MusclePharm Sales Rise in Fourth Quarter, Forecasts Profitability in 2014

Andrew Klips  |

Shares of microcap MusclePharm Corp. (MSLP) are trading narrowly higher on light volume in early Monday activity, following the sports nutrition company posting a 127-percent improvement in the top line during the fourth quarter.

For the quarter ended December 31, 2013, the Denver, Colorado-based company said that net sales increased to $37.5 million, compared to $16.5 million in the year prior quarter. Sales in MusclePharm’s specialty market segment, which include brick-and-mortar and online sales, jumped by 65.8 percent year-over-year to $18.0 million.  International sales were up by 102 percent to $11.3 million. The company also launched its products in the mass market (i.e. food and drug stores and other retailers), with sales totaling $8.1 million.

Gross profit for the quarter was $9.7 million, or 26 percent of sales, versus $4.1 million, or 25 percent of sales, in Q4 2012. MusclePharm noted the timing of rebate accruals as negatively impacting gross margin by 4 percent in the latest quarter.

Net loss from operations for the fourth quarter was $5.96 million, or 45 cents per share, compared to $2.53 million, or $1.12 per share, in last year’s quarter. Operating expenses jumped to $15.7 million from only $6.6 million last year.

During the quarter, the company repurchased 120,000 shares of its common stock for an aggregate of $934,000 as part of a $5-million buyback plan announced December 10, 2013.

In January, MusclePharm completed the acquisition of BioZone Pharmaceuticals ($BZNE), buying substantially all of the assets of BioZone, including its manufacturing facility and QuSomes® technology, for 1.2 million shares of MSLP.

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MusclePharm sells its eponymous brand, a line of supplements targeting women branded as FitMiss and the Arnold Schwarzenegger Series, the first sports nutrition product line that the iconic bodybuilder, actor and politician ever attached his name. MusclePharm has some other high profile athletes as endorsers, including San Francisco 49ers’ quarterback Colin Kaepernick, New York Jets’ wide receiver Eric Decker, and Indianapolis Colts’ safety LaRon Landry. The company is also partnered with the Ultimate Fighting Championship and USA Wrestling.

The products are sold in 110 countries and at leading retail stores, such as Walgreens (WAG) , GNC (GNC) , Costco (COST) , and Vitamin Shoppe (VSI) .

"MusclePharm is becoming a leading lifestyle brand in the sports nutrition market and our financial performance in 2013 is testament to the company's ability to drive strong topline growth and connect with a growing consumer base," said Brad Pyatt, MusclePharm's chairman and chief executive officer, in a Monday statement.

For all of 2013, the company reported net sales of $110.9 million, up 65 percent from $67.1 million in 2012. Gross profit improved to $33.2 million, or 30 percent of net sales, compared to $14.3 million, or 21 percent of sales, a year earlier. Net loss in 2013 decreased to $17.7 million, or $2.46 per share, from $19.0 million, or $13.00 per share, in 2012.

Looking ahead, MusclePharm forecast 2014 revenue of approximately $150 million and gross margin around 33 percent. Diluted earnings are seen in the range of 20 – 22 cents per share (based upon 13.5 million shares outstanding), which could be positively impacted by the aforementioned share repurchase plan.

Shares of MSLP have lost about half their value from a 52-week high of $13.10 in August, through Friday’s closing price of $6.30. The company used to trade at sub-penny levels until it cleaned-up its share structure with a 1-for-850 reverse split in November 2012. The company looks like it could be trying to turn a corner with its guidance for profitability this year, but remains very speculative in nature. Shares hit a 52-week low of $6.16 on Friday. Following this morning’s report, shares are up 3.2 percent at $6.50 with less than 7,000 shares changing hands so far early in the session.

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