SNYR

Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy CHC Corp.'s financial results for the fourth quarter and full year ended December 31, 2025. Joining us today are Synergy CEO Jack Ross, CFO Jaime Fickett, and Greg Robles with Investor Relations. Following their remarks, we'll open the call for analyst questions. Before we go further, I'd like to turn the call over to Mr. Robles as he reads the company's Safe Harbor statement.

Thanks, Liz. Good morning, and thanks for joining our conference call to discuss our fourth quarter and full year 2025 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. 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.

The 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?

Thank you, Greg. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the fourth quarter and full year of 2025. While 2025 was a year of transition in many areas of our business, it was also a year of meaningful strategic progress that sets important foundation for sustainable long-term growth. Before discussing our performance, I want to briefly address the 8-K we filed regarding our international license agreement covering the U.A.E. and Turkey. As many of you recall, in mid-2025, we expanded our international license partnership to include U.A.E. and Turkey for a baseline licensing fee with additional royalties tied to product performance. However, the licensee has elected to terminate the agreement given the increasing instability and uncertainty across the region.

As a result, the $2.5 million licensing revenue associated with the agreement had to be reversed. While unfortunate, this outcome reflects the macro volatility outside of our control rather than any change in our conviction around the potential of FOCUSfactor internationally. We continue to view the U.A.E. and Turkey as an attractive multi-year growth market for both our supplements and functional beverages. The groundwork we laid in 2025 hasn't been lost. The demand remains intact, the brand is strong, and our international strategy continues to be focused on scalable capital efficient expansion. Before I turn the call over to Jamie, I want to touch on another development that further supports our international growth strategy.

During 2025, we established our wholly owned subsidiary in Mexico, and in December, we initiated our first product shipments to Costco de México. On the beverage side of our business, during the first quarter of 2026, we have generated over $600,000 in gross revenue, surpassing the entire 2025 revenue, which now equates to $2.5 million run rate for 2026. We have shipped our Focus and Energy RTDs and shots to new key distribution locations, including EG America, the parent company of Cumberland Farms, convenience stores, Wakefern Food Corp., Indian Nation Wholesale, McCool Distributors, Mancini Beverage, Tenace Incubation, and Pine State Beverage, to name a few.

We have millions of cans of RTDs and shots in stock and ready to ship, and we expect 2026 to be a foundational growth year for our beverage division. We continue to execute on our supplement side as well, having just shipped three new SKUs to all 1,600 Kroger locations. One initiative that we did not achieve in 2025 was turning back on the TV advertising, which is hugely important for our existing store growth. We will be diligently working towards executing this in 2026 to drive same store growth within our key retailers. If the results that we achieved in the past hold true, we expect to see at least a 15% lift in same store sales once the TV advertising is up and running.

With those updates, I'd like to turn the call over to our Chief Financial Officer, Jaime Fickett. Jaime?

Thank you, Jack. I'll now review our financial results. Beginning with the fourth quarter, net revenue was $6.07 million compared to $10.27 million in the year ago quarter. A 41% decrease versus the prior year. The decrease was due to the termination of the license agreement of $2.9 million. Without that reversal, net revenue was $8.97 million, a 12.7% decrease. Gross margin for the fourth quarter was 36.6% compared to 63.3% in the same quarter last year. The decrease in gross margin was primarily driven by the termination of the license agreement of $2.9 million and a write-off of obsolete inventory of $1.04 million. Without those two items, gross margin would have been 68.8%, an increase from prior year.

Operating expenses for the fourth quarter were $15.53 million compared to $5.14 million in the year ago quarter. The increase in operating expenses was largely due to one-time items of an allowance for bad debt of $6.6 million and the write-off of prepaid media credits of $0.9 million. Without those two items, operating expenses would have been $8 million. The majority of the increase was due to professional fees for our corporate development. Loss from operations for the fourth quarter of 2025 was $13.31 million, compared to income from operations of $1.35 million in the fourth quarter of 2024.

As discussed, this is largely due to one-time items of allowance of bad debts of $6.66 million, termination of the license agreement of $2.9 million, write-off of the obsolete inventory of $1.04 million, and the write-off of a prepaid media credit of $0.9 million. Without those one-time items, loss from operations would have been $1.85 million, which is impacted by the increased professional fees for our corporate development. Net loss for the fourth quarter was $14.82 million or $1.35 per diluted share, compared to net income of $105,700. Or $0.01 per diluted share in the fourth quarter of 2024.

This is largely due to one-time items of allowance of bad debt of $6.66 million, termination of the license agreement of $2.9 million, write-off of obsolete inventory of $1.04 million, and the write-off of prepaid media credits of $0.9 million. Without those one-time items, net loss would have been $3.35 million, which is impacted by the increased professional fees for corporate development. EBITDA loss for the fourth quarter was $13.28 million, compared to EBITDA income of $1.68 million in the fourth quarter of 2024. Adjusted EBITDA loss for the fourth quarter was $4.48 million, compared to Adjusted EBITDA income of $2.79 million in the fourth quarter of 2024. Now turning to our full year results.

For the full year of 2025, revenue was $30.38 million, compared to $34.83 million in the year-ago period. Without reversing the $2.9 million in license revenue, our net revenue would have been $33.28 million in 2025. Gross margin for the full year of 2025 was 66.8% compared to 67.9% in the year-ago period. Without the previously discussed inventory write-off, gross margin would have been 70.3% and increased over prior year. Operating expenses for the year were $28.76 million, compared to $17.84 million a year ago. Without the one-time items previously mentioned, operating expenses would have been $21.24 million, which is impacted by the increased professional fees for corporate development.

Loss from operations for the year was $8.46 million, compared to income from operations of $5.8 million a year ago. The decrease is also due to the one-time items as discussed. Without them, the full year income from operations would have been $3 million, impacted by increased professional fees for corporate development. Net loss for the year was $12.3 million or $1.27 per diluted share, compared to net income of $2.1 million or $0.28 per diluted share a year ago. This is also due to the one-time items as discussed, offset by a gain on the settlement of our notes payable of $2.15 million. Without those items, the full year net loss would have been $3.03 million, which again is impacted by the increased professional fees for our corporate development.

EBITDA loss was $6.19 million in 2025, compared to EBITDA of $6.46 million a year ago. Adjusted EBITDA income was $800,000, compared to Adjusted EBITDA income of $7.35 million a year ago. Moving to our balance sheet and cash flow. As of December 31, 2025, we had cash and cash equivalents of $2.6 million, compared to $687.9 thousand as of December 31, 2024. Inventory was at $3.7 million at the end of the fourth quarter compared to $1.7 million at the end of 2024. At the end of December 31, 2025, we had $33.3 million in total liabilities, compared to $33 million in total liabilities December 31, 2024.

At December 31, 2025, we had a working capital surplus of $1.78 million as compared to a working capital deficit of $1.12 million as of December 31, 2024. For the 12 months ended December 31, 2025, our cash used in operating activities was $2.6 million, compared to cash used in operating activities of $4.8 million at December 31, 2024. The decrease primarily reflects higher non-cash charges, including bad debt write-offs and stock-based compensation, as well as improved cash collections and accounts receivable, partially offset by the increased inventory investment and the gain on the settlement of debt. Now I will turn the call back to the Operator.

Thank you, ma'am. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question will come from Sean McGowan with ROTH Capital Partners. Please proceed.

Good morning. Can you hear me okay?

We can. Good morning, Sean.

Great. Good morning. On your comments on the RTD, you know, year-to-date being better than all of last year, that kind of implies that the fourth quarter was, I don't know, maybe 200,000 or something. So what is still going on there that kept that from being a lot higher in the fourth quarter?

As you know, we just raised the money to actually build the inventory in August. You know, to actually get the inventory built, you know, takes time, meaning, you know, 8 weeks-12 weeks to build the inventory. We just really received the majority of the RTD inventory in-house in December. That's, you know, that's what affected that.

Okay. Looking at some of the other lines was, like, let's say, compared to the third quarter, was Flat Tummy up?

No. Flat Tummy continues to decline. You know, the weight loss business is being heavily impacted by the GLP-1s. It seems that, you know, the whole industry's moved to those. We'll be making a strategic decision on Flat Tummy in the near future.

Okay. On the Core Supplement group, what's going on there?

The Core Supplement group, I think, you know, is relatively strong. We continue to, you know, add key retailers like Kroger we mentioned. Although the TV advertising is very key to that, you know, same-store growth. You know, we have our competitors, we all know who the competitors are, pounding the TV airwaves every single day and night. You know, we need to get that TV turned back on.

Okay. What do you think the outlook is gonna be, with a lot of these one-time things behind you regarding gross margin?

Jaime, you wanna talk to that?

Sure. We anticipate gross margin to maintain its current level or increase. Again, it was impacted largely by those one-time items. Other than that, our gross margin remains stable.

Do you mean, when you say at the current level, you mean excluding those one-time items?

Yes. Sorry. Like, as I read in the script.

All right. Okay.

We look at it normalized.

Okay. Has there been any other changes to your approach, you know, kind of go-to-market strategy on the RTD, as you know, look to roll that out?

No, I think, you know, again, it's a sales cycle, Sean, right? You know, these things are all driven by planograms. You know, you really get, you know, twice a year where you can really, you know, quote-unquote, "gain meaningful distribution" in, we'll call it, the major chains. Certainly, you can add, you know, the smaller chains in the meantime, but, you know, we continue with the sales cycle. You know, we do expect, this is big news, we do expect to have some Costco roadshows coming up in different regions, and we expect to have a BJ's roadshow coming up. Should be some meaningful growth there on the beverage side.

Okay. All right. Thank you.

Okay.

As a reminder, if you'd like to ask a question at this time, please press star one one on your touchtone phone. Our next question will come from Edward Woo with Ascendiant Capital. Please proceed.

Yes, thanks for taking my question and congratulations on the, you know, the growth in Mexico. You guys recently formed a subsidiary in Mexico. Are there other international markets that you plan on, you know, creating a subsidiary to, you know, ship directly in those markets?

Edward, good speaking with you today. No, we don't have any other plans on opening international markets directly at this time. Although Mexico is a massive opportunity for us, you know, to build out the retail network there. You know, having that subsidiary there allows us to do that. As you can see, you know, we've started a lot of initiatives last year and, you know, for Synergy, 2026 is about executing against those initiatives. Get those TVs turned back on, get the same store sales growing, get the opportunities in Mexico that we've already identified up and running, and continue to grow our beverage business. That's the focus for 2026.

Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

Thank you.

At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Ross for closing remarks.

Thank you, everyone, for joining the earnings call today. We look forward to speaking to you shortly as we report our first quarter of 2026 results. Thank you.

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

Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy CHC Corporation's Financial Results for the Third Quarter ended September 30, 2025. Joining us today are Synergy's CEO, Jack Ross; CFO, Jamie Fickett; 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. Greg, please go ahead.

Thanks, Karmin. Good morning, and thanks for joining our conference call to discuss our third quarter 2025 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. 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. The 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?

Thank you, Greg. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the third quarter of 2025. We are pleased to report our 11th consecutive quarter of profitability, reflecting our continued operational discipline and focused execution. Revenue, gross profit and income from operations increased year-over-year, underscoring the strength of our platform as we scale across new categories and geographies. Before we get into the financial results, let me touch on a few key developments across our business. During the third quarter, we made important leadership additions to support our expanding operations. First, we welcomed Teresa Thompson to our Board of Directors. Teresa spent nearly 4 decades at Costco Wholesale, including 29 years as a pharmacy OTC buyer, where she oversaw the vitamins and supplement categories across all U.S. warehouses. Her insights and category experience will be invaluable as we scale FOCUSfactor brand globally and strengthen our supplement strategy. We also added Bob Anderson as our new Director of Direct Store Distribution, otherwise known as DSD. Bob has over 20 years' experience in the beverage industry, and he will be responsible for building and optimizing our nationwide direct-to-store distribution for our beverage division. With his extensive experience, we expect to be signing new distribution partners continually and rapidly. Moving to our functional beverage momentum. This business continues to accelerate for us and is supported by a growing national and international retail footprint. During the third quarter, we secured several major distribution wins that significantly expands our retail availability to our functional beverages and shops. Looking at our domestic expansion, EG of America, the sixth largest convenience store chain in the U.S. will launch our focus and energy beverages to over 1,600 high-traffic locations nationwide in Q4 of this year. The rollout meaningfully increases our visibility in convenience channel and strengthens our position in the fast-growing functional beverage category. Additionally, Wakefern Food Group, the largest retailer owned cooperative in the U.S., will carry five focus and energy SKUs across 365 retail locations. On a regional front, we announced new partnerships with AlaBev, one of the premier beverage distributors in the Southeast U.S., who will distribute our beverages and brain health shops to over 5,000 grocery, convenience and specialty retailers across Alabama. We also signed an agreement with Atlantic Importing Company, a leading New England-based distributor to expand our beverage footprint across Massachusetts, Connecticut and Rhode Island. These partnerships reflect strong validation from top-tier retailers and distributors who see the opportunity for the FOCUSfactor beverage to lead the clean energy and brain health beverage segment. As we continue to expand our beverage business, our focus remains on disciplined execution, brand awareness and ensuring the availability of products in key markets that drive both volume and profitability. Turning to the supplement business. We continue to strengthen our momentum in this category as well. FOCUSfactor has recently been named the #1 pharmacist recommended OTC memory supplement for 2025, '26 by the Pharmacy Times. This underscores the confidence pharmacists place in our brand and our mission to deliver meaningful cognitive support to our consumers. In the U.S., our supplement business expands with Kroger, one of America's largest supermarkets operating in 35 states, which will launch 3 SKUs for the FOCUSfactor supplement across 1,600 of its 2,800 locations beginning in April of 2026. In Canada, Uniprix, one of Quebec's largest pharmacy networks will introduce the supplements across 300 stores beginning in February of 2026. Together, these launches expand our core brand presence across grocery and pharmacy channels, reinforcing our dual strategy of growing our supplements and beverages under the trusted FOCUSfactor banner. We also continue our international expansion. We have now received our first round of purchase orders from Costco, Mexico for the FOCUSfactor supplements, which will ship in December in the Q4. Also, our management team -- some of our management team is going to Dubai next week to meet with our licensing partner and attend the Middle East Organic Natural Products Expo, which will provide key contacts as we continue to develop our international footprint. Before passing the call over to Jamie to cover the financial results, I'd like to briefly touch on the public offering we closed in August. We raised $4.4 million of equity capital, which provides us with additional working capital to support our retail rollouts, inventory buildup and production and marketing initiatives. This capital enhances our flexibility to meet rising demand and invest in our continued growth. Overall, the results reflect another strong quarter of execution, meaningful progress across both the beverage and supplement business with new retail authorizations, expanded distribution partnerships, experienced leadership teams being added -- leadership people being added to our team, Synergy is well positioned to accelerate growth through the remainder of '25 and into '26. With that, I'll turn the call over to our Chief Financial Officer, Jamie Fickett. Jamie?

Thank you, Jack. I'll now review our financial results. For the third quarter of 2025, net revenue was $8 million compared to $7.1 million in the year ago quarter, reflecting an increase of 12.4%. Gross margin for the third quarter was 70.9% compared to 67.2% in the same quarter last year. The increase in gross margin was primarily driven by a favorable shift in product mix. Operating expenses for the third quarter were $4.4 million compared to $3.7 million in the year ago quarter. The increase in operating expenses was primarily due to incremental costs associated with being a public company and the added cost of launching our beverage division. Income from operations was $1.28 million, up 21.8% from $1.05 million compared to the third quarter of 2024. Net income for the third quarter was $125,300 compared to $783,600 in the year ago quarter. Earnings per share for the third quarter was $0.01 per diluted share compared to $0.11 per diluted share in the year ago quarter. Adjusted EBITDA per share for the third quarter was $0.15 per diluted share compared to $0.18 per diluted share in the year ago quarter. These decreases are due to other income in the same period last year and higher expenses this year to launch the Beverage division. EBITDA for the third quarter was $1.31 million, down 1.3% compared to $1.33 million in the third quarter of 2024. Adjusted EBITDA for the third quarter was $1.52 million, up 13.4% compared to $1.34 million in the third quarter of 2024. Moving to our balance sheet. As of September 30, 2025, we had cash and cash equivalents of $1 million compared to $687,900 as of December 31, 2024. Inventory was $2.1 million at the end of the third quarter compared to $1.7 million at December 31, 2024, and we also have an increase in our prepaid deposits of nearly $2 million, largely due to an increase in deposits on inventory for our growing beverage division. At September 30, 2025, we have a working capital surplus of $16.68 million compared to a working capital deficit of $1.12 million as of December 31, 2024. For the 9 months ended September 30, 2025, our cash used in operating activities was $3.21 million compared to cash used in operating activities of $1.38 million at September 30, 2024. The increase primarily reflects higher prepaid expenses for deposits on inventory and continued reductions in accounts payable and accrued liabilities. Now I will turn the call back to the operator.

[Operator Instructions] Our first question will come from the line of Sean McGowan with ROTH Capital Partners.

I have a couple of questions. Can you give us some sense of what contribution there was in the quarter from the beverages?

So in the current quarter -- the third quarter was $159,000 of beverage revenue.

Okay. That's helpful. Now -- and that might explain or tie into the next question, which is, can you give me a little bit more color on the dynamics of the product mix? I mean, specifically, like what is the highest margin revenue source? And how high is that in order for the blended average to come out pretty high. I think it is the highest you've seen in a while, right?

Yes. So in our supplement business, we actually took a price increase to our Costco business of 11%, which I think our gross margin on our supplements on gross revenue is about 75% before. So it obviously increased that way. And our net -- our gross to net is about 11% of the difference. So we basically took about 11% increase in half of our business.

Okay. When I said it was the highest you've seen in a while, I meant factoring in the RTD. Anyway, last question, is the G&A that you reported in the quarter indicative of what we should expect to see kind of an ongoing rate? Or given some of the executive additions that you've made that you highlighted at the top of the call as well as some others, will the kind of fourth quarter and ongoing rate be higher than what we see in the third quarter?

It's a good question, Sean. So we've sort of -- we'll call, added a secondary strategy to our beverage rollout. So with the sale of we'll call Poppi to Pepsi and the sale of Alani to Celsius, it really opened up, we'll call a lot of holes in the DSD networks, meaning Poppi and Alani are going back to Pepsi distribution. And we got very fortunate timings everything in life. And the DSD networks, the beer guys have opened up a lot of holes in their distribution network. So two things. Obviously, we expect to have an Allstate's strategy in our DSD network very quickly as we're signing these rapidly, and you'll read about some more next week and the week after and the week after. But more importantly, to support those guys on the DSD side, we will be also adding human capital, salespeople and service people to support those DSD distributors to bring on, we'll call regional retailers. So a little shift there where the opportunity presented itself with holes in the DSD distribution coming available, which should help us accelerate our RTD business a lot quicker than we thought in the convenience store side. So there will be some -- a long way to say, there will be some added human capital in the fourth quarter and first quarter and second quarter as we expand that Allstate DSD distribution.

And at this time, this concludes our Q&A session. I would like to turn the call back over to Mr. Ross for closing remarks.

Thank you, Karmin. In closing, just a few final comments. We currently have over 3 million cans of drink inventory now in stock from our capital raise in August with more production being done as we speak. We are continuing to add key employees throughout our organization to build out our sales network. 2025 has been a foundational year for Synergy between refinancing our debt out to 2029, raising equity to support our balance sheet and growth and signing many key distribution partners and retailers we feel that the team has positioned the company well for an exciting 2026. We thank everyone for joining the call today, and we look forward to speaking with everyone again in March when we announce our year-end results. Thank you.

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