FitLife Brands, Inc.

Good day and welcome to the FitLife Brands' fourth quarter and full year 2023 financial results conference call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Dayton Judd, CEO of FitLife Brands. Sir, the floor is yours.

Thank you, Paul. Welcome, everyone, to FitLife's first ever earnings call. I appreciate you taking the time to join us this afternoon. Joining me on the call is Fitlife CFO, Jacob York. Rather than have Jacob read you the press release, like often happens on earnings calls, I thought instead I'll just give an introduction, talking about the different parts of our business and our priorities going forward, and then open it up for Q&A. We tend to talk about our business in three parts, legacy Fitlife, Mimi's Rock are what we now call MRC and Muscle Farm. As a side note, we'll continue to do that for the near future because we understand that investors want to evaluate the success of our transactions. But the businesses are largely integrated and we don't run them separately. For example, with Muscle Farm, we only hired two of their former employees. One benefit of that is that much of the gross profit translates into incremental EBITDA for fit life. But it does make it hard for us to produce and communicate specific financial statements for each company or each brand. So I'll start with what we call legacy fit life. On the wholesale side, GNC is our largest and most important customer. Like many specialty retailers, GNC has been struggling with foot traffic for some time. As a result, we continue to see low double-digit decline in wholesale revenue for this part of our business. So that's the bad news. The good news is that within wholesale for Legacy FitLife, we aren't losing share. We're just losing customers at the same pace as other participants. We're also exploring some international wholesale opportunities for some of our Legacy FitLife brands. The online side of our business is a positive for Legacy FitLife, where we continue to see positive revenue and subscriber growth. We also continue to innovate within these brands and plan to launch several new products in 2024. In summary, then, even though online is growing for Legacy FitLife, we don't expect to see much top line growth as a whole in the near term, although we expect it to continue to generate strong cash flow. With regard to Mimi's Rock, or what we now call MRC, this is a transaction that we closed a little more than a year ago on February 28th, 2023. We paid just over 17 million dollars for the business and post-closing invested a couple million more in working capital. MRC's primary brand is Dr. Tobias which is one of the largest sellers of fish oil and colon cleanse products on Amazon. The primary opportunity for us with MRC was cutting costs but there was a lot to do commercially as well since unit sales were declining. I can't remember exactly what we've specifically disclosed previously, but within a few months after the transaction, monthly EBITDA was pretty consistently at or exceeding 500,000 U.S. dollars per month. So using the 500,000 monthly EBITDA number, we were able to pretty quickly achieve synergies that bring the acquisition multiple to less than three times EBITDA. MRC also owns a couple of smaller skincare brands that haven't been our primary focus and are struggling somewhat, but the good news is that Dr. Tobias continues to do well. Going forward, we hope to generate some top-line growth with MRC, and we also expect it to generate strong free cash flow. And now moving on to MusclePharm, as was our expectation, MusclePharm had a very minimal impact on Q4 due to, first, the deal closing in October, Second, the fact that we needed to acquire inventory. We only bought, I think, about $200,000 worth of inventory through the asset purchase and bankruptcy. And third, the need to negotiate new agreements with all of the MusclePharm customers that were buying their product at that point. We could have assumed those contracts in bankruptcy, but that would have cost us a lot of money in terms of cure payments and other liabilities that we would have had to assume. So we set out to renegotiate those agreements. Some of them took a couple of weeks, others took three months, but the good news is that's largely behind us. So for us, the MusclePharm business really didn't begin ramping up in terms of both wholesale and online sales until the first quarter. And I'll start with the online business for MusclePharm. With regard to Amazon, which is the primary online sales outlet, MusclePharm previously had an agreement with a third-party reseller, to be the exclusive Amazon seller of MusclePharm products. Since the transaction where we acquired the MusclePharm assets, we have not sold any product to that reseller, although we have allowed them to sell through their inventory without price competition from us. So what that looks like is during that time, you would see us out there on Amazon as a seller, but we keep our price above their price, allowing them to win the buy box and move through the inventory. As they sell out of their inventory, we then step in as the primary seller and lower our price to the MSRP. They largely began selling out of their product in January and into February. At this point, there's I think three products where they're continuing to sell their inventory, but we are the primary seller of MusclePharm products for approximately 95% of the MusclePharm units currently being transacted on Amazon. On the three remaining SKUs that the reseller has, two of those we estimate they'll sell through during the second quarter. So far, the Amazon business is scaling nicely for us, but I'm sure the question that you all have in your mind is what to expect for 2024 in terms of online revenue for MusclePharm. My short answer is I don't know, so I don't want to give any specific guidance, but conservatively, the previous seller was doing about $5 million annually, so we would expect at least that much. It's still early days, but I'm encouraged by the trends. I'll provide a couple of additional data points that we hadn't previously provided. First, our subscriber count for MusclePharm products on Amazon as of the end of the fourth quarter, so December 31st, 2023, was five. We had five subscribers. As of the end of the first quarter, it was over 1,600. So we're seeing some nice growth in subscribers on Amazon. Second, I think we reported MusclePharm online revenue for February in our press release that it was about $330,000. We don't have March numbers finalized yet, but we expect the number to come in quite a bit higher, probably between $400,000 and $450,000 for the month of March. So now, moving on to wholesale for MusclePharm, I have even less of a perspective about exactly what's going to happen on that side. But let me walk you through what's going on and how we view the opportunity here. During February, we were able to get the full MusclePharm product line back onto iHerb. Sales were initially low to start, but have been increasing at a very encouraging pace. We have a number of other wholesale customers. Kupong in particular has been a very big and loyal customer for MusclePharm, and our proteins continue to do very well in South Korea. We've also had a number of encouraging meetings with other potential wholesale and distribution partners and hope to reach formal agreements with some of them during the second quarter. In addition, as we rebuild the MusclePharm brand, we're launching some new MusclePharm products, as well as bringing back some discontinued MusclePharm products that previously were quite successful. For example, we'll be launching three flavors of the Combat Sports Bar in the next couple of weeks, so watch for that on the website as well as on Amazon. We also expect that many, if not all, of our wholesale partners will also bring in the bars. So maybe in conclusion, with regard to MusclePharm, the number one question I get from investors is, how big do you expect it to be? My answer is always, I don't know, but I do want to tell you how I think about the transactions. We paid $18.5 million for the assets, or about $18.8 million if you include the capitalized transaction expenses. I believe that is a fair price for the business, even if we aren't successful at driving much growth. Said another way, I would hope that with minimal effort and basic blocking and tackling, we can generate between $3 and $4 million of EBITDA from the baseline muscle farm business. So if I'm right, in the worst case, We paid between five and six times for the business, but the deal also comes with a massive call option on the upside if we were able to restore MusclePharm distribution to even a fraction of what it used to be. When we did this transaction, my hope was that the outcome for all shareholders was that heads, we win some, tails, we win a lot, and I still think that's the case. So to summarize, while we certainly expect MusclePharm to generate cash, we're even more excited about the revenue growth opportunity but that is going to take some time to develop. I'll provide a few more high-level comments before moving into Q&A. Our balance sheet remains strong. We have about $16.5 million of term loan outstanding. The interest rate on that is SOFR plus 275, which works out to be a little bit more than 8%. We have no balance outstanding on our $3.5 million revolver, and the term loan balance of 16.5 that I provided was after our scheduled $1.1 million amortization payment and a voluntary $2.5 million principal pay down during the first quarter. As we reported in our press release, our net debt as of March the 28th was approximately $13.5 million, which represents a reduction of about $4.7 million during the first quarter. We intend to continue using our free cash flow to pay down debt. In addition, now that we're on NASDAQ, we're taking steps to raise the visibility of the company among potential investors. We participated in the Roth Conference last month, and we currently intend to participate in the Sedoti Microcap Conference next month. And if you all find these investor conferences to be helpful, we're happy to continue doing these on a quarterly basis. To wrap it up, we don't intend to provide any specific guidance for 2024 other than to say that when we're having this call a year from now, we expect revenue and profitability to be higher and net debt to be quite a bit lower. So with that somewhat long introduction, I'll stop talking and we'll go ahead and open it up for your questions. So Paul, if you'd like to poll for questions.

Certainly. At this time, we'll 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 ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, please press star one on your phone at this time if you wish to ask your question. And please hold while we poll for questions. We did have a few questions come in. The first question is coming from Igor Noburetsev from Laras Capital. Igor, your line is live.

Hello, Dayton, and very encouraging results indeed. However, we already had a conversation about the results, and I think you provided a lot of details. I want to concentrate on something which is obviously struggling, FitLife legacy business. So we all know that FitLife legacy online gross margin is much higher than a store wholesale gross margin. So how much effort is to convert giving reduced food traffic to the people who come to the stores and to basically online for at least you can capture a much higher gross margin. And I guess the same question would be for the future of muscle farm, because again, if they buy directly from you, uh, obviously you capture a much higher gross margin.

Yeah. Thanks for the question. So, um, it's, it's somewhat complicated, but I'll do my best to answer. So first of all, we, um, We have multiple brands within Legacy FitLife, right? So it's all of the brands that are exclusive to GNC, but it's also Isatory, Biogenetic Labs, Energize, et cetera. So there's in total probably eight or nine brands that fall under Legacy FitLife. And some of them have different channels to market than the others. But thinking about GNC in particular, like the brands that are sold within GNC, We need to be very careful. We do not want to compete with our GNC franchisee customers. The good news is if foot traffic is down or if the people are not buying them from a GNC store, they're buying it from us. So we're the only other way that they can get the product is getting it on Amazon or Walmart.com or eBay.com or from our websites. So we naturally just pick up that volume. So some of the decline is customers just choosing to buy where they want to buy as opposed to always going to a store. So it'd be kind of dangerous for us to go out there on Amazon and try and advertise or lower our price and try and compete with franchisees. And so we don't want to do that. The franchise business is incredibly important to us and is a priority for us. And so we're out there. If people don't want to buy in the store, they can buy from us. You know, other channels like the Isatory product and Energize, that's kind of more food, drug, and mass, right, from Walmart to Walgreens, Rite Aid, CVS, et cetera. Again, we do advertise those, so we're out there advertising on Amazon and elsewhere and hoping to bring those people into the fold as well. Again, to the extent they choose not to buy in a store, we want to be there where they choose to buy, and that's increasingly online. Does that answer your question?

Yes, thank you. And the very quick follow-up question, in terms of Fitlife, franchisees, since J&C is no longer public, do you know if their number is shrinking, or do you have any idea, or they're just buying less or have fewer revenue per vacation?

Yeah, I'm not privy to their financials, so I don't know. I mean, I did make a comment in my prepared remarks that we're pretty sure we're not losing share. So if I'm down low double digits, that's a pretty good indication that some of the places where we're selling are down low double digits. But I'm not privy to their financials. Their store count is not rapidly declining. I know that. So we can see the number of both franchise stores and corporate stores. In fact, they've opened corporate stores over the past year. So the other thing I'd just say as it relates in particular to GNC, but also wholesale in general for supplement type products in the brick and mortar channels. If you go back and look at even our historical numbers for FitLife, starting in 2020, even though that's the year GNC went bankrupt, that was also when COVID started. And 2020, 2021, and then to 2022, the first half of 2022 were some of the strongest years, the strongest period of time performance for GNC and a lot of other retailers. And so we absolutely participated in that surge. If you go back and look, we were growing wholesale revenue during that time. To a certain extent, what you're seeing in the back half of 22 and then into 23, and we'll see what happens in 24, is that business just coming back down to the level where it was. Again, our numbers are out there so you can see it. But if you go look at where we are right now in wholesale to GNC, yet we're below 21, 22, and 23, but we're not below 2019 and 2020. So, you know, there was an acceleration that happened because of COVID. It'll be interesting to see how 24 plays out. It may be that by the time we're in the back half of 24, we're not declining, right? That it's just come back down to where it was. I don't know, right? I can't tell you that for sure. But that is a phenomenon that we saw, which was GNC franchisees were very close to many of them. They had their best years in 2021 and 2022, like better than the best year they've had in 20 years. So part of it was unique perhaps to the pandemic, but time will tell if it stabilizes or if it continues to decline.

Thank you, Nathan. I'll get on the back of the queue and I'll ask questions afterwards. if there is time for it. All right. Thanks, Igor.

Thank you. And once again, if you wish to ask a question, it is star 1 on your phone. That's star 1 if you wish to join the Q&A queue. The next question is coming from George Morema from Pareto Ventures. George, your line is live.

Thank you. Good afternoon, David. Good afternoon, George. Yeah, first of all, I want to vote yes on conference calls. I appreciate you very much for doing it, and thank you very much for not reading the press release to me. I appreciate your format. My first question is on your operating expenses. The last couple quarters or so, it's sort of in the $3.5 million per quarter range. In 2024, assuming no further acquisitions as you stand today, is the OpEx going to be somewhat level or is it going to change much?

Yeah, and I don't have the financials in front of me. Is that when you're looking at OpEx, you're looking at excluding the merger and acquisition related expenses? Correct. Yeah, just SP&A. Yeah, yeah. So what I would say is with the acquisition of MRC, we do spend quite a bit on advertising, although we spend a lot less now than they did when we purchased them. So there will be a similar – yeah, I think what you're seeing in Q3 and Q4 is probably fairly similar or should be consistent going forward. That said – Again, we bought MusclePharm. We did no advertising to speak of in Q4, and we have started doing that on Amazon in Q1. So to the extent it goes up, it will be investments in advertising, which we would hope to generate a return from as opposed to just kind of overhead that we're adding. We're not adding a bunch of people. We're hiring somebody here and there, but nothing material. So I don't think that the number is going to be

too much higher again with the caveat that to the extent we choose to invest in in marketing um you know it may be but that's what the expectation of generating a return on the spend no that's perfect i was just trying to get a general feel for the operating leverage of the model here so um and then in terms of gross margins um year over year it's real more or less flat around 41 ish percent um Since your online went up quite a bit, I would have thought that your online margins are significantly higher than wholesale margins, I would assume. Do you expect gross margins to start? What would be your target gross margin as you look out over the next year or two?

I think it will be something in the low 40s, let's say 41 to 43 if I had to put a number on it. Online is a lot higher, but it's very different by brand. And so I'll give you an example. Again, the GNC products are the products that we sell in GNC where we're not trying to compete with the franchisees. We price very high on Amazon. We price above them because we're not trying to pull traffic away from them. We just want people that, if they want the convenience of having it show up at their doorstep instead of going to a store, they'll pay a premium. Those margins are quite a bit higher. You can also, though, go and look. You'd have to do some mathematical gymnastics because of the way that that Mimi's Rock was reporting their numbers, they previously included their Amazon fees in SG&A as opposed to in COGS, which is how we do it under GAAP as opposed to, I guess, IFRS. But their margins are, especially for the Dr. Tobias line, are generally in the, again, low 40s, call it 42, 43, maybe 44%. So as we layer in that, again, we're not out there pricing at a premium, right, to other channels there. We're being more competitive. We're advertising. We're trying to get customers. And so as you average those, right, that's where you end up in the kind of call it 42%, 43%. If we didn't have the other product lines, right, then, you know, online sales, For legacy FitLife, you should expect significantly higher gross margins. But again, that's not the entirety of our business anymore.

Okay. And do you know approximately how many years it's been since those combat sports bars have been on the market?

Yeah, it's been less than two years that they've been out of the market. And again, it's kind of fascinating, right, that a company with a very successful product would kill it. But, again, it wasn't intentional. They were in financial distress, and they hadn't paid some of their manufacturers, including the one that makes their bars. And so they just couldn't get anyone to make them. So we have them. They completed in the last week or so, and I've been on the road and taken samples to various customers. And so we're pretty sure there's going to be people bringing it in. Again, I just can't tell you how big it's going to be. and they were successful on Amazon and in other places as well. The good news is I'm pretty sure we can just resurrect the old listing on Amazon. I can't remember how many thousands of reviews it had, but we'll just reactivate that listing and begin selling it.

Yeah. And then my last thing, I've never spoken to you before, and I hope to offline in the days ahead, but could you give me kind of your... Well, first of all, let me step back. I'm really a fan of your capital allocation strategy that you've done in the last several years. I think it's been masterful. But I was sort of curious, what is your next three-year strategic vision here for the company?

Yeah, good question. So like I think we indicated in the press release as well as in my prepared remarks, we will – we will keep a clean balance sheet, right? So we're rapidly paying down debt. That gives us the flexibility to do other stuff, including more transactions. I believe I indicated in our earnings press release that we're continuing to look at other transactions, which we are. We have the ability, and in fact, we will be picky. We were picky in the three acquisitions that we've done since I took over as CEO and will continue to be in the future. I'm not looking to Bet the company or put things at risk. I obviously own a lot of it and I don't, I'm not looking, I don't want to lose money, right? Just like all us investors don't. So we'll be judicious. You know, the transactions that we have done, I mean, Neutrology was very small, but I think we generated, you know, the gross profit in the first year of ownership that we generated, I think, paid for the acquisition. I talked about Mimi's Rock, that when all was said and done, we paid less than three times, right? And we'll see what the final multiple is on MusclePharm. But the trend that maybe you can notice is I like good brands. And when you have a good brand with a bad balance sheet, that can present an opportunity, right? So Mimi's Rock was in financial distress. They were in default on their debt. That's what facilitated that transaction. MusclePharm was obviously in bankruptcy. So We'll continue to look for transactions, but we're not going to do a deal just for sake of doing a deal, if that makes sense.

I really appreciate it. Thank you, Dayton.

Thank you, George.

Thank you. And the next question is coming from Daniel Smoke from Smoke Capital. Daniel, your line is live.

All right. Thanks. Hey, Dayton. Thanks for all the comments early on the call. That was all very helpful. So my first question is, which kind of tags on to your last answer. So regarding the pipeline that you guys are looking at today, you know, are you still, are you seeing an elevated level of opportunities, you know, given that we've had higher interest rates for longer? Or what are you kind of seeing in that pipeline lately versus, you know, 21 and 22?

Yeah, so again, I'm sure I don't see every deal that exists, but we do see a fair amount. I don't know if I'd say we're seeing more deals, but there's always a pretty steady flow of supplement companies for sale. It's an incredibly fragmented market. What does change is the expected transaction multiple. When I first started looking, you could buy companies for three to four times cash flow. During COVID, as the businesses were doing better, people were running six to seven times cash flow. And, you know, as interest rates have gone up, right, that multiple has come down somewhat. So the deal flow is still pretty consistent, right? But the expected multiple is what appears to move around. So, you know, again, there's plenty of opportunities to look at. It's what do people kind of expect to be paid or what are they going to have to accept? So I don't know if that answers your question, but... Yeah, yeah, that's very helpful.

And one other question I had on the... Canadian NOLs, which is kind of interesting, I know that's fully valued against right now, but do you anticipate being able to use a material amount of those Canadian NOLs?

I don't know how to quantify material, right? It's an asset. It's a tremendous asset. Many of you know we had, I think when I took over FitLife, we had something like 35 million of NOLs in the U.S., so it's been a beautiful thing to have them and be able to use them. Unfortunately, that merry-go-round is coming to a halt here probably this year. We still have several million, but much of what remains, we have a little bit we can use here in the first quarter of 24, but the remainder is what we have from the company's acquisition of Isatory back in 2015. And that was obviously a change of control for Isatory, so that triggered... the 382 limitation, which limits our ability to use. So we can only use something like $130,000 per year. So we will take whatever steps we can to try and be tax efficient. So there's a number of things that we have done and that we will continue to do. When we bought Mimi's Rock, one of the challenges and one thing that perhaps made it somewhat less palatable for other buyers and certainly was a concern for us as well was it had a somewhat complicated legal structure with multiple Canadian entities, a financing entity in Barbados, and then at least for the Dr. Tobias side of the business, the Opco was in Germany, right? So we have been working to simplify that structure. And that will allow us to bring cash from overseas to the US in a more tax efficient manner. But there's also a lot that we can do and that we've started to do. I've mentioned how the businesses are largely integrated. We have a team up in Canada, for example, that manages all of the advertising for all of FitLife. And so they can bill FitLife in the U.S., and they can bill Dr. Tobias in Germany for their services, which moves cash flow right to Canada and would allow us to start to chip away at those NOLs. Now, again, how much and how quickly, that I just don't know yet. But, yeah, I'm going to do whatever we can to be as tax-efficient as possible.

Great. Thanks. And then last question for me. You know, congratulations on sounds like you've got the combat crunch bar, you know, close to launch here coming in Q2. So that's that's a great accomplishment. Do you think that helps your case with, you know, new potential wholesale relationships, given that you have that come back crunch bar and it was pretty successful historically? I'd like to hear your thoughts on that.

Yeah, I mean, I do. It's something we heard from customers, so it wasn't like we had to push it on them. So I think a lot of people are excited to see it come back. We have presented it to some new clients as well, for example, some drugstore chains. Again, I don't know if they're going to take it. And just as a reminder for the way brick-and-mortar retail generally works, they don't have multiple planogram resets every year, right? Sometimes it's once a year. Sometimes it's a couple times a year, right? So you can kind of present it. but they may not decide until August, right? So it is an entree into some stores that have never sold it, but there are customers that used to carry it that were not carrying MusclePharm products or hadn't carried MusclePharm products for a couple of years that are taking steps right now to bring it in. So we know we'll sell some. Again, I can't put a number on it, but there definitely is interest. And like I said, it was popular online as well. And so we'll take advantage of that and put it out there in our online channels.

Okay, thanks. That's all for me.

Thank you. And once again, if there were any other questions at this time, please press star 1 on your phone. You'll have a couple of follow-ups come in. The first one is coming from George Morena. George, your line is live.

Yeah, hi again. I want to clarify something. So In your remarks, you mentioned that the vendors selling the MusclePharm stuff for the last, I don't know, a year or two online, or the business when you bought it was roughly $5 million annually online. Was it online only, or was that $5 million in total online and wholesale? And how much did they also sell? Was that only powders, or did they sell bars?

Yeah, good question. The $5 million was just online, so there was additional wholesale business that they were doing, at least during bankruptcy. I think, I'm pretty sure we have continued with all of those customers, or if not all of them, almost all of them. Again, it took some time, though, to kind of negotiate new agreements with them, but I'm pretty sure that all of them are still customers. We just had to go through that process. And no, there were no bars, right? So the bars have been out of market for about two years. So the bars is a new opportunity or new after a couple of years.

And do I understand correct, the bars are primarily going to be sold through wholesale distributors rather than directly online from you?

No, no, we will. The first place you'll be able to buy them is online. I watch in the next two weeks and please go buy them. And I may be biased, but I eat a lot of protein bars, and, look, I think ours are really, really good. But, no, they'll absolutely be online. That's the first place they'll be available, but we're making them available to our wholesale customers as well.

To our wholesale customers, okay. Okay, great. All right, thank you.

Yep. Thank you. And we did have another question come from Igor Najaritsas. Igor, your line is live.

Hi, Nathan. So muscle form. I know that you're working hard to restore the old wholesale channels and there is probably residual bitterness from the previous relationship when muscle formed and bankrupt. So what would it take to get these channels restored? Would you have to sacrifice a gross margin for a while and basically give them very good pricing to get in or it just takes time? I understand that you don't have the precise numbers, but I just kind of want to get your thinking of how you want to proceed with basically getting the business back.

Yeah, good question. So we are not discounting at all right now. Our view is the way this business was run for many, many years was it was all about discounting. It was all about revenue and profit didn't matter. And you can see where that led, right, for the company previously. So our strategy right now is we're seeking to get in with decent margins. And then once we're in, right, we're happy to, you know, on an occasion, right, where it's necessary to promote. And so, you know, I mentioned some of the retailers where we have gotten the product or where we've started selling the product. You know, as that scales, right, we probably will make some, decisions to invest and to drive additional growth. But again, I view that as completely separate. We're not discounting to get in. We're trying to get in and then offering promotional spend to help drive growth for both partners, if that makes sense. In terms of the timing, again, this is where it's just a total uncertainty. There's no one that I think could predict what would happen when. But many retailers, they have one reset a year or maybe two. And so we're kind of somewhat at their mercy. It has been, for as widely as these products were distributed, there's a lot of buyers. When I say buyers, I mean retail buyers, not the end consumer, but the people that work for the companies that got burned by MusclePharm. And it's been an education process for us to try and tell them you know, that that wasn't us, right? We're somebody different. We're the new owner. And look, there are some of them who have said, unless you make us whole for the damage that was caused previously, then, you know, then we don't want to talk about it, right? So that's just some of the issues that we're working through. And, you know, we'll deal with it as it comes. But it's just, again, it's really hard for me to say I can tell you exactly where and when we're going to be and at what point. I will say, I think many of you know, it was in Costco. And Costco is a very, very big customer for MusclePharm. Costco generally carries just a couple of different powdered proteins, right? And one of them is going to be Optimum and the other is going to be somebody else. Once they replace you, they're not exactly looking to welcome you back with open arms, right? You got to kind of work your way back in. And so if we are going to be successful with a place like Costco, and I've put some other retailers on that list as well, It may be that we start with online, right, with their online offering or maybe in a regional assortment, right, of stores as opposed to going chain wide. So, you know, look, like I said in my prepared remarks, I wish I could give you all a number, but we're going to do our best and we're going to try and grow. And the way I view it, right, the day I signed the deal, right, it was, look, I think we're getting a pretty good deal and we've got this massive call option. Maybe it takes a year, maybe it takes five years. Um, I don't know. Right. But I do know, right. That, you know, in the end, I think there's going to be a good investment for us.

Okay. No, that's great. So basically no discount against what, you know, I wanted to hear. So glad to hear that. Uh, my other question is about international opportunities. So traditionally before me in Iraq, I, it was basically us and Canada and maybe a little bit abroad. Now you have Mimerock and now you have MusclePharm. How much do you think can grow international business? I mean, something like Mexico or I don't know, maybe South America, maybe Middle East or anything. So just kind of how you think about the international growth.

Yeah. So we, I mean, we always field calls from international buyers and international distributors and, One thing in the numbers is we may sell to a company or to a distributor that's U.S.-based that distributes the products internationally. For us, that shows up as U.S. revenue, but the end consumer is outside the U.S. I'll give you a very specific example. Dr. Tobias products have been on iHerb for a while. They're predominantly sold on Amazon, obviously, but we also sell to iHerb, and then iHerb resells them. Well, 90% of iHerb's revenue, roughly, is coming from international markets. So they're selling in Saudi Arabia and India and Japan and Asia and Latin America. So we're selling to iHerb in the U.S. That shows up to us as U.S. dollar revenue. But ultimately, the end consumer is outside the U.S. So we know there's demand for the products outside the U.S. because we're selling to people who are selling it. I mentioned Coupang as well, which is similar. It's like kind of the Amazon of South Korea. I mean, MusclePharm does quite a bit of business with Coupang. And Coupang is, you know, we've talked to Coupang about a number of our brands. So, again, that's a domestic sale for us, but it's to an international customer. You cannot buy domestically on Coupang, right? So the demand is there, and we're looking at ways to capitalize on it. But the good news for us is we like selling domestically. We don't have the currency issues. We don't have to deal with foreign currencies. Most of the time when we sell product, we have to pay for the shipment. So I'd much rather pay to ship it to California and have them move it around the world than we have to ship it over an ocean. Does that answer your question?

Yes, thank you. I don't have any more questions. Thank you, Nathan. Thanks, Igor.

Thank you. And there were no other questions at this time. I would now like to hand the call back to Dayton Judd for closing remarks.

All right. Thank you, Paul. And thank you, everybody, for participating in our conference call this afternoon. We certainly appreciate your interest in FitLife. Happy to speak to you all individually if you would like or if you have additional questions between now and the next time we talk. But again, appreciate your interest and look forward to speaking with you in the future.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.