FitLife Brands, Inc. (FTLF) Earnings

Management highlights

Overall Financials - Gross margin for the company was 37.6% in Q1 2026, down from 43.1% in Q1 2025, due to Irwin's lower historical gross margin; gross margins increased sequentially for both segments in Q1 2026 compared to Q4 2025. Erwin's margins are expected to improve over time via supply chain and operational initiatives. - Net income was $1.7 million, down from $2.0 million in Q1 2025, due to higher amortization and interest expenses tied to the Irwin acquisition. Adjusted EBITDA was $3.3 million, a 3% year-over-year decrease. Balance Sheet and Capital Allocation - A scheduled $1.5 million amortization payment was made on the term loan in Q1, bringing the outstanding term loan balance to $37.6 million. An additional $1.4 million was paid down on the revolving line of credit, bringing its balance to $4.2 million. - The company intends to continue deploying excess free cash flow to reduce outstanding indebtedness. Operational Updates - Monthly revenue increased sequentially throughout Q1 2026, with sequential improvement across many Amazon selling accounts late in the quarter and into April 2026. - Irwin's Amazon business continued to grow: revenue reached ~$800,000 in March 2026, ~$900,000 in April 2026, and continued sequential growth (slowing pace) in May month-to-date. Irwin Amazon subscribers grew from ~500 at the start of Q1 to over 5,700 as of the call. - Two MusclePharm SKUs are scheduled to launch in 700-800 Kroger stores nationwide starting in June 2026. - Progress has been made on extending product shelf dating for Irwin inventory: multiple products with three-year dating have been received, 15-20 more are in production, and obsolescence has already been reduced significantly.

Guidance

- Management expects Erwin's gross margins to continue increasing over time as supply chain issues are resolved and operational initiatives are implemented. - Management expects Irwin's Amazon revenue to reach at least $1 million per month in steady state, supported by remaining product listings coming online, resolution of out-of-stock issues, Canadian Amazon launch, and increasing advertising investment. - Margins for the MusclePharm brand are expected to improve going forward, as the company has intentionally exited low-margin large international protein customers, and a majority of current MusclePharm revenue comes from higher-margin online sales. - Inventory obsolescence charges from short-dated acquired Irwin inventory are largely already behind the company, and margins will continue to improve incrementally as more three-year dated product enters inventory and less inventory is written off.

Segment performance

Total company revenue for Q1 2026 was $25.3 million, a 59% year-over-year increase driven primarily by the acquisition of Irwin, partially offset by weakness in the Legacy FitLife segment. - Wholesale: $14.1 million (56% of total revenue), 166% year-over-year increase - Online: $11.2 million (44% of total revenue), 6% year-over-year increase Legacy FitLife segment: Total Q1 2026 revenue was $12.5 million, a 22% year-over-year decrease. 70% of revenue came from online sales, and 30% from wholesale. Wholesale revenue fell 28% year-over-year, while online revenue fell 18% year-over-year. Gross margin was 41.2% (down from 43.1% in Q1 2025, up sequentially from 40.7% in Q4 2025). Contribution was $4.3 million, a 27% year-over-year decline, with contribution margin of 34.1% (down from 36.5% in Q1 2025, up sequentially from 32.5% in Q4 2025). Irwin segment: Total Q1 2026 revenue was $12.8 million. 80% of revenue ($10.3 million) came from wholesale, and 20% came from online sales. Gross margin was 34.0%, and contribution margin was 31.3%. After adjusting for lost customers (Costco US, Rite Aid) exited CBD business, organic Irwin revenue declined ~13% year-over-year, with more than half of the decline ($1 million to $1.5 million) attributable to prior out-of-stock issues.

Risks & headwinds

- Legacy FitLife segment is experiencing continued year-over-year revenue declines across both online and wholesale channels, driven by weakness in core brands and customer inventory volatility related to prior commercial disputes. - Irwin has experienced organic revenue decline year-over-year, with significant headwind from widespread out-of-stock issues that have limited sales across channels, particularly Amazon. - Amazon platform changes have negatively impacted the performance of the company's selling accounts, and the correction process is expected to be multi-month, with full resolution not yet complete. - New product listing approval on Amazon can take multiple weeks due to required third-party testing, delaying the launch of remaining Irwin SKUs. - New wholesale distribution expansion carries execution risk, as seen in the prior Vitamin Shop MusclePharm pilot that resulted in partial product discontinuation. - Canadian Amazon launch requires lengthy regulatory approval (NPN numbers) which takes up to a year to complete, limiting near-term upside from this expansion.

Analyst Q&A

• Q: Ryan Myers asked for color on April and early May 2026 revenue trends, following sequential monthly improvement through Q1 2026. /

  A: January and February 2026 revenue was in the low $8 million range, with February stronger per day than January. March revenue exceeded $9 million. April revenue was higher than January/February but slightly lower than March, with $1.65 million in transit shipments that will be recognized in April (compared to just under $1 million at the end of March). Normalizing for in-transit shipments, April was the strongest sales order month of 2026 to date.

• Q: Myers also asked how much upside remains for Irwin's Amazon revenue before reaching steady state. /

  A: Management expects Irwin Amazon revenue to reach at least $1 million per month. Upside will come from 20 remaining unlisted SKUs (that are gradually being approved for sale), resolution of ongoing out-of-stock issues (which have disproportionately impacted Amazon sales as wholesale gets priority for limited inventory), the upcoming launch of 8-10 approved Canadian SKUs on Amazon Canada, and increasing advertising investment (Irwin ad spend grew from $72k post-acquisition to $358k in Q1 2026, which will drive growth across channels including Amazon).

• Q: Sean McGowan asked for directional performance and margin updates for the MusclePharm brand. /

  A: MusclePharm revenue is down intentionally, as the company chose to exit low-margin sales to large price-sensitive international protein buyers. Exiting these low-margin accounts, MusclePharm is seeing good traction: after double-digit early 2026 declines, online revenue (which carries the highest margins) is now only down mid-single digits, with returning momentum. Margins for MusclePharm are expected to improve going forward, since over half of current revenue is now higher-margin online sales, and the unprofitable low-margin international business has been eliminated.

• Q: McGowan also asked about the status of fixes for Amazon account performance issues following recent platform changes. /

  A: Management noted issues are not fully fixed, and the recovery is a multi-month process. The company has shifted advertising strategy, moving more ad spend off Amazon to off-platform channels including Google, Meta, and TikTok (TikTok launched for Irwin this month). This aligns with the new industry formula for Amazon success, which relies on driving external traffic to Amazon listings. Positive sequential trends have emerged, with top accounts like MusclePharm already seeing a strong partial turnaround, but management emphasized there is still substantial work remaining.

• Q: Samir Patel asked for an update on the Irwin product shelf dating initiative and the cadence of obsolescence charge reductions. /

  A: The company has already received multiple products with new three-year dating, with 15-20 more in production, and has already reduced obsolescence significantly. Most of the inventory write-down from short-dated acquired inventory was already done at the time of the acquisition (a $2.4-$2.7 million reserve was booked upfront), so quarterly obsolescence charges in Q1 were very small. Further improvement will be incremental going forward, with higher margins as fewer write-offs are needed and more three-year dated product enters inventory.