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MC

MusclePharm Corp (MSLPQ)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 net revenue rose 31% sequentially to $13.10M, with gross margin improving to 11.5% from (5.2%) in Q4 2021; Adjusted EBITDA loss narrowed to $(2.01)M from $(3.98)M in Q4 .
  • MP Performance Energy delivered record quarterly net sales of ~$1.10M with 34.8% gross margin; management reaffirmed the path to $30M annual sales by 2023 and highlighted upcoming FitMiss Energy (Q2 2022) and RTD whey protein (H2 2022) launches .
  • Year-over-year, revenue was effectively flat (Q1 2022: $13.10M vs Q1 2021: $13.12M) with a swing to net loss $(6.30)M from net income $0.09M due to higher cost of revenue and interest expense .
  • Wall Street consensus (S&P Global) for Q1 2022 EPS and revenue was unavailable for MSLPQ; comparisons to estimates cannot be made. S&P Global estimates unavailable for MSLPQ (missing CIQ mapping).

What Went Well and What Went Wrong

What Went Well

  • Energy beverage momentum: “Company triples MP Performance Energy Sales in First Quarter of 2022 from Fourth Quarter of 2021 to Over $1.1 Million; Delivers Energy Margins of 35%” .
  • Sequential margin recovery: “second consecutive quarter of margin improvement… despite elevated protein and freight costs,” with gross margin at 11.5% vs (5.2%) in Q4 2021 .
  • Distribution and pipeline expansion: Partnerships with Costco (SoCal/Hawaii), Amazon, and Alliance Sales & Marketing, plus planned FitMiss Energy in Q2 and RTD whey protein in H2 2022 .

What Went Wrong

  • Y/Y profitability deterioration: gross profit fell to $1.51M from $3.69M; net loss $(6.30)M vs $0.09M prior year on higher cost of revenue and interest expense .
  • Interest burden: cash paid for interest of $3.47M in Q1, with senior notes payable rising to $7.74M (from $5.04M at year-end) and total current liabilities increasing to $48.17M .
  • Core margins remain thin: company gross margin 11.5% despite energy margins ~35%, underscoring cost inflation in protein/freight and the need for sustained mix/price improvement .

Financial Results

MetricQ1 2021Q3 2021Q4 2021Q1 2022
Revenue ($USD Millions)$13.12 $11.97 $10.04 $13.10
Gross Margin %n/a0.2% (5.2%) 11.5%
Operating Expenses ($USD Millions)$3.42 $3.47 $3.48 $3.99
Net Income (Loss) ($USD Millions)$0.09 $(3.93) $(6.78) $(6.30)
Diluted EPS ($USD)$0.00 $(0.12) $(0.20) $(0.19)
Adjusted EBITDA ($USD Millions)$0.48 $(2.84) $(3.98) $(2.01)

Segment and product metrics:

MetricQ4 2021Q1 2022
MP Performance Energy Net Sales ($USD Millions)n/a~$1.10
MP Performance Energy Gross Margin %35.0% 34.8%
Cumulative Energy Sales Since Launch ($USD Millions)n/a>$1.60

KPIs and balance sheet/cash flow:

KPIQ4 2021Q1 2022
Cash and Equivalents ($USD Millions)$1.22 $0.53
Accounts Receivable, net ($USD Millions)$6.39 $9.28
Inventory ($USD Millions)$1.83 $0.98
Total Current Liabilities ($USD Millions)$41.08 $48.17
Senior Notes Payable ($USD Millions)$5.04 $7.74
Cash Paid for Interest ($USD Millions, quarter)n/a$3.47
Weighted Avg Diluted Shares (Millions)33.39 33.39

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Annual Sales TargetFY 2023~$30M expected (Q3’21) ~$30M “on track” Maintained
FitMiss Energy LaunchQ2 2022Not previously guidedLaunch in Q2 2022 New
RTD Whey Protein LaunchH2 2022Summer 2022 planned (Q4’21) Second half of 2022 Maintained timeline
Distribution Expansion (Costco/Amazon)2022Announced Q4’21 Reiterated Q1’22 Maintained
Operating Expense Discipline2021–2022Focus on controlling OpEx (Q3’21) Continued focus (Q1’22) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2021)Previous Mentions (Q4 2021)Current Period (Q1 2022)Trend
Supply chain/protein & freight inflationMargins impacted; driving OpEx control (5.2%) GM; adjusted GM 5.0% due to delays/run-off GM improved to 11.5% despite elevated costs Improving sequentially
Product reformulation & co-manufacturer diversificationNew improved whey/protein formulations shipping Rolled out reformulated Combat Protein to Costco US CFO: reformulation, packaging changes, broader co-manufacturers enabled Q1 growth Execution progressing
Beverage expansion (Energy, RTD protein)First MP Combat Energy run sold 100%; $30M in 2023 Energy margins 35%; RTD protein planned summer ~$1.1M energy revenue; FitMiss Energy Q2; RTD whey in H2 Accelerating
Distribution (Costco/Amazon/brokers)n/aCostco/Amazon partnerships; Alliance Sales & Marketing Reiterated partnerships; regional Costco placement Expanding footprint
Financing/leverageSenior secured notes to fund energy ramp Year-end liabilities up; notes payable initiated Senior notes $7.74M; cash interest $3.47M Q1 Leverage/interest pressure persists

Management Commentary

  • “We delivered sequential revenue improvement in the first quarter of 2022 with revenue of $13.1 million… second consecutive quarter of margin improvement… despite elevated protein and freight costs.” — Ryan Drexler (CEO)
  • “Our MP Performance Energy drink line continues to be a bright spot… more than $1.6 million in sales since it launched in September 2021… on track to achieve our guidance of $30 million in annual sales by 2023.” — Ryan Drexler
  • “Measures we took in Q4… reformulation… packaging changes and diversifying and broadening our co-manufacturing partners… enabled us to deliver sequential revenue growth in Q1… MP Performance Energy accounted for $1.1M of net revenue.” — Sabina Rizvi (President & CFO), Q1 call

Q&A Highlights

  • Clarifications on margin trajectory and supply chain costs; management emphasized ongoing mitigation and sequential improvement in Q1 .
  • Beverage roadmap detail: timing for FitMiss Energy (Q2 2022) and RTD whey protein (H2 2022), with distribution expansions to Costco regions and Amazon .
  • Liquidity and financing: interest expense and cash interest outflows discussed; management focused on working capital and growth funding .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q1 2022 EPS and revenue were unavailable for MSLPQ due to missing CIQ mapping; therefore, we cannot quantify a beat/miss versus consensus. S&P Global estimates unavailable for MSLPQ.
  • Given the unavailability, sell-side models may need to incorporate the stronger sequential revenue and improving gross margins, but also higher interest costs and increased current liabilities .

Key Takeaways for Investors

  • Sequential recovery with revenue up 31% q/q to $13.10M and gross margin to 11.5%; Adjusted EBITDA improved materially versus Q4, signaling early operating traction despite cost inflation .
  • Energy beverages are scaling (>$1.1M in Q1, ~35% margin), supported by Costco/Amazon and broker partnerships; beverage mix should be margin accretive versus core protein powders .
  • Interest burden is heavy (cash interest $3.47M in Q1), and leverage increased (senior notes $7.74M); monitor liquidity and capital structure while the beverage ramp offsets financing costs .
  • Y/Y profitability declined sharply due to higher cost of revenue and interest expense; management’s reformulation and diversified manufacturing are beginning to offset pressures, but sustained margin expansion is needed .
  • Near-term catalysts: FitMiss Energy launch (Q2 2022), RTD whey protein in H2 2022, and expanded Costco regional placements—positive for top-line momentum and mix .
  • Without consensus benchmarks, framing the quarter as a sequential improvement story is key; watch for continued margin gains and energy distribution wins in Q2/Q3 to validate the $30M FY2023 target .
  • Risk-reward hinges on execution in beverages and working capital discipline; rising receivables and current liabilities warrant tight monitoring alongside growth initiatives .