Thank you, Paul. Welcome everyone to FitLife's second quarter 2024 earnings call. We appreciate you taking the time to join us this afternoon. Joining me on the call is FitLife’s CFO, Jakob York, and FitLife's EVP, Ryan Hansen. For this call, we'll follow a similar pattern to our previous earnings call. I'll provide some opening commentary about the different parts of our business and then open the call up for Q&A. Beginning with our reporting for the second quarter of 2024, we have provided some additional metrics for some groups of our brands. This reporting is in response to investor questions about the performance of brands subsequent to their acquisition by the company. We've previously provided some revenue numbers, but we are now providing a breakdown of wholesale revenue versus online revenue, gross profit and gross margin, advertising and marketing expense, as well as a metric we call contribution. There may be other companies that report a similar metric, and they may define contribution differently than we do. So, for purposes of our company and our reporting and our discussion today, we define contribution as gross profit less advertising and marketing expense for the brands in question. And the reason we do this is other than advertising and marketing expense, almost all other operating expenses are not easily allocable to specific brands or groups of brands, which is why we utilize this metric contribution as a key performance metric for our brands. We're providing this level of detail for legacy FitLife, which consists of nine brands, MRC, or Mimi's Rock, which consists of the three brands acquired in the Mimi's Rock transaction, and MusclePharm. Further, our current intention is to provide this level of detail for acquired brands for a period of no more than two years following the acquisition of the brands, after which the results of the acquired brands will be reported as part of legacy FitLife. We hope you'll find this level of disclosure helpful and informative. I'll begin by providing a short overview of the performance of the consolidated business and then provide some commentary on the performance of the brands as outlined in the contribution tables. So first, with regard to consolidated performance, for the second quarter of 2024, total revenue increased 15% year-over-year with wholesale revenue increasing 18% and online revenue increasing 13%. Gross profit increased 27% and, excluding the impact of the inventory step-up resulting from the acquisition of MRC, gross margin expanded from 41.9% last year to 44.8% this year. Contribution increased 39% driven by the addition of MusclePharm, gross margin expansion, and the reduction in advertising and marketing spend. Net income increased 34%, basic earnings per share increased 30%, and fully diluted earnings per share increased 33%. Adjusted EBITDA for the second quarter of 2024 increased 29% to $3.8 million, bringing our LTM adjusted EBITDA to $12.4 million. So now with regard to brand level performance, let me start with an overview of legacy FitLife. Total legacy FitLife revenue for the second quarter of 2024 was $6.8 million, of which roughly 62% was from wholesale customers and 38% was from online sales. This represents a 10% year-over-year decline in wholesale revenue and a 7% year-over-year increase in online revenue or a 5% decline in total revenue. Despite the revenue decline, gross profit increased slightly due to the increase in higher margin online revenue more than offsetting the gross profit impact of the declining wholesale revenue. Gross margin increased from 42.0% last year to 44.2% in this year's second quarter. Contribution was down less than 1% due to increased advertising spend in support of online sales. We also continue to experience strong subscriber growth with subscriber count for our legacy FitLife products increasing approximately 19% on a year-over-year basis. Moving on now to the brands acquired in the Mimi's Rock transaction, or MRC. Just as a reminder, this is a company we purchased on February 28, 2023. Total MRC revenue for the second quarter of 2024 was $7.5 million, almost all of which came from online sales. This represents a 2% year-over-year decline in total revenue. Just to drill down a little bit further though, MRC consists of three brands, a supplement brand called Dr. Tobias, which represents about 90% of MRC's revenue, and two smaller skin care brands. Revenue for the Dr. Tobias brand was up 4% during the quarter, while revenue for the skin care brands was down 37%. The increased revenue for Dr. Tobias is encouraging, particularly given the significant reductions in advertising expenditures over the same period. At the time we acquired MRC, advertising spend in support of Dr. Tobias was materially higher and revenue was declining. Today, advertising spend is significantly lower, and revenue is growing. Now with regard to the skin care brands, at the time of the acquisition those brands were sold in a number of geographies, different countries on Amazon. Unfortunately, the brands were experiencing negative gross margins in some markets and negative contribution in almost all markets. To address this problem, we exited a number of geographies, and we raised prices in all other geographies. The result of these changes is lower revenue, but substantially higher gross margins and positive contribution as opposed to negative contribution. Overall, gross profit for MRC increased 21% year-over-year, while gross margin, excluding the impact of the inventory step-up resulting from the acquisition of MRC, increased from 41.7% to 48.2%. This significant increase in gross margin was due to the previously described optimization of the skin care brands as well as beneficial product mix within the Dr. Tobias brand. Contribution for MRC for the second quarter of 2024 increased 61% year-over-year, driven by the skin care brand optimization, beneficial mix within the Dr. Tobias product line, and a 23% year-over-year reduction in advertising and marketing expenditures. On an LTM basis, contribution for MRC was $8.9 million, which compares very favorably to the $17.1 million we paid for the brands. In addition, I would point out that the $8.9 million LTM contribution for MRC does not yet include the full LTM impact of the skin care brand optimization and the reductions in advertising and marketing spend. For the quarter, Amazon subscribers for MRC products grew 5% year-over-year. Skin care subscribers declined due to the previously discussed price and geography optimization, but Dr. Tobias subscribers grew approximately 8%. So now I'll move on to discuss MusclePharm. As a reminder, we purchased the MusclePharm assets out of bankruptcy in October of last year. MusclePharm revenue was approximately $2.7 million for the second quarter of 2024, of which 48% was from online sales and 52% was from wholesale customers. Total revenue increased 27% sequentially from the first quarter of 2024 to the second quarter of 2024 with wholesale growing 24% sequentially and online revenue growing 31% sequentially. Gross profit increased 16% sequentially, while gross margin declined due to increased promotional activity intended to drive revenue growth. Contribution increased 8% sequentially with contribution as a percentage of revenue declining due to increased promotional activity and increased advertising and marketing expenditures. Our subscriber growth on Amazon for MusclePharm continues to be strong. In previous calls, we disclosed that our subscriber count for MusclePharm products on Amazon grew from five subscribers as of the end of 2023, December 31, 2023, to over 1,600 at the end of the first quarter of 2024. As of the end of the second quarter 2024, the subscriber count was over 3,700, and it has continued to grow at an encouraging pace during the first half of the third quarter. For comparison purposes, when we began selling the legacy FitLife products on Amazon, it took more than two years to achieve the number of subscribers that MusclePharm has acquired in our first six months of selling the brand on Amazon. Now let me give a few more high-level comments about the business before moving into Q&A. For the consolidated business, approximately two-thirds of our revenue now comes from online sales. When the current management took over the company in 2018, less than 1% of revenue came from online sales. We're pleased with the results of the strategic shift with the company achieving record growth, record gross margins, and strong cash flow, while simultaneously reducing its concentration risk with large wholesale customers. With regard to the back half of 2024, please keep in mind that our business does experience seasonality with the first half of the year being stronger than the second half of the year. You can see those trends in the five-quarter contribution tables that we provided in the press release and in the 10-Q. That said, we expect to continue to deliver double-digit year-over-year revenue growth for the remainder of the year. In my remarks, I provided some commentary about Amazon subscribers. We love all of our customers, but we especially love our subscribers. Historically, revenue from subscribers has typically accounted for approximately 20% of our online revenue, sometimes higher and sometimes lower, but in general it's in that range. We don't plan to regularly provide subscriber counts for our individual brands or groups of brands, but as a company, we recently surpassed over 100,000 subscribers on Amazon. We're happy about this milestone and look forward to acquiring the next 100,000 subscribers. With regard to our balance sheet, it remains strong with $15.4 million of term loan outstanding at a rate of SOFR +2.75%, and we have no outstanding balance on our $3.5 million revolver. We ended the second quarter of 2024 with $3.7 million of cash, bringing net debt to $11.7 million or approximately 0.9x LTM adjusted EBITDA. As of the end of 2023, the company's net debt was $18.2 million. So we have reduced our net debt by $6.5 million or 36% during the first half of 2024. So now we can shift to the Q&A before we open it up for questions. We have a longtime investor who emailed some questions. So I'll read you the questions. He's unable, I think, to participate in the call today. Let me read the questions that he has asked, and I'll do my best to answer them and then we can poll for additional questions. So the questions asked are what are the goals management has for the company in five to 10 years? I think we know the strategy for the next six to 12 months. That's the first question. The next question, will share buybacks be reinitiated? The third question, is a dividend being considered? And number four, the question is, I'm sure everyone including me will be very interested in hearing about progress with MusclePharm and getting some color around how much revenue we can expect from MusclePharm when it levels out? So, let me address those one-by-one. I'll maybe go in reverse order. MusclePharm, we're just very reluctant to give a number. If I had a really good idea what it was going to be in 12 months or in 24 months or in five years, I would tell you. But the reality of the situation is, I don't know, and I'd rather just tell you we're going to grow it without putting parameters around that. I think we would be disappointed if we haven't doubled our run rate in this business over the next 12 months. So, we expect to continue to grow. As I indicated in my remarks and you can see in the contribution table, we're investing in growth through promotional offers to wholesale partners, through increased advertising online, and we'll continue to invest in growth as we seek to restore the brand to what it was before. I apologize that we're not going to give anything more specific, but we certainly expect it to grow going forward. The question on the share buybacks and dividend, let me maybe lump those two together. Those are kind of capital allocation questions. And I guess the way I would answer that is, right now, we think the best use of our capital is to acquire other brands at attractive multiples and bring them into the fold. Hopefully, with Mimi's Rock, you can see several quarters now of history of what we've been able to do there. Again, just looking at contribution not EBITDA, it's pretty much impossible at this point to calculate an EBITDA for those brands given the fact that SG&A is spread across all of our brands. But again, using contribution, I mean, we're under 2 times contribution in terms of what we paid for that business, and we think that number will continue to improve. So we think that's the highest and best use of capital, and we continue to look for acquisitions. If we can't find any, at that point, I think we would look to things like share buybacks and dividends. With regard to share buybacks, certainly if there was a big pullback in the stock for whatever reason, we would evaluate that on a case-by-case basis. But right now, our capital allocation strategy is first and foremost to M&A. And with regard to goals that management has for the company in five to 10 years, I think that's somewhat related to what I just said regarding capital allocation. We think that the biggest opportunity here is to consolidate within the supplement industry. We've had a good track record of doing that. It's an incredibly fragmented industry, and we think there are a lot of brands to consider. In fact, we know there are, because we're looking at them. We have pretty good deal flow. We get to look at a lot of deals, and we'll wait for the right pitch. And when we do, we expect to drive hopefully similar results like we have with Mimi's Rock. We hope to do the same with MusclePharm and with other brands that we may look at as well.
Yes. Thanks James for the question. Happy to provide commentary, but I won't talk about specific potential wholesale customers. But we have had and continue to have dialogue with a number of potential partners. And the good news is, nobody is saying no, get out of here and don't ever talk to us again. The dialogue is happening, which is good. We've had a number of meetings with large national-type chains, and we have others that are scheduled here during this quarter. There are others who have indicated that they're likely to bring in some of the products, but until we see purchase orders, we don't want to celebrate and we don't want to declare success. So those customers have said they plan to bring in some of the products. Again, we continue to work with them, and there are agreements that are being negotiated and documented. And again, we fully expect that we'll be starting small with some of these folks, but the good news is that I think we're getting some traction. And I hope as we continue to have these calls going forward, we'll have more to report. But the dialogue is happening, meetings are taking place, and we're having good discussions. The customers who have brought it in already and that are reported in our wholesale revenue numbers for MusclePharm, for example, in the contribution tables, roughly 50% of our revenue, those folks have been happy so far with what they've seen. I think with pretty much all of them, I don't have the numbers in front of me, but I can't think of an exception right now. I think every single one of them is growing with the brand. So we're seeing encouraging uptake, right? When we get back in, we're excited, and then each week-to-week and month-to-month, we're seeing increased purchases from them and increased sales to their end consumers. So we're encouraged by the trends. It certainly is a marathon and not a sprint. So we're continuing to run the marathon and are encouraged by what we're seeing so far in the early stages.
