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LifeVantage Announces Financial Results for the Second Quarter of Fiscal 2020

January 28, 2020 at 4:05 PM EST
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Record Second Quarter Revenue of $61 million, increased 5% year over year

Second Quarter Adjusted EBITDA Increased 82%

Reiterates Fiscal 2020 Guidance for Revenue and Adjusted EBITDA

Raises Fiscal 2020 Adjusted EPS Guidance

SALT LAKE CITY, Jan. 28, 2020 (GLOBE NEWSWIRE) -- LifeVantage Corporation (Nasdaq: LFVN) today reported financial results for its second quarter ended December 31, 2019.

Second Quarter Fiscal 2020 Summary*:

  • Revenue increased 5.3% to $61.2 million;
  • Revenue in the Americas increased 4.3% and revenue in Asia/Pacific & Europe increased 7.8%, including 4.7% growth in Japan;
  • Total active accounts increased 0.6% sequentially to 182,000, while declining year over year by 1.1%. The sequential growth included a 4.6% increase in distributors, partially offset by a 1.7% decline in customers. On year over year basis, distributors increased 3.0% and customers declined 3.4%;
  • Adjusted EBITDA increased 82.2% to $6.0 million;
  • Earnings per diluted share were $0.30, compared to $0.06 in the prior year period;
  • Adjusted earnings per diluted share increased 138.5% to $0.31, compared to $0.13 in the prior year period; and
  • Repurchased $2.0 million of common shares during the second quarter of fiscal 2020.

* All comparisons are on a year over year basis and compare the second quarter of fiscal 2020 to the second quarter of fiscal 2019, unless otherwise noted.

"We are pleased with our strong revenue growth and profit performance during the second quarter. We generated over 5% year over year revenue growth, 82% year over year growth of adjusted EBITDA and 138% adjusted EPS growth over the prior year period,” stated LifeVantage President and Chief Executive Officer, Darren Jensen. “The U.S. launch of our newest addition to our flagship Protandim® product line, Protandim® NAD Synergizer™, was a significant success and lifted sales across our entire family of Protandim® products during the quarter. We continue to see a strong consumer response to our recent launch and are focused on driving subscription orders of both our Protandim® NAD Synergizer™ and our newly introduced Protandim® Tri-Synergizer™ bundle. Additionally, we saw strong sales growth in our Asia Pacific and Europe region, particularly within Japan where sales increased 5%. We also enjoyed a strong launch in New Zealand during the quarter, leveraging our existing business in Australia."

"We remain on track to meet our fiscal 2020 expectations for both revenue and adjusted EBITDA, and are increasing our fiscal 2020 adjusted EPS guidance. We remain confident in our business and will continue to execute upon each of our 2020 initiatives to drive growth, margin performance and shareholder value," continued Mr. Jensen.

Second Quarter Fiscal 2020 Results

For the second fiscal quarter ended December 31, 2019, the Company reported revenue of $61.2 million, an increase of 5.3% as compared to $58.2 million in the second quarter of fiscal 2019. Revenue in the Americas for the second quarter increased 4.3% compared to the second quarter of fiscal 2019 and revenue in the Asia/Pacific & Europe region increased 7.8% compared to the second quarter of fiscal 2019. Revenue for the second quarter of fiscal 2020 was positively impacted 0.3 million, or 0.6%, by foreign currency fluctuations associated with revenue generated in international markets when compared to the second quarter of fiscal 2019.

Gross profit for the second quarter of fiscal 2020 was $51.0 million, or 83.3% of revenue, compared to $48.4 million, or 83.2% of revenue, for the same period in fiscal 2019. The increase in gross margin is primarily due to decreased inventory obsolescence and handling costs and changes to our geographic and product sales mix.

Commissions and incentives expense for the second quarter of fiscal 2020 was $29.2 million, or 47.7% of revenue, compared to $28.2 million, or 48.4% of revenue, for the same period in fiscal 2019. The decrease in commissions and incentives expense as a percentage of revenue is due mainly to the timing and magnitude of investments in our promotional and incentive programs and our red carpet program.

Selling, general and administrative expense (SG&A) for the second quarter of fiscal 2020 was $18.1 million, or 29.6% of revenue, compared to $19.6 million, or 33.7% of revenue, for the same period in fiscal 2019. Adjusted for nonrecurring expenses, which are detailed in the GAAP to non-GAAP reconciliation tables included at the end of this press release, adjusted non-GAAP SG&A expenses for the second quarter of fiscal 2020 were $17.9 million, or 29.3% of revenue, compared to adjusted non-GAAP SG&A expenses for the second quarter of fiscal 2019 of $19.1 million, or 32.8% of revenue. The year over year decrease in non-GAAP SG&A primarily was due to decreased event expenses due to our October 2018 Global Convention that was held during the prior year period, as well as decreases in employee compensation related expenses. These decreases were partially offset by increased depreciation expenses associated with our investment in new technology assets that have been placed in service and increased payment processing fees associated with our increased revenue.

Operating income for the second quarter of fiscal 2020 was $3.6 million, or 6.0% of revenue, compared to $0.6 million, or 1.0% of revenue, for the second quarter of fiscal 2019. Accounting for non-GAAP adjustments noted previously, adjusted non-GAAP operating income for the second quarter of fiscal 2020 was $3.9 million, or 6.3% of revenue, compared to $1.1 million, or 1.9% of revenue, for the second quarter of fiscal 2019.

Net income for the second quarter of fiscal 2020 was $4.3 million, or $0.30 per diluted share. This compares to net income for the second quarter of fiscal 2019 of $0.8 million, or $0.06 per diluted share. Accounting for the non-GAAP adjustments noted previously, net of tax, adjusted non-GAAP net income for the second quarter of fiscal 2020 increased 139.0% year over year, to $4.6 million, or $0.31 per diluted share. This compares to adjusted non-GAAP net income for the second quarter of fiscal 2019 of $1.9 million, or $0.13 per diluted share.

Adjusted EBITDA increased 82.2% to $6.0 million for the second quarter of fiscal 2020, compared to $3.3 million for the comparable period in fiscal 2019.

Fiscal 2020 First Six Month Results

For the first six months of fiscal 2020, the Company reported revenue of $117.5 million, an increase of 3.2% as compared to $113.8 million for the first six months of fiscal 2019. Revenue in the Americas for the first six months of fiscal 2020 increased 1.1% compared to the first six months of fiscal 2019 and revenue in the Asia/Pacific & Europe region increased 9.1% compared to the first six months of fiscal 2019. Revenue for the first six months of fiscal 2020 was positively impacted $0.6 million, or 0.5%, by foreign currency fluctuations associated with revenue generated in international markets when compared to the first six months of fiscal 2019.

Gross profit for the first six months of fiscal 2020 was $98.0 million, or 83.5% of revenue, compared to $94.8 million, or 83.3% of revenue, for the same period in fiscal 2019. The increase in gross margin is primarily due to decreased inventory obsolescence and handling costs and changes to our geographic and product sales mix.

Commissions and incentives expense for the first six months of fiscal 2020 was $56.0 million, or 47.7% of revenue, compared to $56.0 million, or 49.2% of revenue, for the same period in fiscal 2019. The decrease in commissions and incentives expense as a percentage of revenue is due mainly to the timing and magnitude of investments in our promotional and incentive programs and our red carpet program.

Selling, general and administrative expense (SG&A) for the first six months of fiscal 2020 was $35.8 million, or 30.5% of revenue, compared to $36.9 million, or 32.4% of revenue, for the same period in fiscal 2019. Adjusted for nonrecurring expenses, which are detailed in the GAAP to non-GAAP reconciliation tables included at the end of this press release, adjusted non-GAAP SG&A expenses for the first six months of fiscal 2020 were $35.4 million, or 30.1% of revenue, compared to adjusted non-GAAP SG&A expenses for the first six months of fiscal 2019 of $36.2 million, or 31.8% of revenue. The year over year decrease in non-GAAP SG&A primarily was due to decreased event expenses due to our October 2018 Global Convention that was held during the prior year period, as well as decreases in employee compensation related expenses. These decreases were partially offset by increased depreciation expenses associated with our investment in new technology assets that have been placed in service and increased payment processing fees associated with our increased revenue.

Operating income for the first six months of fiscal 2020 was $6.2 million, or 5.3% of revenue, compared to $1.9 million, or 1.7% of revenue, for the same period in fiscal 2019. Accounting for non-GAAP adjustments noted previously, adjusted non-GAAP operating income for the first six months of fiscal 2020 was $6.7 million, or 5.7% of revenue, compared to $2.6 million, or 2.3% of revenue, for the same period in fiscal 2019.

Net income for the first six months of fiscal 2020 was $6.1 million, or $0.42 per diluted share. This compares to net income for the first six months of fiscal 2019 of $1.7 million, or $0.12 per diluted share. Accounting for the non-GAAP adjustments noted previously, net of tax, adjusted non-GAAP net income for the first six months of fiscal 2020 increased 120.3% year over year, to $6.5 million, or $0.45 per diluted share. This compares to adjusted non-GAAP net income for the first six months of fiscal 2019 of $2.9 million, or $0.20 per diluted share.

Adjusted EBITDA increased 63.5% to $10.7 million for the first six months of fiscal 2020, compared to $6.5 million for the comparable period in fiscal 2019.

Balance Sheet & Liquidity

The Company generated $9.2 million of cash from operations during the second quarter of fiscal 2020 compared to generating $4.6 million in the comparable period of fiscal 2019. The Company's cash and cash equivalents at December 31, 2019 were $14.5 million, compared to $18.8 million at June 30, 2019. Total debt at December 31, 2019 was $0.5 million compared to $1.5 million at June 30, 2019. During the second quarter of fiscal 2020, the Company utilized approximately $2.0 million to repurchase 140,000 common shares under its share repurchase program.

Fiscal Year 2020 Guidance

The Company is reiterating its outlook for fiscal 2020 revenue and adjusted EBITDA, which was initially provided when the Company reported fourth fiscal quarter and full fiscal year 2019 results on August 14, 2019. The Company expects to generate revenue in the range of $235 million to $245 million in fiscal year 2020 and adjusted EBITDA of $20 million to $22 million. The Company is raising its adjusted earnings per share to a range of $0.74 to $0.79, up from $0.62 to $0.71 previously, which now reflects a full year tax rate of approximately 17% compared to the prior range of 19% to 22%, as well as a reduction in our estimated annual fully diluted share count. The Company's adjusted non-GAAP EBITDA and adjusted non-GAAP earnings per diluted share guidance excludes any non-operating or non-recurring expenses that may materialize during fiscal 2020. The Company is not providing GAAP earnings per diluted share guidance for fiscal 2020 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 (877) 705-6003 from the U.S. International callers can dial (201) 493-6725. A telephone replay will be available approximately two hours after the call concludes and will be available through Tuesday, February 4, 2020, by dialing (844) 512-2921 from the U.S. and entering confirmation code 13698109, or (412) 317-6671 from international locations, and entering confirmation code 13698109.

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 engages in the identification, research, development and distribution of advanced nutraceutical dietary supplements and skin and hair care products, including its Protandim® product line, LifeVantage® Omega+ and ProBio dietary supplements, the TrueScience® line of Nrf2 infused skin care and hair care products, Petandim® for Dogs, Axio® smart energy drink mixes, and the PhysIQ™ 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," "will," "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 executing against and 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) December 31, 2019   June 30, 2019
ASSETS      
Current assets      
Cash and cash equivalents $ 14,479        $ 18,824     
Accounts receivable 1,788        2,066     
Income tax receivable 1,006        1,236     
Inventory, net 14,222        13,753     
Prepaid expenses and other 6,117        7,309     
 Total current assets 37,612        43,188     
       
Property and equipment, net 7,586        7,131     
Right-of-use assets 2,136        —     
Intangible assets, net 917        983     
Deferred income tax asset 3,014        2,693     
Equity securities 2,205        —     
Other long-term assets 1,548        1,278     
TOTAL ASSETS $ 55,018        $ 55,273     
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities      
Accounts payable $ 3,900        $ 5,180     
Commissions payable 8,059        7,916     
Income tax payable 170        592     
Lease liabilities 2,270        —     
Other accrued expenses 10,362        11,053     
Current portion of long-term debt, net 484        1,454     
 Total current liabilities 25,245        26,195     
       
Lease liabilities 288        —     
Other long-term liabilities 387        1,879     
 Total liabilities 25,920        28,074     
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 14,293 and 14,114 issued and outstanding as of December 31, 2019 and June 30, 2019, respectively 1        1     
Additional paid-in capital 125,858        127,096     
Accumulated deficit (96,793 )     (99,960 )  
Accumulated other comprehensive income 32        62     
 Total stockholders’ equity 29,098        27,199     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 55,018        $ 55,273     


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
               
  Three Months Ended December 31,   Six Months Ended December 31,
(In thousands, except per share data) 2019   2018   2019   2018
Revenue, net $ 61,242        $ 58,167        $ 117,470        $ 113,776     
Cost of sales 10,230        9,794        19,421        18,994     
Gross profit 51,012        48,373        98,049        94,782     
               
Operating expenses:              
Commissions and incentives 29,235        28,176        56,009        55,961     
Selling, general and administrative 18,131        19,616        35,817        36,918     
 Total operating expenses 47,366        47,792        91,826        92,879     
Operating income 3,646        581        6,223        1,903     
               
Other expense:              
Interest expense, net (41 )     (100 )     (89 )     (209 )  
Other expense, net (148 )     (72 )     (228 )     (120 )  
Total other expense (189 )     (172 )     (317 )     (329 )  
Income before income taxes 3,457        409        5,906        1,574     
Income tax benefit 846        420        158        166     
Net income $ 4,303        $ 829        $ 6,064        $ 1,740     
Net income per share:              
Basic $ 0.31        $ 0.06        $ 0.44        $ 0.12     
Diluted $ 0.30        $ 0.06        $ 0.42        $ 0.12     
Weighted-average shares outstanding:              
Basic 13,902        13,944        13,908        13,996     
Diluted 14,562        14,963        14,515        14,996     


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
 
  Revenue by Region                
  (unaudited)                
       
  Three Months Ended December 31,   Six Months Ended December 31,
(In thousands) 2019   2018   2019   2018
Americas $ 44,284     72 %   $ 42,440     73 %   $ 84,465       72 %   $ 83,519     73 %
Asia/Pacific & Europe 16,958     28 %   15,727     27 %   33,005       28 %   30,257     27 %
Total $ 61,242     100 %   $ 58,167     100 %   $ 117,470       100 %   $ 113,776     100 %
                               
  Active Accounts                
  (unaudited)                
                               
  As of December 31,                
  2019   2018   Change from Prior Year   Percent Change        
Active Independent Distributors (1)                              
Americas 46,000     68 %   45,000     68 %   1,000       2.2 %        
Asia/Pacific & Europe 22,000     32 %   21,000     32 %   1,000       4.8 %        
Total Active Independent Distributors 68,000     100 %   66,000     100 %   2,000       3.0 %        
                               
Active Customers (2)                              
Americas 89,000     78 %   95,000     81 %   (6,000 )     (6.3 )%        
Asia/Pacific & Europe 25,000     22 %   23,000     19 %   2,000       8.7 %        
Total Active Customers 114,000     100 %   118,000     100 %   (4,000 )     (3.4 )%        
                               
Active Accounts (3)                              
Americas 135,000     74 %   140,000     76 %   (5,000 )     (3.6 )%        
Asia/Pacific & Europe 47,000     26 %   44,000     24 %   3,000       6.8 %        
Total Active Accounts 182,000     100 %   184,000     100 %   (2,000 )     (1.1 )%        
                               
(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 Accounts is the sum of Active Independent Distributor accounts and Active Customer accounts.


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA
(Unaudited)
       
  Three Months Ended December 31,   Six Months Ended December 31,
(In thousands) 2019   2018   2019   2018
GAAP Net income $ 4,303        $ 829        $ 6,064        $ 1,740     
Interest Expense 41        100        89        209     
Provision for income taxes (846 )     (420 )     (158 )     (166 )  
Depreciation and amortization(1) 709        436        1,245        878     
Non-GAAP EBITDA: 4,207        945        7,240        2,661     
Adjustments:              
Stock compensation expense 1,547        1,721        2,918        3,053     
Other expense, net 148        72        228        120     
Other adjustments(2) 55        532        286        693     
Total adjustments 1,750        2,325        3,432        3,866     
Non-GAAP Adjusted EBITDA $ 5,957        $ 3,270        $ 10,672        $ 6,527     
               
(1) Includes $152,000 of accelerated depreciation related to a change in lease term for the three and six months ended December 31, 2019.
               
(2) Other adjustments breakout:              
  Class-action lawsuit expenses $ 55        $ 364        $ 187        $ 367     
  Executive team severance expenses, net —        —        —        (79 )  
  Other nonrecurring legal and accounting expenses —        168        99        405     
Total adjustments $ 55        $ 532        $ 286        $ 693     


LIFEVANTAGE CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Non-GAAP Net Income and Non-GAAP Adjusted EPS
(Unaudited)
       
  Three Months Ended December 31,   Six Months Ended December 31,
(In thousands) 2019   2018   2019   2018
GAAP Net income $ 4,303      $ 829      $ 6,064        $ 1,740     
Adjustments:              
Executive team severance expenses, net —      —      —        (79 )  
Class-action lawsuit expenses 55      364      187        367     
Other nonrecurring legal and accounting expenses —      168      99        405     
Accelerated depreciation related to change in lease term 152      —      152        —     
Tax impact of adjustments 51      547      (14 )     512     
Total adjustments, net of tax 258      1,079      424        1,205     
Non-GAAP Net Income: $ 4,561      $ 1,908      $ 6,488        $ 2,945     
               
  Three Months Ended December 31,   Six Months Ended December 31,
  2019   2018   2019   2018
Diluted earnings per share, as reported $ 0.30      $ 0.06      $ 0.42        $ 0.12     
Total adjustments, net of tax 0.02      0.07      0.03        0.08     
Non-GAAP adjusted diluted earnings per share(1) $ 0.31      $ 0.13      $ 0.45        $ 0.20     
               
(1) May not add due to rounding.

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Source: LifeVantage Corporation