Denver, May 10, 2017 MusclePharm Corporation (MSLP) today announced financial results for the quarter ended March 31, 2017.
Operational and Financial Highlights for First Quarter 2017 (as compared to First Quarter 2016 unless otherwise indicated):
Cost Reduction Activities
"We entered 2017 with strong momentum, having completed our 18-month corporate restructuring in late 2016," commented Ryan Drexler, President and Chief Executive Officer of MusclePharm. "Since completing the restructuring, we have turned our focus to implementing a series of strategic growth initiatives intended to expand our global footprint, broaden our target customer base and build value for shareholders. Specifically, we continue to work with our core specialty retail partners, and at the same we are increasing our penetration in both the independent retail and increasingly important online retail channels, such Amazon."
"Headlining our new initiatives was the launch of our Natural Series line of organic, gluten-free supplements. This launch represents both a significant milestone for MusclePharm as we enter a new retail category as well as sets the stage for the Company to capitalize on its brand and open new distribution channels in the all-natural, healthy living space, which is the fastest growing segment of the supplement market. We have also strengthened our sales and marketing infrastructure to support the launch of Natural Series, including the hiring of two experienced sales executives to help us secure distribution with the leading retailers of organic and health-oriented products," continued Mr. Drexler.
"As we position MusclePharm to capture additional market share, we launched our global expansion strategy, including working to secure local manufacturing capabilities in the UK, supported by the appointment of a new Head of UK Sales, industry veteran Dan Clark. We are very excited about the significant growth opportunities in Europe's food supplement market, which, according to Euromonitor data, is projected to reach a €7.9 billion market value by 2020. Looking ahead, we will continue to execute against our strategic plan to grow both domestically and abroad. MusclePharm's strong brand recognition and efficient business structure, which saw operating expenses decrease 56.8% year-over-year, ensures we are well-positioned to increase our global customer base and achieve sustainable growth. We are committed to remaining an innovative leader in the dynamic and growing supplement market," added Mr. Drexler.
2017 First-Quarter Results
For the first quarter ended March 31, 2017, net revenue was $26.0 million, compared with $42.9 million in the prior year. The decrease in net revenue was primarily due to the termination of the Arnold Schwarzenegger product-line licensing agreement, the sale of our BioZone subsidiary and certain other products being discontinued. Net revenue for the first quarter of 2017 was flat compared to fourth quarter 2016 net revenue of $26.0 million.
Mr. Drexler commented on the financial results, "Throughout the reorganization period, we purposefully terminated sales of certain unprofitable SKUs which, as expected, impacted Q1 2017 revenues compared with the prior year period. Against this backdrop, we are pleased to report that revenue stabilized during the first quarter. Throughout the remainder of 2017 we expect to ramp up sales, driven by the launch of our new Natural Series line and supported by our revamped sales and marketing strategy."
Adjusted EBITDA, including certain one-time adjustments, a non-GAAP measure which removes adjustments totaling approximately $4.7 million in stock-based compensation, restructuring charges, depreciation and amortization, as well as other items defined in the reconciliation table included in the press release, was approximately $1.5 million in the first quarter 2017, compared to Adjusted EBITDA of $1.3 million for the fourth quarter 2016, which also included certain one-time adjustments.
For the first quarter of 2017, gross profit was $6.5 million, compared to $15.2 million in the first quarter of 2016, most of which was related to excessive credits and chargebacks received from a number of traditional bricks-and-mortar clients, as well as increased whey protein costs and discontinued products. Operating expenses were $9.1 million for the first quarter of 2017, compared to $21.0 million for the same period in 2016. The Company reduced operating expenses to 35% of revenue in the first quarter of 2017 compared to 49% for the same period in 2016, with significant reductions in advertising and promotion expense and salaries and benefits expense. Advertising and promotion expense decreased 56.0% to $1.9 million for the first quarter of 2017, or 7% of revenue, compared to $4.3 million, or 10% of revenue, for the first quarter of 2016.
The net loss for the 2017 first quarter was ($3.1 million), or a loss of ($0.23) per share, compared to a loss of ($6.6 million), or a loss of ($0.48) per share, for the same period in the prior year. The 2017 first quarter also includes one-time charges of $0.3 million related to employee severance costs and stock-based compensation of terminated employees.
2017 First Quarter Conference Call Information
When: Wednesday, May 10, 2017
Time: 4:30 p.m. Eastern Time
Conference ID: 7192811
A live webcast will be available online on MusclePharm's website at http://ir.musclepharmcorp.com/, where it will be archived for one year.
An audio replay of the conference call will be available through midnight May 24, 2017 by dialing 1-844-512-2921 from the U.S. or Canada, or 1-412-317-6671 from international locations, Conference ID: 7192811.