Exhibit 99.1
MusclePharm Reports 2017 Second Quarter Financial Results
DENVER, August 14, 2017 -- MusclePharm Corporation (MSLP) ("MusclePharm" or the "Company") (OTCQB: MSLP), a scientifically-driven, performance lifestyle sports nutrition company, today announced financial results for the second quarter ended June 30, 2017.
Operational and Financial Highlights for Second Quarter 2017 (as compared to Second Quarter 2016 unless otherwise indicated):
Financial Results
Net Revenue was $26.2 million, compared to $32.9 million in Q2 2016, and flat sequentially compared to Q1 2017.
Adjusted EBITDA excluding one-time adjustments was $1.7 million, compared to $2.1 million for Q1 2017.
Reduced net loss 25% to $3.1 million.
Gross Margin increased to 29.1%, from 24.9% compared to Q1 2017.
Operational Highlights
Online sales expanded in the quarter to 17.8% of sales, from 14.8% of sales, driven by our enhanced presence on Amazon.com
Shipped first products from the Natural Series line
Natural Series now available in Sprouts Farmers Market, Inc., and other stores
Ramped manufacturing in Europe; added two new customers – Tropicana and Muscle Finesse
Settled the City Football Group litigation with a $3M settlement, representing a significant reduction in potential liability
Entered into a partnership with the United States Air Force School of Aerospace Medicine (USAFSAM) to develop products specific to the needs of special tactics airmen when in combat.
Cost Reduction Activities
Reduced inventory by 28.4% compared to $8.6 million as compared to December 31, 2016
Total operating expenses decreased by 17.6% to $10.0 million
Selling, general and administrative expenses decreased 36.1% to $2.8 million
Salaries and benefits costs decreased 20.4% to $2.6 million
Advertising and promotion expenses decreased 16.6% to $2.2 million
Professional fees decreased 58.3% to $0.7 million
Expansion of the Executive Team and Board of Directors
Appointed Matthew Kerbel as Chief Marketing Officer and Paul Anton as Vice President of Finance; both joined the Company in August 2017
Strengthened corporate governance with two new appointments to the Board of Directors: John J. Desmond, a certified public accountant with more than 40 years of public accounting industry experience, and Brian Casutto, MusclePharm's Executive Vice President of Sales & Operations.
“During the second quarter of 2017, MusclePharm continued to successfully execute against its growth strategy and began to tilt the scales away from the distractions of having to address legacy issues, to truly move forward and build what we are confident will be a high-growth, sustainably profitable business,” commented Ryan Drexler, President and Chief Executive Officer of MusclePharm, Inc. “We made significant progress executing against the three core elements of our growth plan: 1) growing international sales; 2) expanding and improving our product lines; and 3) diversifying our distribution channels, with a focus on growth from our online channels.
International sales accounted for a higher percentage of total revenue in the second quarter, both year-over-year and sequentially. Notable progress was made in the U.K., led by our new U.K. Sales Director, Daniel Clark. As market demand for nutritional supplements remains robust in the region, we are investing significantly in our European manufacturing capabilities to support our sales efforts in this promising market.
“We are excited about the initial market acceptance and broad rollout strategy for the Natural Series. Shipping of initial products commenced in the middle of the second quarter, and we were proud and excited to have the Natural Series accepted by Sprouts Farmers Market. Several additional products also began their initial rollout near the end of the quarter. We are encouraged by the strong initial uptake online and anticipate strong demand for the Natural Series, especially among the specialty retailer channel. We expect to introduce new products in the Natural Series product line in the second half of 2017.
“We also continued to make significant progress diversifying our distribution channels. In particular, we expanded sales online through the online offerings of our existing brick and mortar customers and reported strong results through our distribution partnership with Amazon, which accounted for 12% of our total revenues in the second quarter from 6% in Q1 of 2017.
“The results of these initiatives demonstrate continued strength in our core business and early positive signs that we are making headway against our growth strategy. We are encouraged by the trends we saw in the second quarter and look forward to accelerating our growth strategy in the second half of the year,” concluded Mr. Drexler.
2017 Second-Quarter Results
For the second quarter ended June 30, 2017, net revenue was $26.2 million, compared with $32.9 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 second quarter of 2017 was flat compared to first quarter 2017 net revenue of $26.0 million. Normalized net revenue, which excludes sales from discontinued products, the Arnold Schwarzenegger product-line licensing agreement and the sale of our BioZone subsidiary, was $26.4 million, compared to $31.7 million in Q2 2016. The decrease was due to lower sales at the Company’s traditional brick and mortar retail partners.
Adjusted EBITDA, including certain one-time adjustments, a non-GAAP measure excludes stock-based compensation, restructuring charges, depreciation and amortization, as well as other items defined in the reconciliation table included in the press release, was $1.7 million for the quarter ended June 30, 2017 as compared to $2.1 million in the quarter ended March 31, 2017. Management believes this is a primary metric to track company performance as it excludes one time and non-recurring items and reflects the state of the underlying sustaining business.
For the second quarter of 2017, gross profit was $7.6 million, compared to $10.7 million in the second quarter of 2016, most of which was related to increased whey protein costs and discontinued products. Operating expenses were $10.0 million for the second quarter of 2017, compared to $12.2 million for the same period in 2016. Operating expenses were 38.3% of revenue in the second quarter of 2017 compared to 37.0% for the same period in 2016, with significant reductions in advertising and promotion expense and salaries and benefits expense. Excluding the settlement with City Football Group which totaled $3 million and resulted in a charge of $1.5 million in the quarter ended June 30, 2017, operating expenses were 32.7% of revenues for the second quarter of 2017, a decrease of 4.3% compared to the same period in 2016. Advertising and promotion expense decreased 16.6% to $2.2 million for the second quarter of 2017, or 8.6% of revenue, compared to $2.7million, or 8.2% of revenue, for the second quarter of 2016.
The net loss for the 2017 second quarter was ($3.1 million), or a loss of ($0.23) per share, compared to a loss of ($4.2 million), or a loss of ($0.30) per share, for the same period in the prior year.
2017 Second Quarter Conference Call Information
When: Monday, August 14, 2017
Time: 4:30 p.m. Eastern Time
1-877-407-0792 (domestic)
1-201-689-8263 (international)
Participants must request the MusclePharm Second Quarter Results Call.
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 August 24, 2017 by dialing 1- 844-512-2921 from the U.S. or Canada, or 1-412-317-6671 from international locations, Conference ID: 13667203.
About MusclePharm Corporation
MusclePharm® is a scientifically-driven, performance lifestyle company that develops, manufactures, markets and distributes branded nutritional supplements. The Company offers a range of powders, capsules, tablets and gels. Its portfolio of recognized brands includes MusclePharm® Sport Series, Black Label and Core Series, FitMiss™, as well as Natural Series which was launched in 2017. These products are available in more than 120 countries and over 50,000 retail outlets worldwide. The clinically-proven supplements are developed through a six-stage research process utilizing the expertise of leading nutritional scientists, doctors and universities. MusclePharm is the innovator of the sports nutrition industry. For more information, visit http://www.musclepharm.com. To sign up to receive MusclePharm news via email, please visit http://ir.musclepharmcorp.com/email-alerts.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Statements that are not a description of historical facts constitute forward-looking statements and may often, but not always, be identified by the use of such words as "expects", "anticipates", "intends", "estimates", "plans", "potential", "possible", "probable", "believes", "seeks", "may", "will", "should", "could" or the negative of such terms or other similar expressions. Actual results may differ materially from those set forth in this release due to the risks and uncertainties inherent in the Company's business. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, the Company's Quarter Reports on Form 10-Q and other filings submitted by the Company to the Securities and Exchange Commission, copies of which may be obtained from the SEC's website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and the Company undertakes no obligation to revise or update this release to reflect events or circumstances after the date hereof.
Phil Carlson / Elizabeth Barker
IR for MusclePharm
pcarlson@kcsa.com / ebarker@kcsa.com
212.896.1233 / 212.896.1203
## Tables Follow ##
MusclePharm Corporation
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
Three Months Ended
June 30,
Revenue, net
Cost of revenue (1)
Gross profit
Operating expenses:
Advertising and promotion
Salaries and benefits
Selling, general and administrative
Research and development
Professional fees
Restructuring and othe charges
Settlement of obligation
Impairment of assets
Total operating expenses
Loss from operations
Gain on settlement of accounts payable
Loss on sale of subsidiary
Other expense, net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share, basic and diluted
Weighted average shares used to compute net loss per share, basic and diluted
MusclePharm Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30,
December 31,
Current assets:
Accounts receivable, net of allowance of $521 and $462
Prepaid giveaways
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Other assets
Current liabilities:
Accounts payable
Accrued liabilities
Accrued restructuring charges, current
Obligation under secured borrowing arrangement
Convertible note with a related party, net of discount
Total current liabilities
Accrued restructuring charges, long-term
Other long-term liabilities
Total liabilities
Commitments and contingencies
Stockholders' deficit:
Common stock
Additional paid-in capital
Treasury stock, at cost; 875,621 shares
Accumulated other comprehensive loss
Accumulated deficit
Non-GAAP Adjusted EBITDA
In addition to disclosing financial results calculated in accordance with U.S. Generally Accepted Accounting Principles, (“GAAP”), this press release discloses Adjusted EBITDA, which is net loss adjusted for income taxes, depreciation and amortization of property and equipment, amortization of intangible assets, provision for doubtful accounts, amortization of prepaid stock compensation, amortization of prepaid sponsorship fees, stock-based compensation, issuance of common stock warrants, other expense, net, loss on sale of subsidiary, gain on settlements, restructuring, and asset impairment charges. Management believes that this non-GAAP measures provides investors with important additional perspectives into our ongoing business performance.
The GAAP measure most directly comparable to Adjusted EBITDA is net loss. The non–GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to net 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 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):
Three Months Ended
Three Months Ended
Six Months Ended
Jun. 30, 2017
June 30,
Mar. 31
Year Ended
Dec. 31, 2016
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
Net loss
Stock-based compensation
Restructuring and asset impairment charges
Gain on settlement of accounts payable
Loss on sale of subsidiary
Amortization of prepaid sponsorship fees
Other expense, net
Amortization of prepaid stock compensation
Depreciation and amortization of property and equipment
Amortization of intangible assets
(Recovery) provision for doubtful accounts
Issuance of common stock warrants to third parties for services
Provision for income taxes
Adjusted EBITDA
One time events
Executive severance
Discontinued business/product lines
Settlement related, including legal
Unusual credits against revenue
Whey protein costs
Financing costs
Total one-time adjustments
Adjusted EBITDA excluding one time