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CST: 20/11/2019 18:50:36   

LifeVantage Announces Financial Results for the Third Quarter of Fiscal 2019

203 Days ago

Third Quarter Revenue of $56.0 Million Increased 10.8% YOY

Raises Fiscal 2019 Adjusted EPS Guidance

Active Members Increased 9.2% YOY

SALT LAKE CITY, Utah, May 01, 2019 (GLOBE NEWSWIRE) -- LifeVantage Corporation (Nasdaq: LFVN) today reported financial results for its third quarter ended March 31, 2019.

Third Quarter Fiscal 2019 Summary:

  • Revenue increased 10.8% to $56.0 million year over year;
  • Revenue in the Americas increased 6.2% year over year, and revenue in Asia/Pacific & Europe increased 24.8% year over year;
  • Active members increased 9.2%, including independent distributor growth of 7.9% and active customer growth of 10.0% year over year;
  • Adjusted EBITDA increased 18.2% to $4.0 million year over year;
  • Earnings per diluted share were $0.12, consistent with the prior year period;
  • Adjusted earnings per diluted share were $0.13, compared to $0.12 in the prior year period;
  • Narrowing fiscal 2019 revenue guidance to a range of $224 million to $228 million; and
  • Raising fiscal 2019 adjusted diluted earnings per share guidance to a range of $0.50 to $0.54.

* All year over year growth rates compare the third quarter of fiscal 2019 to the third quarter of fiscal 2018.

"We continued to see strong trends during the third quarter, including 11% revenue growth and 9% active member growth, with each of our global markets posting year over year gains. We continue to have good momentum in the business, with the last two quarters representing two of the largest four revenue quarters in our history, and we are on track to have a record revenue year,” stated LifeVantage President and Chief Executive Officer Darren Jensen. “During the third quarter we saw a strong response to our opening of Spain, held our launch event to commemorate the opening of Taiwan and introduced a brand refresh of our PhysIQ smart weight management system. We remain on track for additional geographic expansions in Europe later this fiscal year and continue to execute each of our product, geographic and member growth strategies.”

Third Quarter Fiscal 2019 Results

For the third fiscal quarter ended March 31, 2019, the Company reported revenue of $56.0 million, an increase of 10.8% as compared to $50.6 million in the third quarter of fiscal 2018. Revenue in the Americas for the third quarter increased 6.2% compared to the third quarter of fiscal 2018 and revenue in the Asia/Pacific & Europe region increased 24.8% compared to the third quarter of fiscal 2018. Revenue for the third quarter of fiscal 2019 was negatively impacted $0.6 million, or 1.3%, by foreign currency fluctuations associated with revenue generated in international markets when compared to the third quarter of fiscal 2018.

Gross profit for the third quarter of fiscal 2019 was $46.7 million, or 83.4% of revenue, compared to $41.6 million, or 82.4% of revenue, for the same period in fiscal 2018. The increase in gross margin is primarily due to benefits of a price increase during the second half of fiscal 2018, decreased inventory obsolescence and handling costs, and changes to our geographic and product sales mix.

Commissions and incentives expense for the third quarter of fiscal 2019 was $27.2 million, or 48.6% of revenue, compared to $24.3 million, or 48.1% of revenue, for the same period in fiscal 2018. The year over year increase is due to continued investment in our red carpet program and other promotional and incentive programs designed to increase revenues.

Selling, general and administrative expense (SG&A) for the third quarter of fiscal 2019 was $17.3 million, or 30.9% of revenue, compared to $15.0 million, or 29.7% of revenue, for the same period in fiscal 2018. Adjusted for class-action action lawsuit expense of $0.2 million and nonrecurring legal and accounting expenses of $0.1 million, adjusted non-GAAP SG&A expenses for the third quarter of fiscal 2019 were $17.1 million, or 30.5% of revenue. Adjusted for class-action lawsuit expense of $0.1 million and executive severance, recruiting and transition expenses of $0.1 million, adjusted non-GAAP SG&A expenses for the third quarter of fiscal 2018 were $14.8 million, or 29.3% of revenue. The $2.3 million year over year increase in non-GAAP SG&A was primarily due to increased expenses associated with stock and other employee incentive compensation programs as a result of improved revenue performance and increases in our share price as compared to the prior year period.

Operating income for the third quarter of fiscal 2019 was $2.2 million, compared to $2.3 million for the third quarter of fiscal 2018. Accounting for non-GAAP adjustments noted previously, adjusted non-GAAP operating income for the third quarter of fiscal 2019 was $2.5 million, consistent with the third quarter of fiscal 2018.

Adjusted EBITDA was $4.0 million for the third quarter of fiscal 2019, compared to $3.4 million for the comparable period in fiscal 2018.

Net income for the third quarter of fiscal 2019 was $1.8 million, or $0.12 per diluted share. This compares to net income for the third quarter of fiscal 2018 of $1.6 million, or $0.12 per diluted share. Accounting for the non-GAAP adjustments noted previously, and tax impacts of these adjustments of $39,000, adjusted non-GAAP net income for the third quarter of fiscal 2019 was $2.0 million, or $0.13 per diluted share. Accounting for the non-GAAP adjustments noted previously, and tax impacts of these adjustments of $0.1 million, adjusted non-GAAP net income for the third quarter of fiscal 2018 was $1.8 million, or $0.12 per diluted share.

Fiscal 2019 First Nine Months Results

For the first nine months of fiscal 2019, the Company reported net revenue of $169.8 million, an increase of 13.8% compared to $149.2 million for the first nine months of fiscal 2018. In the first nine months of fiscal 2019, revenue in the Americas increased 11.5% and revenue in Asia/Pacific & Europe increased 20.5% compared to the prior year period. Revenue for the first nine months of fiscal 2019 was negatively impacted $1.2 million, or 0.8%, by foreign currency fluctuations associated with revenue generated in international markets.

Gross profit for the first nine months of fiscal 2019 was $141.5 million, or 83.4% of revenue, compared to $122.4 million, or 82.0% of revenue, for the first nine months of fiscal 2018.

Commissions and incentives expense for the first nine months of fiscal 2019 was $83.2 million, or 49.0% of revenue, compared to $71.1 million, or 47.7% of revenue, for the first nine months of fiscal 2018.

SG&A for the first nine months of fiscal 2019 was $54.2 million, or 31.9% of revenue, compared to $45.2 million, or 30.3% of revenue, for the first nine months of fiscal 2018. Adjusted for class-action lawsuit expense of $0.5 million and nonrecurring legal and accounting expenses of $0.5 million, partially offset by a benefit associated with executive severance of $0.1 million, adjusted non-GAAP SG&A of expenses for the first nine months of fiscal 2019 were $53.3 million or 31.4% of revenue. Adjusted for class-action lawsuit expenses of $0.3 million, executive severance, recruiting and transition expenses of $0.3 million and other nonrecurring legal and accounting expenses of $0.1 million, adjusted non-GAAP SG&A expenses for the first nine months of fiscal 2018 were $44.6 million or 29.9% of revenue. The $8.7 million year over year increase in non-GAAP SG&A was primarily due to increased expenses associated with stock and other employee incentive compensation programs, which increased as a result of improved revenue performance and increases in the Company's share price as compared to the prior year period, costs associated with higher staffing levels added in late fiscal 2018, and due to increased expenses associated with Global Convention and other events, including the U.S. Elite Academy, and the Japan Convention and Elite Academy events.

Operating income for the first nine months of fiscal 2019 was $4.1 million, compared to $6.0 million for the first nine months of fiscal 2018. Accounting for non-GAAP adjustments noted previously, adjusted non-GAAP operating income for the first nine months of fiscal 2019 was $5.1 million compared to $6.7 million for the first nine months of fiscal 2018.

Adjusted EBITDA was $10.6 million for the first nine months of fiscal 2019, compared to $9.7 million for the same period in fiscal 2018.

Net income for the first nine months of fiscal 2019 was $3.5 million, or $0.24 per diluted share, compared to $2.8 million, or $0.20 per diluted share for the first nine months of fiscal 2018. Accounting for the non-GAAP adjustments noted previously, and tax benefits of these adjustments of $0.5 million, adjusted non-GAAP net income for the first nine months of fiscal 2019 was $4.9 million, or $0.33 per diluted share. Accounting for the non-GAAP adjustments noted previously, and tax expense of these adjustments of $0.2 million and $1.2 million of one-time, non-cash tax expense associated with the re-valuation of deferred tax assets to the new federal corporate tax rate, adjusted non-GAAP net income for the first nine months of fiscal 2018 was $4.4 million, or $0.31 per diluted share.

Balance Sheet & Liquidity

The Company generated $10.8 million of cash from operations during the first nine months of fiscal 2019 compared to $7.8 million in the comparable period of fiscal 2018. The Company's cash and cash equivalents at March 31, 2019 were $15.9 million, compared to $16.7 million at June 30, 2018. Total debt at March 31, 2019 was $1.9 million compared to $5.4 million at June 30, 2018. During the first nine months of fiscal 2019, the Company repurchased $1.7 million of common shares under its share repurchase plan.

Fiscal Year 2019 Guidance

The Company is narrowing its revenue guidance for fiscal 2019 to a range of $224 million to $228 million, compared to $222 million to $232 million previously. The Company is raising its fiscal 2019 non-GAAP adjusted earnings per share guidance to a range of $0.50 to $0.54 compared to $0.46 to $0.52 previously. The significant increase in the Company’s share price during the first half of fiscal 2019 led to increases in the diluted share count and stock-based compensation expenses, each of which is directly correlated to the share price. The impact of these items does not affect expected growth in adjusted EBITDA, which the Company expects will more closely correlate with anticipated revenue growth. The Company's adjusted non-GAAP earnings per diluted share guidance excludes any non-operating or non-recurring expenses that may materialize during the remainder of fiscal 2019. The Company is not providing GAAP earnings per diluted share guidance for fiscal 2019 due to the potential occurrence of one or more non-operating, one-time expenses, which the Company does not believe it can reliably predict.

Conference Call Information

The Company will hold an investor conference call today at 2:30 p.m. MDT (4:30 p.m. EDT). Investors interested in participating in the live call can dial (888) 394-8218 from the U.S. International callers can dial (323) 701-0225. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, May 8, 2019, by dialing (844) 512-2921 from the U.S. and entering confirmation code 3897546, or (412) 317-6671 from international locations, and entering confirmation code 3897546.

There will also be a simultaneous, live webcast available on the Investor Relations section of the Company's web site at http://investor.lifevantage.com/events-and-presentations. The webcast will be archived for approximately 30 days.

About LifeVantage Corporation

LifeVantage Corporation (Nasdaq: LFVN) is a pioneer in Nutrigenomics - a new science dedicated to biohacking the human aging code. The company is engaged in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin and hair care products, including Protandim®, a line of scientifically-validated dietary supplements; TrueScience®, a line of Nrf2 infused skin care and hair care products; Petandim™ for Dogs, a companion pet supplement formulated to combat oxidative stress in dogs; Axio® Smart Energy Drink mixes; PhysIQ™, a Smart Weight Management System; and Omega+, a 3-in-1 fish oil supplement. LifeVantage was founded in 2003 and is headquartered in Salt Lake City, Utah. For more information, visit www.lifevantage.com.

Forward Looking Statements

This document contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as "believe", "hopes", "intends", "estimates", "expects", "projects", "plans", "anticipates", "look forward to", "goal", “may be”, and variations thereof, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include, but are not limited to, statements we make regarding the benefits of our key initiatives, future growth, including geographic and product expansion, and expected financial performance. Such forward-looking statements are not guarantees of performance and the Company's actual results could differ materially from those contained in such statements. These forward-looking statements are based on the Company's current expectations and beliefs concerning future events affecting the Company and involve known and unknown risks and uncertainties that may cause the Company's actual results or outcomes to be materially different from those anticipated and discussed herein. These risks and uncertainties include, among others, those discussed in greater detail in the Company's Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q under the caption "Risk Factors," and in other documents filed by the Company from time to time with the Securities and Exchange Commission. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this document. All forward-looking statements are based on information currently available to the Company on the date hereof, and the Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this document, except as required by law.

About Non-GAAP Financial Measures

We define Non-GAAP EBITDA as earnings before interest expense, income taxes, depreciation and amortization and Non-GAAP Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization, stock compensation expense, other income, net, and certain other adjustments. Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We define Non-GAAP Net Income as GAAP net income less certain tax adjusted non-recurring one-time expenses incurred during the period and Non-GAAP Earnings per Share as Non-GAAP Net Income divided by weighted-average shares outstanding.

We are presenting Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Earnings Per Share because management believes that they provide additional ways to view our operations when considered with both our GAAP results and the reconciliation to net income, which we believe provides a more complete understanding of our business than could be obtained absent this disclosure. Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Earnings Per Share are presented solely as supplemental disclosure because: (i) we believe these measures are a useful tool for investors to assess the operating performance of the business without the effect of these items; (ii) we believe that investors will find this data useful in assessing shareholder value; and (iii) we use Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Earnings Per Share internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Earnings per Share has limitations and you should not consider these measures in isolation from or as an alternative to the relevant GAAP measure of net income prepared in accordance with GAAP, or as a measure of profitability or liquidity.

The tables set forth below present reconciliations of Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP Earnings per Share, which are non-GAAP financial measures to Net Income and Earnings per Share, our most directly comparable financial measures presented in accordance with GAAP.

Investor Relations Contacts:

Scott Van Winkle, ICR
(617) 956-6736, scott.vanwinkle@icrinc.com 

 
LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except per share data) March 31, 2019   June 30, 2018
ASSETS      
Current assets      
Cash and cash equivalents $ 15,913     $ 16,652  
Accounts receivable 1,916     2,067  
Income tax receivable 2,718     451  
Inventory, net 14,490     13,627  
Prepaid expenses and other 7,640     6,141  
Total current assets 42,677     38,938  
       
Property and equipment, net 6,818     6,587  
Intangible assets, net 1,016     1,115  
Deferred income tax asset 2,349     3,255  
Other long-term assets 1,245     1,247  
TOTAL ASSETS $ 54,105     $ 51,142  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities      
Accounts payable $ 5,065     $ 3,813  
Commissions payable 8,336     7,546  
Income tax payable 188     39  
Other accrued expenses 11,950     10,407  
Current portion of long-term debt, net 1,939     2,000  
Total current liabilities 27,478     23,805  
       
Long-term debt      
Principal amount     3,500  
Less:  unamortized discount and deferred offering costs     (88 )
Long-term debt, net of unamortized discount and deferred offering costs     3,412  
Other long-term liabilities 1,881     1,978  
Total liabilities 29,359     29,195  
Commitments and contingencies      
Stockholders' equity      
Preferred stock — par value $0.0001 per share, 5,000 shares authorized, no shares issued or outstanding      
Common stock — par value $0.0001 per share, 40,000 shares authorized and 14,328 and 14,073 issued and outstanding as of March 31, 2019 and June 30, 2018, respectively 1     1  
Additional paid-in capital 125,695     124,663  
Accumulated deficit (100,918 )   (102,731 )
Accumulated other comprehensive income (loss) (32 )   14  
Total stockholders’ equity 24,746     21,947  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 54,105     $ 51,142  
               


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
               
  Three Months Ended March 31,   Nine Months Ended March 31,
(In thousands, except per share data) 2019   2018   2019   2018
Revenue, net $ 56,012     $ 50,562     $ 169,788     $ 149,171  
Cost of sales 9,270     8,921     28,263     26,778  
Gross profit 46,742     41,641     141,525     122,393  
               
Operating expenses:              
Commissions and incentives 27,205     24,320     83,166     71,124  
Selling, general and administrative 17,296     15,023     54,213     45,246  
Total operating expenses 44,501     39,343     137,379     116,370  
Operating income 2,241     2,298     4,146     6,023  
               
Other expense:              
Interest expense, net (72 )   (92 )   (282 )   (357 )
Other income (expense), net (11 )   27     (132 )   (120 )
Total other expense (83 )   (65 )   (414 )   (477 )
Income before income taxes 2,158     2,233     3,732     5,546  
Income tax expense (376 )   (598 )   (210 )   (2,777 )
Net income $ 1,782     $ 1,635     $ 3,522     $ 2,769  
Net income per share:              
Basic $ 0.13     $ 0.12     $ 0.25     $ 0.20  
Diluted $ 0.12     $ 0.12     $ 0.24     $ 0.20  
Weighted-average shares outstanding:              
Basic 14,165     14,006     14,027     13,975  
Diluted 15,286     14,178     14,978     14,136  


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
 
  Revenue by Region                
  (unaudited)                
       
  Three Months Ended March 31,   Nine Months Ended March 31,
(In thousands) 2019   2018   2019   2018
Americas $ 40,366     72 %   $ 38,026     75 %   $ 123,885     73 %   $ 111,092     74 %
Asia/Pacific & Europe 15,646     28 %   12,536     25 %   45,903     27 %   38,079     26 %
Total $ 56,012     100 %   $ 50,562     100 %   $ 169,788     100 %   $ 149,171     100 %
                               
  Active Members                
  (unaudited)                
                               
  As of March 31,                
  2019   2018   Change from
Prior Year
  Percent
Change
       
Active Independent Distributors (1)                              
  Americas 45,000     66 %   45,000     71 %       %        
  Asia/Pacific & Europe 23,000     34 %   18,000     29 %   5,000     27.8 %        
  Total Active Independent Distributors 68,000     100 %   63,000     100 %   5,000     7.9 %        
                                             
Active Customers (2)                                            
  Americas 98,000     81 %   89,000     81 %   9,000     10.1 %        
  Asia/Pacific & Europe 23,000     19 %   21,000     19 %   2,000     9.5 %        
  Total Active Customers 121,000     100 %   110,000     100 %   11,000     10.0 %        
                                             
Active Members (3)                                            
  Americas 143,000     76 %   134,000     77 %   9,000     6.7 %        
  Asia/Pacific & Europe 46,000     24 %   39,000     23 %   7,000     17.9 %        
  Total Active Members 189,000     100 %   173,000     100 %   16,000     9.2 %        
                               
(1)  Active Independent Distributors have purchased product in the prior three months for retail or personal consumption.
(2)  Active Customers have purchased product in the prior three months for personal consumption only.
(3)  Total Active Members is the sum of Active Independent Distributors and Active Customers.


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA
(Unaudited)
       
  Three Months Ended March 31,   Nine Months Ended March 31,
(In thousands) 2019   2018   2019   2018
GAAP Net income $ 1,782     $ 1,635     $ 3,522     $ 2,769  
Interest Expense 72     92     282     357  
Provision for income taxes 376     598     210     2,777  
Depreciation and amortization 478     270     1,356     942  
Non-GAAP EBITDA: 2,708     2,595     5,370     6,845  
Adjustments:              
Stock compensation expense 1,083     657     4,136     2,110  
Other expense, net 11     (27 )   132     120  
Other adjustments(1) 226     185     920     659  
Total adjustments 1,320     815     5,188     2,889  
Non-GAAP Adjusted EBITDA $ 4,028     $ 3,410     $ 10,558     $ 9,734  
               
(1) Other adjustments breakout:              
Class-action lawsuit expenses $ 159     $ 125     $ 527     $ 341  
Executive team severance expenses, net     60     (79 )   60  
Executive team recruiting and transition expenses             207  
Other nonrecurring legal and accounting expenses 67         472     51  
Total adjustments $ 226     $ 185     $ 920     $ 659  
                               


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Non-GAAP Net Income and Non-GAAP Adjusted EPS
(Unaudited)
       
  Three Months Ended March 31,   Nine Months Ended March 31,
(In thousands) 2019   2018   2019   2018
GAAP Net income $ 1,782     $ 1,635     $ 3,522     $ 2,769  
Adjustments:              
Executive team severance expenses, net     60     (79 )   60  
Executive team recruiting and transition expenses             207  
Class-action lawsuit expenses 159     125     527     341  
Other nonrecurring legal and accounting expenses 67         472     51  
Tax impact of adjustments(1) (39 )   (50 )   473     (207 )
Tax expense impact of revaluation of deferred tax assets(2)             1,166  
Total adjustments, net of tax 187     135     1,393     1,618  
Non-GAAP Net Income: $ 1,969     $ 1,770     $ 4,915     $ 4,387  
               
  Three Months Ended March 31,   Nine Months Ended March 31,
  2019   2018   2019   2018
Diluted earnings per share, as reported $ 0.12     $ 0.12     $ 0.24     $ 0.20  
Total adjustments, net of tax 0.01     0.01     0.09     0.11  
Non-GAAP adjusted diluted earnings per share $ 0.13     $ 0.12     $ 0.33     $ 0.31  
               
(1) Tax impact of the fiscal 2018 adjustments excludes the effect of the one-time deferred tax asset adjustment.
(2) Tax impact of the remeasurement of our deferred tax assets, pursuant to the 2017 tax reform legislation. Deferred tax assets were reduced as the reversal of the underlying transactions will be deductible at the lower corporate tax rates included in the 2017 legislation.

 

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