decrease of 3.3% compared to fiscal 2021. Online revenue and wholesale revenue accounted for 28% and 72% of the Company's total revenue, respectively, during 2022.
Total revenue for the fourth quarter was $5.4 million, a decline of 25.4% compared to the same period in 2021. Online revenue for the fourth quarter was $2.0 million, an increase of 22.2% compared to the same period in 2021. Wholesale revenue for the fourth quarter was $3.4 million, a decrease of 39.1% compared to the same period in 2021. Online revenue and wholesale revenue accounted for 37% and 63% of the Company's total revenue, respectively, for the fourth quarter of 2022.
The Company has commented frequently about the variability and unpredictability of orders from its wholesale customers. The 39.1% decline in wholesale revenue during the fourth quarter is due almost entirely to the timing of wholesale orders. Wholesale revenue for the Company was high during the fourth quarter of 2021, resulting in a difficult year-over-year comparison. Additionally, the Company's wholesale revenue for the third quarter of 2022 was strong. And, as discussed further below, wholesale revenue during the first quarter of 2023 to date is also strong.
Rather than focusing on quarterly fluctuations in reported wholesale revenue, the Company believes that retail movement of its products to the end consumer is a better indicator of wholesale revenue expectations over the long term. During the fiscal year ended December 31, 2022, sales of the Company's products to the end consumer by the Company's wholesale customers increased in the mid-single digits. For the fourth quarter of 2022, sales of the Company's products to the end consumer by the Company's wholesale customers declined in the low single digits.
Gross profit for fiscal 2022 declined 3.8% to $12.0 million. Gross profit for the fourth quarter of 2022 declined 29.0% to $2.2 million, primarily due to the 25.4% decline in total revenue during the quarter. The Company's gross margins continue to be impacted by supply chain disruptions that resulted in cost increases on many of our products. While challenges remain, over the past several months the Company has seen encouraging improvements in both procurement costs and lead times for its products.
Prior to COVID, procurement lead times rarely exceeded eight weeks, which allowed the Company to operate more efficiently with less inventory. However, at the peak of the supply chain disruption, lead times frequently exceeded six months. Presently, for most products, the Company is experiencing lead times of approximately 12-16 weeks, and procurement costs for almost all of our products are declining. The Company, which accounts for inventory on a FIFO basis, anticipates continued near-term margin pressure for FitLife products as it finishes selling through higher-cost inventory, with margins anticipated to expand thereafter. In addition, as lead times shorten, the Company anticipates that during fiscal 2023 it will be able to reduce the amount of inventory that it carries.
Net income for fiscal 2022 declined 18.1% to $4.4 million. Approximately 80% of the decline in net income was due to non-recurring items, specifically the forgiveness of the Company's PPP loan during 2021 and expenses incurred in 2022 related to the Company's restatement of prior years' financial statements. Net income for the fourth quarter of 2022 declined 62.1% to $0.5 million driven primarily by the decline in revenue during the quarter, partially offset by an 8.1% decline in operating expense. The Company continues to utilize its net operating loss carryforwards to offset its federal income tax payable. As of December 31, 2022, the Company had approximately $9.7 million of remaining federal net operating loss carryforwards.
Adjusted EBITDA for fiscal 2022 was $6.7 million, a decline of 4.1% from fiscal 2021. The adjusted EBITDA decline for fiscal 2022 was due to the previously discussed gross margin pressure, partially offset by an increase in higher-margin online sales. Adjusted EBITDA for the fourth quarter of 2022 was $0.9 million, a decline of 45.9% from the same period during 2021. The adjusted EBITDA decline for the fourth quarter was primarily due to lower revenue.
As of December 31, 2022, the Company had no debt outstanding and a cash balance of $13.3 million.
Reduction in Outstanding Common Shares
During the fourth quarter of 2022, the Company repurchased 48,596 common shares in multiple private transactions at an average price of $15.86 per share, for total consideration of approximately $0.8 million. All of the repurchased shares were cancelled.
Subsequent to the end of the fiscal year, the Company settled a dispute with a former employee. As a result of the settlement, the former employee forfeited 61,200 shares of common stock to the Company for no consideration, which shares were then immediately cancelled. The forfeiture of these shares equated to a 1.4% reduction in the then-outstanding share count. Combined with the share repurchases during the fourth quarter, the number of the Company's outstanding shares has declined 2.4% since September 30, 2022.
On March 17, 2023, the Board of Directors approved the extension and amendment of the Company's share repurchase program. The amended program authorizes management to repurchase up to $5 million of the Company's common stock over the next two years. To avoid impacting the daily trading volumes of the common stock as the Company prepares to uplist to Nasdaq, management currently intends to continue prioritizing purchases of untraded restricted stock via private transactions.
Acquisition and Integration of Mimi's Rock
As previously reported, on February 28, 2023, the Company completed its acquisition of all of the issued and outstanding shares of capital stock of Mimi's Rock Corp. (TSXV: MIMI, OTCQB: MIMNF) ("MRC"). The Company paid total consideration of CAD $23.2 million (or approximately $17.0 million USD), of which approximately CAD $14.2 million was used to retire all of MRC's outstanding indebtedness, and approximately CAD $9.0 million was used to purchase MRC's shares from its shareholders.
The Company funded the acquisition using a combination of cash on hand and the proceeds of a new $12.5 million term loan. As previously reported, the Company expects to incur between $1.2 and $1.5 million in non-recurring transaction-related expense. The Company also anticipates investing approximately $2.0 million to enhance MRC's working capital going forward.
In the approximately four weeks that the Company has owned MRC, FitLife's management has worked closely with the MRC team to eliminate operating expense that the Company anticipates will result in annualized cost reductions of between $1.6 - 2.0 million. Only a small portion of this amount will be realized during the first quarter of 2023 but, based on actions taken thus far, management anticipates quarterly operating cost savings of between $0.4 and $0.5 million beginning with the second quarter of 2023. In addition, the Company expects to identify opportunities to further enhance operating efficiency as well as drive incremental revenue growth.
Preliminary Comments on First Quarter of 2023
The Company has experienced strong performance thus far during the first quarter of 2023. For the legacy FitLife business, online revenue has continued its strong growth, and wholesale revenue has increased as well. For the first quarter of 2023, the Company currently expects total revenue growth for the legacy FitLife business in the range of 8-12%. Management is also pleased with the initial performance of MRC. Including the 32 days of revenue contribution from MRC during the quarter, the Company currently anticipates total revenue for the first quarter of 2023 to be between $10.4 and $11.0 million.
As of March 26, 2023, the Company had $12.5 million of debt outstanding and a cash balance of approximately $9.0 million, for total net debt of approximately $3.5 million. The Company intends to maintain a meaningful cash balance as it continues evaluating additional M&A opportunities. The Company is currently earning just under 4.0% interest on its cash balances, which offsets a significant portion of the cash interest paid on the outstanding debt.
Dayton Judd, the Company's Chairman and CEO, commented "I am pleased with the continued strong performance of our business. And I am particularly excited to work together with the MRC team to drive increased profitability and growth for their brands."
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 140 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 to 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 below, non-GAAP EBITDA excludes interest, 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 below 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. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| As of December 31, | ||||||||
| 2022 | 2021 | |||||||
| ASSETS: | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 13,277,000 | $ | 9,897,000 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $50,000 and $55,000, respectively | 705,000 | 945,000 | ||||||
| Inventories, net of allowance for obsolescence of $107,000 and $56,000, respectively | 9,105,000 | 6,520,000 | ||||||
| Prepaid expenses and other current assets | 116,000 | 322,000 | ||||||
| Total current assets | 23,203,000 | 17,684,000 | ||||||
| Property and equipment, net | 46,000 | 70,000 | ||||||
| Right of use asset | 103,000 | 158,000 | ||||||
| Intangibles, net of amortization of $72,000 and $30,000, respectively | 150,000 | 192,000 | ||||||
| Goodwill | 358,000 | 358,000 | ||||||
| Deferred tax asset | 1,847,000 | 3,045,000 | ||||||
| TOTAL ASSETS | $ | 25,707,000 | $ | 21,507,000 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 2,995,000 | $ | 2,880,000 | ||||
| Accrued expense and other liabilities | 631,000 | 491,000 | ||||||
| Product returns | 590,000 | 632,000 | ||||||
| Lease liability - current portion | 54,000 | 55,000 | ||||||
| Total current liabilities | 4,270,000 | 4,058,000 | ||||||
| Long-term lease liability, net of current portion | 49,000 | 103,000 | ||||||
| TOTAL LIABILITIES | 4,319,000 | 4,161,000 | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding | ||||||||
| as of December 31, 2022 and December 31, 2021 | ||||||||
| Common stock, $0.01 par value, 60,000,000 shares authorized; 4,507,361 and 4,552,485 | ||||||||
| issued and outstanding as of December 31, 2022 and December 31, 2021, respectively | 45,000 | 46,000 | ||||||
| Treasury stock, 0 and 881,311 shares, respectively | - | (2,087,000 | ) | |||||
| Additional paid-in capital | 30,056,000 | 32,529,000 | ||||||
| Accumulated deficit | (8,713,000 | ) | (13,142,000 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | 21,388,000 | 17,346,000 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 25,707,000 | $ | 21,507,000 | ||||
| FITLIFE BRANDS, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| Years ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | 28,803,000 | $ | 27,913,000 | ||||
| Cost of goods sold | 16,769,000 | 15,409,000 | ||||||
| Gross profit | 12,034,000 | 12,504,000 | ||||||
| OPERATING EXPENSES: | ||||||||
| Selling, general and administrative | 6,267,000 | 6,215,000 | ||||||
| Depreciation and amortization | 66,000 | 59,000 | ||||||
| Total operating expenses | 6,333,000 | 6,274,000 | ||||||
| OPERATING INCOME | 5,701,000 | 6,230,000 | ||||||
| OTHER INCOME | ||||||||
| Interest income | (121,000 | ) | (25,000 | ) | ||||
| Gain on debt forgiveness | - | (453,000 | ) | |||||
| Total other income | (121,000 | ) | (478,000 | ) | ||||
| PRE-TAX NET INCOME | 5,822,000 | 6,708,000 | ||||||
| PROVISION FOR INCOME TAXES | 1,393,000 | 1,298,000 | ||||||
| NET INCOME | $ | 4,429,000 | $ | 5,410,000 | ||||
| NET INCOME PER SHARE | ||||||||
| Basic | $ | 0.97 | $ | 1.23 | ||||
| Diluted | $ | 0.89 | $ | 1.13 | ||||
| Basic weighted average common shares | 4,552,533 | 4,406,614 | ||||||
| Diluted weighted average common shares | 4,974,596 | 4,801,370 | ||||||
| FITLIFE BRANDS, INC. | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| Years Ended December 31, | |||||||||
| 2022 | 2021 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
| Net income | $ | 4,429,000 | $ | 5,410,000 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 66,000 | 59,000 | |||||||
| Right of use asset | 55,000 | 50,000 | |||||||
| Allowance for doubtful accounts | (6,000 | ) | 4,000 | ||||||
| Allowance for inventory obsolescence | 51,000 | - | |||||||
| Stock compensation expense | 363,000 | 452,000 | |||||||
| Forgiveness of PPP loan | - | (453,000 | ) | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable - trade | 247,000 | 974,000 | |||||||
| Inventories | (2,636,000 | ) | (2,945,000 | ) | |||||
| Deferred tax asset | 1,199,000 | 1,294,000 | |||||||
| Prepaid expenses and other assets | 204,000 | (270,000 | ) | ||||||
| Income tax receivable | - | 40,000 | |||||||
| Accounts payable | 115,000 | (366,000 | ) | ||||||
| Lease liability | (55,000 | ) | (50,000 | ) | |||||
| Accrued liabilities and other liabilities | 140,000 | (6,000 | ) | ||||||
| Product returns | (42,000 | ) | 287,000 | ||||||
| Net cash provided by operating activities | 4,130,000 | 4,480,000 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
| Cash paid for acquisition | - | (529,000 | ) | ||||||
| Net cash used in investing activities | - | (529,000 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
| Proceeds from exercise of stock options | 29,000 | 54,000 | |||||||
| Repurchases of common stock and options | (779,000 | ) | (444,000 | ) | |||||
| Net cash used in financing activities | (750,000 | ) | (390,000 | ) | |||||
| CHANGE IN CASH | 3,380,000 | 3,561,000 | |||||||
| CASH, BEGINNING OF PERIOD | 9,897,000 | 6,336,000 | |||||||
| CASH, END OF PERIOD | $ | 13,277,000 | $ | 9,897,000 | |||||
| Supplemental disclosure operating activities | |||||||||
| Cash paid (refunded) for income taxes | $ | 3,000 | $ | (42,000 | ) | ||||
| Supplemental noncash financing activities | |||||||||
| Forgiveness of PPP loan, including accrued interest | $ | - | $ | 453,000 | |||||
| Years ended December 31, | ||||||
| 2022 | 2021 | |||||
| (Unaudited) | (Unaudited) | |||||
| Net income | $ | 4,429,000 | $ | 5,410,000 | ||
| Interest income, net | (121,000 | ) | (25,000 | ) | ||
| Provision for income taxes | 1,393,000 | 1,298,000 | ||||
| Depreciation and amortization | 66,000 | 59,000 | ||||
| EBITDA | 5,767,000 | 6,742,000 | ||||
| Non-cash and non-recurring items | ||||||
| Stock-based compensation expense | 363,000 | 452,000 | ||||
| Acquisition related expenses | 257,000 | 253,000 | ||||
| Restatement expenses | 318,000 | - | ||||
| Non-recurring gains | - | (453,000 | ) | |||
| Adjusted EBITDA | $ | 6,705,000 | $ | 6,994,000 | ||
