Q1 2025 Synergy CHC Corp Earnings Call

Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy CHC Corporation's financial results for the first quarter ended March 31st, 2025.

Good morning, everyone and thank you for participating in today's conference call to discuss <unk> Corporation's financial results for the first quarter ended March 31 2025.

Operator: Joining us today are Synergy CEO Jack Ross, CFO Jaime Fickett, and Greg Robles with Investor Relations. Following the remarks, we'll open the call for analyst questions.

Joining us today are synergy yeah.

Speaker Change: C E O check Ross CFO, Jamie ticket and Greg Royal Bliss with Investor Relations. Following their remarks, we'll open the call for analyst questions. Before we go further I would like to turn the call over to Mr. <unk> as he reads the Companys Safe Harbor statement Greg. Please go ahead.

Greg Robles: Before we go further, I'd like to turn the call over to Mr. Robles as he reads the company's Safe Harbor Statement.

Greg Robles: Greg, please go ahead. Thanks Marvin. Good morning, and thanks for joining our conference call to discuss our first quarter 2025 financial results.

Greg: Thanks Marvin.

Greg: And thanks for joining our conference call to discuss our first quarter 2025 financial results I'd like to remind everyone that this call is available for replay via a live webcast that will be posted on our investor relations site at investors about synergies C. H E Dot com.

Greg Robles: I'd like to remind everyone that this call is available for replay and via a live webcast that will be posted on our investor relations site at investors.synergychc.com. The information on this call contains forward looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's SEC filings under the caption risk factor.

Greg: The information on this call contains forward looking statements. These statements are often characterized by terminology such as believe hope may anticipate expect will and other similar expressions.

Greg: Looking statements are not guarantees of future performance and the actual results may be materially different from the results implied by forward looking statements.

Greg: Factors that could cause results to differ materially from those implied herein include but are not limited to those factors disclosed in the Companys SEC filings under the caption risk factors. The information on this call speaks only as of today's date and the company disclaims any duty to update the information provided herein now I would like.

Greg Robles: The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein.

Jack Ross: Now, I would like to turn the call over to the CEO of Synergy, Jack Ross. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the first quarter of 2025. We are very pleased to report a 30% growth in earnings per share year over year, marking our ninth consecutive quarter of profitability. Additionally, we have expanded our EBITDA margins significantly to 24.1% compared to 19.7% in the prior period. This performance highlights the strength of our operating model and the ongoing discipline around cost management.

Greg: I turn the call over and over.

Jack Ross: Over to the CEO of synergy Jack Ross Jack.

Jack Ross: Good morning, everyone.

Jack Ross: Thank you for joining us today to discuss synergies performance for the first quarter of 2025.

We are very pleased to report a 30% growth in earnings per share year over year, marking our ninth consecutive quarter of profitability. Additionally.

Jack Ross: Additionally, we have expanded our EBITDA margins significantly to 24, 1% compared to 19, 7% in the prior period.

Jack Ross: This performance highlights the strength of our operating model and the ongoing discipline around cost management.

Jack Ross: Before we get into the results, I want to highlight a few exciting business developments that the team has been working diligently on. First, as an update on our international expansion. We have entered into a three-year license agreement for the Focus Factor brand with a company in the United Arab Emirates which allows Focus Factor to expand its global reach. We expect the licensee and their designated territory to begin generating revenue by the fourth quarter. Looking ahead, we plan to expand our global presence by adding new licensees in selected markets where Synergy does not currently operate and does not intend to establish a direct footprint.

Jack Ross: Before we get into the results I want to highlight a few exciting business development that the team has been working diligently on.

Jack Ross: First as an update on our international expansion.

Jack Ross: We have entered into a three year license agreement for the focus factor brand with a company in the United Arab Emirates, which allows focus factor to expand its global reach we expect the licensee and Andrew designated territory to begin generating revenue by the fourth quarter.

Jack Ross: Looking ahead, we plan to expand our global presence by adding new licensees in selected markets, where synergy does not currently operate and does not intend to establish a direct footprint.

Jack Ross: Additionally, we have incorporated a wholly owned subsidiary in Mexico and we are working on onboarding our manufacturing partners and customers. which includes Costco and Walmart. We expect this initiative to start generating revenue early in the third quarter. We still intend to open Australia and Taiwan markets early in the fourth quarter with Costco being the lead customer for both regions.

Jack Ross: Additionally, we have incorporated a wholly owned subsidiary in Mexico, and we are and we are working on Onboarding, our manufacturing partners and customers, which includes Costco and Walmart. We expect this initiative to start generating revenue early in the third quarter.

Jack Ross: We still intend to open Australia.

Jack Ross: And Taiwan markets early in the fourth quarter with Costco being the lead customer for both regions.

Jack Ross: Second, I would like to provide an update on our RTD beverage progress. We have hired an industry veteran with over 10 years of experience in the beverage and convenience store industry. He is set to join our team on May 26. We expect him to add significant growth to our beverage business starting almost immediately. Since our last call in March, we now have opened more than 400 additional convenience stores in Canada, doing business with Metro, Enroute, INS Markets, to name a few. Moving forward, we will continue to grow our Canadian and U.S. convenience store business for our TD Barrels.

Jack Ross: Second I would like to provide an update on our RTD beverage progress.

Jack Ross: We have hired an industry veteran with over 10 years of experience in the beverage and convenient store industry. He has set to join our team on may 26th.

Jack Ross: We expect him to add significant growth to our beverage business starting almost immediately.

Jack Ross: Since our last call in March we now have opened more than 400 additional convenience stores in Canada doing business with Metro on route Ians markets to name a few.

Jack Ross: Moving forward, we will continue to grow our Canadian and U S convenience store business for our TD beverages.

Jack Ross: We are pleased to report that during the second quarter, we received nearly $1 million of purchase orders from Amazon for our RTD products. These orders represent strong momentum through the second quarter. We expect to be in full rollout mode with Amazon and other major retailers in the back half of the year.

Jack Ross: We are pleased to report that during the second quarter, we received nearly $1 million of purchase orders from Amazon for RCD products. These orders represent strong momentum through the second quarter.

Jack Ross: We expect to be in full rollout mode with Amazon and other major retailers.

Jack Ross: In the back half of the year.

Jack Ross: Third.

Jack Ross: We have entered into a long-term supplier agreement for Focus Factor products, which will have significant cost-saving benefits to Synergy. This arrangement has changed our capital needs from Synergy buying and owning the inventory for the Focus Factor brand to the supplier now owning the inventory and shipping directly to our customers.

Jack Ross: We have entered into a long term supplier agreement for focus factor products.

Jack Ross: We which will have significant cost saving benefits to synergy. This arrangement has changed our capital needs from synergy buying and owning the inventory for the focus factor brand to the supplier now owning the inventory and shipping directly to our customers.

Jack Ross: Lastly... We also have entered into two term sheets to refinance our debt that we expect to close as soon as possible, which is expected to accelerate free cash flow in the business in the near term and extend our debt maturity date into 2029. With the terms that are currently being presented, this refinancing will alleviate more than $10 million of principal payments in 2025.

Jack Ross: Lastly.

Jack Ross: We also have entered into two term sheets to refinance our debt that we expect to close as soon as possible, which is expected to accelerate free cash flow in the business in the near term and extend our debt maturity date into 2029.

Jack Ross: With the terms that are currently being presented this refinancing will alleviate more than $10 million of principal payments in 2025.

Jack Ross: Before passing the call over to Jaime, I want to touch briefly on tariffs as we know this evolving situation is on top of the mind of all investors. Synergy purchases all its products from suppliers in their representative countries, meaning all products sold within a country are produced in that country. While we may see some impact from tariffs on certain ingredients, we do not expect to have any material impact on our business.

Jack Ross: Before passing the call over to Jamie I want to touch base I want to touch briefly on tariffs as we know this evolving situation that's on top of the mind of all investors.

Speaker Change: Synergy purchases all its products from suppliers in their representative countries, meaning all products sold within a country are produced in that country. While we may see some impact from tariffs on certain ingredients, we do not expect to have any material impact on our business.

Jaime Fickett: With those updates, I'd like to turn the call over to our Chief Financial Officer, Jaime Fickett. Thank you, Jack. I'll now review our financial results. For the first quarter of 2025, net revenue was $8.2 million compared to $9.4 million in the year-ago quarter, reflecting a 13% decrease year-over-year. This decline was primarily driven by a one-time sell-in to one customer during 2024 that did not repeat in 2025. Gross margin for the first quarter was 75.4% compared to 72% in the same quarter last year. The increase in gross margin was primarily driven by a favorable product mix.

Jack Ross: With those updates I'd like to turn the call over to our Chief Financial Officer, Jamie Jamie.

Speaker Change: Jamie.

Jamie Jamie: Thank you Jack I'll now review our financial results.

Jamie Jamie: For the first quarter of 2025, net revenue was $8 2 million compared to $9 4 million in the year ago quarter, reflecting a 13% decrease year over year. This decline was primarily driven by a one time selling to one customer during 2024 that did not repeat in 2025.

Jamie Jamie: Gross margin for the first quarter was 75, 4% compared to 72% in the same quarter last year. The increase in gross margin was primarily driven by a favorable product mix.

Jaime Fickett: Operating expenses for the first quarter were $4.2 million compared to $5 million in the year ago quarter. The decrease of 15% in operating expenses reflects our ongoing focus on managing cost effectively while continuing to invest in key growth initiatives. Income from operations was $1.9 million, an increase of 8% compared to $1.8 million in the first quarter of 2024. Net income for the first quarter was $876,000, or $0.10 per diluted share, compared to $580,000, or $0.08 per diluted share in the year-ago quarter. This represents a 30% increase in earnings per share year-over-year, reflecting the successful execution of our Strategic Growth Initiative and Cost Management.

Jamie Jamie: Operating expenses for the first quarter were $4 2 million compared to $5 million in the year ago quarter. The decrease of 15% in operating expenses reflects our ongoing focus on managing cost effectively while containing continuing to invest in key growth initiatives.

Jamie Jamie: Income from operations was $1 9 million, an increase of 8% compared to $1 8 million in the first quarter 2024.

Jamie Jamie: Net income for the first quarter was 876000 or 10 cents per diluted share compared to 580000 or eight cents per diluted share in the year ago quarter. This represents a 30% increase in earnings per share year over year, reflecting the successful execution of our strategic growth initiatives and cost management.

Jaime Fickett: EBITDA for the first quarter was $1.98 million compared to $1.85 million in the first quarter of 2024, up 7%.

Jamie Jamie: EBITDA for the first quarter with 1.98 million compared to 1.85 million in the first quarter of 2024 up 7%.

Jaime Fickett: Moving to our balance sheet. As of March 31st, 2025, we had cash and cash equivalents of $177.9 000 compared to $687.9 000 as of December 31st, 2024. Inventory was $2.3 million at the end of the first quarter compared to $1.7 million at the end of December 31st, 2024. At March 31st, we had $31.3 million in total liabilities, which compares to $33 million in total liabilities at December 31st, 2024, which is a decrease of $1.7 million in the first quarter. For the three months ended March 31st, 2025, our cash used in operating activities was $823,000 compared to cash used in operating activities of $858,000 at March 31st, 2024.

Jamie Jamie: Moving to our balance sheet as of March 31, 2025, we had cash and cash equivalents of 177 9000 compared to 687 9000 as of December 31, 2024 inventory was $2 3 million at the end of the first quarter compared to $1 7 million at the end of December 31, two.

24 at March 31st 2025, we had $31 3 million and total liabilities, which compares to 33 million and total liabilities at December 31, 2024, which is a decrease of $1 7 million in the first quarter.

Jamie Jamie: For the three months ended March 31, 2025, our cash used in operating activities was 823000 compared to cash used in operating activities of 858000 at March 31, 2024. The decrease was primarily attributable to an increase in inventory and a decrease in accounts payable and accrued.

Jaime Fickett: The decrease was primarily attributable to an increase in inventory and a decrease in accounts payable and accrued expenses offset by a decrease in receivables.

Jamie Jamie: Expenses offset by a decrease in receivables now I will turn the call back over to the operator.

Jaime Fickett: Now, I will turn the call back over to the operator. Thank you.

Operator: At this time we'll conduct a question and answer session. To ask a question you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question please press star 11 again. Please stand by while I compile the Q&A roster.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Speaker Change: Ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: Please stand by we'll compile the Q&A roster.

Speaker Change: Okay.

Sean McGowan: And our first question comes from the line of Sean McGowan of Roth Capital Partners.

Speaker Change: Okay.

Speaker Change: Our first question comes from the line of Sean Mcgowan of Roth Capital Partners. Please proceed.

Sean McGowan: Please proceed. Good morning. Thanks for taking the questions. My first question would be on the RTD beverage. So how much was in the quarter and kind of what are the plans for the rollout for the remainder of the year?

Sean McGowan: Good morning, Thanks for taking the questions.

My first question would be on.

Sean McGowan: The RTD beverage so how much was in the quarter and kind of what are the plans for the rollout for the remainder of the year.

Jaime Fickett: Thank you for the question. So if you sort of look at Synergy's budget, we didn't have really anything planned for the first quarter. We did $30,000 of RTD revenue in the first quarter. In the second quarter, with what's happened already with Amazon, we expect to do about $2 million. Okay, and in terms of kind of geographic territories and other distribution channels, what's the plan for the balance of the year? for RTD. Yeah, yeah, in terms of adding new stores and new customers. Yeah, so, so primarily just in Canada and the US at this point, and not nothing's changed from, you know, the major customers that we are targeting, meaning convenience stores, obviously, we're going to go back to Costco, and and the rest of the retailers that we already have in our system that we sell our current bills.

Sean McGowan: Yes, Sean.

Sean McGowan: Thank you for the question. So if you sort of look at synergies budget. We didn't have really anything planned for the first quarter, we did $30000.

Sean McGowan: <unk> revenue in the first quarter.

Sean McGowan: In the second quarter.

Sean McGowan: What's happened already with Amazon, we expect to do about $2 million.

Speaker Change: Okay in terms of kind of geographic territories.

Speaker Change: Other distribution channels, what's the plan for the balance of the year.

Speaker Change: For RTD.

Speaker Change: Yes, yes in terms of adding new stores and new customers. Yes. So so primarily just in Canada and the U S. At this point.

Speaker Change: And nothing's changed from you know.

Speaker Change: The major customers that we are targeting.

Speaker Change: Targeting meaning convenience stores, obviously, we're going to go back to Costco and the rest of the retailers that we already have in our system that we sell our current bells too.

Sean McGowan: Okay.

Sean McGowan: And then a question on expenses. Good job there. They came in below where I thought.

Speaker Change: Okay.

Speaker Change: And then a question on expenses so.

Speaker Change: Good job there they came in below where I thought but would you say this G&A level is going to rise through the year or is this.

Jaime Fickett: Do you say this GNA level is going to rise through the year, or is this something we should expect to see consistently through the year? So, so GNA, we will have a couple of headcount ads, if you will, to GNA, but I think it'll be. you know, as a percentage, it will probably be pretty flat.

Speaker Change: That we should expect to see consistently from here.

So so G&A, we will have a couple of head count.

Speaker Change: <unk> adds if you will to G&A, but I think it'll be.

Speaker Change: You know as a percentage it will probably be pretty flat.

Sean McGowan: Okay, and then my last question was... What's the licensing revenue that you booked in the first quarter there? Is that something you've talked about before? I thought that was stuff that we would expect later in the year.

Speaker Change: Okay.

Speaker Change: And then my last question was.

Speaker Change: What's the licensing revenue that you booked in the first quarter there.

Speaker Change: That's something we've talked about before.

Speaker Change: That was stuff that we would expect later in the year yeah. So that's as mentioned in my dialogue on the call here, we signed a license fee for the United Arab Emirates that we.

Jaime Fickett: Yeah, so that's, as mentioned in my dialogue on the call here, we signed a licensee for the United Arab Emirates that we received a fee for 1.5 million dollars for that territory and we will pursue other territories that way that we don't plan on having a footprint ourselves in, if you will. So, expanding our global reach, basically. So in the future, then, for at least that particular contract, that would be just based on the actual revenue, and this is just sort of a start-up fee? That's correct. In the fourth quarter they got a bit of registration timeline to start generating revenue but we expect to start generating revenue in the fourth quarter.

Speaker Change: Received the fee for $1 $5 million for that territory, and we will pursue other territories that way that we don't plan on having a footprint ourselves. If you will so expanding our global reach basically.

Speaker Change: So in the future than that or at least that particular contract that would be just based on the actual revenue and this is just sort of a startup fee that's correct.

Speaker Change: Okay in the fourth quarter, they've got a bit of a registration timeline.

Speaker Change: To start generating revenue, but we expect to generate start generating revenue in the fourth quarter.

Sean McGowan: Okay, thank you.

Sean McGowan: Just one more clarification.

Speaker Change: Okay. Thank you just one more clarification did you mentioned, Australia, and Thailand, where those two countries are in Taiwan.

Sean McGowan: Did you mention Australia and Thailand? Were those the two countries you expected?

Sean McGowan: Taiwan. Okay, thank you. Thank you.

Speaker Change: Hi want okay. Thank you.

Speaker Change: Thank you.

Operator: And again, as a reminder, to ask a question, you will need to press star 11 on your telephone.

Speaker Change: And again as a reminder to ask a question you will need to press star one on your telephone.

Operator: At this time, I'm showing no questions.

Speaker Change: At this time I'm showing no questions I'll now turn the call back over to Mr. Ross for closing remarks.

Jack Ross: I'll now turn the call back over to Mr. Ross for closing remarks. Thank you. We'd like to thank everyone for joining our earnings call and we look forward to speaking with you when we report the second quarter results in August.

Jack Ross: Thank you.

Jack Ross: We'd like to thank everyone for joining our earnings call and we look forward to speaking with you when we report our second quarter results in August.

Jack Ross: <unk>.

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

Jack Ross: Ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Jack Ross: Okay.

Jack Ross: [music].

Jack Ross: Okay.

Jack Ross: Yeah.

Jack Ross: [music].