FitLife Brands - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 delivered double‑digit growth and margin expansion: revenue $15.013M (+13% YoY), gross margin 41.4% (+110 bps YoY), net income $2.1M (+40% YoY), and adjusted EBITDA $3.1M (+31% YoY).
• Against Wall Street consensus, FTLF modestly beat on EPS ($0.21 vs $0.20*) and revenue ($15.013M vs $14.955M*); Q3 had missed both EPS ($0.215 vs $0.25*) and revenue ($15.977M vs $16.947M*).
• Management resolved a December dispute with GNC on Jan 23, restored distribution center POs, and shipped direct to franchisees interim; Q1 Legacy FitLife wholesale likely down YoY but online strong, with consolidated Q1 revenue guided -4% to -6% and adjusted EBITDA ~flat YoY.
• MusclePharm wholesale surged (+37% seq) on promotional investment; gross margin compressed to 26.5% from mid‑30s, with continued intentional promotional spend to drive growth and new Pro Series pilot at Vitamin Shoppe (≈60% store base).
• Near‑term narrative catalysts: tariff cost risk (two 10% tranches on China imports), proactive raw material pre‑buy and alternative sourcing (India) to mitigate; M&A pipeline active with capacity given net debt $8.6M (~0.6x LTM adj. EBITDA).

What Went Well and What Went Wrong

What Went Well

• Consolidated performance: Q4 revenue +13% YoY to $15.013M, gross profit +16% YoY to $6.212M, contribution +18% YoY to $5.233M; gross margin up to 41.4%.
• MRC optimization: gross margin up to 48.7% (+830 bps YoY), contribution up 31% YoY despite slight revenue decline; Dr. Tobias revenue +6% YoY, skin care rationalization improved profitability.
• Management confidence and balance sheet strength: “Our balance sheet is strong… net debt… 0.6x adjusted EBITDA” and proactive tariff mitigation via forward‑buy/alternative sourcing (India).

What Went Wrong

• Legacy FitLife headwinds: Q4 revenue -13% YoY, wholesale -20% YoY, online -1% YoY; GNC dispute temporarily disrupted wholesale flow in December.
• MusclePharm margin compression: gross margin fell to 26.5% on increased promotional allowances and elevated whey costs; contribution margin 22.3%.
• Q1 2025 outlook softer: consolidated revenue guided down 4%–6% YoY, largely due to tough MRC compare and leap‑year day; while EBITDA ~flat, near‑term topline a headwind.

Transcript

Operator (participant)

Good day, everyone, and welcome to the FitLife Brands Fourth Quarter 2024 financial results. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Dayton Judd, Chief Executive Officer of FitLife Brands. Sir, the floor is yours.

Dayton Robert Judd (Chairman and CEO)

Thank you, Matt. I would like to welcome everyone to FitLife Brands' fourth quarter and full year 2024 earnings call. We appreciate you taking the time to join us this afternoon. Joining me on this call is FitLife's CEO Jacob York, CFO Jacob York. To get us started, I'll provide some opening commentary, and then we'll open the call up for Q&A. As a reminder, the company effected a two-for-one forward stock split on February 7, 2025. All per-share amounts in our 10-K press release and discussion today have been retroactively adjusted to account for the forward split. For the company overall, for the full year 2024, total revenue increased 22% year-over-year to $64.5 million. Online sales grew 29% year-over-year and represented 67% of the company's total revenue. Gross profit increased 31%, and gross margin expanded from 40.7%-43.6%.

Contribution, which we define as gross profit less advertising and marketing expense, increased 37% to $23.5 million. Our net income increased 70% to $9 million, with basic EPS increasing 66% to $0.98 a share and fully diluted EPS increasing 69% to $0.91 a share. Adjusted EBITDA for the full year increased 39% to $14.1 million. With regard to the balance sheet, the company ended the year with $13.1 million outstanding on its term loans and no balance on its $3.5 million revolving line of credit. Considering the cash of $4.5 million outstanding at year-end, our net debt was $8.6 million, which is equivalent to 0.6x the company's LTM adjusted EBITDA. Continuing for the company overall, but now just looking at the fourth quarter of 2024 compared to the fourth quarter of 2023, total revenue increased 13% to $15 million.

Online revenue increased 12% to $10.1 million, or 67% of total revenue. Gross profit increased 16% to $6.2 million, and gross margin expanded from 40.3%-41.4%. Contribution increased 18% to $5.2 million. Our net income increased 40% to $2.1 million, with basic earnings per share increasing 44% to $0.23 a share and fully diluted EPS increasing 40% to $0.21 per share. Our adjusted EBITDA for the quarter increased 31% to $3.1 million. With regard to the brand-level performance, I'll provide some high-level financial commentary on the fourth quarter and then provide some additional color on what is going on with each grouping of brands. I'll start with Legacy FitLife. Total Legacy FitLife revenue for the fourth quarter of 2024 was $5.3 million, of which 60% was from wholesale customers and 40% was from online sales.

This represented a 20% year-over-year decline in wholesale revenue and a 1% year-over-year decline in online revenue for a total decline of 13% for total revenue. Our gross margin declined slightly from 40.4% to 39.7%. As we highlighted in the 10-K, as well as in our press release, our biggest challenge for Legacy FitLife during the fourth quarter was a commercial dispute with our largest customer that began in December and continued through the first half of the first quarter of 2025. Without going into too much detail, in essence, they were asking for substantially improved commercial terms that were financially detrimental to us and for which the company would receive no benefit. Rather than acquiesce, once we started receiving POs from them with the altered commercial terms, we began rejecting those POs.

As a result, the company accepted no orders from GNC for the period from December 1, 2024, through January 23, 2025. The impact of this was that the company's products in the GNC distribution centers were largely depleted before the end of December. At the beginning of January, we began selling and shipping our products directly to our GNC franchisee customers. On January 23, GNC and FitLife settled the commercial dispute, and the company again began accepting POs from GNC, with the first shipment of products back into the GNC distribution centers occurring a couple of weeks after that. Clearly, this affected our fourth quarter numbers, and I'm sure you are wondering what the impact will be on the first quarter of 2025.

The short answer is that what our sales and operations teams did to manage through this process and transition to direct fulfillment to the franchisees was nothing short of remarkable. We actually expect the first quarter of 2025 to be quite strong for Legacy FitLife. If I had to guess, wholesale will probably still be down a little bit year over year, but at a significantly lower rate than previous quarters. In addition, with the strong year-over-year performance we are seeing in the online side of the business for Legacy FitLife, I think there is a good chance that Legacy FitLife as a whole will be up for the first quarter of 2025. Moving on now to the brands acquired in the Mimi's Rock transaction, or what we call MRC. Total MRC revenue for the fourth quarter of 2024 was $6.9 million, down slightly 0.4% from the previous year.

MRC's gross margin increased year over year from 40.4%-48.7%, and contribution as a percentage of revenue increased from 28.2%-37.1%. During the fourth quarter of 2024, revenue for the largest MRC brand, Dr. Tobias, increased 6%, while revenue for the skincare brands declined 38%. On previous calls, we've discussed the challenges with the skincare brands when we inherited them as part of the MRC acquisition, but the short story is that the brands had a significant amount of unprofitable revenue, which we rationalized beginning in late 2023 and into 2024. This optimization of the skincare brands, along with beneficial product mix for the Dr. Tobias brand, explains why you see dramatically increased gross profit and contribution for MRC, even while revenue is flat.

In dollar terms, contribution for MRC during the full year 2024 was just over $10 million, which, less than two years after the acquisition, compares very favorably to the $17.1 million purchase price we paid to acquire the company. Regarding MRC's performance during the first quarter of 2025, we indicated in our press release that we expect to see MRC online revenue down between 10% and 13% for the quarter. Let me talk a little bit more about that. In short, the first quarter of 2024 was very strong for Dr. Tobias, at least partially due to new subscription discounting that we implemented during the month of February 2024.

The result was that the period from February 12th through March 24th was the strongest six-week period of the entire year for the Dr. Tobias brand on Amazon in terms of revenue, even higher than the periods that included Amazon's Prime Days or other promotional events. If I drill down even further, January of 2025 was fairly strong and very similar to January of 2024, with a revenue decline of approximately only 1.5%.

The shortfall that we are seeing in the current quarter is really just in the past several weeks when we are lapping the revenue surge that began in February of 2024. That reference period that I mentioned was February 12th through March 24th. We are just now coming out of that period, and it is too early to tell what the second quarter will look like because the second quarter of last year was fairly strong as well, but we are optimistic that the comparisons will be getting a bit easier going forward.

With regard to MusclePharm, the fourth quarter for MusclePharm was the strongest quarter we have had in terms of revenue since we bought the brand. Total revenue increased 14% sequentially from the third quarter of 2024 to the fourth quarter of 2024, driven by a 37% increase in wholesale revenue. Online revenue declined by 8% sequentially, consistent with the typical seasonal pattern for sports nutrition products. The strong growth for MusclePharm on the wholesale side was a function of two things. First, as we disclosed in our previous earnings report, some orders that were received in September of last year did not ship until October. Second, the company invested in increased promotion in an attempt to drive increased sales of the MusclePharm products. This investment in increased promotion primarily consisted of increased marketing allowances to wholesale customers.

Under GAAP, these marketing allowances are accounted for as a price reduction, which lowers reported net revenue and gross profit, and therefore gross margin. The company intends to continue investing in promotional spend for the foreseeable future, although the timing and amounts may vary. Subsequent to the end of the fourth quarter, there have been a number of developments for the MusclePharm brand, particularly on the product side. As previously disclosed just a couple of weeks ago, the company launched its new MusclePharm Pro Series, a collection of nine SKUs of premium sports nutrition products, in a two-month pilot in high-volume Vitamin Shoppe stores, consisting of approximately 60% of Vitamin Shoppe's nationwide store base. If the pilot is successful, the Pro Series line is anticipated to gain permanent shelf space system-wide within the chain and will be exclusive to Vitamin Shoppe for a period of 12 months.

In addition, we recently launched two new flavors of the MusclePharm protein bars, as well as three flavors of a new ready-to-drink protein with 40 grams of protein and no added sugar. Last, we have previously talked about the rebrand of the Legacy MusclePharm products. Products in the new packaging began shipping in late 2024, and the transition from old packaging to new packaging will continue over the next few months as we sell through the remaining inventory in the old packaging. We expect MusclePharm wholesale revenue to be down somewhat in the first quarter, driven primarily by one account that took advantage of our promotional investment during the fourth quarter that did not increase their sell-through of the product, which has affected their reorder volumes.

However, we expect the decline in MusclePharm wholesale revenue for the first quarter of 2025 to be at least partially offset by strong online sales, which have grown at a double-digit rate thus far during the first quarter. Now, I'll provide a few high-level comments on our expectations overall for the first quarter of 2025 and a couple of other topics, and then we can move into Q&A. Our current estimate is that on a consolidated basis, revenue for the first quarter of 2025 will be in the range of 4%-6% lower than the first quarter of 2024.

I talked about the various factors affecting each of the brand groupings, but if I had to sum it all up, I think the decline for the quarter is due primarily to the MRC year-over-year comparison and that the rest of the business combined should be at least flat, if not up, slightly. The first quarter of 2024 also had one more day than the first quarter of 2025 because of leap year, and that explains about 1% of the anticipated 4%-6% decline. With regard to adjusted EBITDA for the first quarter of 2025, we expect that to be roughly flat despite the anticipated revenue decline. On other topics, I addressed the topic of tariffs in our press release.

There's still quite a bit of uncertainty, but if you have questions about tariffs, please feel free to ask during the Q&A session, and I will do my best to answer them. The company's balance sheet is strong and continues to get stronger. Since year-end, we have made one additional scheduled amortization payment, bringing our outstanding indebtedness to $12 million. Even considering the amortization payment, our cash balance has continued to grow, bringing our net debt to adjusted EBITDA ratio even lower than the 0.6 times leverage ratio we had at the end of the fourth quarter. We won't comment on M&A other than to say we are pretty much always actively evaluating one or more targets, and we will continue to be patient and wait for the most compelling opportunities. I will also point out that the stronger our balance sheet, the bigger the acquisition we can handle.

Although we still look at some smaller acquisitions, we will prioritize a larger transaction when possible. In addition, we are hopeful that the recent market and macroeconomic dislocations will bring more M&A candidates to the market and possibly at lower purchase multiples. That concludes my opening commentary. Matt, you can go ahead and poll for questions.

Operator (participant)

Certainly. Everyone at this time will be conducting a question-and-answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing a question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Thank you. Your first question is coming from Ryan Meyers from Lake Street Capital Markets. Your line is live.

Ryan Meyers (Senior Research Analyst)

Hey, guys. Thanks for taking my question. Dayton, just as a follow-up from what you just mentioned a few minutes ago, the potential tariff impact, how many products right now are you guys sourcing from China, and what would be kind of the hurdle that you guys would have to get over to be able to source some of these products here domestically?

Dayton Robert Judd (Chairman and CEO)

Yeah. Good question. We do not actually source anything from China. All of our products come from manufacturers in the U.S., right? To figure out the impact of tariffs on us, you have to drill down further into where our manufacturers are getting their ingredients. China is a big source of ingredients for all nutritional supplement companies. We kind of have to, again, drill down to the formula level and ask our manufacturers, "Okay, is this coming from China, or is it coming from somewhere else? If it is coming from China, can you get it from other places?" These China tariffs have actually been a boon for India. There are a number of ingredient manufacturers in India that are now kind of stepping forward and trying to take the place of some of the ingredients coming from China.

To date, we have actually not had a single product where the cost has increased when we have manufactured it, but we have absolutely kind of received commentary from our manufacturers that it's coming, that they're now, in what they're procuring, beginning to see those tariffs pass through. The reason for the delay is there's just, at any given point in time, a decent amount of material in the supply chain that's already either in the U.S., has already come from China, or is already en route, that was not subject to the tariffs. Those ingredients, that stock is certainly running out. To try and get ahead of it, again, we're asking them to look at the opportunity to source products from other countries. In particular, India is perhaps the most promising location to look at.

Other things that we have been doing, we have been just more aggressively, I mean, we're not going crazy, but we're being a bit more kind of forward-thinking when we procure. We have increased our stock, right? We have tried to buy product from our manufacturers before those tariffs increased the price. In other ingredients, we have actually kind of forward-bought, right? There is some ingredient like glutamine, a lot of glutamine that we use in a lot of our products comes from China.

I mean, we went out a few weeks ago and bought a year's supply of glutamine from somebody who had it already on shore, and we will just kind of warehouse that and use it as we go forward. We are taking steps to try and mitigate the impact of the tariffs. Again, it is very complicated. It is really hard to say what the impact is going to be.

We do know we have done a very high-level analysis with our manufacturers to say, "If we did not source the ingredients from somewhere else, what kind of impact should we expect to see?" As you can imagine, it is a pretty broad range. We have some products where the impact will be negligible. Protein is a great example, right? MusclePharm is primarily a protein company. Whey protein does not come from China. We expect virtually no increase on proteins, but there are other products where the cost increase could be 5%, 7%. I think the highest one we have seen would be 11% if we do not, again, source it from somewhere else.

When you average it across the portfolio, we're not talking about a 10% increase across the portfolio, but it's real enough that it's something we've been working on for quite some time and, again, taking steps to try and mitigate, again, either through forward procurement and stockpiling, if you will, some of these ingredients, as well as looking to India and other sources.

Ryan Meyers (Senior Research Analyst)

Okay. Got it. That's helpful to understand. Just thinking about the tougher year-over-year comparisons that you have in the MRC business, walk me through a little bit more of that dynamic. Is it just a function of you saw so many customers last year at this time purchasing products at the beginning of the year, and you're not maybe seeing as many return customers? Just help me kind of understand the pattern of what you're seeing from a customer dynamic. Is that simply what it is, just less customers buying than it was last year?

Dayton Robert Judd (Chairman and CEO)

I'll do my best. I'll tell you what our hypothesis is, which is kind of what I shared on the call, in my prepared remarks. Let me drill down a bit more. Recently, and by recently, I mean in the last little bit more than a year ago, Amazon unlocked some functionality that allowed deeper discounting to a new customer if they signed up to subscribe. Historically, before they unlocked or made that functionality available, your choices as a seller on Amazon are to offer no discount to somebody who subscribes, offer a 5% discount to someone who subscribes, or a 10% discount to someone who subscribes. Our model, our approach has been, we just always offer a 10%.

Again, going back a little bit more than a year ago, right, Amazon made it possible to essentially offer really anything up to, I think, a 40% discount for that first purchase that a customer makes in order to encourage them to subscribe. We turned that functionality on for the Dr. Tobias brand in, again, I couldn't give you an exact date, but I think it was early February. Again, it was relatively new at that point in time. That, again, this is our working hypothesis based on what we're seeing in the data over the last few weeks, right? That clearly drove significant uptake.

In fact, I don't have the subscriber numbers here in front of me, but if we look at our subscriber base for the Dr. Tobias brand leading up till February when we made that change, it was up and down a little bit here and there. It kind of, I think, varied between about 78,000 and 80,000 people on subscription. Within two months of turning that on, right, we had gained several thousand new customers on subscription. I know that that's at least a part of this.

Whether there's some other just general softness in the consumer, it's hard to tell, right? I mentioned it's interesting in our other selling accounts, our MusclePharm and FitLife Brands selling account, or what we call Legacy FitLife, we're seeing strong double-digit growth, right? Seeing strong double-digit growth in some accounts makes me think that I can't really blame the consumer, but I do know one thing that was different was turning on those deepened discounts for the subscriptions in February of last year.

I mentioned that sometimes we look at things on a one-week rolling basis, four-week rolling basis, six-week rolling basis. That is why I gave you the six-week period from February 12th to March 24th. That was literally the highest revenue for the Dr. Tobias brand over the course of the full year. In some regards, we know it is a difficult compare. Could there be something beyond that? Yes, absolutely. Based on what we know right now, that to me is the biggest thing. Again, it did not stop after March 24th. You can look at our Q2 numbers for Dr. Tobias, and they were strong as well. I do think the year-over-year comparisons obviously get easier after March 24th. Does that answer your question?

Ryan Meyers (Senior Research Analyst)

Yes, it does. Got it. I think that makes total sense. There was such a huge discount last year that drove a ton of subscribers and more than what you traditionally would see. I definitely understand that dynamic. Awesome. Thanks for taking my questions.

Dayton Robert Judd (Chairman and CEO)

Yep. Thanks, Ryan.

Thank you. Your next question is coming from Samir Patel from Askeladden Capital. Your line is live.

Samir Patel (Founder and Portfolio Manager)

Hey, Dayton. Good to be speaking with you. Can you maybe provide some more color around kind of your expectations for the MusclePharm ramp throughout the year as you potentially get that space in Vitamin Shoppe and then some of the other accounts that you've been targeting?

Dayton Robert Judd (Chairman and CEO)

Yeah. I mean, I'm happy to talk generally. I can't frame it with numbers for you. I mean, if I had numbers I was confident in, I guess I would consider sharing them. Look, it's just been a bit of a slog, right? We've had a lot to do with rebranding and trying to get the products back on store shelves. I feel like we're pulling all the right levers. I talked about the new products. We think that the ready-to-drink protein, again, I have no idea what the uptake is going to be. I know that all of the major distributors kind of in the sports nutrition space have all kind of placed POs, have all brought that in effectively in the last week or two. It's relatively new. What the uptake is going to be, we're not sure, right?

We have sent samples to Vitamin Shoppe and other customers, and maybe some of them will bring it in. It is a little bit like, I do not know, today is opening day for baseball. It is a little bit like we have a lot of at-bats. There are a lot of pitches we are looking at, and we are swinging on a lot of stuff. I could not tell you for sure when we are going to get a hit and when we are going to strike out. We certainly feel like we are doing the right things.

The rebranding, if you have not seen that, I would encourage you to go look at that. You can see that on our website. If you go look at some of the listings on Amazon for the products that have already transitioned, you can see it in the Amazon images as well.

The packaging, the branding had not been updated for probably 10-plus years for MusclePharm, and it was kind of stale. We had received feedback on that from potential customers. Again, I wish I could frame it with some numbers for you, but I think all I can say is we feel like we are doing the right things, and we are taking a lot of swings here, and hopefully we connect on some of them. Vitamin Shoppe, I think it is too early to tell. We have got about two weeks of data, and we have been in a number of stores, and we have our salespeople calling on a number of stores. I think it was just in the last, like earlier this week was the first time I went in a store, and they actually had all nine SKUs, right?

They're just now getting all of the products to the store shelves. We'll obviously be watching that closely over the next two months, but at this point, I don't even have a data point I could reference to say it's a success or it's not. I don't know if that answers your question. Sorry, I can't be more specific, but our goal is up. We hope to have revenue and even higher each year as we continue to work on MusclePharm.

Samir Patel (Founder and Portfolio Manager)

That makes sense. Maybe you can dive into a little bit of those promotional expenses that are running through gross profit and maybe just for the benefit of those of us who are less familiar with the industry, just explain. Is that kind of like a one-time thing when you're kind of going into these new accounts? I know that you're, I mean, obviously, your focus across the business is kind of on that contribution dollars. Maybe explain kind of what you're doing there, kind of the timeline on that, and kind of how you see the ROI on that, obviously leading to higher contribution dollars down the line.

Dayton Robert Judd (Chairman and CEO)

Yeah. Okay. The way it works, and this is very, very typical in the industry, is that a brand can offer promotional dollars to the customers. The way that that works, it's essentially a discount off of the invoice. If I sold somebody some product for $100, but I want to say, "Hey, I'll give you $10 of that," right? You only have to pay me $90, but you've got to use that $10 to promote the product, right? The goal being that movement increases, right? We're not in the business, or we're not really interested in giving someone a $10 discount if they're just going to pocket it. To a certain extent, I mentioned kind of one customer that either pocketed the money or was not effective in how they spent it, right?

If you're talking about getting into a new account, you can do something like this. I'm talking about discounts to existing customers, right? We know what their movement is. We know how much they're selling. The idea is you get some product into their hands for cheaper, essentially, or put some money into their pocket that they are required to use to market the product. The expectation is that they grow, right? If you give someone that marketing support and the product doesn't grow, then you have a very interesting conversation the next time you talk to that customer, which we're dealing with right now, at least with one customer. We haven't had those issues with other customers. We're seeing increased kind of retail sell-through movement when we provided additional marketing support.

In terms of GAAP, the way the accounting works is unless we as a company have the right to dictate exactly how they spend that $10, and we're literally approving every program and, in fact, directing them how to spend it, then the way you have to account for it is a reduction from gross revenue, right? What we report is net revenue. What you see is net revenue. For the quarter, I don't know if I have the numbers right here in front of me, but for the quarter we had for MusclePharm, let's see, we had wholesale revenue of $1.689 million, right? Our gross revenue, the amount of product we sold, was even higher than that, right? We're deducting that promotional amount to get to the $1.7 million, essentially.

Because the net revenue number is lower and our cost of goods has not changed, right, that is what drives the lower gross margin. It just kind of filters through. In terms of what are we looking for, right? In an ideal world, you would want to allow increased promotional spend and might accept lower gross margins if your total contribution and your total gross profit did not change. What we saw in the fourth quarter is certainly very nice uptake in revenue. Margins were lower. Our gross profit was down, and our contribution was down, right? It did not work out as perfectly as we would like, but I mentioned there is one account in particular, an international account, where we did not see the sell-through, and therefore we have not seen the reorders that we would like.

I don't know if that answers your question, Samir, but that's kind of how the industry works as well as how the accounting works on promotional spend.

Samir Patel (Founder and Portfolio Manager)

Yeah. I guess given the, I guess what I'm trying to get at is given the recurring nature of consumer use of these items, I mean, it sounds like you're trying to increase sell-through, right? But then once you kind of have consumers habituated to using that product, you don't necessarily have to support it with that level of marketing spend all the time, right? I mean, you may have to go back a year or two years or three years to boost it a little bit more, but you're basically trying to get more product in the hands of consumers, and then they continue to buy it, and you don't necessarily need to continue. That's what I'm trying to get at, right? It's not a permanent thing that you're doing per account. Is that a reasonable way of looking at it?

Dayton Robert Judd (Chairman and CEO)

Yeah. That's a very accurate statement, right? That one account that we gave discounts to, they know that it's not happening again, right? We gave it to you, and you didn't. It wasn't effective. Sorry. This is not, once you turn it on, you have to leave it on. Some customers do have a fixed small amount. Every product they buy from every customer, they take a 3% deduction for marketing. I'm not talking about that. I'm talking about a conscious decision, something that's completely within our power to work with them. A very specific example is you'll see products on sale at Walmart or any store you go to where you might see a product or a brand that's 20% off, right? Almost always, that is funded by the brand, right? We are funding promotions, and they can do it through price.

They can do it through buy one, get one 50% off. They can get it through, they can spend the money for direct marketing, right, to blasting out emails to their consumers. There are a lot of ways that the retailers can spend the money, and we do not limit them. None of them like to be told how to spend it, right? Our only direction is, "Hey, if we are giving you this discount, we expect to see increased movement. If we do not see that, then we will have to talk again about whether we can support promotions within your store." Hopefully that explains how it works. No, it is not like crack cocaine that they are getting hooked to it, and we are committed somehow to continue to give it to them. We can turn it on and turn it off anytime we want.

Samir Patel (Founder and Portfolio Manager)

Sure. Okay. That makes sense. Sorry if I missed this, but I did not see it in the Roth presentation with regards to you mentioned briefly that you are kind of looking at larger M&A targets. Just remind me kind of the typical size in terms of revenue that you are looking for right now.

Dayton Robert Judd (Chairman and CEO)

Yeah. I don't know if I'd characterize it by revenue because it could be a smaller company that is just ridiculously profitable, right? I'd maybe think about it in terms of what we're able to pay. Our current bank will kind of loan us 2x performing EBITDA, almost no questions asked, with the ability to flex up from there, right, if there are clear opportunities for us with the brand, right? Just to, again, frame this using an example, if I've got $14 million of EBITDA and I was looking at a company that had $8 million of EBITDA, again, let me use $6 million just to make the math easy. A company with $6 million of EBITDA on a pro forma basis, right, our companies have $20 million. They have no qualms whatsoever about loaning us $40 million.

If I can show them, "Hey, on that $6 million on the target with $6 million of EBITDA, I can save $2 million out of the gate because of X, Y, and Z," right? They'll even underwrite that and say, "Okay, really, you got $22 million of EBITDA. So we'll loan you $44 million." You take the $44 million in that example, and you'd subtract the amount that we currently owe them, which is about $12 million. We could borrow an incremental $32 million, again, using this hypothetical scenario that I'm giving you without really any difficulty from the bank. On top of that, the reason that we keep a fair amount of cash on our balance sheet as opposed to paying down our debt is they don't want to ever fully fund an acquisition with debt. It's kind of like buying a house, right?

They want us to put a down payment on our purchase. That rate can vary from 20% down to 33% down, right? If I'm buying a business for $40 million, I'd put in $6 million or $8 million or $10 million or something like that, and then they would fund the rest, right? The question is, how much revenue can you get for $40 million? It depends. You could get a business with $60 million-$80 million of revenue if there's a lot of opportunity and maybe it's not doing as well as it could, or you could buy a business with $20 million of revenue that pukes cash, right? It's really hard to say on revenue, and it's easier to frame it in terms of debt capacity, if that makes sense.

Samir Patel (Founder and Portfolio Manager)

Yeah. No, that's super helpful. In terms of your comment around distress, I mean, is that something you're actually seeing in the market, or is that just a trend that you're saying could happen if there's companies that are kind of overexposed from a supply chain standpoint to one geography or things like that?

Dayton Robert Judd (Chairman and CEO)

Yeah. I think we're beginning to see it. It's really hard to tell, right? The deal flow kind of ebbs and flows just in the normal course of business, having been in the deal flow now for several years. Are we seeing an uptick in deals to look at? Yes, right? Can I guarantee or can I tell you definitively that it's because of the current macroeconomic environment? No. I will say, though, to the extent we are seeing more, it's not because of supply chain. It's because of debt. There are a number of companies out there that are over-levered, and they may have been expecting to be able to refinance their debt.

If you follow kind of the debt capital markets, there's not a lot of lenders out there that are maybe that excited about lending money now as opposed to two months ago, at least to an industry where, again, Trump has instituted tariffs and whatnot. There is just a lot of uncertainty, and I don't think we're seeing a lot of businesses that are doing well and are not distressed, obviously, into the sale process, but there are businesses that are levered and have some debt and maybe aren't doing as well as they would like that are testing the market.

Samir Patel (Founder and Portfolio Manager)

Understood. Thanks for all the color. I'll turn it back over.

Dayton Robert Judd (Chairman and CEO)

All right. Thanks, Samir.

Operator (participant)

Thank you. Your next question is coming from James Bogin from Legend Capital. Your line is live.

James Bogin (Retired Professional Investor)

Hi. And good afternoon. I'm a retired professional investor. I own about 32,000 shares. I was wondering if it would be helpful to understand what MusclePharm's sales were at their peak before they went busto, and if you think you can attain that level and surpass in the future. I am not a big daily stock price guy, but I thought your numbers looked pretty good, and your stock price plunged today, 7% or 8%. I'm just wondering why the market didn't like it as much as I did.

Dayton Robert Judd (Chairman and CEO)

I was going to ask you guys that last question. On the, okay, on MusclePharm, yeah, I have their historical numbers. They used to be publicly traded before they kind of fell into default and then ultimately into bankruptcy. If you go back and look at their historical financials, their peak trailing 12-month revenue, I believe, was in excess of $175 million. This was probably 12, 15 years ago. From there, it declined consistently until they filed bankruptcy. At the time they filed bankruptcy, it was more like $40 million-$45 million, if I'm not mistaken. I should also add that the company or the CFO and other executives of the company admitted to falsifying records. The reality is I don't know if anybody knows. Look, when we took it over, it was sub $10 million run rate of revenue.

The brand was clearly impaired. I do not think anyone would argue that it was not impaired. That said, there is still a lot of people that know about it, a lot of brand equity over the years from people like Arnold Schwarzenegger and Tiger Woods and a lot of UFC fighters that were kind of spokespeople for the brand. We were finally able to get back into our Instagram account after we got locked out for some reason, but you can go and look at that account and see that there is still something like 530,000, 540,000 people that still kind of follow the brand and engage with the brand to a certain extent. There is brand equity there, and we have taken it upon ourselves to try and unlock that.

I think I've said on previous calls, if we get back to half of what they had before they filed bankruptcy, I mean, it's an absolute home run for us. I'm not going to sit here and tell you we're going to get it back to $175 million, but that is kind of the history, and it's just unfortunate what can happen to a brand when it's not maybe managed as well as it could be and should be and is in decline for quite some time. On your question about the market, look, I obviously can't speak for the market. I don't know if there's one person that's unhappy. I do know we were up quite a bit the day before. We're down a lot over the last, look at early March. I think we were pretty consistently around $15 a share.

Obviously, the market overall has sold off. We were at one point consistently around $150 million market cap and then kind of down to about $125 million. Even before we put out our numbers and all of that, we were down roughly 15% in conjunction with the overall market. I cannot comment on daily stock swings and what is going on, but my hope—look, I am obviously a long-term investor here. I own more of the company than anybody. I am not worried, right, about the stock price. In fact, I am looking hopefully for the silver lining, which is that this dislocation can maybe turf up some M&A opportunities for us. If my valuation is coming down, so is the valuation of companies that are struggling more than we are. I will just leave it at that.

James Bogin (Retired Professional Investor)

Your gross margins, I think, were 40%, but you're eating the marketing, so it's 25%. Is there any prospect of increasing gross margins, or are they about where they should be, do you think, overall?

Dayton Robert Judd (Chairman and CEO)

I missed the first part.

James Bogin (Retired Professional Investor)

I think you're eating that MusclePharm margins.

Dayton Robert Judd (Chairman and CEO)

Oh, MusclePharm margins.

James Bogin (Retired Professional Investor)

Gross margins, yes, you're eating the marketing. I understand that. Is there potential to increase the gross margins, or are they where they should be?

Dayton Robert Judd (Chairman and CEO)

Oh, I could increase them next month if we wanted to. Again, we would just stop the promotions that we're doing. We're just.

James Bogin (Retired Professional Investor)

No, I mean, outside, forgetting the promotions. Forgetting the promotions, of course, you have to do that.

Dayton Robert Judd (Chairman and CEO)

No, look, the only way to do it is to lower cost or increase price. I do not think we are trying to grow the brand, so we do not want to increase the price. In fact, if anything, I did not call this out specifically, but another contributor to those margins in Q4, I mentioned that MusclePharm is, again, I could not tell you the number, but call it 70-80% of the brand's revenue is protein. Whey protein has gone up significantly in the second half of 2024. We could have attempted to pass those cost increases along to consumers, right? We did not, partially because some other people, right? Other people were not passing them along, at least not yet. Again, we are in the business right now of trying to increase our sales, not challenge them. We did not pass along the protein increases.

By the way, we're starting to see protein kind of come down a bit, right, in the last week or two. Hopefully, we'll be the beneficiary of that. We got some cost going up, and then we've got the intentional promotional spend. We're trying to grow the brand, right? We feel like we've fixed it from a number of dimensions, again, whether it's the branding, adding some new products, and now we're trying to grow it. Hence the investment in marketing and the investment in growth.

James Bogin (Retired Professional Investor)

Thank you.

Dayton Robert Judd (Chairman and CEO)

You're welcome. Thanks, James.

Operator (participant)

Thank you. Your next question is coming from Igor Novgorodtsev from Lares Capital. Your line is live.

Igor Novgorodtsev (Managing Director)

Hello, Dayton.

Dayton Robert Judd (Chairman and CEO)

Hey, how are you?

Igor Novgorodtsev (Managing Director)

Yeah, good to talk to you again. I have a few more, again, perhaps detailed questions. Maybe you can talk a little bit about online advertisement, probably specifically on Amazon and Subscribe & Save. In other words, how much of your advertising is still continuing from quarter to quarter? Because I remember you substantially cut it from Mimi's Rock when you acquired the company. Also, how your Subscribe & Save is doing for each brand.

Dayton Robert Judd (Chairman and CEO)

Yeah. Good question. On advertising, we still tinker with things. You certainly saw very significant decreases over the first, call it 12, maybe 18 months that we bought the brand. You see it a lot lower now for Mimi's Rock. I would just say there are no dramatic cuts and no dramatic increases. We do not manage to a particular percent of revenue. The decisions that we make are on a campaign-by-campaign basis. Even within campaigns, there are literally tens of thousands of campaigns, if you want to define it that way. I mean, we are looking at, for we have more than 250 products we are selling on Amazon across all of our brands. For any given product, we might be advertising on 50 or 100 keywords.

For every product, every keyword, you can look and see how it's performing, and you can increase your spend, you can decrease your spend, you can eliminate your spend, you can add new keywords. I think we're at a roughly good level. We're not looking to increase it more, and we're not looking to cut it more. Any movement that you see is just continued tinkering or experimentation. We'll turn some stuff off, certain ad types off, and see what the impact is, and then turn them back on, for example. I don't know if that answers your question, but if what you're getting at is should we expect to see significant growth in ad expense or further cuts in advertising expense, I would say no.

Any fluctuation you see is just us continuing to tinker or try and maximize the efficiency of the spend that we are having. In terms of subscribers, that's a number we used to provide, and maybe I'll start providing that again. Again, I just don't have the numbers in front of me, but we see it's a very rare week when we do not see growth sequentially from week to week in subscribers, really for all of our brands. The only exception I would make, and again, I don't want to talk into too much detail about how we run our business and some of the experimentation that we do, but I mentioned the deeper discounting that we turned on for Mimi's Rock last year. We eliminated a lot of those discounts kind of later in the year.

When we started to see some of the weakness this year in Q1, we went back and turned them back on. We probably had some declines in subscribers on the Mimi's Rock side early this year when we were not offering the discounts, and then we turned them back on and see a different impact. If you sum up across all of our selling accounts, all of our brands, again, I do not have the numbers in front of me, but it is a very rare week that we do not grow subscribers. I can tell you definitively, every single week on MusclePharm, they are higher. Every single week on Legacy FitLife, they are higher. Mimi's Rock, I think, is more a function of how big of a discount are we offering, and did we turn them on or turn them off, if that makes sense.

Igor Novgorodtsev (Managing Director)

Okay. I think that answers my question, at least qualitatively. My next question is, do you have appreciable international sales now after all your acquisitions, or is it still relatively small?

Dayton Robert Judd (Chairman and CEO)

International, it depends on how you define international. We do break it out in our 10-K, and again, I do not have the number in front of me, but I think like 97% or 95% of our revenue is domestic. There is very—and most of what is not in the U.S. is up in Canada, right? Our skincare brands are predominantly Canadian, sold on Amazon in Canada. They have some products sold on Amazon in the U.S. We do sell some products from some brands to international partners where the international partner, where essentially the ship-to address is outside the U.S. That would be lumped into our international sales as well. What I do not have for you and what we do not break out and probably will not ever break out is there are international companies that sell internationally, but we ship to them in the U.S.

They tend to be online retailers. I think they do not like us saying their names, but there is one company that is essentially the Amazon of South Korea. We ship to them. They pay us in dollars. We ship to an address in the United States. How they fulfill it to their customers outside the country beyond that is not really up to us. We do not consider that international, and we certainly do not bear any currency risk. There is another third party that we are not allowed to mention by name, but they sell thousands and thousands of predominantly U.S. brands to global supplement consumers around the world. They get more than 90% of their revenue outside the U.S. Same thing. We sell to them. It is an increasing amount every month, and we ship it to a U.S. address, and they pay us in U.S. dollars.

Beyond that, all we know is that most of it is ending up in the hands of an overseas consumer, but I couldn't tell you exactly how much, and we don't account for it as an international sale. Does that answer your question?

Igor Novgorodtsev (Managing Director)

To answer my question, if I may, just—sorry. I just kind of wanted to clarify my question. If there is a retaliatory tariff on the U.S., it does not sound like it would be a significant tax on you, right?

Dayton Robert Judd (Chairman and CEO)

No, I don't think we would ever try—yeah, I don't think we would ever try and avoid the tariff issue by manufacturing outside the U.S. Look, occasionally we look at some—like I think we've publicly disclosed previously, right? We have a partner in Israel that licenses the MusclePharm brand and produces products under our brand over there. We are looking at doing something similar with certain countries in Asia. Yeah, I don't think I'd upend our business entirely as a potential reaction to the tariff issue. I'm hopeful that calm heads will prevail eventually and that the world can get back to normal.

Igor Novgorodtsev (Managing Director)

My last question is an interesting one. I was very surprised to see that when you had a dispute with GNC, you started to directly ship to your franchise stores. What's the reason you cannot directly ship, and what's the nature of this relationship to the best that you can disclose? Because if I remember correctly, GNC has been leaning on you for quite some time trying to get better and better terms, and it hasn't been an isolated incident. Is there any chance that your relationship with GNC can radically change?

Dayton Robert Judd (Chairman and CEO)

Good question, and I'll tread very carefully in how I answer it. Look, they're our biggest customer. They're a very important and very valuable partner to us. That said, right, we're not willing to be bulldozed and bullied. Our customer is ultimately the GNC franchisees. We have only one product, right, out of our 250-plus products that is sold in a corporate GNC store. And if you go back more than 10 years ago, right, as a company, we'd never sold directly to GNC, right? Our distribution was directly to the GNC franchisees. We know them. We know them incredibly well. They love us. We love them. That kind of fulfillment relationship changed about 10 years ago when we got so big, right, that GNC basically said, "You need to go through GNC distribution." We get it, right? That's what other big brands, Optimum and whatnot, right?

They go through the GNC distribution system as well. Again, we have those relationships. If we have to, we can, and we've demonstrated that we will sell direct. What's going to happen going forward? I don't know. I think it is customer. You said they've leaned on us for years. I don't think that's unusual. I think a lot of retailers look to the brands that they work with to become more efficient on a regular basis each year. I don't think that's that unusual. Certainly, the magnitude of what they were asking for this time was completely, in our view, unjustified, and hence the reaction that we had. That's probably all I should say, but maybe the last thing I should say is, look, again, we like them. We love them. They love us.

We value our relationship with GNC, and we probably prefer to be going through GNC distribution. It's way easier for our team, right? Because we fill a truck with product and send it to a distribution center. When we ship directly to franchisees, they're ordering one of this and two of that and four of these. And so you've got pick, pack, ship, 3PL logistics that is just a lot more challenging. We prefer and are happy to be back in distribution with GNC Corporate and are hopeful and optimistic that that relationship continues and continues to improve.

Igor Novgorodtsev (Managing Director)

The agreement you came in, it's not a ceasefire. It's at least somewhat of a lasting peace, would I be fair to say?

Dayton Robert Judd (Chairman and CEO)

Yeah. Good question. Look, yeah, I think both sides are very happy with where we ended up, but I couldn't tell you what's going to happen a month from now or two years from now.

Igor Novgorodtsev (Managing Director)

Okay. All right. Thank you, Dayton. I don't have any more questions.

Dayton Robert Judd (Chairman and CEO)

All right. Thanks, Igor.

Operator (participant)

Thank you. Your next question is coming from Sean McGowan from Roth Capital Partners. Your line is live.

Sean McGowan (Managing Director and Senior Research Analyst)

Hi, yes, Sean. Thanks for taking the questions. Circling back on that GNC issue, did that affect both revenue and gross margin in that segment and Legacy in the fourth quarter?

Dayton Robert Judd (Chairman and CEO)

It would certainly affect revenue, and I don't know if it would affect gross margin any differentially than earlier in the quarter. We didn't do anything differently in December other than not ship or not take orders. Again, we continued to ship. Anything they had ordered prior to December 1 under the old commercial terms, we continued to ship. The shipments tend to be two weeks, sometimes three weeks after the PO. Basically, by, call it the third week of December, we had shipped, and they had received everything. I don't think that there would be a dramatic difference in gross margins in Q4. They were down a bit. If anything, I would cite the—I mean, it was one of the worst quarters I think we've had for Legacy FitLife online revenue.

I think it may be the first time we've had actually a negative comp. It was very slightly negative, I think, down 1%. That is, as you know, the higher margin business. I think, if anything, the decline in gross margin for the fourth quarter was probably due to that. Fortunately, like I mentioned in my remarks, we're seeing very, very strong and different results for Q1. In Q1, I'm not going to be able to give you a number, but yes, the margin profile is probably going to be different in Q1, right? Because when we're selling directly to the franchisees, we're actually selling to them at a higher price than we were selling to GNC for, right? We also have to handle the fulfillment. Where it all comes out in the wash, I would be guessing if I gave you a number.

Sean McGowan (Managing Director and Senior Research Analyst)

Okay. Thanks. Just one more question on GNC then. You were kind of out of business with them for a while. You're back in business with them. Is there any degree of catch-up, or is it a lost sale or lost sale? I mean, do you wind up seeing, once you're back shipping to them, sort of a catch-up on lost shipments before that?

Dayton Robert Judd (Chairman and CEO)

Yeah. I think there is definitely an element of catch-up as it relates to their destocking and then restocking of their distribution center. Clearly, right, Q4 was impacted by not shipping to them as much as we otherwise would have, especially leading into January in Q1, which is the prime selling season for supplements. In terms, though, of lost sale to the end consumer, we are cautiously optimistic that that did not happen. Again, we kept product—product kept arriving at their DCs until, call it the third or fourth week of December. We flipped the switch, and we are shipping directly to franchisees January 2nd. Theoretically, right, our hope is that at no point in time were our products not on the store shelves. The question is, where did they get it? For all of December, they got it by destocking the GNC distribution centers.

For January, all of January, they got it from us. For half of February, they got it from us. As the products got back into stock, it is much more of they're getting it from the GNC distribution centers. I will say, and GNC knows this and acknowledges this, if they cannot keep our products in stock in the DC, they understand that we will not let our products be out of stock with the franchisees. We are there as a backstop to continue to do direct shipments. Again, our preference, and I think their preference, is to just do it through the distribution centers.

Sean McGowan (Managing Director and Senior Research Analyst)

Okay. Remind us, is there a difference in your kind of overall profitability of sales to the franchisees versus the corporation?

Dayton Robert Judd (Chairman and CEO)

Yeah. That's the part where I couldn't give you a definitive answer. I said it's all going to come out in the wash. Again, we charge a higher revenue number, but when we ship to GNC, again, some of it's less than truckload. A lot of it's full truckload, right? So we pay a relatively small amount per unit to get it to their distribution centers, and then they incur the cost of getting it to the franchisees. When we have to pay for pick, pack, and ship and a 3PL to do that and the shipping cost, again, this was brand new to us in January, and we're still kind of counting the pennies to see whether we come out ahead. Again, we sell for more, but do we make more money selling? I don't think we make less. Let's put it that way.

I can't tell you that we make more by selling to the franchisees.

Sean McGowan (Managing Director and Senior Research Analyst)

Just to be clear, circling to MusclePharm for a minute, to someone understand you, when you say you want to continue to invest, should we expect the gross margins in that segment to kind of stay at this mid-20s, mid-to-upper 20s level, or is it the plan over time to get that back up?

Dayton Robert Judd (Chairman and CEO)

I think for right now, again, we've made the decision to invest in growth. Again, I don't even know. I couldn't tell you, even if I knew, right? I don't know what our margins are going to be for Q1, but I would be surprised if it's not less than it's—I think it's probably less than 30. I think you'll continue to see margins at this level. Certainly, the increased online sales will help offset some of that. Right now, again, we're investing for growth. Whether and when and how we dial that back, I couldn't tell you, but we haven't made any changes in the first quarter.

Sean McGowan (Managing Director and Senior Research Analyst)

Great. That's helpful. Shifting for a second to expenses. Operating expenses overall were lower than I thought they would be, and G&A in particular. Are there any unusual items in those numbers that would be offsetting expenses, or are these kind of levels that we should expect to see going forward?

Dayton Robert Judd (Chairman and CEO)

Yeah. Nothing comes to mind. I think, yeah, I could not call out anything specific that would cause them to be different. I will drill into that, and if there is something, we will kind of let folks know. I cannot think of anything unusual at this point.

Sean McGowan (Managing Director and Senior Research Analyst)

Okay. Two more quick things then. One quick thing. Could you remind us of the dates of that Amazon discount for subscriptions?

Dayton Robert Judd (Chairman and CEO)

Yeah. Again, I couldn't tell. The dates that I gave in my prepared remarks, and these are not the dates that we were running a promotion, right? We've got daily sales on Amazon going back years. We just kind of look at—we look at the historical data, obviously, on a daily basis, but also on a rolling one-week, four-week, six-week basis. I just picked a six-week period of time, looked back at all of our historical data, and said, "Hey, what six-week period of time in 2024 was the highest revenue for the brand?" It was February 12 through March 24, which is roughly, again, right after we turned on those incremental discounts for Subscribe and Save. That is what's leading to our hypothesis that that's part of the comparison. There certainly could be other factors going on.

To be clear, we didn't turn them on on the 12th and turn them off on the 24th. That's just the reference period that was the highest for us in the last, in all of 2024. I use that as an example.

Sean McGowan (Managing Director and Senior Research Analyst)

Okay. That's helpful. The last thing, any comment on your expectations of kind of the current administration's impact on supplements and wellness products in general? What is it you think might change?

Dayton Robert Judd (Chairman and CEO)

Yeah. Other than the tariffs, which I think are unfortunate and short-sighted in many regards, look, I think you've got a guy now in Health and Human Services, Secretary Robert F. Kennedy Jr., that is probably more pro-supplement than anyone that's ever sat in that chair. I also think he will shake things up in terms of perhaps some ingredients. In particular, he's already commented publicly and had private discussions with the large global food companies about stuff like artificial colors. We have never been—we use artificial colors, but we have never been the ones to be too aggressive with ingredients. I'll give you an example. The FDA banned a food colorant called Red No. 3, actually, under the previous administration. We had already moved away from Red No. 3 in just about all of our products.

I think we had two or three capsule manufacturers that were still using it. Again, this is even before RFK. We have generally moved away from that stuff earlier than others. Even before this current administration took office and before RFK Jr. was confirmed, we have been migrating away from artificial colors to the extent we can. Most of our popular powdered products, pre-workouts and whatnot, have used artificial colors. Rolling out right now in GNC and everywhere that we sell these products are the exact same products, but without artificial colors. That process will take a few months, but it is underway, and we have some products already out there that have made that transition. Interestingly, MusclePharm, all along, even until the time when we bought it, was one of those kind of don't use artificial colors type of company.

We're already good in that front with regard to those products. I think those are the risks. I will say that I think we're probably not—I don't want to mislead people and say that we're at the forefront, right? We've been pretty early to adjust and to adapt against some of these trends like artificial colors.

Sean McGowan (Managing Director and Senior Research Analyst)

Okay. Thank you very much.

Dayton Robert Judd (Chairman and CEO)

Thank you, Sean.

Operator (participant)

Thank you. There are no further questions in the queue.

Dayton Robert Judd (Chairman and CEO)

All right. Thank you all for taking the time to join our call. We appreciate your interest in the company and look forward to speaking with you again in about six weeks. Thanks.

Operator (participant)

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.