The brand, once based in Denver but long since moved to Southern California, was founded by former NFL player Brad Pyatt. Pyatt built the company on high profile athletic sponsorships and marketing deals with Arnold Schwarzenegger, Tiger Woods and others. At one time reported annual revenue of more than $150 million.
Costs run out of control, FTC files case
But costs rose even faster and the company was not able to break through to profitability even as sales soared. The Federal Trade Commission got involved, charging the company with a series of accounting and disclosure violations. To settle the case Pyatt was ousted as CEO in 2015 and agreed to pay a $150,000 fine.
Ryan Drexler, one of the company’s main investors, took over as CEO and embarked on a restructuring plan. There have been several reported ‘turn the corner’ moments over the years as Drexler unwound Pyatt’s expensive marketing partnerships. The company also had to settle an expensive lawsuit with a contract manufacturer.
But stock traders didn’t seem to share the company’s view of its restructuring progress. Shares of MusclePharm traded at $13 a share and higher during the Pyatt era. After his ouster and the extensive restructuring needed to put the company on a path toward profitability stretched out, the share price declined more or less steadily into the penny stock realm. The share price sank below $1 for the first time in late 2018 and stayed there until the company released its year end earnings this week.
In the earnings statement Drexler said the company managed to become profitable even though sales continued to fall. And this was achieved during the pandemic, which was a difficult time for many sports nutrition brands aimed at selling products to support gym workouts.
“Despite 2020 being a challenging year due to COVID-19, we executed at the highest level achieving strong results by turning a profit for the first time in our Company’s history. We reduced operating expenses by 29%, expanded our gross margins to over 30% and strategically expanded our omni-channel strategy by increasing penetration with our largest online customers,” Drexler said.
Earnings details
MusclePharm reported fourth quarter 2020 net revenue of $15.1 million, compared to $17.4 million during the same quarter of 2019. But gross margin was up to 31.7% compared to 14.4% year over year, and the company turned a $2.8 million profit on those sales, as opposed to a loss of $3.5 million the year previously.
For the full year, the company reported $64.4 million in net sales, compared to $79.7 million the year previously. For the full year, MusclePharm showed net income of $3.2 million versus a full year loss of $18.9 million in 2019.
Stock traders rewarded the company for the turnaround. Shares of Musclepharm climbed more than 30% after the announcement, and the stock is trading at $1.12 today, the first time it has broken the $1 barrier in more than two years.
