Q4 2024 FitLife Brands Inc Earnings Call

Okay.

Operator: Good day everyone and welcome to the FitLife Brands fourth quarter 2024 financial results.

Speaker Change: Good day, everyone and welcome to the fifth life Brands' fourth quarter 2024 financial results.

Operator: At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation.

At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.

Dayton Judd: It is now my pleasure to turn the floor over to your host, Dayton Judd, Chief Executive Officer of FitLife Brands. Sir, the floor is yours. Thank you, Matt. I would like to welcome everyone to FitLife's fourth quarter and full year 2024 earnings call. We appreciate you taking the time to join us this afternoon.

Speaker Change: It is now my pleasure to turn the floor over to your host Dayton Judd Chief Executive Officer rest at life brands, Sir the floor is yours.

Speaker Change: Okay.

Matt: Thank you Matt.

Speaker Change: I'd like to welcome everyone to fit lives fourth quarter and full year 2024 earnings call. We appreciate you taking the time to join US This afternoon join.

Dayton Judd: Joining me on this call is FitLife CEO Jacob York, CFO Jacob York. To get us started, I'll provide some opening commentary and then we'll open the call up for Q&A. As a reminder, the company affected a two for one forward stock split on February the 7th 2025. All per share amounts in our 10K press release and discussion today have been retroactively adjusted to account for the forward split. For the company overall, for the full year 2024, total revenue increased 22% year over year to $64.5 million. Online sales grew 29% year-over-year and represented 67% of the company's total revenue.

Matt: Joining me on this call is fit like CEO Jacob York CFO Jacob you work.

Matt: To get US started I'll provide some opening commentary and then we'll open the call up for Q&A.

Matt: As a reminder, the company effected a two for one forward stock split on February the seventh 2025.

Matt: All per share amounts in our 10-K press release and discussion today have been retroactively adjusted to account for the forward split.

Matt: Yeah.

Matt: For the company overall for the full year 2024, total revenue increased 22% year over year to $64 5 million.

Matt: Online sales grew 29% year over year and represented 67% of the company's total revenue.

Dayton Judd: Gross profit increased 31% and gross margin expanded from 40.7% to 43.6%. Contribution, which we define as gross profit less advertising and marketing expense, increased 37% to $23.5 million. Our net income increased 70% to $9 million. with Basic EPS increasing 66% to 98 cents a share. fully diluted EPS increasing 69% to 91%. Adjusted EBITDA for the full year increased 39% to $14.1 million. With regard to the balance sheet, the company ended the year with $13.1 million outstanding on its term limits. no balance on its $3.5 million revolving line of credit. Considering the cash of $4.5 million outstanding at year-end, our net debt was $8.6 million.

Matt: Gross profit increased 31% and gross margin expanded from 47% to 43, 6%.

Matt: Contribution, which we define as gross profit less advertising and marketing expense increased 37% to $23 5 million.

Matt: Our net income increased 70% to $9 million with basic EPS, increasing 66% to 98 cents a share and fully diluted EPS, increasing 69% to 91 cents a share.

Matt: Adjusted EBITDA for the full year increased 39% to $14 1 million.

Matt: With regard to the balance sheet. The company ended the year with $13 1 million outstanding on its term loans and no balance on its $3 5 million revolving line of credit.

Matt: Considering the cash of $4 5 million outstanding at year end, our net debt was $8 6 million, which is equivalent to 0.6 times the company's LTM adjusted EBITDA.

Dayton Judd: which is equivalent to 0.6 times the company's LTM adjustment. Continuing for the company overall, but now just looking at the fourth quarter of 2024 compared to the fourth quarter of 2023, total revenue increased 13% to $15. Online revenue increased 12% to $10.1 million, or 67% of total revenue. Gross profit increased 16% to $6.2 million. gross margin expanded from 40.3% to 41.4%. Contribution increased 18% to $5.2 million. Our net income increased 40% to $2.1 million, with basic earnings per share increasing 44% to $0.23 a share, and fully diluted EPS increasing 40% Our adjusted EBITDA for the quarter increased 31% to $3.1 million.

Matt: Yeah.

Matt: Continuing for the company overall, but now just looking at the fourth quarter of 2024 compared to the fourth quarter of 2023 total revenue increased 13% to $15 million.

Matt: Online revenue increased 12% to $10 1 million or 67% of total revenue.

Matt: Gross profit increased 16% to $6 2 million and gross margin expanded from 43% to 41, 4%.

Matt: Contribution increased 18% to $5 2 million.

Matt: Our net income increased 40% to $2 1 million with basic earnings per share, increasing 44% to 23 cents a share and fully diluted EPS, increasing 40% to 21 cents per share.

Matt: Our adjusted EBITDA for the quarter increased 31% to $3 1 million.

Matt: With regard to the brand level performance I'll provide some high level financial commentary on the fourth quarter.

Dayton Judd: With regard to the brand level performance, I'll provide some high-level financial commentary on the fourth quarter. and then provide some additional color on what is going on.

Matt: And then provide some additional color on what is what is going on with each grouping of brands.

Dayton Judd: Grouping Brand.

Dayton Judd: I'll start with Legacy FitLife. Total Legacy FitLife revenue for the fourth quarter of 2024 was $5.3 million, of which 60% was from wholesale customers and 40% was from online sales. This represents a 20% year-over-year decline in wholesale revenue and a 1% year-over-year decline in online revenue for a total decline of 13% for total. Our gross margin declined slightly from 40.4% to 39.7%.

Matt: I'll start with legacy fit life total legacy fit life revenue for the fourth quarter of 2024 was $5 3 million of which 60% was from our wholesale customers and 40% was from online sales.

Matt: This represents a 20% year over year decline in wholesale revenue and a 1% year over year decline in online revenue for a total decline of 13% for total revenue.

Matt: Our gross margin declined slightly from 44% to 39, 7%.

Matt: As we highlighted in the 10-K as well as in our press release.

Dayton Judd: As we highlighted in the 10K, as well as in our press release, Our biggest challenge for Legacy FitLife during the fourth quarter was a commercial dispute with our largest customer that began in December and continued through the first half of the first quarter of 2025. without going into too much detail. In essence, they were asking for substantially improved commercial terms. that were financially detrimental to us and for which the company would receive no benefit. So rather than acquiesce, once we started receiving POs from them, with the altered commercial terms, we began rejecting those POs. As a result, the company accepted no orders from GNC for the period from December 1, 2024 through January 23, 2025.

Matt: Our biggest challenge for legacy fit life during the fourth quarter was.

Matt: It was a commercial dispute with our largest customer that began in December and continued through the first half of the first quarter of 2025.

Matt: Without going into too much detail in essence, they were asking for substantially improved commercial terms.

Matt: We're financially detrimental to us and for which the company would receive no benefit.

Matt: So rather than acquiesce once we started receiving pose from them with the altered commercial terms, we began rejecting those pose.

Matt: As a result, the company accepted no orders from GNC for the period from December one 2024 through January 23rd 2025.

Dayton Judd: The impact of this was that the company's products in the GNC distribution centers were largely depleted before the end of December. And at the beginning of January, we began selling and shipping our products directly to our GNC franchisee customers. On January 23rd, GNC and FitLife settled the commercial And the company, again, began accepting POs from GNC. The first shipment of products back into the GNC distribution centers occurring a couple of weeks after that.

Matt: The impact of this was the company's products in the GNC distribution centers were largely depleted before the end of December.

Matt: And at the beginning of January we began selling and shipping our products directly to our GNC franchisee customers.

Matt: On January 23rd GNC and fit life settled the commercial dispute and the company again began accepting pose from GNC with the first shipment of products back into the GNC distribution centers occurring a couple of weeks after that.

Dayton Judd: So clearly this affected our fourth quarter numbers, and I'm sure you are wondering what the impact will be on the first quarter of 2025. The short answer is that what our sales and operations teams did to manage through this process and transition to direct fulfillment to the franchisees was nothing short of remarkable. And we actually expect the first quarter of 2025 to be quite strong for Legacy FitLife. If I had to guess, wholesale will probably still be down a little bit year over year, but at a significantly lower rate than previous quarters. In addition, with the strong year-over-year performance we're seeing in the online side of the business for Legacy FitLife.

Matt: So clearly this affected our fourth quarter numbers and I'm sure you were wondering what the impact will be on the first quarter of 2025.

Matt: The short answer is that what our sales and operations teams did to manage through this process and transition to direct fulfillment to the franchisees was nothing short of remarkable.

Matt: And we actually expect the first quarter of 2025 to be quite strong for legacy fit life.

Matt: If I had to guess wholesale will probably still be down a little bit year over year, but at a significantly lower rate than previous quarters.

Matt: In addition, with our strong year over year performance, we're seeing in the online side of the business for legacy Fed life.

Dayton Judd: I think there's a good chance that Legacy FitLife as a whole will be up for the first quarter of 2020.

Matt: I think there's a good chance that legacy fit life as a whole will be up for the first quarter of 2025.

Matt: Moving on now to the brands acquired in the Mimi's rock transaction or what we call MRC.

Dayton Judd: Moving on now to the brand acquired in the Mimi's Rock transaction, or what we call MRC. Total MRC revenue for the fourth quarter of 2024 was $6.9 million, down slightly, 0.4% from the previous quarter. MRC's gross margin increased year-over-year from 40.4% to 48.7%. The contribution as a percentage of revenue increased from 28.2% to 37.1%. During the fourth quarter of 2024, revenue for the largest MRC brand, Dr. Tobias, increased 6%. while revenue for the skin care brands declined 38%. On previous calls, we've discussed the challenges with the skincare brands when we inherited them as part of the MRC acquisition.

Matt: Total MRC revenue for the fourth quarter of 2024 was $6 9 million down slightly 0.4% from the previous year.

Matt: <unk> gross margin increased year over year from 44% to 48, 7%.

Matt: And contribution as a percentage of revenue increased from 28, 2% to 37, 1%.

Matt: During the fourth quarter of 2020 for revenue for the largest MRC brand Dr. Tobias increased 6%.

Matt: Revenue for the skincare brands declined 38%.

Matt: On previous calls we've discussed the challenges with the skincare brands when we inherited them as part of the MRC acquisition.

Dayton Judd: But the short story is that the brands had a significant amount of unprofitable revenue. which we rationalized beginning in late 2023 and into 2020. This Optimization of the Skin Care Brand. along with beneficial product mix for the Dr. Tobias brand. explains why you see dramatically increased gross profit and contribution for MRC. even while revenue is flat. In dollar terms, contribution for MRC during the full year 2024 was just over $10 million. which less than two years after the acquisition. compares very favorably to the $17.1 million purchase price we paid to acquire.

Matt: But the short story is that the brands had a significant amount of unprofitable revenue, which.

Matt: Which we rationalized beginning in late 2023, and then into 2024.

Matt: This optimization of the skincare brands, along with beneficial product mix for the Doctor Tobias brand explains why you see dramatically increased gross profit and contribution for MRC.

Matt: Even while revenue is flat.

Matt: In dollar terms contribution for MRC during the full year 2024 was just over $10 million.

Matt: It's less than two years after the acquisition.

Matt: <unk> very favorably to the $17 1 million purchase price, we paid to acquire the company.

Matt: Regarding mrc's performance during the first quarter of 2025, we indicated in our press release that we expect to see MRC online revenue down between 10 and 13% for the quarter. So let me talk a little bit more about that.

Dayton Judd: Regarding MRC's performance during the first quarter of 2025, we indicated in our press release that we expect to see MRC online revenue down between 10 and 13% for the quarter. So let me talk a little bit more about that. In short, the first quarter of 2024 was very strong for Dr. Tobias, at least partially due to new subscription discounting that we implemented during the month of February 2024. The result was that the period from February 12th through March the 24th was the strongest six-week period of the entire year for the Dr. Tobias brand on Amazon in terms of revenue, even higher than the periods that included Amazon's Prime Days or other promotional events.

Matt: In short the first quarter of 2024 was very strong for Doctor Tobias at least partially due to new subscription discounting that we implemented during the month of February 2024.

Matt: The result was that the period from February 12 through March. The 24 was the strongest six week period of the entire year for the Doctor to bias brand on Amazon in terms of revenue even higher than the periods that included Amazon's prime days or other promotional events.

Dayton Judd: If I drill down even further, January of 2025 was fairly strong and very similar to January of 2024, with a revenue decline of approximately only 1.5%. So the shortfall that we are seeing in the current quarter is really just in the past several weeks when we are lapping the revenue surge that began in February of 2024. And that reference period that I mentioned was February 12th through March the 24th. So we are just now coming out of that period, and it is too early to tell what the second quarter will look like, because the second quarter of last year was fairly strong as well, but we are optimistic that the comparisons will be getting a bit easier going forward.

Matt: Drill down even further January of 2025 was fairly strong and very similar to January of 2024.

Matt: With a revenue decline of approximately only one 5%.

So the shortfall that we are seeing in the current quarter is really just in the past several weeks. When we are lapping the revenue surge that began in February of 'twenty 'twenty four.

Matt: And that reference period that I mentioned was February 12th through March the 24th. So we are just now coming out of that period and it is too early to tell with the second quarter will look like.

Matt: Because the second quarter of last year was fairly strong as well, but we are optimistic that the comparisons will be getting a bit easier going forward.

Matt: With regard to muscle farm, the fourth quarter for muscle farm was the strongest quarter. We've had in terms of revenue since we bought the brand.

Dayton Judd: With regard to muscle farm, the fourth quarter for muscle farm was the strongest quarter we have had in terms of revenue since we bought Total revenue increased 14% sequentially from the third quarter of 2024 to the fourth quarter of 2021. driven by a 37% increase in wholesale revenue. Online revenue declined by 8% sequentially, consistent with the typical seasonal pattern for sports nutrition products.

Matt: Total revenue increased 14% sequentially from the third quarter of 2024 to the fourth quarter of 2024, driven by a 37% increase in wholesale revenue.

Matt: Online revenue declined by 8% sequentially consistent with the typical seasonal pattern for sports nutrition products.

Dayton Judd: The strong growth for muscle farm on the wholesale side was a function of two First, as we disclosed in our previous earnings report, some orders that were received in September of last year did not ship until October. Second, the company invested in increased promotion in an attempt to drive increased sales of the MusclePharm product. This investment in increased promotion primarily consisted of increased marketing allowances to wholesale customers. Under GAAP, these marketing allowances are accounted for as a price reduction which lowers reported net revenue and gross profit, and therefore gross margin. The company intends to continue investing in promotional spend for the foreseeable future.

Matt: The strong growth for muscle farm on the wholesale side was a function of two things.

Matt: First as we disclosed in our previous earnings reports some orders that were received in September.

Matt: Of last year did not ship until October.

Matt: And second the company invested in increased promotion in an attempt to drive increased sales of the muscle farm products.

Matt: This investment and increased promotion primarily consisted of increased marketing allowances to wholesale customers.

Matt: Under GAAP. These marketing allowances are accounted for as a price reduction, which lowers reported net revenue and gross profit and therefore gross margin the.

Matt: The company intends to continue investing in promotional spend for the foreseeable future, although the timing and amounts may vary.

Dayton Judd: Although the timing and amounts may vary.

Matt: Subsequent to the end of the fourth quarter, there have been a number of developments for the muscle farm brand, particularly on the product side.

Dayton Judd: Subsequent to the end of the fourth quarter, there have been a number of developments for the MusclePharm brand, particularly on the product As previously disclosed, just a couple weeks ago. The company launched its new muscle farm pro a collection of nine SKUs of premium sports nutrition products. in a two-month pilot in high-volume vitamin shop stores consisting of approximately sixty percent of vitamin shops nationwide store if the pilot is successful. The Pro Series line is anticipated to gain permanent shelf space system-wide within the chain and will be exclusive to Vitamin Shop for a period of 12 months.

Matt: As previously disclosed just a couple of weeks ago.

Matt: The company launched its new muscle farm Pro series.

Matt: A collection of nine Skus, if premium sports nutrition products.

Matt: In a two month pilot in high volume vitamin Shoppe stores, consisting of approximately 60% of vitamin shops nationwide store base.

Matt: If the pilot is successful.

Matt: The Pro series line is anticipated to gain permanent shelf space system wide within the chain and will be exclusive to vitamin shop for a period of 12 months.

Matt: In addition, we recently launched two new flavors of the muscle farm protein bars, as well as three flavors of a new ready to drink protein with 40 grams of protein and no added sugar.

Dayton Judd: In addition, we recently launched two new flavors of the MusclePharm protein bars, as well as three flavors of a new ready-to-drink protein. with 40 grams of protein and no added sugar.

Matt: Last we've previously talked about the rebrand of the legacy mussel farm products.

Dayton Judd: Last, we have previously talked about the rebrand of the Legacy MuscleForm product. Products in the new packaging began shipping in late 2024, and the transition from old packaging to new packaging will continue over the next few months as we sell through the remaining inventory in the old packaging. We expect MusclePharm wholesale revenue to be down somewhat in the first quarter, driven primarily by one account that took advantage of our promotional investment during the fourth quarter, that did not increase their sell through of the product, which has affected their reorder volume. However, we just expect the decline in muscle farm wholesale revenue for the first quarter of 2025 to be at least partially offset by strong online sales, which have grown at a double digit rate thus far during the first quarter.

Matt: Products in the new packaging began shipping in late 2024.

Matt: And the transition from old packaging to new packaging will continue over the next few months as we sell through the remaining inventory in the old packaging.

Matt: We expect muscle farm wholesale revenue to be down somewhat in the first quarter driven primarily by one account that took advantage of our promotional investment during the fourth quarter, but did not increase their sell through of the product which has affected their reorder volumes.

However, we expect the decline in muscle farm wholesale revenue for the first quarter of 2025 to be at least partially offset by strong online sales, which have grown at a double digit rate thus far during the first quarter.

Matt: Now I'll provide a few high level comments on our expectations overall for the first quarter of 2025 and a couple of other topics and then we can move into Q&A.

Dayton Judd: Now I'll provide a few high-level comments on our expectations overall for the first quarter of 2025 and a couple other topics and then we can move into Q&A. Our current estimate is that on a consolidated basis, revenue for the first quarter of 2025 will be in the range of 4-6% lower than the first quarter of 2024. I talked about the various factors affecting each of the brand groups. But if I had to sum it all up, I think the decline for the quarter is due primarily to the MRC year-over-year comparison. and that the rest of the business combined should be at least flat, if not up slightly.

Matt: Our current estimate is that on a consolidated basis revenue for the first quarter of 2025 will be in the range of 4% to 6% lower than the first quarter of 2024.

Matt: I talked about the various factors affecting each of the brand groupings, but if I had to sum it all up I think the decline for the quarter is due primarily to the MRC year over year comparison and that the rest of the business combined should be at least flat if not up slightly.

Matt: The first quarter of 2024 also had one more day than the first quarter of 2025 because of leap year in there.

Dayton Judd: The first quarter of 2024 also had one more day than the first quarter of 2025 because of leap And that explains about 1% of the anticipated 4% to 6% decline. With regard to adjusted EBITDA for the first quarter of 2025, we expect that to be roughly flat despite the anticipated revenue decline.

Matt: That explains about 1% of the anticipated 4% to 6% decline.

Matt: With regard to adjusted EBITDA for the first quarter of 2025, we expect that to be roughly flat. Despite the anticipated revenue decline.

Matt: On other topics I address the topic of tariffs and our press release Theres still quite a bit of uncertainty, but if you have questions about the tariffs. Please feel free to ask during the Q&A session and I will do my best to answer them.

Dayton Judd: On other topics, I address the topic of tariffs in our press release. There's still quite a bit of uncertainty. But if you have questions about tariffs, please feel free to ask during the Q&A session and I will do my best.

Dayton Judd: The company's balance sheet is strong and continues to get stronger. Since year-end, we have made one additional scheduled amortization payment, bringing our outstanding indebtedness to $12 million. And even considering the amortization payment, our cash balance has continued to grow, bringing our net debt to adjusted EBITDA ratio even lower than the 0.6 times leverage ratio we had at the end of the month.

Matt: The company's balance sheet is strong and continues to get stronger.

Matt: Since year end, we have made one additional scheduled amortization payment, bringing our outstanding indebtedness to $12 million.

Matt: And even considering the amortization payment our cash balance has continued to grow bringing our net debt to adjusted EBITDA ratio, even lower than the 0.6 times leverage ratio, we had at the end of the fourth quarter.

Matt: We won't comment on M&A other.

Dayton Judd: We won't comment on M&A other than to say we are pretty much always actively evaluating one or more targets. We will continue to be patient and wait for the most compelling opportunity. I will also point out that the stronger our balance sheet, the bigger the acquisition we can handle. And although we still look at some smaller acquisitions, we will prioritize a larger transaction when possible. In addition, we are hopeful that the recent market and macroeconomic dislocations will bring more M&A candidates to the market. possibly at lower.

Matt: Other than to say, we are pretty much always actively evaluating one or more targets and we will continue to be patient and wait for the most compelling opportunities.

Matt: I will also point out that the stronger our balance sheet the bigger the acquisition we can handle.

Matt: Although we still look at some smaller acquisitions, we will prioritize a larger transaction when possible.

Matt: In addition, we are hopeful that the recent market and macroeconomic dislocations will bring more M&A candidates to the market.

Matt: And possibly at a lower purchase multiples.

Dayton Judd: So that concludes my opening commentary. And Matt, you can go ahead and poll for questions.

Matt: So that concludes my opening commentary and Matt you can go ahead and poll for questions.

Matt: Certainly.

Operator: Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Thank you.

Speaker Change: At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.

Speaker Change: We do ask well posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.

Speaker Change: Once again, if you have any questions or comments. Please press star one on your phone.

Speaker Change: Thank you. Your first question is coming from Ryan Meyers from Lake Street Capital markets. Your line is live.

Ryan Myers: Your first question is coming from Ryan Myers from Lake Street Capital Markets. Your line is live. Hey guys, thanks for taking my questions. Dayton, you know, just as a follow up from what you just mentioned a few minutes ago, you know, the potential tariff impact, you know, how many products right now are you guys sourcing from China? And what would be kind of the hurdle that you guys would have to get over to be able to source some of these products here domestically? Yeah, so good question.

Ryan Meyers: Hey, guys. Thanks for taking my questions.

Ryan Meyers: Dayton, you know just as a follow up from what you just mentioned a few minutes ago and all the potential tariff impact you know how many products right. Now are you guys sourcing from China and what.

Ryan Meyers: It would be kind of a hurdle that you guys would have to get over to be able to source. These products here domestically.

Yeah.

Ryan Meyers: So a good question, we don't actually source anything from China, We all all of our products come from manufacturers in the U S right bit but to figure out the impact of tariffs on us you've got to drill down further into where our manufacturers are getting their ingredients.

Dayton Judd: We don't actually source anything from China. We all of our products come from manufacturers in the US, right? But to figure out the impact of tariffs on us, you got to drill down further into where our manufacturers are getting their ingredients. So China is a big source of ingredients for all nutritional supplements. And so, we kind of have to, you know, again, drill down to the formula level and ask our manufacturers, okay, is this coming from China or is it coming from somewhere else? And if it is coming from China, can you get it from other places?

Ryan Meyers: So China is a big source of ingredients for for all nutritional supplement companies.

Ryan Meyers: And so we've kind of have to again.

Ryan Meyers: Again drill down to the formula level and ask our manufacturers. Okay is this coming from China or is it coming from somewhere else and if it is coming from China can you get it from other places. These these China tariffs have actually been a boon for.

Dayton Judd: These China tariffs have actually been a boon for Indian. There's a number of ingredient manufacturers in India that are now kind of stepping forward and trying to take the place of some of the ingredients coming from China. To date, like we have actually not had a single product where the cost has increased when we have manufactured it. But we have absolutely kind of received commentary from our manufacturers that it's coming, that they're they're now in what they're procuring beginning to see those tariffs pass through. The reason for the delay is there's just at any given point in time, a decent amount of material in the supply chain that's already, you know, either in the US has already come from China or is already in route, that was not subject to the tariffs.

Ryan Meyers: Indian.

Ryan Meyers: There's a number of ingredient manufacturers in India that are now kind of stepping forward in trying to take the place of some of the ingredients coming from China.

Ryan Meyers: To date, we've actually not had a single product where the cost has increased when we have manufactured it but.

Ryan Meyers: But we have absolutely kind of received commentary from our manufacturers that it's coming that they're there now and what they are procuring beginning to.

Ryan Meyers: See those tariffs passed through the reason for the delay is theres just at any given point in time, a decent amount of material in the supply chain that's already either in the U S has already come from China or is already in route.

Ryan Meyers: That was not subject to the tariffs, but that that those are the ingredients that stock is certainly running out to try and get ahead of it again, we're asking them to look at the opportunity to source products from other countries and in particular, India is.

Dayton Judd: But that that those ingredients, that stock is certainly running out. To try and get ahead of it, again, we're asking them to look at the opportunity to source products from other countries, again, in particular, India is, you know, perhaps the most promising location to look at other things that we have been doing. So we've, we've been just more aggressively, I mean, not we're not going crazy, but we're being a bit more kind of forward thinking when we procure. So our, you know, we are, you know, we've increased our stock, right, we've tried to buy product from our manufacturers before those tariffs increase the price.

Ryan Meyers: Perhaps the most.

Ryan Meyers: Promising location to look at other things that we have been doing so we've been just more aggressively I mean, not we're not going crazy, but we're being a bit more.

Ryan Meyers: Kind of forward thinking when we procure so are we are you know we've increased our stock right. We've tried to buy product from our manufacturers before those tariffs increase the price.

Dayton Judd: And in other ingredients, we've actually kind of forward bought, right? So there's some ingredients, like glutamine, a lot of glutamine that we use in a lot of our products comes from China. I mean, we went out a few weeks ago and bought a year supply of glutamine, you know, from somebody who had it already on shore. And we'll just kind of warehouse that and use it as we go forward. So we're taking steps to try and mitigate the impact of the tariffs. Again, it's very complicated. It's really hard to say what the impact is going to be.

Ryan Meyers: And in other ingredients, we've actually kind of forward bought right. So theres some great like glued them in a lot of glutamine that they were using a lot of our products coming from China. I mean, we went out a few weeks ago and bought our year supply of glutamine.

Ryan Meyers: From somebody who had it already onshore and we'll just kind of a warehouse that and use it as we go forward. So we're taking steps to try and mitigate the impact of the tariffs again, it's a very complicated its really hard to say what the impact is going to be.

Dayton Judd: We do know, like we have done a very high level analysis with our manufacturers to say, you know, if we didn't source the ingredients from somewhere else, what kind of impact should we expect to see? And as you can imagine, it's a pretty broad range. We have some products where the impact will be negligible. Protein is a great example, right? Muscle Pharma is primarily a protein company. You know, whey protein does not come from China. So, you know, we expect virtually no increase on proteins, but there's other products where, you know, the cost increase could be 5 percent, 7 percent.

Ryan Meyers: We do know like we have done a very high level analysis with our manufacturers to say.

Ryan Meyers: If we didn't source the ingredients from somewhere else.

Ryan Meyers: What kind of impact should we expect to see and as you can imagine it's a pretty broad range, we have some products, where the impact will be negligible.

Ryan Meyers: Protein is a great example, right muscle farm is primarily a protein company.

Ryan Meyers: Wade whey protein does not come from China.

Ryan Meyers: So so we expect virtually no increase on proteins, but theres other products, where the cost increase could be 5%, 7% I think the highest one we've seen would be 11%. If we don't against source it from somewhere else. So when you average it across the portfolio, we're not talking about a 10% increase across the portfolio but.

Dayton Judd: I think the highest one we've seen would be 11 percent if we don't, again, source it from somewhere else. So when you average it across the portfolio, we're not talking about a 10 percent increase across the portfolio. But, you know, it's real enough that it's something we've been working on for quite some time and again, taking steps to try and mitigate.

Ryan Meyers: It's real enough that it's something we've been working on for quite some time and again, taking steps to try and mitigate again either through forward procurement and stockpiling. If you will some of these ingredients as well as looking to India and other sources.

Ryan Myers: Again, either through forward procurement and stockpiling, if you will, some of these ingredients, as well as looking to India and other countries. Okay, got it, that's helpful to understand.

Ryan Meyers: Okay got it that's helpful. I understand and then just thinking about the tougher year over year comparisons that you have in the MSC business.

Ryan Myers: And then just, you know, thinking about the tougher year-over-year comparisons that you have in the MRC business, you know, walk me through a little bit more of that dynamic. Is it just, you know, a function of, you saw so many customers last year at this time purchasing products at the beginning of the year, and you're not maybe seeing as many return customers, or, you know, just help me kind of understand the pattern of what you're seeing from like a customer dynamic. Is that simply what it is? Just less customers buying than it was last year?

Ryan Meyers: Walk me through a little bit more of that dynamic is it just a function of you saw so many customers last year at this time purchasing products at the beginning of the year and Youre not maybe seeing as many returned customers or just help me kind of understand.

Ryan Meyers: Patterns of what Youre seeing from like a customer dynamic is that simply what it is just lost customers.

Ryan Meyers: Buying than it was last year.

Dayton Judd: So I'll do my best.

Ryan Meyers: So I'll I'll I'll do my best I'll tell you, what our hypothesis, which is kind of what I shared on the call, but all on.

Dayton Judd: I'll tell you what our hypothesis is, which is kind of what I shared on the call, but on prepared remarks, but let me drill down a bit more. Recently, and by recently I mean in the last, you know, a little bit more than a year ago, Amazon unlocked some functionality that allowed deeper discounting to a new customer if they signed up to subscribe. So historically, before they unlocked or made that functionality available, your choices as a seller on Amazon are to offer no discount to somebody who subscribes. offer a 5% discount to someone who subscribes, or a 10% discount to someone who subscribes.

Ryan Meyers: On the prepared remarks, but let me drill down a bit more.

Ryan Meyers: Hum.

Ryan Meyers: Recently and by recently I mean in the last little bit more than a year ago Amazon unlocked some functionality.

That allowed deep.

Ryan Meyers: Deeper discounting to a new customer.

Ryan Meyers: If they signed up to subscribe.

Ryan Meyers: So historically before they unlocked or made that that functionality available your choices as a seller on Amazon or to offer no discount to somebody who subscribes.

Ryan Meyers: After a 5% discount to someone who subscribes for a 10% discount to someone who subscribes and our model. Our approach has been we just always offer at 10% well again going back a little bit more than a year ago right. Amazon made it possible to essentially offer really anything up to I think a 40% discount for that.

Dayton Judd: And our model, our approach has been we just always offer a 10% Well, again, going back a little bit more than a year ago, right, Amazon made it possible to essentially offer really anything up to I think a 40% discount for that first purchase that a customer makes in order to encourage them to subscribe. And so we turned that functionality on for the Dr. Tobias brand in, again, I couldn't give you an exact date, but I think it was early February. And again, it was relatively new at that point in time. So that again, this is our working hypothesis based on what we're seeing in the data over the last few weeks, right, that clearly drove significant uptake.

Ryan Meyers: That first purchase that a customer makes in order to encourage them to subscribe.

Ryan Meyers: And so we turned that functionality on for the Doctor to bias brand in again I couldn't give you an exact date, but I think it was early February and it again it was relatively new at that point in time. So that again. This is this is our working hypothesis based on what we're seeing in the data over the last few weeks right that that clearly drove significant uptake in <unk>.

Dayton Judd: In fact, I don't have the subscriber numbers here in front of me. But if we look at our subscriber base for the Dr. Tobias brand leading up till February, when we made that change, you know, it was up and down a little bit here and there, it kind of, I think, varied between about 78 and 80,000 people on subscription, you know, within two months of turning that on, right, we had gained several thousand new customers on subscription. So, so I know that that's at least a part of this, whether there's some other to You know, general softness in the consumer, it's hard to tell, right?

Ryan Meyers: I don't have the subscriber numbers here in front of me, but if we look at our subscriber base for the Doctor Tobias brand, leading up until February when we made that change.

Ryan Meyers: It was up and down a little bit here and there it kind of I think varied between about 78% to 80000 people on subscription within two months of turning that on right. We had gained several thousand new customers on subscription so so.

Ryan Meyers: I know that that's at least a part of this whether there's some other.

Ryan Meyers: General softness in the consumer it's hard to tell right I mentioned.

Dayton Judd: I mentioned, you know, it's interesting in our other selling accounts, you know, Muscle Farm and FitLife Brands selling account, or what we call Legacy FitLife, we're seeing strong double-digit growth, right? So seeing strong double-digit growth in some accounts makes me think that, you know, I can't really blame the consumer, but I do know one thing that was different was turning on those deepened discounts for the subscriptions in February of last year. And I mentioned that, you know, sometimes we look at things on a, you know, one-week rolling basis, four-week rolling basis, six-week rolling basis. That's why I gave you the six-week period from February 12th to March the 24th.

Ryan Meyers: It's interesting in our other selling accounts mussel farm in and fit life brand selling account.

Ryan Meyers: What we call legacy felt life, we're seeing strong double digit growth right. So seeing strong double digit growth in some accounts makes me think that you know I can't really blame the consumer.

Ryan Meyers: But I do know one thing that was different was turning on those deepen discounts for the subscriptions in February of last year, and I mentioned that sometimes we look at things on a one week rolling basis, four week rolling basis, six week Rolling basis. That's why I gave you. The six week period from February 12 to March the 24th like that that was literally the highest revenue for the doctors.

Ryan Myers: Like that was literally the highest revenue for the Dr. Tobias brand over the course of the full year. So in some regards, we know it's a difficult compare. Could there be something beyond that? Yes, absolutely. But based on kind of what we know right now, that to me is the biggest thing. Again, it didn't stop after March the 24th. You can look at our Q2 numbers for Dr. Tobias and they were strong as well. But I do think the year-over-year comparisons obviously get easier after March. does that answer your question? Yes, it does, got it.

Ryan Meyers: Biased brand over the course of the full year. So in some regards we know it's a difficult compare could there be something beyond that yes, absolutely, but based on kind of what we know right now that that to me is.

Ryan Meyers: Is the biggest thing again it didn't stop after March 24th you can look at our Q2 numbers for Doctor Tobias and they were strong as well so.

Ryan Meyers: But I do think.

Ryan Meyers: The year over year comparisons, obviously get easier after March 24th So does that answer your question, yes. It does got it and I think that makes total sense. There was such a huge discount last year that drove a ton of subscribers more than what you traditionally would see so help me understand that dynamic, but awesome. Thanks for taking my questions.

Ryan Myers: And I think that makes total sense. There was such a huge discount last year that drove a ton of subscribers and more than what you traditionally would see. So definitely understand that dynamic, but awesome. Thanks for taking my questions. Yep, thanks Ryan. Thank you.

Ryan Meyers: Thanks Ryan.

Speaker Change: Thank you. Your next question is coming from Samir Patel from <unk> capital. Your line is live.

Samir Patel: Your next question is coming from Samir Patel from Ask Aladdin Capital. Your line is live. Hey, Dayton, good to be speaking with you. Can you maybe provide some more color around kind of your expectations for the Muscle Farm ramp throughout the year as you potentially get that space in Vitamin Shop and then some of the other accounts that you've been targeting? Um, yeah, I mean, I'm happy to talk generally, I can't frame it with numbers for you. I mean, if I if I had numbers, I was confident, I guess I would, I would consider sharing them.

Samir Patel: Hey, Jason good to be speaking with you can you maybe provide some more color around some of your expectations for the muscle farm ramp throughout the year as you potentially get that space and vitamin shop, and then some of the other accounts that you've been targeting.

Jason: Yeah, I mean, I am happy to talk generally I can't frame it with numbers for you I mean, if I if I had numbers.

Jason: I was confident I guess I would I would consider sharing them, but look it it's just been a bit of a slog right we've had.

Dayton Judd: But look, it's just been a bit of a, you know, slog, right? We've had a lot to do with rebranding and, and trying to get the products back on store shelves. So I feel like we're pulling all the right levers. I talked about the new products. You know, we think that the ready to drink protein, again, I have no idea what the uptake is going to be. I know that all of the major distributors to kind of in the sports nutrition space have have all kind of placed POs have all brought that in effectively in the last week or two.

Speaker Change: <unk> had a lot to do with rebranding and trying to get the products back on store shelves. So I feel like we're pulling all the right levers I talked about the new products.

Speaker Change: We think that the the ready to drink protein again I have no idea what the uptake is going to be I know that all of the major distributors.

Speaker Change: Two kind of in the sports nutrition space have all kind of place P. O Scott have all brought that in it.

Speaker Change: Effectively in the last week or two so it's relatively new.

Dayton Judd: So it's relatively new. But what the uptake is going to be, we're not sure, right? We and on that we've sent, you know, samples to vitamin shop and, you know, other customers. And so maybe some of them will bring it in.

Speaker Change: But what the uptake is going to be we're not sure right. We end on that we've sent samples to vitamin shop and other customers and so maybe some of them will bring it in so it's a little bit like I Dunno today's opening day for baseball is a little bit like we got a lot of at bats, Theres a lot of pitches were looking at and we're swinging a lot of stuff and I couldn't tell you for sure when we're going to get a hit.

Dayton Judd: So it's a little bit like, I don't know, today's opening day for baseball, it's a little bit like, like, we're, you know, we've got a lot of bats, there's a lot of pitches we're looking at, and we're swinging a lot of when we're going to get a hit and when we're going to strike out. But, you know, we certainly feel like we're doing the right things. The rebranding, if you haven't seen that, I'd encourage you to go look at that. You can see that on our website. Or if you go look at some of the listings on Amazon for the products that have already transitioned, you can see it in the Amazon images as well.

Speaker Change: And when we're going to strike out but we.

Speaker Change: We certainly feel like we're doing the right things that the rebranding if you haven't seen that I'd encourage you to go look at that you can see that on our website.

Speaker Change: If you go look at some of our listings on Amazon for the products that are already transition you can see it in the Amazon images as well but.

Dayton Judd: But, you know, the packaging, the branding hadn't been updated for probably 10 plus years for muscle farm. And so it was kind of stale. And, you know, we'd received feedback on that from potential customers. So You know, again, I wish I could frame it with some numbers for you, but I think all I can say is we feel like we're doing the right things and we're, you know, taking a lot of swings here and hopefully we connect on, you know, some of them. Vitamin Shoppe, I think it's too early to tell, we've got about kind of two weeks of data and, you know, we've been in a number of stores and we have our sales people calling on a number of stores.

Speaker Change: The packaging the branding hadn't been updated for probably 10 plus years for muscle farm and so it was kind of stale and we'd receive feedback on that from from potential customers. So.

Speaker Change: You know again I wish I wish I could frame it with some numbers for you, but I think all I can say is we feel like we're doing the right things and we're.

Speaker Change: <unk> taken a lot of swings here and hopefully we can act on some of them.

Speaker Change: Vitamin Shoppe. It I think it's too early to tell we've got about two weeks of data and we've been in a number of stores and we have our salespeople calling on a number of stores I think it was just in the last like earlier. This week was the first time I went in the store and they actually had all nine skus right. So.

Dayton Judd: I think it was just in the last, like earlier this week was the first time I went in a store and they actually had all nine SKUs, right? So they're just now getting all of the products to the store shelves, we'll obviously be watching that closely over the next two months, but at this point I don't even have a data point I could reference to say, you know. It's a success or it's not. So, I don't know if that answers your question. Sorry, I can't be more specific, but you know, we just, our goal is up.

Speaker Change: They're just now getting all of the products to the store shelves will obviously be watching that closely.

Speaker Change: Over the next two months, but at this point I don't even have a data point I could reference to say you know.

Speaker Change: It's a success or if not.

Speaker Change: So I don't know I don't know if that answered your question, sorry, I can't be more specific but we just our goal is up.

Samir Patel: So we hope to have revenue and EBITDA higher each year as we continue to work. That makes sense.

Speaker Change: So we hope to have revenue and EBITDA pyre, each year as we continue to work on muscle for them.

Speaker Change: That makes sense and maybe you can dive into a little bit those promotional expenses that are running through.

Samir Patel: And maybe you can dive into a little bit those promotional expenses that are running through gross profit, and maybe just for the benefit of those of us who are less familiar with the industry, just explain. So is that kind of like a one-time thing like when you are kind of going into these new accounts? Because I know that you are – I mean obviously your focus across the business is kind of on that contribution dollars. So maybe explain kind of what you are doing there, kind of a timeline on that, and kind of how you see the ROI on that, obviously leading to higher contribution dollars down the line.

Speaker Change: Gross profit and you know maybe just for the benefit of those of US who are less familiar with the industry. Just explain so is that kind of like a one time thing like when you're kind of going into these new accounts.

Speaker Change: Because I know that you I mean, obviously your focus across the business is kind of on that contribution dollars. So maybe explain kind of what youre doing there kind of a timeline on that and kind of how you see the ROI on that obviously, leading to higher contribution dollars down the line, yes. So the okay. So the way it works and this is very very.

Dayton Judd: Yeah. So the way it works, and this is very, very typical in the industry, is that a brand can offer promotional dollars to the customers. And the way that that works, it's essentially a discount off of the invoice. So if I sold somebody some product for $100 – uh... but i but i want to say hey i'll give you ten dollars of that you only have to pay me nine but you've got to use that 10 to promote the product, right? And with the goal being that movement increases, right? We're not in the business or we're not really interested in giving someone a $10 discount if they're just gonna pocket it.

Speaker Change: <unk> in the industry is that a brand can offer promotional dollars to to the customers and the way that that works, it's essentially a discount off of the invoice. So if I sold somebody some product for $100.

Speaker Change: But I, but I wanted to say, Hey, I'll give you a $10 of that right you only have to pay me 90.

Speaker Change: But you've got to use that 10 to promote the product right and with the goal being that that movement increases right. We're not in the business. So we're not really interested in giving somewhat.

Speaker Change: $10 discount if they're just gonna pocketed and to a certain extent I mentioned kind of one customer.

Dayton Judd: And to a certain extent, I mentioned kind of one customer that either pocketed the money or was not effective in how they spent it, right? So you can, this is, if you're talking about getting into a new account, you can do something like this. I'm talking about discounts to existing customers, right? So we know what their movement is. We know how much they're selling. The idea is you get some product into their hands for cheaper essentially, or put some money into their pocket that they are required to use to market the product. And the expectation is that they grow, right?

Speaker Change: That either pocketed the money or was not effective in how they spent it right. So you can do this is if you are talking about getting into a new account you can do something like this I'm talking about discounts to existing customers right. So we know what their movement is we know how much they're selling the idea is you get some product into their hands for cheaper.

Speaker Change: Essentially or put some money into their their pocket that they that they are required to use to market the product.

Speaker Change: And the expectation is that they grow right. If you give someone that marketing support and the product doesn't grow then you have a very interesting conversation. The next time, you talked to that customer, which we're dealing with right now at least with one customer.

Dayton Judd: If you give someone that marketing support and the product doesn't grow, then you have a very interesting conversation the next time you talk to that customer, which we're dealing with right now, at least with one customer. You know, we haven't had those issues with other customers. We're seeing increased kind of retail sell-through movement when we provided additional marketing support. So in terms of GAAP, the way the accounting works is unless we as a company have the right to dictate exactly how they spend that $10, and we're like literally approving every program, and in fact, directing them how to spend it, then the way you have to account for it is a reduction from gross revenue.

Speaker Change: Haven't had those issues with other customers we are seeing increased.

Speaker Change: Kind of retail sell through movement, when we provided additional marketing support.

Speaker Change: In terms of GAAP the way the accounting works is unless we as a company have the right to dictate exactly how they spend that $10 and were like literally approving every program and in fact directing them how to spend it than the way you have to account for it is a reduction from gross revenue.

Dayton Judd: right to you know, so you are reported what we report is net revenue, what you see is net revenue. So for the, you know, for the quarter If I have the numbers right here in front of me, but for the quarter we had for Muscle Farm, let's see, we had wholesale revenue of 1.689 million. Our gross revenue, the amount of product we sold was even higher than that, but we're deducting that promotional amount to get to the 1.7 million essentially. But because the net revenue number is lower and our cost of goods hasn't changed, that's what drives the lower gross margin.

Speaker Change: Two our reported what we reported net revenue what you see is net revenue.

Speaker Change: So for that you know for.

Speaker Change: For the quarter.

Speaker Change: I don't know if I have the numbers right here in front of me, but for the quarter we had.

Speaker Change: For muscle farm, let's see we had a wholesale revenue of 1.689 million our gross revenue the amount of product. We sold was even higher than that right, but we're deducting that promotional amount to get to the 1.7 million essentially.

Speaker Change: But because the net revenue number is lower than our cost of goods hasn't changed right. That's what drives the lower gross margin. So it just kind of it just kind of filters through so in terms of what are we looking for right in an ideal world.

Dayton Judd: So it just kind of filters through. So in terms of what are we looking for in an ideal world? You would want to allow increased promotional spend. and might accept lower gross margins if your total contribution and your total gross profit didn't So, what we saw in the fourth quarter is certainly very nice uptake in revenue. Margins were lower, our gross profit was down, and our contribution was down, right? So, it didn't work out as perfectly as we would like, but I mentioned there's one account in particular, an international account, where, you know, we didn't see the sell-through and therefore we haven't seen the reorders.

Speaker Change: You would want to allow increased promotional spend.

Speaker Change: And might accept lower gross margins if your total contribution and your total gross profit didn't change.

Speaker Change: So what we saw in the fourth quarter is certainly very nice uptake in revenue.

Speaker Change: Margins were lower our gross profit was down and our contribution was down right. So it didn't work out as perfectly as we would like but I mentioned, there's one account in particular and international account, where we didn't see the sell through and therefore, we haven't seen the reorders that we would like so I don't know if that answers your question Sameer, but that's how the.

Dayton Judd: So I don't know if that answers your question, Samir, but that's kind of how the industry works, as well as how the accounting works. Yeah, but I guess given the, I guess what I'm trying to get at is given the recurring nature of consumer use of these items, I mean, it sounds like you're trying to increase sell-through, right? But then once you kind of have consumers habituated to using that product, you know, you don't necessarily have to support it with that level of marketing spend all the time, right? I mean, you may have to go back in a year or two years or three years to goose it a little bit more, but you're basically trying to get more product in the hands of consumers and then they continue to buy it and you don't necessarily need to continue.

Speaker Change: Kind of how the industry works as well as how the accounting works on promotional spend.

Speaker Change: So I guess, given the I guess, what I'm trying to get out and given the recurring nature of consumer use of these items I mean, it sounds like you're trying to increase sell through right. But then once you kind of have consumers situated to using that product.

Speaker Change: You don't necessarily have to support it with that level of marketing spend all the time right. I mean, you may have to go back a year or two years or three years excuse it a little bit more but you are basically trying to get more product and enhanced casinos and then they continue to buy it and you don't necessarily need to.

Speaker Change: That's what I'm trying to get it right. It's more of a it's not a permanent thing that youre doing on per account is that a reasonable way of looking at it yeah. That's a very accurate statement right. So that that one account that we gave you discounts to right. They know you know that.

Dayton Judd: That's what I'm trying to get at, right? It's more of a, it's not a permanent thing that you're doing per account. Is that a reasonable way of looking at it? Yeah, that's a very accurate statement, right? So that one account that we gave the discounts to, right, they know, you know, that it's not happening again, right? We gave it to you and you didn't, it wasn't effective. So, you know, sorry. So no, yeah, this is not, yeah, once you turn it on, you have to leave it on. Some customers do have like a fixed small amount, like every product they buy from every customer, they take a 3% deduction for marketing.

Speaker Change: It's not happening again, right. We gave it to you and you didn't it wasn't effective so yeah sorry.

Speaker Change: Sorry.

Speaker Change: So not yet this is not yet once you turn it on you have to leave it on some customers do have like a fixed small amount like every product they buy from every customer they take a 3% deduction for marketing I'm not I'm not talking about that I'm talking about a conscious decision.

Dayton Judd: I'm not talking about that. I'm talking about a conscious decision, you know, something that's completely within our power to work with them. A very specific example is you'll see products on sale at, you know, Walmart or any store you go to where you might see a product or brand that's 20% off, right? Almost always that is funded by the brand, right? So we are funding promotions and they can do it through price. They can do it through buy one, get one 50% off. They can get it through, they can spend the money to, you know, for direct marketing, right?

Speaker Change: Something that is completely within our power to work with them.

Speaker Change: A very specific examples you'll see products on sale at Walmart or any store you go to where you might see a product or brand thats, 20% off.

Speaker Change: Almost always that is funded by the brand right. So we are funding promotions and they can do it through price. They can do it through buy one get 150% off they can get it through.

Speaker Change: They they can they can spend the money to for for direct marketing right to sit blasting out E mails to their consumers. There's a lot of ways that the retailers can spend the money and we don't limit them. We don't we none of them liked to be told how to spend it right. So our only direction is hey, if we're giving you. This discount we expect to see any.

Dayton Judd: Blasting out emails to their consumers. There's a lot of ways that the retailers can spend the money and we don't limit them. We don't, we, none of them like to be told how to spend it, right? So our only direction is, you know, hey, if we're giving you this discount, we expect to see increased movement. And if we don't see that, then, you know, we'll have to talk again about whether. Support Promotions within your store. So, again, hopefully that explains how it works, but no, it's not like... crack cocaine that they're getting hooked to it and we're committed somehow to continue to give it to them.

Speaker Change: <unk> movement, and if we don't see that then.

Speaker Change: We'll have to talk again about whether we can support promotions within your store.

Speaker Change: So again, hopefully that explains how it works, but no it's not like.

Speaker Change: Crack cocaine that theyre getting hooked to it and there were committed somehow to continue to give it to them. We can turn it on and turn it off anytime we want.

Dayton Judd: We can turn it on and turn it off anytime we want.

Speaker Change: Sure Okay.

Dayton Judd: Sure, okay, that makes sense.

Speaker Change: That makes sense and sorry, if I missed this but I didn't see it in the Roth presentation with regards to you mentioned briefly that youre kind of looking at larger M&A targets, just remind me kind of the typical.

Samir Patel: And, you know, sorry if I missed this, but I didn't see it in the Roth presentation with regards to, you mentioned briefly that you're kind of looking at larger M&A targets. Just remind me kind of the typical, you know, size in terms of revenue that you're looking for right now. Yeah, I don't know if I'd characterize it by revenue. Because it could be, you know, a smaller company that is just ridiculously profitable, right? So I'd maybe think about it in terms of what we're able to pay. You know, our current bank will kind of loan us two times performing EBITDA, almost no questions asked, with the ability to flex up from there, right, if there are, you know, clear opportunities for us with the brand, right?

Speaker Change: In terms of revenue that you are looking for right now.

Speaker Change: Yeah, I don't know if I'd characterize it by revenue.

Speaker Change: Because it could be you know a smaller company that is just ridiculously profitable right. So I, maybe think about it in terms of what we're able to pay.

Speaker Change: Our current bank will kind of alone is two times pro forma EBITDA almost no questions asked.

Speaker Change: With the ability to flex up from there right. If there are.

Speaker Change: Clear opportunities for us with the brand right. So just to again frame. This using an example.

Dayton Judd: So just to, again, frame this using an example, if I, you know, I've got 14 million of EBITDA, and I was looking at a company that had 8 million of EBITDA, again, I'm just, or let me use 6 million, just to make the math easy, a company with 6 million of EBITDA, on a pro forma basis, right, our have 20 million, they have no qualms whatsoever about loaning us, you know, 40 million. And, you know, if I can show them, hey, on that 6 million on the target with 6 million of EBITDA, you know, I can save two million out of the gate because of X, Y, and Z, right?

Speaker Change: If I you know I've got $14 million of EBITDA and I was looking at a company that had 8 million of EBITDA again, I'm, just let me 6 million just to make the math easier company with 6 million of EBITDA on a pro forma basis right. Our companies have 20 million. They have no qualms whatsoever about loaning us $40 million.

Speaker Change: And if I can show them, Hey on that 6 million on the target with <unk> 6 million of EBITDA.

Speaker Change:

Speaker Change: No I can I can save $2 million out of the gate because of X y and Z right that they'll even underwrite that and say okay. It really you got 22 million of EBITDA. So alone you're 44. So you take the 44 in that example, and you'd subtract the amount that we currently owe them, which is about 12 so.

Dayton Judd: They'll even underwrite that and say, okay, really, you've got 22 million to be the doc. So we'll loan you 44. So you take the 44 in that example, and you'd subtract the amount that we currently owe them, which is about 12. So, you know, we could, you know, borrow an incremental $32 million, again, using this hypothetical scenario that I'm giving you, without really any difficulty from the bank. And on top of that, the reason that we keep a fair amount of cash on our balance sheet, as opposed to paying down our debt, is they don't want to ever fully fund an acquisition with debt.

Speaker Change: We could we could borrow an incremental $32 million again, using this hypothetical scenario that I'm, giving you with without really any difficulty from the bank.

Speaker Change: And on top of that the reason that we keep a fair amount of cash on our balance sheet as opposed to paying down our debt.

Speaker Change: Is they don't want to ever fully fund an acquisition with that.

Dayton Judd: So they, it's kind of like buying a house, right? They want us to put a down payment on our, on our. And that rate, that can vary from 20% down to 33% down, right? So if I'm buying a business for, you know, 40 million, you know, I put in, you know, six or eight or 10 or something like that, and then they would fund the rest, right? So, so the question is, how much revenue can you get for 40 million? Well, you know, depends, you could get a business with 60 to 80 million of revenue, if You know, there's a lot of opportunity and maybe it's not doing as well as it could or you could buy a business.

Speaker Change: So they it's kind of like buying a house right. They want us to put a down payment on our on our.

Speaker Change: On our purchase.

Speaker Change: And that rate that that can vary from 20% down to 33% down right. So if I'm buying a business for $40 million.

Speaker Change: You know I'd put in six or eight or 10 or something like that and then they went to fund the rest right. So so the question is how much revenue can you get for 40 million well you know it depends you could get a business was $60 million to $80 million of revenue if.

Speaker Change: You know, there's a lot of opportunity and maybe it's not doing as well as it could or you could buy a business with.

Dayton Judd: 20 million of revenue that pukes cash, right? So it's really hard to say on revenue, and it's easier to frame it in terms of debt capacity.

Speaker Change: $20 million of revenue that keeps cash right. So it's really hard to say on revenue.

Speaker Change: And it's easier to frame it in terms of debt capacity if that makes sense.

Dayton Judd: Yeah, no, that's that's super helpful. And in terms of your comment around the stress? I mean, is that something you're actually seeing in the market? Or is that just a trend that you're saying could happen if there's companies that are kind of overexposed from a supply chain standpoint to one geography or things like that? Yeah, I think we're beginning to see it. It's really hard to tell, right? The deal flow kind of ebbs and flows just in the normal course of business, having been in the deal flow now for a year. Can I tell you definitively that it's because of the current macroeconomic environment?

Speaker Change: Yes.

Speaker Change: Super helpful and in terms of your.

Speaker Change: Comment around the strikes me is that something you're actually seeing in the market or is that just the trend that you are saying could happen. If there's companies that are kind of over exposed from a supply chain standpoint to one geography or things like that yeah. I think we're beginning to see it I'm I'm, it's really hard to tell right. The the.

Speaker Change: Deal flow kind of ebbs and flows just in the normal course of business having been in the deal flow now for several years. So are we seeing an uptick in deals to look at yes, right can I cannot guarantee or can I tell you definitively that its because of the current macroeconomic environment no.

Dayton Judd: No. I will say, though, to the extent we are seeing more, it's not because of supply chain. It's because of debt. uh... so there are a number of companies out there that are over levered and they may have been expecting to be able to refinance their debt well if you follow kind of a debt capital markets there's not a lot of lenders out there that are maybe that excited about lending money now as opposed to two months ago at least to an industry where again trump is instituted tariffs and whatnot so so there's just a lot of uncertainty and and uh...

Speaker Change: I will say, though if to the extent we are seeing more it's not because of supply chain, it's because of that.

Speaker Change: So there are a number of companies out there that are over levered and they may have been expecting to be able to refinance their debt well. If you follow kind of a debt capital markets. There's not a lot of lenders out there that are you know maybe that excited about lending money now as opposed to you know.

Speaker Change: Two months ago at least to an industry, where Trump has instituted tariffs and whatnot. So so theres just a lot of uncertainty and.

Dayton Judd: i don't think we're seeing a lot of businesses that are doing well uh... and are not distressed, obviously, enter the sale process, but there are businesses that are levered and have some debt and maybe aren't doing as well as they would like that are tested.

Speaker Change: I don't think we're seeing a lot of businesses that are doing well.

Speaker Change: And are not distressed obviously into the sale process, but there are businesses that are levered and have some debt and maybe aren't doing as well as they would like that.

Speaker Change: That are testing the market.

Dayton Judd: Understood. Thanks for all the color.

Ryan Meyers: Thanks for all the color I'll turn it back over alright, Thanks Samir.

Operator: I'll turn it back over. All right.

Operator: Thanks, Samir.

Speaker Change: Thank you. Your next question is coming from James Bogan from legend capital. Your line is live.

James Bogan: Thank you. Your next question is coming from James Bogan from Legend Capital. Your line is live. Hi, and good afternoon. I'm a retired professional investor. I own about 32,000 shares.

James Bogan: Hi, and good afternoon.

Speaker Change: I'm a retired professional investor I own about 32000 shares.

Dayton Judd: And I was wondering if it would be helpful to understand what MusclePharm's sales were at their peak before they went busto. And if you think you can attain that level and surpass in the future. And also, I'm not a big daily stock price guy, but I thought your numbers look pretty good. And your stock price plunged today, 7 or 8%. I'm just wondering why the market didn't like it as much as I did. I was going to ask you guys that last question. On Muscle Farm, I have their historical numbers. They used to be publicly traded before they kind of fell into default and then ultimately into bankruptcy.

James Bogan: I was wondering if it would be helpful to understand what muscle farms sales were at.

James Bogan: At their peak before they went bust, though and if you think you can attain that level and surpass it in the future.

James Bogan: Also I'm not a big daily stock priced guy, but I thought your numbers look pretty good and your stock price plunge today are seven or 8% I'm just wondering why the market didn't like it as much as I did.

James Bogan: I was going to ask you guys that last question.

Speaker Change: On the Oh, Okay mussel farm I have their historical numbers. So they they used to be publicly traded before they kind of fell into default and then ultimately into bankruptcy. If you go back and look at their historical financials their peak.

Dayton Judd: If you go back and look at their historical financials, their peak Trailing 12-month revenue, I believe, was in excess of $175 million. Now, this was probably 12-15 years ago, and from there, it declined consistently until they filed bankruptcy. At the time they filed bankruptcy, it was more like $40 to $45 million, if I'm not mistaken. I will also... I see. I should also add that... the company or the CFO and other executives of the company admitted to falsifying records. So the reality is, I don't know if anybody knows, when we took it over, it was sub-10 million run rate of revenue.

Speaker Change: <unk> trailing 12 month revenue I believe was in excess of 175 million now this was Oh, my God, I'd, probably 12 or 15 years ago.

Speaker Change: And from there it declined consistently until they file bankruptcy.

Speaker Change: At the time they filed bankruptcy it was more like 40 to 45 million if I'm not mistaken and I will also I see should also add that.

Speaker Change: The company or the CFO and other executives of the company admitted to falsifying record. So there. The reality is I don't know if anybody knows.

Speaker Change: When we took it over it was it was.

Speaker Change: Sub 10 million run rate of revenue.

Dayton Judd: The brand was clearly impaired, I don't think anyone would argue that it wasn't impaired. That said, there's still a lot of people that know about it, a lot of brand equity over the years from people like Arnold Schwarzenegger and Tiger Woods and a lot of UFC fighters that were kind of spokespeople for the brand.

Speaker Change: The brand was clearly impaired I don't think anyone would do that.

Speaker Change: But it wasn't a pair that said there's still a lot of people that know about it a lot.

Speaker Change: Brand equity over the years from people like Arnold Schwarzenegger, and Tiger Woods, and a lot of UFC fighters that were kind of spoke speedway for the brand.

Dayton Judd: We were finally able to get back into our Instagram account after we got locked out for some reason, but you can go and look at that account and see that there's still at www.FitLifeBrands.com I'm not going to sit here and tell you we're going to get it back to 175, but that is kind of the history and it's just unfortunate what can happen to a brand when it's gone. not maybe managed as well as it could be and should be and is in decline for quite some time. On your question about the market, look, I obviously can't speak for the market.

Speaker Change: We were finally able to get back into our Instagram account. After we got locked out for some reason, but you can go and look at that account and see that you know there still.

Speaker Change: Something like 530, 540000 people, but that's still kind of followed the brand and engage with the brand to a certain extent. So so there's brand equity there.

Speaker Change: And we have.

Speaker Change: It upon ourselves to try and unlock that I don't I think I've said on previous calls if we get back to half of what they had before they filed workers see I mean, it is an absolute homerun for us.

Speaker Change: Yes, so so.

Speaker Change: Just I I'm not going to sit here and tell you we're going to get it back to 175.

Speaker Change: But that red is kind of a history and it's just unfortunate what can happen to a brand when it's.

Speaker Change: Not maybe managed as well as it could be and should be in and is in decline for quite some time on your question about the market look I I I I, obviously can't speak for the market I don't know if this is there's one person that's unhappy.

Dayton Judd: I don't know if there's one person that's unhappy. You know, I do know we were up quite a bit the day before. We're down a lot, over the last look at early March, I think we were consistently around $15 a share. And obviously, the market overall has sold off. We were, at one point, fairly consistently around $150 million market cap, and then kind of down to about $125 million. So even before we put out our numbers and all of that, we were down roughly 15%, I think. in conjunction with the overall market. So, again, I can't comment on daily stock swings and what's going on, but...

Speaker Change: I do know we were up quite a bit the day before we were down a lot over the last shook. It early March I think we were pretty consistently around 15 Bucks a share and.

Speaker Change: Obviously the market overall is sold off we were at one point fairly consistently around 150 million market cap and then kind of down to about 125. So.

Speaker Change: Even before we put out our numbers and all of that we were down.

Speaker Change: 15% I think in conjunction with the overall market.

Speaker Change: Chuck and I can I can't comment on.

Speaker Change: Restock swings and what's going on but.

Speaker Change: My Hope I look I'm, obviously, a long term investor here I own more of the kind of obviously anybody even though right now I'm.

Dayton Judd: I'm obviously a long-term investor here. I own more of the company than anybody. I'm not worried about the stock price. In fact, I'm looking hopefully for the silver lining, which is that this dislocation can maybe turf up some. some M&A opportunities for us. If my valuation is coming down, so is the valuation of companies that are struggling more than we are, so I'd probably just leave it at that.

Speaker Change: I'm not worried about the stock price so and in fact, I'm I'm looking hopefully for the silver lining which is that this dislocation can maybe turf up some.

Speaker Change: Some M&A opportunities for US look if my if my valuations coming down so is the valuation of companies that.

Speaker Change: You know are struggling more than we are so I'd, probably just leave it there.

James Bogan: Your gross margins, I think, were 40%, but you're eating the marketing, so it's 25%. Is there any prospect of increasing gross margins, or are they about where they should be, do you think, overall? I missed the first part of your question. I'm speaking mainly about muscle farms. You said gross margins at four. Oh, muscle farms. Gross margins, yes, you're eating the marketing, I understand that, but is there potential to increase the gross margins, or are they where they should be? Oh, I could increase them next month if we wanted to. Again, we would just stop the promotions that we're doing.

Speaker Change: Your gross margins I think we're 40%, but you're eating your even the marketing. So it's 25% is there any prospect of increasing gross margins or are they about where they should be do you think overall.

Speaker Change: I misunderstood your gross margins at four O My gross margins yes.

Speaker Change: Marketing I understand that but is there potential to increase the gross margins or are they where they should be oh I could increase them next month. If we wanted to again, we've just stopped the promotions that we're doing so we're just not I mean outside forgetting the promotions forgetting the promotions or you have not looked with the only way to do it is to lower cost or increase price I don't think we're trying to.

Dayton Judd: No, I mean outside, forgetting the promotions. Forgetting the promotions, of course, you have to do that. No, look, the only way to do it is to lower cost or increase price. I don't think ... We're trying to grow the brand, so we don't want to increase the price. In fact, if anything, I didn't call this out specifically, but another contributor to those margins in Q4, I mentioned that Muscle Farm is, I couldn't tell you the number, but call it 70% to 80% of the brand's revenue is protein. Whey protein has gone up significantly in the second half of 2024.

Speaker Change: Grow the brand. So we don't want to increase the price in fact, if anything I didn't call. This out specifically, but another contributor to those margins in Q4 I mentioned that.

Speaker Change: Mussel farm is.

Speaker Change: I couldn't tell you the number but call it 70% to 80% of the brand's revenue is protein.

Speaker Change: Whey protein has gone up significantly in the second half of 2024, we could have attempted to pass those cost increases along to consumers right, but we do partially because some other people.

Dayton Judd: We could have attempted to pass those cost increases along to consumers, right, but we didn't, partially because some other people weren't passing them along, at least not yet. And again, we are in the business right now of trying to increase our sales, not challenge them. So we didn't pass along the protein increases. By the way, we're starting to see protein kind of come down a bit, right, in the last week or two. And so hopefully we'll be the beneficiary of that. But so, you know, we got some costs going up and then we've got the, you know, intentional promotional spend.

Speaker Change: Other people weren't passing them along at least not yet and again, we're in the business right now of trying to increase our sales not not sure challenge them.

Speaker Change: No you didn't pass along the protein increases by the way, we're starting to see protein kind of come down a bit right in the last week or so.

Speaker Change: Hopefully, we'll be the beneficiary of that but so you know we got some costs going up and then we've got the intentional.

Speaker Change: Promotional spend.

James Bogan: We're trying to grow the brand, right? We feel like we've fixed it from a number of dimensions, again, whether it's the branding, you know, adding some new products and that, now we're trying to grow it. So hence the investment in marketing and the investment in growth. Thank you. You're welcome.

Speaker Change: We're trying to grow right. We we we feel like we exited from in a number of dimensions again, whether it's the branding.

Speaker Change: Adding some new products in that now we're trying to grow it so hence the investment in marketing and the investment in growth.

Speaker Change: Thank you Rob.

Speaker Change: Thanks James.

Speaker Change: Thank you. Your next question is coming from either a nuclear upset from layers capital. Your line is live.

Igor Novgorodtsev: Thank you. Your next question is coming from Igor Novgorodtsev from Layers Capital. Your line is live. Hello, Dayton. I have a few more detailed questions. Maybe you can talk a little bit about online advertisements, probably specifically on Amazon and Subscribe and Save. In other words, how much of your advertisement is still continuing from quarter to quarter, because I remember you substantially cut it from a mini rock when you acquired the company, and also how your Subscribe and Save is doing for each brand.

Speaker Change: Hello, Dave.

Speaker Change: Yeah.

Speaker Change: Yeah, I got to talk to you again.

Speaker Change: I have a few more I kept perhaps detail questions.

Speaker Change: Maybe you can talk a little bit about online advertisement.

Speaker Change: Probably specifically on Amazon and subscribing safe in other words, how much of your advertising.

Speaker Change: There's still continuing from quarter to quarter, because I remember you substantially got it cool when you acquired the company.

Speaker Change: And also how youre subscribe and save is doing for each brand.

Speaker Change: Yeah.

Dayton Judd: Yeah, good question. So on advertising, we still tinker with things. We certainly saw very significant decreases, you know, over the first call it 12, you know, maybe 18 months that we bought the brand. And you see it a lot lower now. For Mimi's Rock, I would just say there, there are no dramatic cuts and no dramatic increases. We don't manage to a particular percent of revenue. The decisions that we make are on a campaign by campaign basis. And even, you know, within campaigns, there's literally 10s of 1000s, you know, of campaigns, if you want to define it that way.

Good question, so on advertising, we still Tinker with things, we certainly saw very significant decreases.

Speaker Change: As you know over the first call. It 12, maybe 18 months that we bought the brand.

Speaker Change: And you see it a lot lower now.

For me MS Rock I would just say there are no dramatic cuts in no dramatic increases we don't manage to a particular percent of revenue the decisions that we make are on a campaign by campaign basis and even within campaigns. There is literally tens of thousands.

Speaker Change: If campaigns if you wanted to find out that way I mean, we're looking at for.

Dayton Judd: I mean, we're looking at for, we have more than 250 products we're selling on Amazon across all of our brands. uh... before any given product we might be advertising on fifty or a hundred keywords so for every product every keyword you can look and see how it's performing and you can increase your spend you can decrease your spend you can eliminate your spend you can add new keywords so uh...

Speaker Change: More than 250 products, we're selling on Amazon across all of our brands.

Speaker Change: For any given product we might be advertising on 50 or 100 keywords. So for every product every keyword you can look and see how it's performing and you can increase your spend you can decrease your spend you can eliminate your spend you can add new keywords. So.

Dayton Judd: i i think we're at a roughly you know good level we're not looking to to increase it more we're not looking to cut it more that that any movement that you see is just continue tinkering or experimentation you know we'll turn some stuff off certain ad types off and see what the impact is and then turn them back on So I don't know if that answers your question, but if what you're getting at is should we expect to see significant growth in ad expense or further cuts in advertising expense, I would say no. and any fluctuation you see is just us continuing to.

Speaker Change: I think we're at a roughly you know good level, we're not looking to increase it more than we're not looking to cut it more than any movement that you see is just continued tinkering or experimentation.

Speaker Change: We'll turn some stuff off certain AD types off and see what the impact is and then turn them back on for example.

Speaker Change: So I don't know if that answers your question, but if the if what you're getting at is should we expect to see significant growth in AD expense or further cuts in advertising expense I would say no and then any fluctuation you see is just us continuing to.

Dayton Judd: to tinker or try and maximize the efficiency of the spend that we are having.

Speaker Change: To tinker or try and maximize the efficiency of the spend that we are having in terms of subscribers. That's a number we used to provide and maybe I'll start providing that again I don't again I just don't have the numbers in front of me, but where we see like it's it's a very rare week.

Dayton Judd: In terms of subscribers, that's a number we used to provide and maybe I'll start providing that again. Again, I just don't have the numbers in front of me, but we see like, it's a very rare. when we did not see growth.

Speaker Change: When we do not see growth.

Speaker Change: Sequentially from week to week and subscribers really for all of our brands. The only exception I would make and again I don't want to talk into too much detail about how we run our business and some of the experimentation that we do but I mentioned the deeper discounting that we turned on for Mimi's rock last year.

Dayton Judd: sequentially from week to week and subscribers really for all of our The only exception I would make, and again, I don't want to talk into too much detail about how we run our business and some of the experimentation that we do, but I mentioned the deeper discounting that we turned on for Mimi's Rock last year. Well, we eliminated a lot of those discounts kind of later in the year. And then when we started to see some of the weakness this year in Q1, we went back and turned them back on. So, we probably had some declines in subscribers on Mimi's Rock side early this year when we weren't offering the discounts.

Speaker Change: Well, we we eliminated a lot of those discounts kind of later in the year and then when we started to see some of the weakness.

Speaker Change: This year in Q1, we went back and turn them back on so so we probably had some declines in subscribers for <unk>.

Speaker Change: These rock side.

Speaker Change: Early this year, when we weren't offering the discounts and so then we turn them back on and and you know she see a different impact so.

Dayton Judd: And so then we turned them back on and see a different impact. you know, but if you if you sum up across all of our selling accounts, all of our brands, again, I don't have the numbers in front of me, but it is a very rare that we don't grow subscribers. I can tell you definitively, every single week on Muscle Farm, they're higher. Every single week on Legacy FitLife, they're higher. And Mimi's Rock, I think, is more a function of, you know, how big of a discount are we offering and did we turn them on or turn them off?

Speaker Change: But if you if you sum up across all of our selling accounts all of our brands.

Speaker Change: Again, I don't have the numbers in front of me, but it is a very rare week.

Speaker Change: That we don't grow subscribers I can tell you definitively every single week on muscle farm their hire every single week on legacy IFF It life, they're higher.

Speaker Change: And MS Rock I think is more a function of you know how big of a discounts are we offering and if they did we turned the monitoring them off if that makes sense.

Speaker Change: Okay. So I think that times first my question at least call. It basically that's my next question is do you have appreciable international sales now that all jaco position. So it's still relatively small.

Igor Novgorodtsev: Okay, so I think that answers my question, at least qualitatively.

Igor Novgorodtsev: My next question is, do you have appreciable international sales now after all your acquisitions, or is it still relatively small? So international, it depends on how you define international. So we do break it out in our 10k. And again, I don't have the number in front of me. But I think I think like 97 or 95% of our revenue is domestic. So there's very little, and most of what isn't in the U.S. is up in Canada, right? So like our skincare brands are predominantly sold on Amazon in Canada. They have some products sold on Amazon in the U.S.

Speaker Change: So international it depends it depends on how you define international so we do break it out in our 10-K and again I don't have the number in front of me, but I think I think like 97 or 95% of our revenue is domestic.

Speaker Change: So, there's very little and and most of what isn't in the U S.

Speaker Change: Is up in Canada, right. So like our skincare brands are predominantly Canadian sold on Amazon in Canada. They have some products sold on Amazon in the U S.

Dayton Judd: We do sell some products from some brands to international partners where the international partner, where essentially the ship-to address is outside the U.S. That would be lumped into our international sales as well.

Speaker Change: We do sell some products from some brands.

Speaker Change: Two international partners.

Speaker Change: Where the international partner, where essentially the ship to address is outside the U S that would be lumped into our international sales as well what would I don't have for you and what we don't break out and probably won't ever breakout is there are international companies that.

Dayton Judd: What I don't have for you and what we don't break out and probably won't ever break out is there are international companies that that sell internationally, but we ship to them in the U.S. and they tend to be online retailers. I think they don't like us saying their names, but there's one company that is essentially the Amazon of South Korea. And so we ship to them, they pay us in dollars. We ship to an address in the United States and kind of how they fulfill it to their customers outside the country beyond that, it's not really up to us.

Speaker Change: Sell internationally, but we shipped to them in the U S.

Speaker Change: They tend to be online retailers I think they don't like us saying their names.

Speaker Change: But there's one company that is essentially the Amazon of South Korea.

Speaker Change: And we so we ship to them they pay us in dollars, we shipped to an address in the United States.

Speaker Change: And kind of how they fulfill it to their customers outside the country beyond that it's not really up to us. So we don't we don't consider that international.

Dayton Judd: So we don't consider that international and we certainly don't bear any currency.

Speaker Change: And we certainly don't bear any currency risk.

Dayton Judd: There's another third party that we're not allowed to mention by name, but they sell... thousands and thousands of predominantly U.S. brands to global supplement consumers around the world. They get more than 90% of their revenue outside the U.S. Same thing. We sell to them. It's an increasing amount every month, and we ship it to a U.S. address, and they pay us in U.S. dollars, and beyond that, all we know is that most of it is ending up in the hands of an overseas consumer, but I couldn't tell you exactly how much, and we don't account for it as an international sale.

Speaker Change: There's another third party.

Speaker Change: That we're not allowed to mention by name, but they sell.

Speaker Change: Thousands and thousands of predominantly U S brands to global supplement consumers around the world they get more than 90% of their revenue outside the U S. Same thing we sell to them its an increasing amount every month.

Speaker Change: And we.

Speaker Change: You know we ship it to a U S address and they pay us in U S dollars and beyond that you know all we know is that most of it is ending up in the hands of an overseas consumer but.

Speaker Change: You know, we I Couldnt tell you exactly how much and we don't account for it as an international sale.

Igor Novgorodtsev: Does that answer your question?

Speaker Change: Does that answer is the nature of my question, if I may just sorry.

Igor Novgorodtsev: Well, to answer my question, if I may, just, sorry, I just kind of wanted to clarify my question. If there is a retaliatory tariff on U.S., it doesn't sound like it would be a significant effect on you. No, I don't think we would ever try to avoid the tariff issue by manufacturing outside the U.S. Look, occasionally we look at some, like I think we've publicly disclosed previously, we have a partner in Israel that licenses the MusclePharm brand and produces product under our brand over there. We are looking at doing something similar with certain countries in Asia, but I don't think I'd upend our business entirely as a potential reaction to the tariff issue.

Speaker Change: Kind of wanted to quantify my question you bet.

Speaker Change: Salads or any tariffs on U S.

Speaker Change: <unk> sound like it would be a significant backpack from you.

Speaker Change: No I don't feel like we would ever tried yeah I don't think we would ever try and avoid the tariff issue by you.

Speaker Change: Manufacturing outside the U S.

Speaker Change: Occasionally we look at some like I think we've publicly disclosed previously right we have a partner in Israel.

Speaker Change: That license is the muscle farm brand and produces product under our brand over there.

Speaker Change: We are looking at doing something similar with <unk>.

Speaker Change: Certain countries in Asia.

Speaker Change: But yeah, I don't think I'd up and our business entirely.

Speaker Change: Potential reaction to the tariff issue.

Igor Novgorodtsev: I'm hopeful that palm heads will prevail eventually and that the world can get back Well, my last question is an interesting one.

Speaker Change: I'm hopeful that calmer heads will prevail eventually in and the world can get back to normal.

Speaker Change: Well My last question is an interesting one I was very surprised to see that when you have a view at this.

Dayton Judd: I was very surprised to see that when you had a dispute with JNC, you started to directly ship to your franchise stores. What's the reason you cannot directly ship? And what's the nature of this relationship to the best that you can disclose? Because if I remember correctly, JNC has been leaning on you for quite some time, trying to get better and better terms, and it hasn't been an isolated incident. So is there any chance that your relationship with JNC can radically change? Good question, and I'll tread very carefully in how I answer it. Look, they're our biggest customer.

Speaker Change: This fancy startup to geographically.

Speaker Change: <unk> shipped to Europe.

Speaker Change: Your franchise stores.

Speaker Change: What's the reason you cannot directly ship in what's the nature of this relationship to the best that you can disclose because if I remember correctly advance he had been linear for quite some time.

Speaker Change: They'll get better and better terms and it hasn't been an isolated incident so what's the.

Speaker Change: Is there any chance that your chance you can radically changed.

Speaker Change: Yeah.

Speaker Change: Good question and I'll have a tread very carefully in how I answer it looks there they're our biggest customer there are very important and very valuable partner to us.

Dayton Judd: They're a very important and very valuable partner to us. That said, right, we're not willing to be bulldozed and bullied. You know, our customer is ultimately the GNC franchisees. We have only one product, right, out of our 250 plus products that is sold in a corporate GNC store. And if you go back more than 10 years ago, as a company, we never sold directly to GNC. Our distribution was directly to the GNC franchisees. We know them. We know them incredibly well. They love us. We love them. But that kind of fulfillment relationship changed about 10 years ago when we got so big that GNC basically said, you need to go through GNC distribution.

Speaker Change: That said right, we're not willing to be bulldozed and bullied.

Speaker Change: Our customer is ultimately the GNC franchisees.

Speaker Change: That we we have only one product right out of our 250 plus products that is sold in a corporate GNC store. So and if you go back more than 10 years ago right as a company, we never we'd never sold directly to GNC right. Our distribution was directly to the GNC franchisees, we know them, we know them incredibly well they love US we love them.

Speaker Change: But that route that.

Speaker Change: Kind of fulfillment relationship changed about 10 years ago. When we got so big right that GNC basically said you need to go through GNC distributions, we get it right that's what other.

Dayton Judd: We get it. That's what other big brands, Optimum and whatnot, they go through the GNC distribution system as well. But again, we have those relationships. If we have to, we can, and we've demonstrated that we will sell. So, you know, what's going to happen going forward? I don't know. I think it is customary. You said, you know, they've leaned on us for years. I don't think that's unusual. I think a lot of retailers look to the brands that they work with to, you know, become more efficient, you know, on a regular basis each year. So I don't think that's that unusual.

Big brands optimum and whatnot right. They they go through the GNC distribution system as well.

Speaker Change: But again, we have those relationships.

Speaker Change: If we have to we can and we've demonstrated that we will sell direct.

Speaker Change: So you know.

Speaker Change: Whats going to happen going forward I don't know I think it is customary you said they've leaned on us for years.

Speaker Change: I I don't think that's unusual I think a lot of retailers look to the brands that they work with to.

Speaker Change: Become more efficient.

Speaker Change: On a on a regular basis each year. So that so I don't think that's that unusual certainly the magnitude of what they were asking for it this time was completely.

Dayton Judd: Certainly the magnitude of what they were asking for this time was completely, you know, in our view, unjustified, and hence the reaction that we had. So that's probably all I should say. But maybe the last thing I should say is, again, we like them. We love them. They love us. We value our relationship with GNC. we probably prefer to be going through GNC Distribution. It's way easier for our team, right? Because we fill a truck with product and send it to a distribution center. When we ship directly to franchisees, you know, they're ordering one of this and two of that and four of these.

Speaker Change: If you are justified and hence the reaction that we had.

Speaker Change: So that's probably all I should say, but maybe the last thing I should say is look we again, we we like them, we love them They love us.

Speaker Change: We value our relationship with GNC and.

Speaker Change: We we probably prefer to be going through GNC distributions, it's way easier for our team because we.

Speaker Change: We feel a truck with product and send it to a distribution center when we shipped directly the franchisees, they're they're ordering one of this and to have that in four of these until you've got pick pack ship three P. L. Logistics that is just a lot more challenging so we prefer and are happy to be back in distribution with with GNC Corp.

Dayton Judd: And so you've got pick, pack, ship, you know, 3PL logistics that is just a lot more challenging. So we prefer and are happy to be back in distribution with GNC Corporate and are hopeful and optimistic that that relationship continues.

Speaker Change: And are hopeful and optimistic that that relationship continues.

Speaker Change: And it continues to improve.

Speaker Change: So as that agreement there came in it's not a ceasefire.

Dayton Judd: So the aggrimeter came in, it's not a ceasefire. at least somewhat of a less. Would that be fair to say? Yeah, good question. Look, I think both sides are very happy with where we ended up, but I couldn't tell you what's going to happen a month from now or two years Okay.

Speaker Change: At least somewhat of a lasting peace.

Speaker Change: That would be fair to say.

Speaker Change: Yeah. Good question, Yeah, I think I look I think both sides are very happy with where we ended up.

Speaker Change: But I Couldnt tell you, what's going to happen a month from now or two years from now.

Nathan: Okay, Alright, Thank you Nathan I don't have any more questions alright. Thanks Igor.

Igor Novgorodtsev: All right.

Operator: Thank you, Dayton. I don't have any All right, thanks Igor.

Yes.

Operator: Thank you.

Speaker Change: Thank you. Your next question is coming from Sean Mcgowan from Roth Capital Partners. Your line is live.

Sean McGowan: Your next question is coming from Sean McGowan from Roth Capital Partners. Your line is live. Good afternoon, Dayton. Thanks for taking the questions. Circling back on that GNC issue, so did that affect both revenue and gross margin in that segment and legacy in the fourth quarter? It would certainly affect revenue, and I don't know if it would affect gross margin any differentially than, you know, earlier in the quarter. So we didn't do anything differently in December other than not ship, or not take orders. Again, we continued to ship. Anything they had ordered prior to December 1st, under the old commercial terms, we continued to ship.

Nathan: Sean.

Sean McGowan: Thanks for taking the questions.

Nathan: Circling back on the GNC.

Nathan: Issue, so does that affect both revenue and gross margin.

Nathan: Segment and legacy in the fourth quarter.

Nathan: Yeah.

Nathan: It would certainly affect revenue.

Nathan: And I don't know if it would affect gross margin any differentially.

Nathan: Then you know earlier in the quarter. So we didn't do anything differently in December other than not ship.

Nathan: Or not take orders again, we continued to ship anything they had ordered prior to December 1st under the old commercial terms, we continued to ship.

Dayton Judd: And the shipments tend to be two weeks, sometimes three weeks after the P.O. So basically by, call it the third week of December, we had shipped and they had received everything. So I don't think that there would be a dramatic difference in gross margins in Q4. They were down a bit. If anything, I would cite the – I mean, it was one of the worst quarters I think we've had for legacy FitLife online revenue. I think it may be the first time we've had actually a negative comp. It was very, very slightly negative, I think down 1%.

Nathan: And that the shipments tend to be two weeks, sometimes three weeks after the Po so basically by call. It the third week of December we had shipped and they had received everything so I don't think that there would be a dramatic difference in gross margins in Q4.

Nathan: We're down a bit if anything I would I would cite the I mean that was one of the worst quarters. I think we've had four legacy fit life online revenue I think it may be the first time, we've had actually a negative comp. It was very very slightly negative I think down 1% and that's as you know the higher margin business. So.

Dayton Judd: And that's, as you know, the higher margin business. So I think if anything, the decline in gross margin for the fourth quarter was probably due to that. And fortunately, like I mentioned in my remarks, we're seeing very, very strong, you know, different results for Q1. In Q1, I'm not going to be able to give you a number, but yes, the margin profile is probably going to be different in Q1, right?

Nathan: I think if anything that the decline in gross margin for the fourth quarter was probably due to that.

Nathan: Unfortunately, like I mentioned in my remarks, where we're seeing very very strong.

Nathan: A different result for Q1.

Nathan: In Q1, I am not going to be able to give you a number but yes. The the margin profile. There is probably going to be different in Q1, right because when we're selling directly to the franchisees, where we're actually selling to them at a higher price than we were selling to GNC for.

Sean McGowan: Because when we're selling directly to the franchisees, we're actually selling to them at a higher price than we were selling to GNC for, right? But we also have to handle the fulfillment. And so where it all comes out in the wash, I would be guessing if I gave you a number. Okay, thanks.

Nathan: But we also had have to handle the fulfillment.

Nathan: And so where it all comes out in the wash.

Nathan: I'd be guessing if I gave you a number.

Nathan: Okay.

Dayton Judd: So and then on just one more question on GNC then, so you're kind of out of business with them for a while, you're back in business with them. Is there any degree of catch up or, you know, is a lost sale a lost sale? I mean, do you wind up seeing, you know, once you're back shipping to them, sort of a catch up on lost shipments before that? Yeah, I think there is definitely an element of catch up as it relates to their destocking and then restocking of the distribution center. So clearly, right, Q4 was impacted by not shipping to them as much as we otherwise would have, especially, you know, leading into the, you know, to January and Q1, which is the prime selling season for supply.

Nathan: And then on just <unk>.

Nathan: One more question on GNC them, so you're kind of out of business in terms of while you're back in business with them is there any.

Nathan: Degree of catch up or you know it was a loss sale a lost sale.

You wind up seeing you know once you back shipping to them sort of a <unk>.

Nathan: Got you up on lost shipments before that.

Speaker Change: Yeah, I think there is definitely an element of catch up as it relates to <unk>.

Speaker Change: They're destocking and then restocking of the distribution center. So clearly Q4 was impacted by not shipping to them as much as we otherwise would have especially leading into the.

Speaker Change: January in Q1, which is the prime selling season for supplements.

Dayton Judd: So, in terms though of lost sale to the end consumer, we are cautiously optimistic that that didn't happen. So again, we kept product, product kept arriving at their DCs until call it the third or fourth week of December. and we were, we flipped the switch and we're shipping directly to franchisees January 2nd. So, theoretically, right, our hope is that at no point in time were a product not on the store shelf. The question is, where did they get it? So they, for all of December, they got it by de-stocking the GNC distribution center. uh... for january all of january they got it from us for half a february they got it from us and then the kind of as the product got back into stock it's much more of they're getting it from the GNC distribution centers.

Speaker Change: So.

Speaker Change: In terms, though of of loss of sale to the end consumer where we are.

Speaker Change: Are cautiously optimistic that that didn't happen. So again, we kept product kept product kept arriving at their dcs until call. It the third or fourth week of December.

Speaker Change: And we were we flip the switch and were shipping directly to franchisees January 2nd.

Speaker Change: So.

Speaker Change: Theoretically right are our hope is that at no point in time, where our products not on the store shelves the.

Speaker Change: The question is where did they get it. So they are good for all of December they they got it by by Destocking, The GNC distribution centers.

Speaker Change: For January all of January they got it from us for half of February They got it from US and then kind of as the products got back into stock it's much more of.

Speaker Change: They're getting it from the GNC distribution centers now I will say and GNC knows this and acknowledges as if if they if they can't keep our products in stock in the D C. They.

Dayton Judd: Now, I will say, and GNC knows this and acknowledges this, if they can't keep our products in stock in the DC, they understand that we will not let our products be out of stock with the franchisees. So, we're there as a backstop to continue to do direct shipments, but again, our preference, and I think their preference, is to just do it through the distribution center.

Speaker Change: They understand that we will not let our products be out of stock with the franchisees. So so we're there as a backstop to continue to do direct shipments, but again, our preference and I think their preferences to to just do it through through the distribution centers.

Dayton Judd: Okay, and remind us, is there a difference in your, you know, kind of overall profitability of sales to the franchisees versus the corporation? Yeah, that's the part where I couldn't give you a definitive answer. I said it's all got to come out in the wash. Again, we charge a higher revenue number, but when we ship to GNC, again, some of it's less than truckload. A lot of it's full truckload. So we pay a relatively small amount per unit to get it to their distribution centers, and then they incur the cost of getting it to the franchisees.

Speaker Change: Okay.

Speaker Change: And is there a difference in.

Speaker Change: Your overall profitability of sales to the franchisees versus corporation.

Speaker Change: Yeah, that's the part where I couldn't give you a definitive answer I said, it's all got to come out in the wash.

Again, we charge a higher revenue number.

But we have you know when we shipped to GNC again, we it's all some of its less than truckload a lot of its full truckload right. So we pay a relatively small amount per unit to get it to their distribution centers and then they incurred the cost of getting it to the franchisees when we have to pay for pick pack and ship and a three PL to do that and the shipping cost.

Dayton Judd: When we have to pay for pick, pack, and ship, and the 3PL to do that, and the shipping cost, again, this was brand new to us in January, and we're still kind of counting the pennies to see whether we come out ahead. Again, we sell for more, but do we make more money selling? I don't think we make less. Let's put it that way. But I can tell you that we make more by selling directly to the franchisees.

Speaker Change: Again, this was brand new to us in January and we're still kind of counting the pennies to see whether we come out ahead again, we sell for more.

Speaker Change: But you know do we make more money selling I don't think we make last lets put it that way, but I can't tell you that we do we make more by selling direct to the franchisees.

Sean McGowan: Just to be clear, circling to muscle farm for a minute, to somewhat understand you, when you say you want to continue to invest, so should we expect the gross margins in that segment to kind of stay at this mid-20s, mid-to-upper-20s level, or is it the plan over time to get that back up? I think for right now, again, we've made the decision to invest in growth. So again, I don't even know. I couldn't. tell you, even if I knew, right, I don't know what our margins are going to be for Q1, but I would be surprised if it's, you know, not less, I think it's probably less than 30.

Speaker Change: And just to be clear, that's not going to muscle tone.

Speaker Change: Some of them.

Speaker Change: So you want to continue to invest so should we expect gross margins in that segment is kind of stay at this mid twenty's mid to upper twenty's level or.

The plan over time to get that back up.

Speaker Change: I think for right now again, we we've made the decision to invest in growth. So I again, I don't even know I couldn't I couldn't.

Speaker Change: Tell you, even if I knew right well I I don't know what our margins are going to be for Q1, but I would be surprised if it's not less.

Speaker Change: I think it's probably less than 30, so I think you'll see you'll continue to see margins at this level certainly the increased online sales will help offset some of that but right now again, we're investing for growth.

Dayton Judd: So I think you'll continue to see margins at this level. Certainly the increased online sales will help offset some of that, but right now, again, we're investing for growth. Whether and when and how we dial that back, I couldn't tell you, but we haven't made any changes in the first place.

Speaker Change: <unk>.

Speaker Change: Whether and when and how we dialed that back I couldn't tell you, but we haven't made any changes in the first quarter.

Sean McGowan: Great, that's helpful.

Speaker Change: Great that's helpful.

Dayton Judd: Shifting for a second to expenses. So operating expenses overall were lower than I thought they would be and G&A in particular. So are there any unusual items in those numbers that would be offsetting expenses or are these kind of levels that we should expect to see going forward? Yeah, nothing comes to mind. So I think Yeah, I couldn't call out anything specific that... that would cause them to be different. So I'll drill into that. And if there is something, we'll kind of let folks know. But I can't think of anything.

Speaker Change: Shifting for a second too.

Speaker Change: Expenses, so operating expenses overall were lower than I thought it would be in G&A in particular or anything really unusual items in those numbers that will be offsetting.

Speaker Change: Expenses or are these kind of levels that we should expect to see.

Speaker Change: Sure.

Speaker Change:

Speaker Change: Yeah nothing comes to mind, so I think.

Speaker Change: Yeah, I I couldn't call out anything specific that.

Speaker Change: That would cause them to be different so I'll I'll drill into that and if there is something that will kind of let folks know, but I don't I can't think of anything unusual at this point okay.

Sean McGowan: Okay, two more quickies and one quickie. Well, could you remind us of the dates of that Amazon discount for subscriptions? Yeah, I couldn't tell I can't the dates that I gave in the in my prepared remarks, and these are not the dates that we were running a promotion, right? We've got daily sales on Amazon, you know, going back And we just kind of look at, we look at the historical data, obviously on a daily basis, but also on a, you know, rolling one week, four weeks, six week basis. So, you know, I just picked a six week period of time, look back at all of our historical data and said, hey, what, what six week period of time in 2024 was the highest revenue for the brand?

Speaker Change: We work with as well.

Speaker Change: One quick well.

Speaker Change: Can you remind us of the data that Amazon discard for subscriptions.

Speaker Change: I don't I couldn't tell I can't the data that I gave in the in my prepared remarks, and these are not the dates that we were running a promotion right.

Speaker Change: We've got daily sales on Amazon going back years, and we just kind of look at it we look at the historical data obviously on a daily basis, but also on a on a roll.

Speaker Change: Rolling one week four week six week basis. So you know I just picked a six week period of time.

Speaker Change: Look back at all of our historical data and said Hey, what what six week period of time in 2024 was the highest revenue for the brand and it was February the 12th through March the 24th which is roughly again.

Dayton Judd: And it was February the 12th. March the 24th, which is roughly, again, right after we turned on those incremental discounts for subscribers. So that is what's leading to our hypothesis that that's part of the comparison, but there certainly could be other factors going on. But to be clear, we didn't turn them on on the 12th and turn them off on the 24th. That's just a reference period that was the highest for us in all of 2024, and so I use that as a reference.

Speaker Change: After we turned on those incremental discounts for subscribing safe.

Speaker Change: So that's that is what is leading to our hypothesis that that's part of the comparison.

Speaker Change: But there certainly could be other factors going on but to be clear, we didn't turn them on the 12th and turn them off on the 24 that that's just a reference period that was.

Speaker Change: It was was the highest for us and in the in the last you know and all.

Speaker Change: All of 2024, and so I used that as an example.

Sean McGowan: Okay, that's helpful.

Speaker Change: Okay. That's helpful lessening.

Dayton Judd: And the last thing, can you comment on your expectations of the current administration's impact on supplements and, you know, wellness products in general? What is it that you think might change? Yeah, well, so other than the tariffs, which I think are unfortunate and short-sighted in many regards, look, I think you've got a guy now in Health and Human Services Secretary, R.F.K. Jr., that is probably more pro-supplement than anyone that's ever sat in that chair. But I also think he will shake things up in terms of perhaps some ingredients, and in particular, he's already commented publicly and had private discussions with the large global food companies about stuff like artificial colors.

Speaker Change: Comment on your expectations of.

Speaker Change: They're telling me administrations impact on supplements, our wellness products in general what is it what.

Speaker Change: You can buy change.

Speaker Change: Yeah, well so other than the tariffs.

Speaker Change: Which I think are unfortunate and shortsighted and in many regards look I think you've got a guy now in health and human services Secretary RFK Junior that is probably more pro supplement than anyone that's ever sat in that chair, but I also think he will shake things up in terms of.

Speaker Change: Perhaps some ingredients and in particular, he he's already commented publicly.

Speaker Change: And had private discussions with the large global food companies about stuff like artificial colors.

Speaker Change: We have never been we use artificial colors, but we've never been the ones to be too aggressive with ingredients.

Dayton Judd: We have never been... We use artificial colors, but we have never been the ones to be too aggressive with ingredients. I'll give you an example. The FDA banned a food colorant called Red No. 3, actually, under the previous administration. And we had already moved away from Red No. 3 in just about all of our products, and I think we had two or three capsule manufacturers that were still using it. Again, this is even before RFK. So we have generally moved away from that stuff earlier than others. Even before this current administration took office and before RFK Jr.

Speaker Change: Give you an example.

Speaker Change: D H band.

Speaker Change: A food colorant called Red number three actually under the previous administration.

Speaker Change:

And we had already moved away from Red number three in just about all of our products and I think we had two or three capsule manufacturers that we are still using it again. This is even before RFK. So so we have we have generally moved away from that stuff earlier than others.

Speaker Change: Even before this current administration took office in before RFK Junior was confirmed we we have been migrating away from artificial colors to the extent, we can so most of our powder popular powdered products.

Dayton Judd: was confirmed, we have been migrating away from artificial colors to the extent we can. Most of our popular powdered products, pre-workouts and whatnot, have used artificial colors. Rolling out right now in GNC and everywhere that we sell these products are the exact same products but without artificial colors. That process will take a few months but it's underway and we have some products already out there that have made that transition. Interestingly, MusclePharm all along, even up until the time when we bought it, was one of those kind of don't use artificial colors type of companies. We're already good in that front with regard to those products.

Speaker Change: Pre workouts and whatnot have used artificial colors and rolling out right now in GNC and everywhere that we sell these products are the exact same products, but without.

Speaker Change: Artificial colors.

Speaker Change: That process will take a few months, but its underway and we have some products already out there that have made that transition interestingly mussel farm all along right even up until the time, we bought when we bought it was one of those kind of don't use artificial colors type of company. So so we're already good in that front with regard to those products. So I.

Dayton Judd: I think those are the risks and I will say that we're probably not, I don't want to mislead people and say that we're at the forefront. But we've been pretty early to adjust and to adapt against some of these trends like RFK.

I think those are the risks and I will say that I think we're probably we're probably not I don't want to mislead people and say that we're at the forefront right that.

Speaker Change: But we've been pretty early to adjust and to adapt hum against some of these trends like artificial colors.

Sean McGowan: Okay, thank you very much.

Speaker Change: Thank you very much.

Operator: Thank you, Sean.

Sean McGowan: Thank you Sean.

Speaker Change: Thank you there are no further questions in the queue.

Operator: Thank you.

Operator: There are no further questions in the queue.

Speaker Change: Alright, well. Thank you all for taking the time to join our call. We appreciate your interest in the company and look forward to speaking with you again in about six weeks. Thanks.

Alright, well thank you all for taking the time to join our call. We appreciate your interest in the company and look forward to speaking with you again in about six weeks. Thanks. Thank you.

Speaker Change: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.

Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.