Synergy CHC Corp. (SNYRQ) Q4 2025 Earnings Call Transcript

Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy CHC Corporation's financial results for the fourth quarter and full year ended December 31st, 2025. Joining us today are Synergy's CEO, Jack Ross, CFO, Jamie Fickett, and Greg Robles with Investor Relations. Following their remarks, we'll open the call for analyst questions. Before we go further, I'd like to turn the call over to Mr. Robles as he reads the company's safe harbor statement.

Thanks, Liz. Good morning, and thanks for joining our conference call to discuss our fourth quarter and full year 2025 financial results. I'd like to remind everyone that this call is available for replay and via a live webcast that will be posted on our investor relations website at investors.synergychc.com. The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's SEC filings under the caption, Risk Factors. The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now, I would like to turn the call over to the CEO of Synergy, Jack Ross.

Thank you, Greg. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the fourth quarter and full year of 2025. While 2025 was a year of transition in many areas of our business, it was also a year of meaningful strategic progress that sets important foundation for sustainable long-term growth. Before discussing our performance, I want to briefly address the 8K we filed regarding our international license agreement covering the UAE and Turkey. As many you recall in mid-25 we expanded our international license partnership to include UAE and Turkey for a baseline licensing fee with additional royalties tied to product performance. The licensee is elected to terminate the agreement, giving the increasing instability and uncertainty across the region. As a result, the 2.5 million dollar licensing revenue associated with the agreement had to be reversed? While unfortunate, this outcome reflects the macro volatility outside of our control rather than any change in our conviction around the potential of focus factor internationally. We continue to view the UAE and Turkey as an attractive, multi-year growth market for both our supplements and functional beverages. The groundwork we laid in 2025 hasn't been lost. The demand remains intact. the brand is strong, and our international strategy continues to be focused on scalable, capital-efficient expansion. Before I turn the call over to Jamie, I want to touch on another development that further supports our international growth strategy. During 2025, we established our wholly-owned subsidiary in Mexico, and in December, we initiated our first product shipments to costco mexico on the beverage side of our business during the first quarter of 2026 we have generated over 600 000 in gross revenue surpassing the entire 2025 revenue which now equates to 2.5 million dollar run rate for 2026. we have shipped we have shipped our focus in energy rtds and shots to new key distribution locations including eg of america the parent company of cumberland farms convenience stores wakefern foods indian nation wholesale mccool distributors mancini beverages tennis incubation and pine state beverages to name a few we have millions of millions of cans of rtds and shots in stock and ready to shift and we expect 2026 to be a foundational growth year for our beverage division. We continue to execute on our supplement side as well, having just shipped three new SKUs to all 1,600 Kroger locations. One initiative that we did not achieve in 2025 was turning back on the TV advertising, which is hugely important for our existing store growth. We will be diligently working towards executing this in 2026 to drive same-store growth within our key retailers. If the results that we achieved in the past hold true, we expect to see at least a 15% lift in same-store sales once the TV advertising is up and running. With those updates, I'd like to turn the call over to our Chief Financial Officer, Jamie Fickett. Jamie?

Thank you, Jack. I'll now review our financial results. Beginning with the fourth quarter, net revenue was $6.07 million compared to $10.27 million in the year-ago quarter, a 41% decrease versus the prior year. The decrease was due to the termination of the license agreement of $2.9 million. Without that reversal, net revenue was $8.97 million, a 12.7% decrease. Gross margin for the fourth quarter was 36.6% compared to 63.3% in the same quarter last year. The decrease in gross margin was primarily driven by the termination of the license agreement of $2.9 million and a write-off of obsolete inventory of $1.04 million. Without those two items, gross margin would have been 68.8%, an increase from prior year. Operating expenses for the fourth quarter were $15.53 million compared to $5.14 million in the year-ago quarter. The increase in operating expenses was largely due to one-time item of an allowance for bad debt of $6.6 million and the write-off of prepaid media credits of $0.9 million. Without those two items, operating expenses would have been $8 million. The majority of the increase was due to professional fees for our corporate development. Loss from operations for the fourth quarter of 2025 was $13.31 million compared to income from operations of $1.35 million in the fourth quarter of 2024. As discussed, this is largely due to one-time items of allowance of bad debts of $6.66 million, termination of the license agreement of $2.9 million, write-off of the obsolete inventory of $1.04 million, and the write-off of a prepaid media credit of $0.9 million. Without those one-time items, loss from operations would have been $1.85 million, which is impacted by the increased professional fees for our corporate development. Net loss for the fourth quarter was $14.82 million, or $1.35 per diluted share, compared to net income of $105.7,000, or $0.01 per diluted share income in the fourth quarter of 2024. This is largely due to one-time items of allowance of bad debt of $6.66 million, termination of the license agreement of $2.9 million, write-off of obsolete inventory of $1.04 million, and the write-off of prepaid media credits of $0.9 million. Without those one-time items, net loss would have been $3.35 million, which is impacted by the increased professional fees for corporate development. EBITDA loss for the fourth quarter was $13.28 million compared to EBITDA income of $1.68 million in the fourth quarter of 2024. Adjusted EBITDA loss for the fourth quarter was $4.48 million compared to adjusted EBITDA income of $2.79 million in the fourth quarter of 2024. Now turning to our full year results. For the full year of 2025, revenue was $30.38 million compared to $34.83 million in the year-ago period. Without reversing the $2.9 million in license revenue, our net revenue would have been $33.28 million in 2025. Gross margin for the full year of 2025 was 66.8% compared to 67.9% in the year-ago period. Without the previously discussed inventory write-off, gross margin would have been 70.3% and increased over prior year. Operating expenses for the year were $28.76 million compared to $17.84 million a year ago. Without the one-time items previously mentioned, operating expenses would have been $21.24 million, which is impacted by the increased professional fees for corporate development. Loss from operations for the year was $28.46 million compared to income from operations of $5.8 million a year ago. The decrease is also due to the one-time items as discussed. Without them, the full-year income from operations would have been $3 million impacted by increased professional fees for corporate development. Net loss for the year was $12.3 million or $1.27 per diluted share compared to net income of $2.1 million or $0.28 per diluted share a year ago. This is also due to the one-time items as discussed, offset by a gain on the settlement of our notes payable of $2.15 million. Without those items, the full-year net loss would have been $3.03 million, which again is impacted by the increased professional fees for our corporate development. EBITDA loss was $6.19 million in 2025 compared to EBITDA of $6.46 million a year ago. Adjusted EBITDA income was $800,000 compared to adjusted EBITDA income of $7.35 million a year ago. Moving to our balance sheet and cash flow. As of December 31st, 2025, we had cash and cash equivalents of $2.6 million compared to $687.9,000 as of December 31st, 2024. Inventory was at $3.7 million at the end of the fourth quarter compared to $1.7 million at the end of 2024. At the end of December 31st, 2025, we had $33.3 million in total liabilities compared to $33 million in total liabilities December 31st, 2024. At December 31st, 2025, we had a working capital surplus of $1.78 million as compared to a working capital deficit of $1.12 million as of December 31st, 2024. For the 12-month end of December 31st, 2025, our cash used and operating activities was $2.6 million compared to cash used and operating activities of $4.8 million at December 31st, 2024. The decrease primarily reflects higher non-cash charges, including bad debt write-offs and stock-based compensation, as well as improved cash collections and accounts receivable, partially offset by the increased inventory investment and the gain on the settlement of debt. Now I will turn the call back to the operator.

Thank you, ma'am. To ask a question, please press star 11 on your telephone and wait for your name to be To withdraw your question, please press star 1-1 again. And our first question will come from Sean McGowan with Roth Capital Partners. Please proceed.

Good morning. Can you hear me okay? We can. Good morning, Sean. Great.

On your comments on the RTD year-to-date being better than all of last year, it kind of implies that the fourth quarter was, I don't know, maybe $200,000 or something. and so what's what is still going on there that kept that from being a lot higher in the fourth quarter we as you know we just raised the money to actually build the inventory in august and you know to actually get the inventory built um you know takes takes time meaning you know eight 12 weeks to build the inventory. So we just really received the majority of the RTD inventory in-house in December. So that's what affected that.

Okay. And looking at some of the other lines, let's say compared to the third quarter, was flat tummy up?

No, flat tummy continues to decline. You know, the weight loss business is being heavily impacted by the GLP-1s. It seems that, you know, the whole industry has moved to those. So, we'll be making a strategic decision on flat tummy in the near future.

Okay.

And then on the core supplement group, what's going on there? the core supplement group i think um you know is relatively strong we continue to you know add key retailers like like kroger we mentioned uh although the tv advertising is very key to that you know same store growth you know we have our competitors we all know who the competitors are pounding the tv airwaves every single day and night um and um you know we need to get that tv be turned back on.

Okay. And what do you think the outlook is going to be with a lot of these one-time things behind you regarding gross margin?

Now, Jamie, you want to talk to that?

We anticipate gross margin to maintain its current level or increase. Again, it was impacted largely by those one-time items, but other than that, our gross margin remains stable.

Do you mean, when you say at the current level, you mean excluding those one-time items?

Yes. Sorry, like as I read in the script. We look at it normalized.

Okay. And have there been any other changes to your approach, you know, kind of go-to-market strategy on the RTD as you look to roll that out?

No, I think, you know, again, it's a sales cycle, Sean, right? So, you know, these things are all driven by planet grams. So, you know, you really get, you know, twice a year where you can really, you know, we'll call gain meaningful distribution and we'll call the major chains. Certainly you can add, you can add, you know, the smaller chains in the meantime, but, you know, you know, we continue with the sales cycle. You know, we do expect, this is big news, we do expect to have some Costco roadshows coming up in different regions, and we expect to have a BGA's roadshow coming up. So, there should be some meaningful growth there on the beverage side.

Okay.

As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchstone phone. And our next question will come from Edward Wu with Ascendient Capital. Please proceed.

Yes, thanks for taking my question and congratulations on the, you know, the growth in Mexico. You guys recently formed a subsidiary in Mexico. Are there other international markets that you plan on, you know, creating a subsidiary to, you know, ship directly in those markets?

Edward, good speaking with you today. No, we don't have any other plans on open international markets directly at this time. Although Mexico is a massive opportunity for us to build out the retail network there. So having that subsidiary there allows us to do that. But as you can see, you know, we've started a lot of initiatives last year. And, you know, for Synergy, 2026 is about executing against those initiatives. Get those TVs turned back on. Get the same store sales growing. Get the opportunities in Mexico that we've already identified up and running. And continue to grow our beverage business. That's the focus for 2026.

Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Ross for closing remarks.

Thank you, everyone, for joining the earnings call today. We look forward to speaking to you shortly as we report our first quarter 2026 results.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.