LifeVantage Announces Financial Results for the Third Quarter of Fiscal 2018

Sandy, Utah, UNITED STATES


Third Quarter Revenue Increased 12.3% Year over Year

Raises Midpoint of 2018 Guidance Range for Adjusted Earnings Per Share

2018 Initiatives Driving Sequential Revenue Growth

SALT LAKE CITY, May 09, 2018 (GLOBE NEWSWIRE) -- LifeVantage Corporation (Nasdaq:LFVN) today reported financial results for its third quarter ended March 31, 2018.

Third Quarter Fiscal 2018 Summary:

  • Revenue increased 12.3% to $50.6 million year over year and 2.2% sequentially;
  • Revenue in the Americas increased 10.6% and revenue in Asia/Pacific & Europe increased 18.0% including a 10.1% increase in Japan, both on a year over year basis. On a sequential basis, all geographical regions generated growth, with the exception of Japan, which followed its typical seasonal pattern from the second to third quarter;
  • Active independent distributors stayed consistent and active preferred customers decreased 0.9% year over year and increased on a sequential basis 1.6% and 1.9%, respectively;
  • Adjusted EBITDA increased 109.8% year over year to $3.4 million;
  • Earnings per diluted share were $0.12, up from $0.00 in the prior year period; and
  • Adjusted earnings per diluted share were $0.12, up from $0.03 in the prior year period.

”We are pleased to report stronger third quarter sales growth on both a sequential and year over year basis,” stated LifeVantage President and Chief Executive Officer Darren Jensen. “We are beginning to see the benefits of our 2018 key initiatives, which are driving sales growth and improvements in our key metrics. March was the highest recruitment month in three years and retention of both distributors and preferred customers increased during the third quarter. Our Stacks product strategy is performing ahead of plan and drove a 23% increase in average order size during the third quarter. Our sales growth is delivering improved earnings and we are increasing the midpoint of our adjusted earnings per share guidance as a result. We look forward to continuing to build upon the recent success by driving each of our initiatives focused on geographical expansion, distributor and customer acquisition and increasing average order size.”

Third Quarter Fiscal 2018 Results

For the third fiscal quarter ended March 31, 2018, the Company reported revenue of $50.6 million, an increase of 12.3% as compared to $45.0 million in the third quarter of fiscal 2017. Revenue in the Americas for the third quarter increased 10.6% compared to the third quarter of fiscal 2017 and revenue in the Asia/Pacific & Europe region increased 18.0% compared to the third quarter of fiscal 2017. Revenue in Japan increased 10.1% compared to the third quarter of fiscal 2017. Revenue for the third quarter of fiscal 2018 was positively impacted $0.8 million, or 1.8%, by foreign currency fluctuations associated with revenue generated in several international markets when compared to the third quarter of fiscal 2017.

Gross profit for the third quarter of fiscal 2018 was $41.6 million, or 82.4% of revenue, compared to $36.8 million, or 81.7% of revenue, for the same period in fiscal 2017. Commissions and incentives expense for the third quarter of fiscal 2018 was $24.3 million, or 48.1% of revenue, compared to $22.8 million, or 50.8% of revenue, for the same period in fiscal 2017. Selling, general and administrative expense (SG&A) for the third quarter of fiscal 2018 was $15.0 million, or 29.7% of revenue, compared to $13.7 million, or 30.5% of revenue, for the same period in fiscal 2017.

Operating income for the third quarter of fiscal 2018 was $2.3 million, compared to $0.2 million for the third quarter of fiscal 2017. Operating income during the third quarter of fiscal 2018 included approximately $0.1 million for expenses associated with executive severance, recruiting and transition and approximately $0.1 million for expenses associated with class-action lawsuits. Adjusted EBITDA was $3.4 million for the third quarter of fiscal 2018, compared to $1.6 million for the comparable period in fiscal 2017.

Net income for the third quarter of fiscal 2018 was $1.6 million, or $0.12 per diluted share. This compares to net income for the third quarter of fiscal 2017 of $0.1 million, or $0.00 per diluted share. Adjusted for class-action lawsuit expense of $0.1 million and executive severance, recruiting and transition expenses of $0.1 million, net of $0.1 million of tax impacts of these adjustments, adjusted Non-GAAP net income was $1.8 million for the third quarter of fiscal 2018, or $0.12 per diluted share, compared to $0.4 million, or $0.03 per diluted share for the comparable period of fiscal 2017. Non-GAAP adjustments to net income during the third quarter of fiscal 2017 included executive severance, recruiting and transition expenses of $0.4 million and class-action lawsuit expense of $0.1 million, net of $0.2 million of tax impacts for these adjustments.

Fiscal 2018 First Nine Months Results

For the first nine months of fiscal 2018, the Company reported net revenue of $149.2 million, an increase of 0.2% compared to $148.8 million for the first nine months of fiscal 2017. In the first nine months of fiscal 2018, revenue in the Americas decreased 0.9%, while revenue in Asia/Pacific & Europe increased 3.7%. Revenue for the first nine months of fiscal 2018 was negatively impacted $0.1 million, or 0.1%, by foreign currency fluctuations associated with revenue generated in several international markets.

Gross profit for the first nine months of fiscal 2018 was $122.4 million, or 82.0% of revenue, compared to $124.3 million, or 83.5% of revenue, for the first nine months of fiscal 2017. Commissions and incentives expense for the first nine months of fiscal 2018 was $71.1 million, or 47.7% of revenue, compared to $72.7 million, or 48.8% of revenue, for the first nine months of fiscal 2017. SG&A for the first nine months of fiscal 2018 was $45.2 million, or 30.3% of revenue, compared to $48.7 million, or 32.7% of revenue, for the first nine months of fiscal 2017.

Operating income for the first nine months of fiscal 2018 was $6.0 million, compared to $2.9 million for the first nine months of fiscal 2017. Operating income for the first nine months of fiscal 2018 includes approximately $0.3 million for expenses associated with class-action lawsuits, approximately $0.3 million associated with executive severance, recruiting and transition expenses and approximately $0.1 million associated with non-recurring legal and accounting expenses. Operating income in the first nine months of fiscal 2017 included approximately $2.7 million for expenses associated with the audit committee review, approximately $0.6 million associated with executive severance, recruiting and transition expenses and $0.1 million associated with class-action lawsuits. Adjusted EBITDA was $9.7 million for the first nine months of fiscal 2018, compared to $9.8 million for the same period in fiscal 2017.

Net income for the first nine months of fiscal 2018 was $2.8 million, or $0.20 per diluted share, compared to $1.5 million, or $0.11 per diluted share for the first nine months of fiscal 2017. Adjusted for class-action lawsuit expenses of $0.3 million, severance, recruiting and transition expenses of $0.3 million, and non-recurring legal and accounting expenses of $0.1 million, net of $0.2 million of tax impacts of these adjustments, 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. Adjusted for expenses associated with the audit committee review of $2.7 million, $0.6 million of costs for executive severance, recruiting and transition expenses and class-action lawsuit expenses of $0.1 million, net of $1.0 million of tax impacts of these adjustments, adjusted Non-GAAP net income for the first nine months of fiscal year 2017 was $3.9 million, or $0.28 per diluted share.

Balance Sheet & Liquidity

The Company generated $7.8 million of cash from operations during the first nine months of fiscal 2018 compared to $4.6 million in fiscal 2017. The year-over-year increase in cash provided by operations during fiscal 2018 primarily relates to increases in net income and favorable changes in net working capital. The Company's cash and cash equivalents at March 31, 2018 were $14.0 million, an increase of $2.5 million when compared to $11.5 million at June 30, 2017. Total debt at March 31, 2018 was $6.0 million compared to $7.4 million at June 30, 2017.

Fiscal Year 2018 Guidance

The Company is narrowing its non-GAAP adjusted earnings per diluted share guidance to a range of $0.45 to $0.50 from $0.40 to $0.50 previously disclosed. For the fourth quarter, the Company anticipates non-GAAP adjusted earnings per diluted share of $0.14 to $0.19 and anticipates that fourth quarter revenue will increase both on a sequential and year over year basis. The Company's adjusted non-GAAP earnings per diluted share guidance excludes any non-operating or non-recurring expenses that may materialize during fiscal 2018. The Company is not providing GAAP earnings per diluted share guidance for fiscal 2018 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. MST (4:30 p.m. EST). Investors interested in participating in the live call can dial (800) 239-9838 from the U.S. International callers can dial (323) 794-2551. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, May 16, 2018, by dialing (844) 512-2921 from the U.S. and entering confirmation code 1443602, or (412) 317-6671 from international locations, and entering confirmation code 1443602.

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 is a science-based health, wellness and anti-aging company dedicated to helping people transform themselves internally and externally at a cellular level. Its scientifically-validated product lines include Protandim® Nrf2 and NRF1 Synergizers, TrueScience® Anti-Aging Skin Care Regimen, Petandim® for Dogs, AXIO® Smart Energy and the PhysIQ™ Smart Weight Management System. 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 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 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
Managing Director, ICR
(617) 956-6736
scott.vanwinkle@icrinc.com


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except per share data)March 31, 2018 June 30, 2017
ASSETS   
Current assets   
Cash and cash equivalents$13,952  $11,458 
Accounts receivable1,329  1,334 
Income tax receivable280  913 
Inventory, net15,816  16,575 
Prepaid expenses and deposits7,852  5,266 
Total current assets39,229  35,546 
    
Property and equipment, net5,660  3,127 
Intangible assets, net1,148  1,247 
Long-term deferred income tax asset3,593  4,087 
Other long-term assets1,299  1,242 
TOTAL ASSETS$50,929  $45,249 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities   
Accounts payable$4,629  $4,850 
Commissions payable7,372  6,837 
Income tax payable72  215 
Other accrued expenses11,617  9,453 
Current portion of long-term debt2,000  2,000 
Total current liabilities25,690  23,355 
    
Long-term debt   
Principal amount4,000  5,500 
Less:  unamortized discount and deferred offering costs(35) (60)
Long-term debt, net of unamortized discount and deferred offering costs3,965  5,440 
Other long-term liabilities1,972  1,927 
Total liabilities31,627  30,722 
Commitments and contingencies   
Stockholders' equity   
Preferred stock — par value $0.0001 and $0.001 per share, 5,000 and 50,000 shares authorized, no shares issued or outstanding   
Common stock — par value $0.0001 and $0.001 per share, 40,000 and 250,000 shares authorized and 14,307 and 14,232 issued and outstanding as of March 31, 2018 and June 30, 2017, respectively 1   14 
Additional paid-in capital123,955  121,599 
Accumulated deficit(104,723) (106,992)
Accumulated other comprehensive income (loss)69  (94)
Total stockholders’ equity19,302  14,527 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$50,929  $45,249 


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
        
 Three Months Ended March 31, Nine Months Ended March 31,
 2018 2017 2018 2017
(In thousands, except per share data)               
Revenue, net$50,562  $45,007  $149,171  $148,848 
Cost of sales8,921  8,233  26,778  24,565 
Gross profit41,641  36,774  122,393  124,283 
        
Operating expenses:       
Commissions and incentives24,320  22,843  71,124  72,679 
Selling, general and administrative15,023  13,708  45,246  48,695 
Total operating expenses39,343  36,551  116,370  121,374 
Operating income2,298  223  6,023  2,909 
        
Other expense:       
Interest expense(92) (131) (357) (406)
Other income (expense), net27  (32) (120) (353)
Total other expense(65) (163) (477) (759)
Income before income taxes2,233  60  5,546  2,150 
Income tax (expense) benefit(598) 1  (2,777) (626)
Net income$1,635  $61  $2,769  $1,524 
Net income per share:       
Basic$0.12  $  $0.20  $0.11 
Diluted$0.12  $  $0.20  $0.11 
Weighted-average shares outstanding:       
Basic14,006  13,915  13,975  13,858 
Diluted14,178  14,105  14,136  14,122 


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
 
 Revenue by Region   
 (unaudited)   
 Three Months Ended March 31, Nine Months Ended March 31,
 2018 2017 2018 2017
(In thousands)                           
Americas$38,026  75% $34,379  76% $111,092  74% $112,127  75%
Asia/Pacific & Europe12,536  25% 10,628  24% 38,079  26% 36,721  25%
Total$50,562  100% $45,007  100% $149,171  100% $148,848  100%
                
 Active Independent Distributors (1)        
 (unaudited)        
                
 As of March 31,        
 2018 2017        
Americas45,000  71% 46,000  73%        
Asia/Pacific & Europe18,000  29% 17,000  27%        
Total63,000  100% 63,000  100%        
                
 Active Preferred Customers (2)        
 (unaudited)        
                
 As of March 31,        
 2018 2017        
Americas89,000  81% 89,000  80%        
Asia/Pacific & Europe21,000  19% 22,000  20%        
Total110,000  100% 111,000  100%        
                
(1)  Active Independent Distributors have purchased product in the prior three months for retail or personal consumption.
(2)  Active Preferred Customers have purchased product in the prior three months for personal consumption only.


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,
 2018 2017 2018 2017
(In thousands)               
GAAP Net income$1,635  $61  $2,769  $1,524 
Interest Expense92  131  357  406 
Provision for income taxes598  (1) 2,777  626 
Depreciation and amortization270  399  942  1,224 
Non-GAAP EBITDA:2,595  590  6,845  3,780 
Adjustments:       
Stock compensation expense657  277  2,110  1,792 
Other (income) expense, net(27) 32  120  353 
Other adjustments(1)185  726  659  3,902 
Total adjustments815  1,035  2,889  6,047 
Non-GAAP Adjusted EBITDA$3,410  $1,625  $9,734  $9,827 
        
(1) Other adjustments for the three months ended March 31, 2018 include approximately $0.1 million for expenses associated with executive severance, recruiting and transition and $0.1 million for expenses associated with class-action lawsuits. Other adjustments for the three months ended March 31, 2017 include approximately $0.6 million for expenses associated with executive severance, recruiting and transition and search firm expenses and $0.1 million for expenses associated with class-action lawsuits. Other adjustments for the nine months ended March 31, 2018 include approximately $0.3 million for expenses associated with class-action lawsuits, $0.3 million for expenses associated with executive severance, recruiting and transition and $0.1 million for expenses associated with non-recurring legal and accounting. Other adjustments for the nine months ended March 31, 2017 include approximately $2.7 million for costs associated with the audit committee review, $1.1 million for executive transition and search firm expenses and $0.1 million associated with class-action lawsuits.


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,
 2018 2017 2018 2017
(In thousands)               
GAAP Net income$1,635  $61  $2,769  $1,524 
Adjustments:       
Executive team severance expenses, net60  (40) 60  39 
Executive team recruiting and transition expenses  477  207  542 
Audit committee independent review expenses      2,742 
Class-action lawsuit expenses125  86  342  86 
Other nonrecurring legal and accounting expenses    51   
Tax impact of adjustments (1)(50) (152) (207) (993)
Tax expense impact of revaluation of deferred tax assets (2)    1,166   
Total adjustments, net of tax135  371  1,619  2,416 
Non-GAAP Net Income:$1,770  $432  $4,388  $3,940 
        
        
 Three Months Ended March 31, Nine Months Ended March 31,
 2018 2017 2018 2017
Diluted earnings per share, as reported$0.12  $  $0.20  $0.11 
Total adjustments, net of tax0.01  0.03  0.11  0.17 
Diluted earnings per share, as adjusted (3)$0.12  $0.03  $0.31  $0.28 
        
(1) Tax impact of 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.
(3) May not add due to rounding.