Synergy CHC Q2 2025 Earnings Call Transcript

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August 14, 2025

Key Takeaways

  • Positive Sentiment: Synergy reported its tenth consecutive quarter of profitability, with revenue, gross profit, net income, and EPS all increasing year-over-year.
  • Positive Sentiment: The company expanded its FocusVactor licensing agreement to include Turkey and formed a wholly owned subsidiary in Mexico, targeting Costco and Walmart Mexico shipments by Q3 or early Q4, with Australia and Taiwan entry planned in early 2025.
  • Positive Sentiment: Major distribution wins include national authorization with Core Mark for 50,000 North American retail locations, two Walmart Canada SKUs launching in Q4, and a McKesson Canada agreement for pharmacies and wellness retailers.
  • Positive Sentiment: Synergy completed a $20 million term loan refinancing, drawing $17.5 million to eliminate short-term debt, extend maturity to 2029, and enhance financial flexibility and free cash flow.
  • Positive Sentiment: Financial highlights: Q2 net revenue rose 1% to $8.1 million plus $1.4 million in license fees, gross margin improved to 76.7%, net income jumped 125% to $1.47 million, and EBITDA increased 136% to $3.8 million.
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Earnings Conference Call
Synergy CHC Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy's CHC Corporation's financial results for the second quarter ended 06/30/2025. Joining us today are Synergy's CEO, Jack Ross CFO, Jamie Thicket and Greg Robles with Investor Relations. Following their remarks, we'll open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Robles as he reads the company's safe harbor statement.

Operator

Greg, please go ahead.

Speaker 1

Thanks, Lisa. Good morning, and thanks for joining our conference call to discuss our second quarter twenty twenty five financial results. I'd like to remind everyone that this call is available for replay and via a live webcast that will be posted on our Investor Relations website at investors.synergychc.com. The information on this call contains forward looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions.

Speaker 1

Forward looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward looking statements. Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's SEC filings under the caption Risk Factors. Information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now I would like to turn the call over to the CEO of Synergy, Jack Ross. Jack?

Speaker 2

Thank you, Greg. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the 2025. We are very pleased to report that the quarter marked our tenth consecutive quarter of profitability, a significant milestone that reflects our continued operational discipline and focused execution. Revenue, gross profit, net income, earnings per share all grew year over year, underscoring the strength of our platform as we continue scaling profitability.

Speaker 2

Before we get into the results, let me touch on a few key developments across our business. First, an update on our international expansion. Following last quarter's announcement of a license agreement for The UAE, we have expanded that agreement to now include Turkey, further extending our global footprint for the FocusVactor brand. These agreements allow us to enter high potential international markets in a capital efficient way, and we expect both regions to begin generating additional revenue before the end of this year. We continue to pursue additional partner licensing partnerships in markets where we do not intend to establish a direct footprint.

Speaker 2

We have completed a formation of a new wholly owned subsidiary in Mexico. We are actively engaging manufacturing partners and customers. We expect to be shipping our first two new customers, Costco Mexico and Walmart Mexico, late in the third quarter or early in the 2025. We still plan on entering Australia and Taiwan markets early in the 2025, with Costco being the lead customer in both regions. Next, I would like to update you on the functional beverage business momentum that continues to build both operationally and organizationally.

Speaker 2

During the second quarter, we've assembled a high caliber leadership team to drive Synergy's beverage strategy and growth. Their decades of collective experience across CPG, convenience and global retail development will position us to scale quickly and effectively. In fact, the growth is already translating to shelf. During the second quarter, we secured some of the most significant distribution wins in Synergy's history, which will meaningfully expand access to both Focus Factor supplements and Focus and Energy beverages across North America. A few highlights on the beverage side, Core Mark, a division of Performance Food Group, one of North America's largest food and beverage distributors, granted national item authorization for the focus factor, focus and energy, unlocking access to sell to over 50,000 retail locations across The U.

Speaker 2

S. And Canada. On the supplement side, Walmart Canada will be launching two SKUs nationally in Q4, marking a major milestone for us. This placement builds on our eighteen year relationship with Walmart U. S.

Speaker 2

And further affirms Hocus Factor's leadership in growing the brain health category. In parallel, McKesson Canada, the country's largest pharmaceutical distributors, has signed a national distribution agreement that gives us access to thousands of pharmacies and wellness retailers across Canada. These retail wins are a clear signal that our expanding reach and growing relevance with both consumers and retail partners, combined with strong execution from our leadership team, we expect the momentum to accelerate into the second half and beyond. Before passing the call over to Jamie, our CFO, I want to touch briefly on our debt refinancing, which we announced we completed in June. We entered into a new $20,000,000 term loan credit facility, of which we've drawn down $17,500,000 of that facility to pay out previous facilities.

Speaker 2

This extends our debt maturity date into 2029, which includes interest only payments through the '5. The transaction immediately improves our balance sheet by eliminating all short term debt obligations and providing growth capital to support our strategic initiatives. We view this refinancing as a major milestone that enhances financial flexibility, increases free cash flow in the near term and better aligns our capital structure with Synergy's long term growth strategy. With those updates, I'd like to turn the call over to our Chief Financial Officer, Jamie Pickman. Jamie?

Speaker 3

Thank you, Jack. I'll now review our financial results. For the 2025, net revenue was $8,100,000 compared to $8,000,000 in the year ago quarter, reflecting an increase of 1%. We also generated $1,400,000 in license fee revenue during the quarter. Gross margin for the second quarter was 76.7% compared to 69.5% in the same quarter last year.

Speaker 3

The increase in gross margin was primarily driven by license revenue. Operating expenses for the second quarter were $4,600,000 compared to $4,000,000 in the year ago quarter. The increase in operating expenses was primarily due to the incremental costs associated with being a public company. Income from operations was $1,620,000 up 2.5% from $1,580,000 compared to the 2024. Net income for the second quarter was $1,470,000 compared to $655,000 in the year ago quarter, representing an increase of 125%.

Speaker 3

Earnings per share for the second quarter was $0.17 per diluted share compared to zero nine dollars per diluted share in the year ago quarter, representing an increase of 86%. These increases reflect the successful execution of our strategic growth initiatives and cost management. EBITDA for the second quarter was $3,800,000 up 136% compared to $1,610,000 in the 2024. Moving to our balance sheet. As of 06/30/2025, we had cash and cash equivalents of $1,500,000 compared to $687,900 as of 12/31/2024.

Speaker 3

Inventory was $2,400,000 at the end of the second quarter compared to $1,700,000 at 12/31/2024. At 06/30/2025, we had 32,100,000.0 in total liabilities, which compares to 33,000,000 in total liabilities at 12/31/2024, which is a decrease of 869,000 in the second quarter. Subsequent to the quarter end, we've also reduced our outstanding notes payable by an additional 1,800,000 At 06/30/2025, we had a working capital surplus of $12,400,000 compared to a working capital deficit of $1,120,000 as of 12/31/2024. For the six months ended 06/30/2025, our cash used in operating activities was $899,700 compared to cash used in operating activities of 1,100,000.0 at 06/30/2024. The decrease primarily reflects higher net income, partially offset by changes in working capital, including increases in accounts receivable and inventory.

Speaker 3

Now I will turn the call back to the operator.

Operator

Thank you, ma'am. At this time, if you would like to ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press 11 again. We also ask that you wait for your name and company to be announced before proceeding with your question.

Operator

One moment for the first question. And the first question that I have today is coming from the line of Sean McGowan of ROTH Capital Partners. Please proceed.

Speaker 4

Hi, good morning, Jack. Good morning, Jamie. How are you?

Speaker 2

Good morning, Sean. How are you today?

Speaker 4

Good. A couple of questions on the RTD. So did you were you able to book much revenue in the quarter? Or is that still to come?

Speaker 2

Mostly still to come, but we did see a significant improvement on our Amazon sell through, relatively speaking. Quarter over quarter, last quarter, I think we sold $41,000 on Amazon. This quarter, it was three times that. It was 148,000 if you will. So as you know, the minute that we closed our financing round, our debt restructuring, and we could utilize the capital to start growing our RTD business in a meaningful way, we instantly switched and started adding team and started signing retail partners.

Speaker 2

So more to come on RTDs very quickly in the third and fourth quarter.

Speaker 4

Okay. So besides Amazon, what retailers currently have the product on shelf right now?

Speaker 2

Multiple retailers in Canada. You know, I'd have to get you a list of them, Sean, but multiple retailers in Canada, if you will.

Speaker 4

I'm just wondering, like, we started to see that revenue or is that not yet showing up? I'm trying to get a sense of how much was in the quarter.

Speaker 2

Dollars 148,000 in the quarter.

Speaker 4

Okay, thank you on that. And I assume that the licensing revenue is basically 100% gross margin?

Speaker 2

Correct.

Speaker 4

Would you expect the licensing revenue to, I'm not sure how the deals are constructed, is it strictly a percentage of sales or do you get kind of, you know, steady payments? What should we expect that line to do? Is that going to grow slowly or is it going to be lumpy?

Speaker 2

Yeah, so, you know, it's going to grow slowly. We are talking to other groups in other countries. Again, we only plan to do those deals where we don't intend to put a sales team or our own organization to sell the retail. So we are talking to some other groups, but we don't really expect anything in the third quarter for license and revenue. So it might get a little bumpy, if you will.

Speaker 4

Okay. Got it. Jamie, could you talk about any expenses, that hit the quarter that you would say are kind of unusual or non recurring? Is there anything of that nature?

Speaker 3

We did have a lot of professional fees and legal expenses that were higher than normal, again, due to being a public market company. Selling and operations was in line. I would say that would be the only one timers or unusual in the quarter.

Speaker 4

Okay. But those professional I mean, the costs of being public are going to persist, right?

Speaker 2

Yes, correct. But they didn't index against last year. That's all she's saying.

Speaker 4

Right. All right. And then Mexico, will that be accounted for as a revenue or a license deal? That's revenue, right?

Speaker 2

That's revenue. We have our own footprint there. We have our own company there. Really anywhere Costco is, we'll have our own sales teams and have our own revenue, if you will. Okay.

Speaker 4

And are you was there were you able to book any flat tummy revenue in this quarter?

Speaker 2

A flat tummy is, you know, is staying pretty steady, but we'll call nothing new to report at this point in time.

Speaker 4

All right. Thank you very much.

Speaker 2

Thank you, Sean.

Operator

Thank you. And this does conclude today's Q and A session, and I would like to go ahead and turn the call back over to Mr. Ross for closing remarks. Please go ahead.

Speaker 2

Thank you, Lisa. We'd like to thank everyone for joining the earnings call today, and we look forward to speaking with you when we report the third quarter results in November. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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