Revenue in Americas Increases 7.2% Compared to
Prior Year Period
Company Plans New Product Launch in April 2014 at
its Global Convention
Expands Senior Management with Appointments of
Chief Sales Officer and Chief Science Officer
Company Reiterates Fiscal 2014 Operating Margin
and EPS Guidance; Updates Fiscal 2014 Revenue Guidance Range
LifeVantage Corporation (Nasdaq:LFVN), a company dedicated to
helping people achieve healthy living through a combination of a
compelling business opportunity and scientifically validated
products, today reported financial results for the fiscal 2014
second quarter and six months ended December 31, 2013.
Fiscal 2014 Second Quarter Highlights:
- Net revenue of $51.5 million, negatively impacted by $3.6
million of year-over-year foreign currency fluctuation;
- Increased revenue in the Americas 7.2% compared to prior
year;
- Hired Chief Sales Officer and Chief Science Officer;
- Began Real Salt Lake Major League Soccer marketing
sponsorship;
- Achieved operating income of $5.2 million and net income of
$3.3 million; and
- Planned product launch date for April.
Douglas C. Robinson, President and Chief Executive Officer of
LifeVantage stated, "During the second quarter, we have taken
significant steps to reignite growth by: (1) enhancing our
management team with the additions of a new Chief Sales Officer and
a new Chief Science Officer, (2) beginning our sports marketing
sponsorship, (3) expanding our geographic reach and (4) continuing
to strengthen our distributor culture with improved marketing
programs. These initiatives contributed to our year-over-year sales
increase in the Americas of 7.2% and increased sales in Hong
Kong."
Mr. Robinson continued, "These steps have us better positioned
for future growth. However, the second quarter strength we
experienced in certain regions was offset by foreign currency
fluctuations, primarily the Yen, coupled with slower than expected
improvement in Japan. We remain committed to returning this
important market to strong and sustainable growth. In
addition, after extensive product testing, we are preparing to
launch new products in April 2014 at our Global Convention to
further strengthen our markets."
Fiscal 2014 Second Quarter Results
For the second fiscal quarter ended December 31, 2013, the
Company reported net revenue of $51.5 million, compared to $53.4
million for the same period in fiscal 2013. Revenue growth of $2.3
million, or 7.2%, in the Americas and $1.9 million from Hong Kong
was offset by lower sales in Japan. Revenue for the quarter was
negatively impacted $3.6 million, or 6.7%, by foreign currency
fluctuation.
Gross profit for the second fiscal quarter ended December 31,
2013 was $43.6 million, compared to $38.8 million for the same
period last year, delivering a gross margin of 84.6%, compared to
72.5% in the prior year period. Gross profit for the second fiscal
quarter of last year included the impact of approximately $5.9
million of one-time costs associated with the Company's product
recall in that period.
Operating income for the second fiscal quarter of 2014 was $5.2
million, compared to $0.5 million in the same period last year,
including one-time expenses. Operating margin for the current
quarter was 10.0%.
Net income for the second fiscal quarter of 2014 was $3.3
million, or $0.03 per diluted share. This compares to net
income in the second fiscal quarter of 2013 of $209 thousand, or
$0.00 per diluted share, including one-time expenses.
Fiscal 2014 First Six Months Results
For the six months ended December 31, 2013, the Company reported
net revenue of $102.9 million, compared to $106.3 million in the
prior year. Revenue in the Americas increased $4.5 million, or 7%,
and Hong Kong contributed $3.6 million. Revenue for the first
six months of fiscal 2014 was negatively impacted $7.5 million, or
7.0%, by currency fluctuation and continued softness of the Japan
market.
Operating income for the first six months of fiscal 2014 was
$10.2 million, for an operating margin of 10.0%, compared to $7.3
million, for an operating margin of 6.9%, in the prior year period,
including one-time expenses.
Net income for the first six months of fiscal 2014 was $6.5
million, or $0.06 per diluted share, compared to $4.4 million, or
$0.03 per diluted share in the prior year period, including
one-time expenses.
Balance Sheet & Liquidity
The Company's cash and cash equivalents at December 31, 2013
were $34.5 million, compared to $26.3 million at the end of fiscal
year 2013 and $28.0 million at September 30, 2013. The Company
generated $6.9 million of cash flow from operations in the first
six months of 2014 compared to $6.4 million in the first six months
of fiscal 2013.
The Company announced that it entered into a Financing Agreement
on October 18, 2013, with a fund managed by TCW Special Situations,
LLC. The Financing Agreement provides for a senior secured credit
facility in an aggregate principal amount of up to $67 million, of
which $47 million was funded at closing. On October 31, 2013, the
Company also announced that it completed a modified Dutch auction
which was funded with proceeds received under the credit facility.
The Company repurchased an aggregate of 16,326,530 shares of its
common stock at a purchase price of $2.45 per share, for an
aggregate cost of $40 million. The shares repurchased in the
modified Dutch auction represented approximately 13.9% of the
Company's total shares outstanding as of September 13, 2013.
Fiscal Year 2014 Guidance
The Company is updating its annual revenue guidance. The Company
expects to generate revenue in the range of $205 to $220 million in
fiscal year 2014 compared to the previous range of $225 to $235
million. The Company is reiterating its previous GAAP
operating margin of 9% to 10% and the Company is also reiterating
its GAAP earnings per diluted share in the range of $0.09 to $0.11,
based on estimated weighted average diluted shares outstanding of
111 million.
Conference Call Information
The Company will hold an investor conference call today at 2:30
p.m. Mountain time (4:30 p.m. Eastern time). Investors interested
in participating in the live call can dial (888) 349-9617
from the U.S. International callers can dial (719)
325-2207. A telephone replay will be available approximately
two hours after the call concludes and will be available through
Saturday, February 8, 2014, by dialing (877) 870-5176 from the U.S.
and entering confirmation code 6572357, or (858) 384-5517 from
international locations, and entering confirmation code
6572357.
There also will be a simultaneous, live webcast available on the
Investor Relations section of the Company's web site at
http://investor.lifevantage.com/events.cfm. The webcast will be
archived for approximately 30 days.
About LifeVantage Corporation
LifeVantage Corporation (Nasdaq:LFVN), a leader in Nrf2 science
and the maker of Protandim®, the Nrf2 Synergizer® patented dietary
supplement, TrueScience® Anti-Aging Cream and LifeVantage® Canine
Health, is a science based network marketing company. LifeVantage
is dedicated to visionary science that looks to transform wellness
and anti-aging internally and externally with products that
dramatically reduce oxidative stress at the cellular level.
LifeVantage was founded in 2003 and is headquartered in Salt Lake
City, Utah.
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"
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 our future
revenue, operating income, operating margins, earnings per share,
cash flow from operations, product launches and future investment
and growth. 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 Adjusted Gross Profit as Gross Profit as determined in
accordance with GAAP excluding certain costs associated with the
product recall included in GAAP cost of sales. We define
Adjusted Gross Margin as gross margin as determined in accordance
with GAAP (gross profit as a percentage of sales, net) excluding
the costs associated with the product recall. We define
Adjusted Operating Income as Operating Income excluding certain
costs associated with the product recall. We define Adjusted
Net Income as Net Income excluding certain costs associated with
the product recall and the applicable tax impacts associated with
these items. Adjusted EPS is calculated based on Adjusted Net
Income and the weighted average number of common and potential
common shares outstanding during the period. Adjusted Gross
Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted
Net Income and Adjusted EPS may not be comparable to similarly
titled measures reported by other companies.
We are presenting Adjusted Gross Profit, Adjusted Gross Margin,
Adjusted Operating Income, Adjusted Net Income and Adjusted EPS
because management believes that excluding the product recall costs
from the relevant GAAP measures, when viewed with our results under
GAAP and the accompanying reconciliations provides useful
information about our period-over-period growth and profitability
and provides additional information that is useful for evaluating
our operating performance. Each of Adjusted Gross Profit,
Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net
Income and Adjusted EPS is presented solely as a supplemental
disclosure because: (i) we believe it is a useful tool for
investors to assess the operating performance of the business
without the effect of these items; and (ii) we use Adjusted Gross
Profit, Adjusted Operating Income, Adjusted Net Income and Adjusted
EPS internally as a benchmark to evaluate our operating performance
or compare our performance to that of our competitors. The use
of Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating
Income, Adjusted Net Income and Adjusted EPS has limitations and
you should not consider these measures in isolation from or as an
alternative to the relevant GAAP measures, including gross profit,
gross margin, operating income, net income or net income per
diluted share prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
The tables set forth below present a reconciliation of Adjusted
Gross Profit, Adjusted Operating Income, Adjusted Net Income and
Adjusted EPS, all of which are non-GAAP financial measures, to
Gross Profit, Operating Income, Net Income, and Diluted EPS, our
most directly comparable financial measures presented in accordance
with GAAP.
LIFEVANTAGE CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS |
(Unaudited) |
|
|
|
(In thousands, except per share data) |
As
of |
ASSETS |
December 31,
2013 |
June 30, 2013 |
Current assets |
|
|
Cash and cash equivalents |
$ 34,454 |
$ 26,299 |
Accounts receivable |
873 |
1,789 |
Income tax receivable |
651 |
2,150 |
Inventory |
9,843 |
10,524 |
Current deferred income tax asset |
2,885 |
2,885 |
Prepaid expenses and deposits |
4,161 |
2,294 |
Total current assets |
52,867 |
45,941 |
|
|
|
Long-term assets |
|
|
Property and equipment, net |
5,279 |
5,692 |
Intangible assets, net |
1,731 |
1,747 |
Deferred debt offing costs, net |
1,472 |
-- |
Long-term deferred income tax asset |
730 |
730 |
Other long-term assets |
1,315 |
1,374 |
TOTAL ASSETS |
$ 63,394 |
$ 55,484 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current liabilities |
|
|
Accounts payable |
$ 2,805 |
$ 5,171 |
Commissions payable |
7,183 |
7,564 |
Other accrued expenses |
7,230 |
7,831 |
Short-term portion of debt |
4,700 |
-- |
Total current liabilities |
21,918 |
20,566 |
|
|
|
Long-term debt |
|
|
Principal amount |
42,300 |
-- |
Less: unamortized discount |
(1,145) |
-- |
Long-term debt, net of unamortized
discount |
41,155 |
-- |
Other long-term liabilities |
869 |
973 |
Total liabilities |
63,942 |
21,539 |
|
|
|
Commitments and contingencies |
|
|
Stockholders' equity |
|
|
Preferred stock - par value
$.001, 50,000 shares authorized; no shares issued or
outstanding |
-- |
-- |
Common stock - par value $.001, 250,000
shares authorized; 103,898 and 117,088 issued and outstanding as of
December 31, 2013 and June 30, 2013, respectively |
104 |
121 |
Additional paid-in capital |
113,014 |
110,413 |
Accumulated deficit |
(113,087) |
(76,476) |
Accumulated other comprehensive loss |
(579) |
(113) |
Total stockholders' equity |
(548) |
33,945 |
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ 63,394 |
$ 55,484 |
|
LIFEVANTAGE CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE INCOME |
(Unaudited) |
|
|
|
|
|
|
For the three
months ended December 31, |
For the six
months ended December 31, |
|
2013 |
2012 |
2013 |
2012 |
(In thousands, except per share data) |
|
|
|
|
Sales, net |
$ 51,538 |
$53,438 |
$ 102,866 |
$ 106,297 |
Cost of sales |
7,944 |
8,799 |
15,753 |
16,606 |
Product recall costs |
-- |
5,879 |
-- |
5,879 |
Gross profit |
43,594 |
38,760 |
87,113 |
83,812 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Sales and marketing |
29,785 |
29,593 |
60,027 |
59,133 |
General and administrative |
7,561 |
7,495 |
14,962 |
15,404 |
Research and development |
584 |
742 |
891 |
1,257 |
Depreciation and amortization |
498 |
443 |
997 |
681 |
Total operating expenses |
38,428 |
38,273 |
76,877 |
76,475 |
Operating income |
5,166 |
487 |
10,236 |
7,337 |
|
|
|
|
|
Other income (expense), net: |
|
|
|
|
Interest and other income (expense), net |
(365) |
(16) |
(327) |
(1) |
Total other income (expense) |
(365) |
(16) |
(327) |
(1) |
Net income before income taxes |
4,801 |
471 |
9,909 |
7,336 |
Income tax expense |
(1,519) |
(262) |
(3,371) |
(2,963) |
Net income |
$ 3,282 |
$ 209 |
$ 6,538 |
$ 4,373 |
Net income per share: |
|
|
|
|
Basic |
$ 0.03 |
$ 0.00 |
$ 0.06 |
$ 0.04 |
Diluted |
$ 0.03 |
$ 0.00 |
$ 0.06 |
$ 0.03 |
Weighted average shares outstanding: |
|
|
|
|
Basic |
105,770 |
113,449 |
110,218 |
112,158 |
Diluted |
112,392 |
127,131 |
117,363 |
126,046 |
|
|
|
|
|
Other comprehensive loss, net of tax: |
|
|
|
|
Foreign currency translation
adjustment |
(192) |
68 |
(466) |
63 |
Other comprehensive loss |
$ (192) |
$ 68 |
$ (466) |
$ 63 |
Comprehensive income |
$ 3,090 |
$ 277 |
$ 6,072 |
$ 4,436 |
|
LIFEVANTAGE
CORPORATION |
Sales by
Region |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three months
ended December 31, |
Six months ended
December 31, |
|
2013 |
2012 |
2013 |
2012 |
(In thousands) |
|
|
|
|
|
|
|
|
Americas |
$ 34,418 |
67% |
$ 32,112 |
60% |
$ 68,916 |
67% |
$ 64,419 |
61% |
Asia/Pacific |
17,120 |
33% |
21,326 |
40% |
33,950 |
33% |
41,878 |
39% |
Total Net Sales |
$ 51,538 |
100% |
$ 53,438 |
100% |
$ 102,866 |
100% |
$ 106,297 |
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFEVANTAGE
CORPORATION |
|
|
|
|
|
Active Independent
Distributors (1) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, |
|
|
|
|
|
2013 |
2012 |
|
|
|
|
Americas |
43,000 |
62% |
35,000 |
64% |
|
|
|
|
Asia/Pacific |
26,000 |
38% |
20,000 |
36% |
|
|
|
|
Total |
69,000 |
100% |
55,000 |
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFEVANTAGE
CORPORATION |
|
|
|
|
|
Active Preferred
Customers(2) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, |
|
|
|
|
|
2013 |
2012 |
|
|
|
|
Americas |
110,000 |
81% |
116,000 |
82% |
|
|
|
|
Asia/Pacific |
25,000 |
19% |
25,000 |
18% |
|
|
|
|
Total |
135,000 |
100% |
141,000 |
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 |
Reconciliation of GAAP
Gross Profit to Non-GAAP Adjusted Gross Profit: |
(Unaudited) |
|
For the three
months ended December 31, |
For the six
months ended December 31, |
|
2013 |
2012 |
2013 |
2012 |
(In thousands) |
|
|
|
|
GAAP Gross profit |
$ 43,594 |
$ 38,760 |
$ 87,113 |
$ 83,812 |
|
|
|
|
|
Adjustments: |
|
|
|
|
Cost of sales associated with product
recall |
(525) |
5,879 |
(525) |
5,879 |
Total adjustments |
(525) |
5,879 |
(525) |
5,879 |
Non-GAAP Adjusted gross profit |
$ 43,069 |
$ 44,639 |
$ 86,588 |
$ 89,691 |
|
|
|
|
|
Reconciliation of GAAP
Operating Income to Non-GAAP Adjusted Operating
Income: |
|
|
|
|
|
|
For the three
months ended December 31, |
For the six
months ended December 31, |
|
2013 |
2012 |
2013 |
2012 |
(In thousands) |
|
|
|
|
GAAP Operating income |
$ 5,166 |
$ 487 |
$ 10,236 |
$ 7,337 |
|
|
|
|
|
Adjustments: |
|
|
|
|
Costs associated with product recall: |
|
|
|
|
Cost of sales |
(525) |
5,879 |
(525) |
5,879 |
General and administrative |
-- |
71 |
-- |
71 |
Total adjustments |
(525) |
5,950 |
(525) |
5,950 |
Non-GAAP Adjusted operating income |
$ 4,641 |
$ 6,437 |
$ 9,711 |
$ 13,287 |
|
|
|
|
|
Reconciliation of GAAP
Net Income to Non-GAAP Adjusted Net Income and related Adjusted
Earnings Per Share: |
|
|
|
|
|
|
For the three
months ended December 31, |
For the six
months ended December 31, |
|
2013 |
2012 |
2013 |
2012 |
(In thousands) |
|
|
|
|
GAAP Net income |
$ 3,282 |
$ 209 |
$ 6,538 |
$ 4,373 |
|
|
|
|
|
Adjustments: |
|
|
|
|
Costs associated with product recall: |
|
|
|
|
Cost of sales |
(525) |
5,879 |
(525) |
5,879 |
General and administrative |
-- |
71 |
-- |
71 |
Tax impact of adjustments |
179 |
(2,358) |
179 |
(2,358) |
Total adjustments |
(347) |
3,592 |
(347) |
3,592 |
Non-GAAP Adjusted net income |
$ 2,936 |
$ 3,801 |
$ 6,192 |
$ 7,965 |
|
|
|
|
|
Diluted shares |
112,392 |
127,131 |
117,363 |
126,046 |
|
|
|
|
|
Non-GAAP Adjusted diluted net income per
share |
$ 0.03 |
$ 0.03 |
$ 0.05 |
$ 0.06 |
CONTACT: Investor Relations Contact:
Cindy England (801) 432-9036
Director of Investor Relations
-or-
John Mills (310) 954-1105
Senior Managing Director, ICR, LLC
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