Q2 2023 LifeVantage Corp Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to today's conference call to discuss Lifevantage second quarter fiscal 2023 results. At this time all participants are in a listen only mode. Following the formal remarks, we will conduct a question and answer session and instructions will be provided at that time.
Great job.
Hosting today's conference will be read I understand with ICR. As a reminder, today's conference is being recorded now I would like to turn the conference over to Mr. Anderson.
Please go ahead, sir thank.
Thank you good afternoon, and welcome to Lifevantage Corporation's conference call to discuss results for the second quarter of fiscal 2023 on the call today from Lifevantage with prepared remarks are Steve <unk>, President and Chief Executive Officer, and Carl Alright, Chief Financial Officer by now everyone should have access to the earnings release, which went out this.
Afternoon at approximately four O five P M. Eastern time, if you've not received the release. It is available on the Investor Relations portion of Lifevantage as web site at Www Dot Lifevantage dotcom.
Call is being webcast and a replay will be available on the company's website as well.
Before we begin we'd like to remind everyone that our prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them.
These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of Lifevantage. Its most recently filed forms 10-K and 10-Q. Please.
Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis.
Management believes these financial measures can facilitate a more complete analysis and greater transparency into lifevantage as ongoing results of operations, particularly when comparing underlying operating results from period to period. We've included a reconciliation of these non-GAAP measures with today's release. This call also contains time sensitive information that is accurate only as of the date of this libra.
Cast February 2023, Lifevantage assumes no obligation to update any forward looking projections that may be made in today's release or call now I will turn the call over to Steve <unk>, The President and Chief Executive Officer of Lifevantage. Thanks.
Thanks, Reed and good afternoon, everyone. Thank you for joining us today.
It's an incredibly exciting time at Lifevantage.
Iraq. The rhythm you then held earlier this month on January 18th and simultaneously broadcast to our U S. Japan, Australia, New Zealand markets served as the public announcements from major transformation initiatives designed to forge a new more modern chapter in our COO.
Right.
Over a year ago myself, along with the executive team took a hard look at where we were as an organization and what was needed to propel sustainable gross Lifevantage has always had a reputation for having superior products, which delivered year some stability, but it was time to get back.
To be in the company to watch.
Our team dug deep into consumer trends, we met with top industry advisors, we evaluated the options, we had to support growth opportunities and multiple paths to earn for our consultants previously known as our distributors.
The strategic plan that emerged from this comprehensive analysis, what's called L. D 360.
Because to really deliver the outcomes, we were looking for we needed to take a holistic approach with innovations happening across all the major touch points of our consultants and customer experience.
One of the biggest components of Lv 360 has evolved our new industry, leading modern compensation plans.
You've all focuses on driving key consultant behaviors, including product sales with commissions possible through new three tier pricing structure and graduated bonus incentives.
Evolve outlines freak progressive stages of the consulting pass share building ROE and lead and clearly defines the earning opportunities at each stage.
If all meats consultants, where they are on their respective journey, it's rewarding them for working in the way that works for their personalities and lifestyles.
It is a simple path that is attractive to both direct so sales professionals and those who simply want to earn by sharing products. They love.
Our new customer loyalty program called reward circle is another key element of <unk> hundred 60.
Like our updated compensation plan rewards circles is structured in a simple and efficient manner, which cancers its value proposition.
With each subscription order lifevantage customers earn torturing ward.
Which one's earned can be applied as a discount on future orders.
Insider status is unlocked once a certain subscription spend threshold as mats.
Once insider status has earned reward credits double in value.
Their program benefits include a free full sized product on a customer's second consecutive qualifying subscription order as well as the product guests on their anniversary existing customers on subscription as the March 1st of all automatically have insider status in the loyalty program.
Both the evolved and reward circle are scheduled to launch in the U S, Australia, New Zealand and Japan on March 1st.
These initiatives are planned to rollout to our other markets for Lifevantage products are sold and distributed over the next 12 months.
Another important element of Lv 360, our product innovation and that should have kicked off last calendar year with strong activation positioning across the portfolio.
And that should of been includes last year's launch of liquid collagen.
And then October at Global Convention, we launched our activation paths.
Optimized cell achieved more look radian and evolve possibilities that make it easier for consultants to guide customers through their wellness journey.
Iraq, There is I'm afraid new products were launched in the U S, Japan, Australia, and New Zealand markets.
<unk> a M and reset T system is a multi multi nutrient blends of vitamins minerals and adapt to Jens <unk> and <unk>.
Telegent Lee design with time wise nutrient nutria and delivery.
The system that aligns with the new natural circadian rhythms of your body.
To deliver the right nutrients in the right amounts at the right time.
The formula support cell signaling and gene activation to help maximize the effect and the effectiveness of the Protandim line.
It demonstrates the importance role of micro nutrients and cellular communication and activation. We performed a clinical study targeting key genetic markers such as catalysts lithify and cetura so two of them.
The combination of rise a and reset T M.
With Protandim and are off to synergize or increased gene expression and glutathione peroxidase by 67% over Protandim at our two center guys are alone the.
The combination of rise a M and reset P M.
Tried synergize or increase the total start to ones activity by 68% over twice energize or alone.
These and other results from the study combined with data from Intel showing that 76% of Americans rely on dietary supplementation to fill nutritional gaps position this product.
Well with our current Protandim users as well as opens the door to new market share as we reach new customers currently purchasing a multi vitamin elsewhere.
Also added to the product line Lifevantage D. Three plus does more than simply supplement you with vitamin D. It is also an excellent source of vitamin tea to magnesium and calcium to support strong bones immune and cardiovascular health muscle and nerve health.
As well as improved.
Lv.
They include major enhancements to our digital experience as well starting on March 1st and continuing over the next couple of months, we will be introducing a revamped e-commerce experience as well as major in half since two account and subscription management, which will continue to elevate our overall use.
Her experience and drive engagement.
We are thrilled to unveil Lv 360, and the initiatives designed to drive growth for our company.
Several new promotions and incentives have already kicked off in advance of the March 1st launch to help consultants prepare for the exciting new opportunities that lie ahead.
We are executing on a well thought out training plan, which includes over 50, Roadshows and virtual training sessions worldwide.
Trading posted by our corporate team and partnered with our top leaders are aimed at developing confident consultants excited to share their best in class opportunity with others.
Current L. D 360, trainings will culminate at regional evolved events, which will be held in March in the U S, Australia, and Japan to continue field support and kick off the next phase of field training and development as well as a new recognition program.
It was important for us to work towards the public announcement of Lv 360, while laying a strong foundation for the initiatives to build a.
Second quarter revenue of $53.7 million was up two 8%.
Our first year over year increase in 10 quarters and on a constant currency basis revenue was up seven 4%.
<unk> was the key driver with second quarter revenue up 15, 4%.
Internationally, our Philippine launch continues to show progress.
And we are encouraged by recent trends in several other key markets.
Liquid collagen remains a top performer and contributor to the U S revenue games.
Supply chain challenges surrounding the product.
We're able to be resolved in Q2.
Recall that we first launched this product in June and in the first full quarter of sales, which would have been our fiscal year ending in September .
Orders sharply exceeded forecast, resulting in a significant backlog the breadth of the demand.
For our unique collagen product bodes well for future quarters as well as our overall product strategy.
Customer penetration was 24.1% in Q2 up from 18.2% in Q1 and consultant penetration reached 27.2% compared to 25, 3% in Q1 on a blended basis penetration was 24 eight.
Percents in Q2 compared to 23% in Q1.
Customer acquisition, Similarly benefited from our liquid collagen product, which accounted for approximately $9 $1 million or approximately 17% of Q2 revenues.
You're launching liquid collagen in Japan, Australia, New Zealand in March in a fashion similar to the U S launch in June we look forward to sharing results from those launches with you in future quarters.
The launch of Protandim, NAD, <unk>, Japan, Australia, and Mexico enabled us to introduce the Protandim Tri Synergize your stack in these markets.
Consisting of Protandim and are off to Protandim and are off one and for tandem.
The price had not changed their stack has been a top performer in the U S and initial results in these markets show similar potential our blended penetration rate in Japan was 13, 4%.
Australia, It was four 8% and in Mexico. It was 12, 5% showing strong early adoption.
Energy levels in the field remained high as we continue to elevate and sharpen our brand messaging.
Trends have remained very favorable across our social media channels with november's total user engagement with brand content up 178% in December .
226% compared to those months in 2021.
The MVP builder incentives in college and cash has continued to drive key behaviors for consultants as well as set them up for success with our new and evolved compensation plan.
Q2, we also introduce fish sharing bonus for M D and axial it is structured similar to college and cash for new products in Australia, New Zealand and Japan.
Our newest incentive run to pro four is also designed to help consultants earned with evolve.
Finally, the awkward advancement of consultants provide further proof of our strong momentum and as eight individuals' recently qualified for their first elite retreat.
In summary, the evolution of our business model and culture solidifies, our leadership as the activation company and positioned for growth and improved profitability.
We've invested over $2 million during calendar 2022, which further demonstrates our commitment to the Lv 360 initiatives and strategic plan.
We are very pleased with our latest results, including a return to topline growth in the second quarter.
But recognize that it's still early in our transformation journey organizational.
Organizationally the alignment between corporate and the field is more unified than ever giving us a high degree of confidence in our future trajectory.
Leaders within the field are driving implementation within their teams.
As well, which is creating so much energy and excitement.
There's never been a better time to be part of this company now.
Now, let me turn the call over to Carl I'll read our Chief Financial Officer to review, our second quarter financial results.
Thank you, Steve and good afternoon, everyone. Let me walk you through our second quarter financial results. Please note that I'll be discussing our non-GAAP . Adjusted results you can refer to the GAAP to non-GAAP reconciliations in today's press release for additional details.
Second quarter revenue was $53 7 million up two 8% on a year over year basis, and up three 6% sequentially from the first quarter.
Foreign currency fluctuations negatively impacted revenue by $2 4 million in the second quarter, excluding the negative impact of foreign currency fluctuations second quarter revenue was up $3 9 million or approximately seven 4% compared to the prior year period Rev.
Revenue in the Americas region increased 14.4%, including a 15, 4% increase in the United States compared to the prior year period to $39 7 million driven primarily by the launch of our true science liquid collagen product and partially offset by a seven 1% decline in total act.
<unk> accounts in the region.
Revenue in our Asia Pacific and Europe region decreased 22% to 14 million driven by a 12% decrease in total active accounts and negative impact from foreign currency exchange rate fluctuations.
Excluding the negative impact from foreign currency fluctuations second quarter revenue in our Asia Pacific and Europe region was down 7%.
The foreign currency impact was primarily related to currency fluctuations in Japan, which drove lower revenue in the country. Despite the foreign currency headwinds we continue to be encouraged by the results. We're seeing from our launch of the Philippines due to continued distributor leadership development and advancement.
Gross margin was 78, 1% for the second quarter compared to 81, 5% in the prior year period. The decrease in gross margin was primarily due to elevated shipping expenses the negative impacts of foreign currency fluctuations as well as shifts in geographic and product sales mix.
We are actively pursuing cost savings initiatives across our entire supply chain to help offset the recent cost increases that have negatively impacted our gross margins.
Commissions and incentive expense in the second quarter decreased 1.9 million year over year.
As a percentage of revenue commissions and incentive expense decreased 490 basis points to 43, 9% versus one year ago levels, which was primarily driven by the timing and magnitude of various promotional and incentive programs.
non-GAAP adjusted SG&A expense was $19 4 million versus $16 7 million in the prior year quarter and was up 400 basis points as a percentage of revenue to 36, 1%.
This increase was primarily a result of higher event related costs increased travel expenses higher employee compensation related expenses and outside professional service fees related to the upcoming initiatives launching in the second half of fiscal 2023, Oh as compared to the prior year period.
Adjusted operating loss was <unk> 9 million compared with adjusted operating income of <unk> 3 million in the prior year period.
Adjusted net loss was <unk> 8 million or seven cents per fully diluted share in the second quarter compared to adjusted net income a point 6 million or <unk> per fully diluted share in the comparable period last year.
We recorded a tax benefit of $17000 in the second quarter compared to a tax benefit of <unk> 6 million a year earlier.
The decrease in tax benefit was primarily due to the favorable impact of discrete tax adjustments relating to taxes on foreign income recorded in the comparable period last year.
For fiscal year 2023, we expect our effective tax rate will be approximately 31%.
Adjusted EBITDA for the second quarter was <unk> 8 million or one 5% of revenues compared to $1 9 million and three 6% in the same period a year ago.
Please note that all of the adjustments from GAAP to non-GAAP I discuss today are reconciled in our earnings press release issued this afternoon.
We ended the second quarter in a strong financial position was $17 4 million of cash and no debt. We also continue to maintain $5 million of availability under our revolving line of credit.
Capital expenditures totaled <unk> 8 million in the second quarter, we anticipate total capital expenditures for fiscal 2023 to be approximately $3 million.
Now turning to our fiscal 2023 outlook, we anticipate our fiscal 2023 revenue will be in the range of 202 million to $212 million and adjusted non-GAAP EBITDA in the range of 11 million to 13 million with adjusted non-GAAP earnings per share in the range of 22.
<unk> 28 per share.
With that let me turn the call back over to the operator for questions operator.
Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Yeah.
Yeah.
Yeah.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our first question is from Justin right correct.
<unk>. Please proceed with your question.
Yes, I just was interested to hear how.
With the new comp plan and how you feel that that's going to be better than the old one.
Yes. Thanks.
We feel like this is going to address.
Some of the gaps that we've had in our plan and especially become much more appealing for people that are.
One too.
We sell products.
We're proud of our history of products that we have and the innovation that comes with those but frankly, our new plan does a much better job of incentivizing and an AA and people that are interested in selling products along with those that.
Want to build the business.
Yeah.
Is it is it does better in the middle of the company or at the top.
It's throughout throughout the organization.
Okay.
Oh cool thanks.
It appears that there are no further questions at this time I would now like to turn the floor back over to Steve Weisz for closing comments.
Alright, well, thank you for joining us today in closing I want to take the opportunity to thank all of our employees for their hard work and dedication as well as our outstanding team of independent consultants and loyal customers. We are very excited about this modernization of our company and remain focused on the opera.
<unk> that lie ahead.
We hope you all stay safe and healthy and look forward to updating you on our next call have a great day.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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