Company Continues Focus on Controlling Operating Expenses with 21% Decline in Third Quarter 2021
First Production Run of MP Combat Energy Successfully Sold 100%; $30 Million of Annual Sales Expected in 2023
Company Expects Sequential Revenue Growth in Fourth Quarter 2021 from
New Product Formulation and MP Energy Drink Line
LAS VEGAS, Nov. 15, 2021 (GLOBE NEWSWIRE) -- MusclePharm Corporation (OTCMKTS: MSLP), a global provider of leading sports nutrition & lifestyle branded nutritional supplements, today reported financial results for the third quarter and nine months ended September 30, 2021.
Mr. Ryan Drexler, the Chairman of the Board of Directors and Chief Executive Officer, stated, “Sales and margins in the third quarter were impacted by supply chain shortages which were mitigated by our continued focus on operating expense reduction. We are excited to launch a new and improved formula that delivers improved taste and mixability to consumers of two of our top selling products, Combat 100% Whey and Combat Protein Powder, to begin shipping this month. This new product formulation, along with the continued production of the MP Energy drink line, is expected to drive sequential revenue growth in the fourth quarter of 2021. Also, as mentioned on our second quarter earnings call, we brought on T.J. Dillashaw for marketing and business development and have already seen a significant impact on our business through the formation of marketing partnerships that will support our expected fourth quarter revenue growth.”
Mr. Drexler continued, “In addition, our recent $7.0 million senior secured notes offering has us well positioned to capture market share in the functional energy drink segment, and we believe we can grow the business to $30.0 million in annual sales starting in 2023.”
The following are key financial highlights for the period. Reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.
Third Quarter 2021 Financial Highlights
| ● | Revenue, net was $12.0 million. | |
| ● | Gross margin was 0.2% due to increased protein and freight costs. | |
| ● | Operating expenses were $3.5 million. | |
| ● | Net loss was $(3.9) million. | |
| ● | Loss per share was $(0.12). | |
| ● | Adjusted EBITDA was $(2.8) million. |
Nine-months ended September 30, 2021 Financial Highlights
| ● | Revenue, net was $40.0 million. | |
| ● | Gross margin was 14.7% due to increased protein and freight costs. | |
| ● | Operating expenses were $10.8 million. | |
| ● | Net loss was $(6.1) million. | |
| ● | Loss per share was $(0.18). | |
| ● | Adjusted EBITDA was $(3.6) million. |
Non-GAAP Financial Measures
Within this press release, the Company refers to a non-GAAP financial measure (Adjusted EBITDA) which has a directly comparable U.S. GAAP financial measure (net (loss) income). EBITDA is defined as net (loss) income excluding interest, net, income taxes and depreciation and amortization. Adjusted EBITDA, in addition to those amounts included in EBITDA, is further adjusted for items such as stock-based compensation, gain on disposal of property and equipment, and (gain) loss on settlements.
Adjusted EBITDA is provided so that investors have the same financial data that management uses to assess the Company’s operating results with the belief that it will assist the investment community in properly assessing the ongoing performance of the Company for the periods being reported and future periods. The presentation of this additional information is not meant to be considered a substitute for measures prepared in accordance with U.S. GAAP.
Conference Call Information
The Company will host a conference call to discuss its operating results today at 1:30 pm Pacific Time (4:30 pm Eastern Time). Investors interested in accessing the live call can dial (800) 667-5216 from the U.S. and International callers can dial (303) 223-2688. A telephone replay will be available following the event and can be accessed by dialing (844) 512-2921 from the U.S. and International callers can dial (412) 317-6671; the conference ID is 21999197.
There will also be a simultaneous, live webcast with the ability to ask questions of management on the Investor Relations section of the Company’s website at www.musclepharm.com. The webcast will be archived for 30 days.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. Such forward-looking statements only speak as of the date of this press release and the Company assumes no obligation to update the information included in this press release, except as required by law. Statements made in this press release that are forward-looking in nature may involve risks and uncertainties. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, without limitation, risks relating to consumer spending may decline or that U.S. and global macroeconomic conditions may worsen resulting in reduced demand for the Company’s products, risks relating to changes in consumer preferences away from the Company’s offerings, risks relating to the effectiveness and efficiency of the Company’s advertising campaigns and marketing expenditures, including existing brands and the launch of new brands, which may not result in increased revenue or generate sufficient levels of brand name and program awareness, risks if the Company becomes subject to health or advertising related claims from its customers, competitors or governmental and regulatory bodies, and risks relating to increased competition from other nutrition providers. As a result of these various risks, our actual outcomes and results may differ materially from those expressed in these forward-looking statements.
This list of risks, uncertainties and other factors is not complete. We discuss some of these matters more fully, as well as certain risk factors that could affect our business, financial condition, results of operations, and prospects, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in subsequent reports we file from time-to-time with the SEC, which are available to read at www.sec.gov. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the results of any revisions to the forward-looking statements made in this press release.
About MusclePharm Corporation
MusclePharm® is an award-winning, worldwide leading sports nutrition & lifestyle company offering branded nutritional supplements. Its portfolio of recognized properties include the MusclePharm® Sport Series, Essentials Series, and recently-launched Natural Series, as well as FitMiss™ – a product line designed specifically for female athletes. MusclePharm® products are available in more than 100 countries globally, with its Combat Protein product lineup being the company’s most popular.
Contact:
John Mills, Managing Partner
ICR, Inc.
646-277-1254
John.Mills@Icrinc.com
| MusclePharm Corporation | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue, net | $ | 11,971 | $ | 16,085 | $ | 40,000 | $ | 49,309 | ||||||||
| Cost of revenue | 11,942 | 11,073 | 34,102 | 34,504 | ||||||||||||
| Gross profit | 29 | 5,012 | 5,898 | 14,805 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administration | 2,453 | 3,586 | 7,609 | 11,001 | ||||||||||||
| Selling and promotion | 1,012 | 623 | 3,195 | 2,100 | ||||||||||||
| Impairment of intangible assets | - | 167 | - | 167 | ||||||||||||
| Total operating expenses | 3,465 | 4,376 | 10,804 | 13,268 | ||||||||||||
| Income (loss) from operations | (3,436) | 636 | (4,906) | 1,537 | ||||||||||||
| Other (expense) income: | ||||||||||||||||
| Loss on settlement obligation | - | - | - | (87) | ||||||||||||
| Interest and other income (expense), net | (465) | (456) | (1,144) | (1,539) | ||||||||||||
| Gain on settlement of payables | - | 518 | - | 518 | ||||||||||||
| Income (loss) before provision for income taxes | (3,901) | 698 | (6,050) | 429 | ||||||||||||
| Provision for income taxes | 32 | 20 | 40 | 64 | ||||||||||||
| Net income (loss) | $ | (3,933) | $ | 678 | $ | (6,090) | $ | 365 | ||||||||
| Net income (loss) per share, basic | $ | (0.12) | $ | 0.02 | $ | (0.18) | $ | 0.01 | ||||||||
| Net income (loss) per share, diluted | $ | (0.12) | $ | 0.01 | $ | (0.18) | $ | 0.01 | ||||||||
| Weighted average shares used to compute net income (loss) per share, basic | 33,386,200 | 33,008,189 | 33,134,933 | 32,746,147 | ||||||||||||
| Weighted average shares used to compute net income (loss) per share, diluted | 33,386,200 | 49,097,595 | 33,134,933 | 48,835,553 | ||||||||||||
| MusclePharm Corporation | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands, except share and per share data) | ||||||||
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 384 | $ | 2,003 | ||||
| Accounts receivable, net of allowances of $1,033 and $3,407 at September 30, 2021 and December 31, 2020, respectively | 7,332 | 7,488 | ||||||
| Inventory, net | 1,589 | 1,032 | ||||||
| Prepaid expenses and other current assets | 1,538 | 1,341 | ||||||
| Total current assets | 10,843 | 11,864 | ||||||
| Property and equipment, net | 7 | 13 | ||||||
| 115 | 356 | |||||||
| Operating lease right-of-use assets | 271 | 474 | ||||||
| Other assets | 75 | 295 | ||||||
| TOTAL ASSETS | $ | 11,311 | $ | 13,002 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Obligation under secured borrowing arrangement | $ | 6,090 | $ | 7,098 | ||||
| Line of credit | - | 743 | ||||||
| Operating lease liability, current | 446 | 381 | ||||||
| Convertible notes with a related party, net of discount | 5,329 | 2,872 | ||||||
| Accounts payable | 18,770 | 14,719 | ||||||
| Accrued and other liabilities | 6,928 | 6,194 | ||||||
| Total current liabilities | 37,563 | 32,007 | ||||||
| Operating lease liability, long-term | - | 343 | ||||||
| Other long-term liabilities | 3,561 | 5,071 | ||||||
| Total liabilities | 41,124 | 37,421 | ||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, par value of $0.001 per share; 100,000,000 shares authorized, 34,261,821 and 33,980,905 shares issued as of September 30, 2021 and December 31, 2020, respectively; 33,386,200 and 33,105,284 shares outstanding as of September 30, 2021 and December 31, 2020, respectively | 32 | 32 | ||||||
| Additional paid-in capital | 178,955 | 178,261 | ||||||
| Treasury stock, at cost; 875,621 shares | (10,039) | (10,039) | ||||||
| Accumulated deficit | (198,761) | (192,673) | ||||||
| TOTAL STOCKHOLDERS’ DEFICIT | (29,813) | (24,419) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 11,311 | $ | 13,002 | ||||
| MusclePharm Corporation | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (In thousands, except share and per share data) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income (loss) | $ | (6,090) | $ | 365 | ||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 9 | 130 | ||||||
| Amortization of intangible assets | 240 | 240 | ||||||
| Bad debt expense | 326 | 174 | ||||||
| Gain on disposal of property and equipment | - | (176) | ||||||
| Gain on settlement of payables | - | (518) | ||||||
| Inventory loss provision | 1 | (115) | ||||||
| Stock-based compensation | 694 | 206 | ||||||
| Issuance of common stock to non-employees | - | 116 | ||||||
| Impairment of operating lease right-of-use assets | - | 167 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (169) | (572) | ||||||
| Inventory | (557) | 3,347 | ||||||
| Prepaid expenses and other current assets | (197) | 36 | ||||||
| ROU and other assets | 423 | 429 | ||||||
| Accounts payable and accrued liabilities | 2,856 | (1,259) | ||||||
| Net cash (used in) provided by operating activities | (2,466) | 2,570 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (3) | (4) | ||||||
| Proceeds from disposal of property and equipment | - | 220 | ||||||
| Net cash (used in) provided by investing activities | (3) | 216 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment to line of credit | (528) | (2,452) | ||||||
| Payments from line of credit | 2,192 | - | ||||||
| Proceeds from secured borrowing arrangement, net of reserves | 38,247 | 32,762 | ||||||
| Payments to secured borrowing arrangement, net of fees | (39,255) | (34,289) | ||||||
| Proceeds from shareholder's loan | 49 | - | ||||||
| Proceeds from issuance of Paycheck Protection Program Loan | - | 965 | ||||||
| Repayment of finance lease obligations | - | (54) | ||||||
| Proceeds of notes payable | 145 | |||||||
| Repayment of Notes payables | - | (165) | ||||||
| Net cash (used in) provided by financing activities | 850 | (3,233) | ||||||
| NET CHANGE IN CASH | (1,619) | (447) | ||||||
| CASH — BEGINNING OF PERIOD | 2,003 | 1,532 | ||||||
| CASH — END OF PERIOD | $ | 384 | $ | 1,085 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for Interest | $ | 1,153 | $ | 522 | ||||
Non-GAAP Adjusted EBITDA
In addition to disclosing financial results calculated in accordance with U.S. GAAP, this press release discloses Adjusted EBITDA, which is net loss adjusted for stock-based compensation, gain on disposal of property and equipment, (gain) loss on settlements, interest and other expense, net, depreciation of property and equipment, amortization of intangible assets, impairment of operating lease right of use asset and provision for income taxes.
Management uses Adjusted EBITDA as a supplement to U.S. GAAP measures to further evaluate period-to-period operating performance, as well as the Company’s ability to meet future working capital requirements. The exclusion of non-cash charges, including stock-based compensation, gain on disposal of property and equipment, depreciation of property and equipment, amortization of intangible assets, and provision for income taxes, is useful in measuring the Company’s cash available for operations and performance of the Company. Management believes these non-GAAP measures will provide investors with important additional perspectives in evaluating the Company’s ongoing business performance.
The U.S. GAAP measure most directly comparable to Adjusted EBITDA is net income (loss). The non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to net income (loss). Adjusted EBITDA is not a presentation made in accordance with GAAP and has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA excludes some, but not all, items that affect net income (loss) and is defined differently by different companies, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Set forth below are reconciliations of our reported GAAP net loss to Adjusted EBITDA (in thousands):
| For the | For the | For the | For the | |||||||||||||
| Three Months ended | Three Months | Nine Months ended | Nine Months ended | |||||||||||||
| 30-Sep-21 | 30-Sep-20 | 30-Sep-21 | 30-Sep-20 | |||||||||||||
| Net Income (Loss) | $ | (3,933) | $ | 678 | $ | (6,090) | $ | 365 | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Stock-based compensation | 386 | 27 | 694 | 206 | ||||||||||||
| Gain on disposal of property and equipment | - | (165) | - | (176) | ||||||||||||
| (Gain) loss on settlements | (94) | (518) | (265) | (518) | ||||||||||||
| Interest expense | 683 | 632 | 1,800 | 1,715 | ||||||||||||
| Depreciation of property and equipment | 3 | 24 | 9 | 130 | ||||||||||||
| Amortization of intangible assets | 80 | 80 | 240 | 240 | ||||||||||||
| Impairment of operating lease right of use asset | - | 167 | - | 167 | ||||||||||||
| Provision for income taxes | 32 | 20 | 39 | 64 | ||||||||||||
| Adjusted EBITDA | $ | (2,843) | $ | 945 | $ | (3,573) | $ | 2,193 | ||||||||
