FitLife Brands, Inc. Common Stock 2026 Q2 Earnings Call

I'd like to welcome everyone to FitLife's second quarter 2026 earnings call. We appreciate you taking the time to join us this afternoon. Joining me on the call is FitLife's President, Ryan Hansen, and FitLife's CFO, Jakob York. For the second quarter of 2026, total revenue was $26.5 million, an increase of 65% compared to the same quarter last year, with the increase driven primarily by the acquisition of Irwin, partially offset by lower revenue for Legacy FitLife. Wholesale revenue was $14.6 million or 55% of revenue, an increase of 156% compared to the second quarter of 2025. Online revenue was $11.9 million or 45% of total revenue, an increase of 14% compared to the second quarter of 2025. Gross margin was 37.0% compared to 42.8% during the second quarter of 2025.

The decline in gross margin is primarily due to the acquisition of Irwin, which has historically operated at a lower gross margin than Legacy FitLife. Contribution, which we define as gross profit less advertising and marketing expense, increased 46%, driven primarily by the addition of Irwin, partially offset by lower contribution from Legacy FitLife. Net income for the second quarter of 2026 was $2.0 million, compared to $1.7 million during the second quarter of 2025. Adjusted EBITDA was $3.7 million, a 10% increase compared to the second quarter of 2025. In addition to the year-over-year numbers, I would like to highlight some sequential comparisons. Total revenue increased 4.8% sequentially compared to the first quarter of 2026, with wholesale revenue increasing 3.7% and online revenue increasing 6.3%. Diluted earnings per share has increased sequentially in each of the past three quarters.

Although we have been working through a number of challenges in the business over the past three quarters, we are pleased with the progress the team is making. With regard to brand-level performance, I'll start with Legacy FitLife. Total Legacy FitLife revenue for the second quarter of 2026 was $12.4 million, of which 68% was from online sales and 32% was from wholesale customers. This represents a 31% year-over-year decrease in wholesale revenue and a 19% year-over-year decrease in online revenue, or a 23% decrease in total revenue. The online revenue decline was primarily attributable to MRC, and the wholesale revenue decline was primarily attributable to reduced sales to GNC. Sequentially, total revenue for Legacy FitLife for the second quarter of 2026 declined less than a half a percent compared to the first quarter of 2026, with wholesale revenue increasing 3.0% and online revenue declining 2.0%.

Although the year-over-year declines are still high, we were happy to see the sequential stability during the quarter. Gross margin for Legacy FitLife declined from 42.8% in the second quarter of 2025 to 41.7% in the second quarter of 2026. However, gross margin for Legacy FitLife increased sequentially from 41.2% in the first quarter of 2026 to 41.7% in the second quarter of 2026. In fact, the second quarter of 2026 represents the third quarter in a row that gross margin for Legacy FitLife has increased sequentially, so we are encouraged by that trend. Contribution for Legacy FitLife in the second quarter of 2026 declined 25.9% to $4.2 million, and contribution as a percentage of revenue decreased to 34.1%, compared to 35.4% in the same quarter of 2025.

Sequentially, contribution and contribution as a percentage of revenue were approximately flat from the first quarter of 2026 to the second quarter of 2026. Moving on now to Irwin. Total Irwin revenue for the second quarter was $14.1 million, of which $10.7 million or 76% came from wholesale customers and 24% came from online sales. Gross margin for Irwin for the second quarter was 32.8%, and contribution as a percentage of revenue was 29.2%. As previously mentioned, we began selling Irwin products on Amazon in mid-October, and the business has scaled nicely for the past several months. Monthly revenue for Irwin on Amazon reached approximately $0.5 million in December of 2025, approximately $0.8 million in March of 2026, and just under $1 million in June of 2026. Although June revenue was helped by Prime Day, which took place June 23rd through the 26th.

Sales for Irwin on Amazon have remained strong since the end of the second quarter, with July revenue comparable to June, but without the benefit of Prime Day. In early April, on our fourth quarter earnings call, I outlined five initiatives we were focused on to drive improved performance in our business. I thought it would be productive to provide a brief update on our progress against each of those. The first initiative was to significantly improve Irwin's supply chain. This is a project that will take several more months before we can declare victory, but I'm pleased with the tangible progress we have made. More specifically, the biggest opportunity was to transition as many of our products as possible to three-year dating compared to the two-year dating the products had at the time of the acquisition.

As a reminder, Irwin has historically written off and disposed of approximately $2 million worth of inventory each year, largely because of a combination of high MOQs and a short 12-month selling window, since retail partners require 12 months of shelf life on incoming products. Increasing the shelf life to three years doubles the selling period, resulting in lower inventory obsolescence. As of today, we have approved three-year formulas for 85% of Irwin's products. We have inventory on hand with three-year dating for 12% of Irwin's products, with POs outstanding for an additional 22%. We will continue to transition more and more of our formulas to three years as we reach reorder points. Another supply chain improvement opportunity is to reduce the number of out-of-stock situations.

While we don't have this fully behind us yet, I am pleased that lost revenue due to out of stocks declined over 50% in the second quarter of 2026 compared to the first quarter of 2026. Additionally, we are working on other supply chain initiatives around better managing logistics expense, which we expect to favorably impact cost of goods sold. Bottom line, we are making progress improving Irwin's supply chain, which we expect to translate into improved margins in the coming quarters. The second initiative was to improve new product development at Irwin. New product launches are important to maintaining relevance in the nutritional supplement industry. When we bought Irwin, the new product pipeline was almost nonexistent. A related problem was that Irwin has historically focused on the nutritional supplement categories where it was the strongest. Unfortunately, its two strongest categories, weight loss and men's health, are declining significantly.

In other words, Irwin was previously focused primarily on defending share in declining categories rather than strengthening its presence in growing categories. We have three new products currently in production and slated for launch late during the third quarter or early in the fourth quarter, although unfortunately, most of those are in men's health or weight loss. For future product launches, however, we have a robust pipeline of products in development that are more focused on attractive and growing nutritional supplement categories. Our goal is to launch at least four of these new products each quarter, beginning in 2027. The third initiative was to drive off-Amazon awareness for our products, which we expect to translate into strength on Amazon as well. This strategic shift is in response to the Amazon algorithm changes that we have previously highlighted.

During the second quarter, we increased our advertising and marketing expense by 16.4% sequentially compared to the first quarter of 2026. Importantly, off Amazon spend is a much higher percentage of that number than it has ever been. Like many of our other initiatives, it is going to take some time before we know the outcome, but we are beginning to see some recent encouraging metrics. For example, average weekly sessions on Amazon for our portfolio of brands, including Dr. Tobias, is higher in the last five weeks compared to the 13-week period prior to Prime Day at the end of June. The fourth initiative was to leverage Irwin's sales team to cross-sell other FitLife products into the wholesale channel. The sales process in wholesale is long, with many retailers resetting planograms only once or potentially twice a year.

We previously announced the two MusclePharm SKUs that were added to over 700 Kroger locations late during the second quarter. We also previously announced the placement of six MusclePharm SKUs in a regional grocery chain, which was supposed to happen in the second quarter but has been delayed until later this year. We continue to have productive discussions with a number of retailers and hope to have other updates on this initiative in the coming quarters. The fifth initiative was to operate more efficiently with regard to SG&A. SG&A for the second quarter of 2026 was approximately $4.8 million, down 3.8% sequentially from approximately $5.0 million in the first quarter of 2026. On an annualized basis, this improvement is equivalent to approximately $0.8 million.

In addition, since the end of the second quarter, we have acted on other SG&A reductions and have identified other improvement opportunities we intend to implement over the remainder of this year. As previously indicated, we don't believe any individual SG&A reduction opportunity will be material on its own, but in total, we expect them to be compelling. Now, let me provide a few additional high-level comments and then we can move into Q&A. We have previously fielded questions and provided commentary about subscriber counts on Amazon, particularly when subscriber counts started declining after Amazon made one-time purchase the default buying option about a year ago, rather than Subscribe & Save. Following this change, our subscriber counts declined for several months, with our weakness on Amazon over the past several months probably contributing to the decline.

Our total subscriber count on Amazon across all brands bottomed in mid-April, a little above 90,000 subscribers before starting to grow again, and it has increased almost every week since then. Currently, we have approximately 94,000 active subscribers on Amazon across all of our brands. Regarding the balance sheet, we made a scheduled amortization payment of approximately $1.5 million during the second quarter, bringing our term loan balance to $36.1 million. We also paid down an additional $2.2 million on our revolving line of credit during the second quarter, bringing the balance to $2.0 million. Since closing the Irwin Naturals acquisition through the end of the second quarter of 2026, we have paid off approximately $8.6 million of indebtedness, in addition to paying approximately $2.0 million of transaction-related expenses.