Q1 2024 LifeVantage Corp Earnings Call
Speaker 1: Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss life-vantage first quarter of fiscal 2024 results. At this time, all participants are in a listen-only mode. Following the formal remarks, we welcome back a question and answer session and instructions will be provided at that time for you to queue up.
Good day, ladies and gentlemen, thank you for standing by welcome to today's conference call to discuss Lifevantage first quarter of fiscal 2024 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 for you to queue up.
Hosting today's conference will be Reed Anderson with ICR.
As a reminder, today's conference is being recorded.
And now I would like to turn the conference over to Mr. Anderson. Please go ahead Sir.
Thank you good afternoon, and welcome to Lifevantage Corporation's conference call to discuss results for the first quarter of fiscal 2024.
The call today from Lifevantage with prepared remarks are Steve <unk>, President and Chief Executive Officer, and Carl <unk>, Chief Financial Officer.
By now everyone should have access to the earnings release, which went out this afternoon at approximately 405 P M Eastern time.
You have not received the release, it's available on the Investor Relations portion of Lifevantage. Its website at Www Dot Lifevantage Dot com. This call is being webcast and a replay will be available on the company's website as well.
Before we begin we would 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.
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 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 to 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's accurate only as of the date of the slide broadcast November nine 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, Reed and good afternoon, everyone. Thank you for joining us today.
Our latest results once again demonstrate the effectiveness of Lv 360, coupled with our robust innovation portfolio to drive growth and improve profitability across the entire lifevantage organization from consultants to customers from corporate employees to board members energy.
<unk> levels remain incredibly high as our key initiatives continue gaining traction.
We delivered a six 5% revenue increase in the U S. While overall revenues were down fractionally year over year on a constant currency basis.
True science Illiquid collagen continues to be the key driver as demand has remained very strong.
This product was introduced in the U S. In June 2022, and only recently began launching in international markets, which should set the stage for growth in those markets as fiscal 2024 unfolds profits.
Profitability also continues to show solid improvement with adjusted EBITDA, increasing over 41% to $4 million in the first quarter.
And then adjusted EBITDA margin up 230 basis points to seven 8%.
Approximately $12 million or 23, 5% of Q1 revenue was attributable to liquid collagen plus the healthy glow with central stack, which bundles liquid collagen with procurement and RF to synergize there.
In the U S customer penetration was 28, 1% versus 26, 9% in Q4 of fiscal 'twenty, three and compared to 24% at the end of calendar 2022.
Reorder rates provide another strong indicator of the health of the product and strong demand and second month Reorders were up recently at 77, 8% versus 77% at the end of Q4 dollars 23.
Collagen sales are still predominantly driven by activity in the U S. But we are seeing a recent expansion of liquid collagen into international markets ramp up steadily as you.
May recall workload collagen entered Australia, New Zealand and Japan in March 2023, and the results to date have exceeded our internal expectations.
At the end of September we launched liquid collagen into Mexico, and we are commencing sales in the Philippines in November followed by our Canadian launch in December of 2023.
In addition to expanding into new geographic markets, we continue to advance our innovation agenda by introducing new products that broaden our unique health and wellness offering.
For example in early October <unk> launched a new product <unk> Science <unk> daily Firming complex.
To all U S consultants and those in attendance at our global Convention.
Through renewed as a cleaner kinder cosmetic retinal alternative that has proven to tackle 11 visible signs of AEG.
A perfect complement to the interactive nation power of pro tandem and RF, <unk> and tree science liquid collagen and ushers in a new era for the brand's true science activated skin care line.
Prelaunch to all consultant in international markets on October 20th and then to all consumers globally on November 2nd.
We also announced further enhancements to <unk> hundred 60 in early October, including the new fast track reset incentives that launched in all markets currently operating with the new evolve compensation plan. This.
This incentive and bites all consultants to focus on the next 90 days with bonuses that are typically only available to new consultants.
The market is not yet on the evolve compensation plan, a similar rank advancement incentive was launched.
Both <unk> and the fast track reset incentives and the rank advancement incentives were announced October six and seven at our global Convention, where over 2000 consultants joined us in San Antonio Texas.
For the C band was all is and it serves as not only a celebration for our Lv 360 transformation and the milestone achieved thus far.
In addition to the true Renaud and product promotion surrounding that product launch convention attendees also received first access to our new limited time flavors of Vaxjo Green, Apple and Orchard pair decaf as well as the new true science true power advanced slip duo.
Which is the next fully aided web scrubbed and hydrating lip oil package together and a great giftable set.
These limited time products also went live to consumers in the U S on November 2nd.
Our global Convention, we also announced our next phases of Lv 360 in Canada, Europe, and Mexico, which will be transitioning to our newly evolved compensation plan in early 2024 with our remaining markets transitioning by the end of our fiscal year 2024.
Convention attendees also received new consultant training as well as recognition for their recent achievements.
<unk> energy then serve as an excellent community builder and global convention with no different consultants were able to join together with their teams and plan for the coming months, while also celebrating each other.
Yes.
Consultant feedback on the event was overwhelmingly positive and the excitement for the future of Lifevantage was palpable.
We are looking forward to our next events, which include our virtual global kickoff 2024 in January and our in person momentum Mccann and.
In March and Nashville for our U S market.
During the first quarter, we also continued to execute against our capital allocation priorities.
Turning value to shareholders through dividends and stock buybacks.
We paid a total of $5 5 million or 43, five cents per share in cash dividends during the quarter, including a 40 special dividend and utilized approximately $800000 to repurchase 145000 shares.
As many of you are aware, we held our fiscal year 2024 annual meeting of stockholders on Monday November six.
Based on the preliminary results provided by the independent inspector of elections.
Shareholders.
Reelected all seven Lifevantage incumbent directors.
And approve all proposals included in the proposal to ratify the stockholder rights plan.
The radar Sudbury group has exercised its right to review and challenge the independent these factors preliminary voting tabulation.
We expect that process to take place over the coming days.
We will report the preliminary results on a form 8-K as required and we will also disclose the final certified results once the review and challenge period has concluded.
In the meantime, we would like to thank our shareholders for their constructive feedback engagement and attention to the annual meeting we have learned from our dialogue with our shareholders and appreciate their continued support as we remain focused on executing our <unk> hundred 60 initiatives to drive.
<unk> profitable growth and value creation.
We do not intend to answer any questions on this topic during the call today.
In summary, we are very pleased with the early progress on the key Lv 360 initiatives to drive consultant engagement and expect the positive trends to continue in the U S. While broadening to international markets over the next several quarters.
Strong demand for new products also continues to drive our optimism about the future as we build on the momentum of liquid collagen through.
Our expansion into new geographic areas and complementary offerings organizationally, we are firmly aligned with the future vision of Lifevantage and our strong balance sheet ensures we are well positioned to do.
Deliver significant growth and value to shareholders.
Now, let me turn the call over to Carl <unk>, Our Chief Financial Officer to review, our first quarter financial results Carl.
Okay.
Thank you, Steve and good afternoon, everyone. Let me walk you through our first 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.
First quarter revenue was $51 4 million down 8% on a year over year basis, and was down five 3% from the fourth quarter foreign currency fluctuations negatively impacted revenue by $3 million in the first quarter, excluding the negative impact of foreign currency fluctuations first quarter revenue was down slightly.
$5 1 million or approximately 2% as compared to the prior year period.
Revenue in the Americas region increased five 9% to $38 5 million in the quarter, including a six 5% increase in the U S as compared to the prior year period.
This increase was primarily driven by a higher average revenue per count, resulting from the continued success of our true science liquid collagen product revs.
Revenue in our Asia Pacific and Europe region decreased 16, 6% to $12 9 million in the quarter driven by a 17% decrease in total active accounts and the negative impact from foreign currency exchange rate fluctuations.
Excluding the negative impact from foreign currency fluctuations first quarter revenue in our Asia Pacific and Europe region was down 14, 6% as compared to the prior year period.
The foreign currency impact continues to be driven by fluctuations in Japan accounting for $3 million of the impact adjusting for this impact revenue in Japan declined 4% on a constant currency basis.
Gross margin was 82% for the first quarter compared to 88% in the prior year period. The decrease in gross margin was primarily due to shifts in product sales mix increased raw material and manufacturing related costs and higher shipping expenses and warehouse fulfillment expenses during the quarter.
Commissions and incentive expense in the first quarter decreased $1 3 million year over year.
As a percentage of revenue commissions and incentive expense decreased 220 basis points to 43, 8% versus year ago levels, which was primarily driven by changes in sales mix as well as the timing and magnitude of promotional and incentive programs.
non-GAAP adjusted SG&A expense was $16 6 million, which was consistent with the prior year quarter and was up 30 basis points as a percentage of revenue to 32, 4%.
Adjusted non-GAAP operating income was $2 1 million compared with $1 4 million in the prior year period.
Adjusted non-GAAP net income was $1 7 million or <unk> 13 per fully diluted share in the first quarter compared to adjusted net income of <unk> 7 million or <unk> <unk> per fully diluted share in the comparable period last year.
We recorded tax expense of <unk> 2 million in the first quarter of 2024, and 2023, respectively for the first quarter, our effective tax rate was 24, 1%.
Adjusted EBITDA for the first quarter was 4 million or seven 8% of revenues compared to $2 8 million and five 5% in the same period a year ago.
Please note that all of the adjustments from GAAP to non-GAAP that I discussed today are reconciled in our earnings press release issued this afternoon.
We ended the first quarter in a strong financial position with $18 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 $1 1 million in the first quarter, we anticipate total capital expenditures for fiscal 2024 to be approximately $2 5 million.
We will continue to focus on our capital allocation strategy in order to maximize shareholder value.
During the first quarter, we used approximately $800000 in cash to repurchase approximately 145000 common shares under our share repurchase authorization as.
As of September 32023, there was $26 1 million remaining under our stock repurchase authorization.
We also announced a quarterly cash dividend of $3 five per share of common stock or approximately $400000 in the aggregate. This dividend will be paid on December 15, 2023 to shareholders of record on December the <unk>.
Turning to our fiscal 2024 outlook, we continue to anticipate our fiscal 2020 for revenue will be in the range of $216 million to $226 million.
Adjusted non-GAAP EBITDA in the range of $16 million to $18 million with adjusted non-GAAP earnings per share in the range of 52 to <unk> 62 per share.
For fiscal 2024, we expect our annual effective tax rate to be approximately 22% to 25%.
Included in our fiscal 2024 guidance is over $2 million of nonrecurring expenses related to an expiring sponsorship agreement and costs associated with the rollout of Lv 362 are remaining mark.
It will not be incurred in future years.
We remain committed to improving our adjusted EBITDA margins and we believe we are on track to reach our long term target of low double digits and with that let me turn the call back to the operator for Q&A.
Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad.
<unk> gone from acknowledging your request and Youre questions, maybe bold Andy order Darius should.
Should you wish to declines in the polling process. Please press the star Biden and break you and if you are using a speaker phone. Please. Please go ahead Christopher Betsy any one moment. Please for your first question.
Your first question comes from the line of Doug Lane from weather thorough research. Please proceed with your question.
Yes, Thank you and good afternoon everybody.
Steve There's a lot of moving parts here and I think the one that stands out to me is how successful.
And how quickly.
<unk> been successful in the U S.
All of these rollouts earlier in the year with.
The new comp plan and the new marketing program.
Can you give us a sense for where the U S is vis vis expectations six or nine months ago, and then how long do you think it'll take to obtain similar success in your international markets, which are still struggling a little bit.
Yes. Thanks good question.
<unk>.
We are extremely pleased with just how quickly the U S market and has has adapted and adopted.
Evolve compensation plan and.
I attributed to a couple of things one.
Just how solid the plan is itself and when we set out to redesign.
The best and best in industry plan, we wanted to have a plan that would be appealing.
Two individuals who were looking on to sell product and to earn income.
Comparable to what social sellers or Influencers can can do.
What part time.
<unk>.
People that are really looking for just decide hustle by selling products can do but also a plan that can continue to build on individuals that want to build an organization and have kind of long term stability.
And are really entrepreneurs.
And interested in building a long term business and I think we've achieved that with this plan and I think the adoption in the U S is indicative of that I think we did.
Phenomenal job with individuals.
Both the employees and our consultant leadership group in terms of the rollout and the communication.
Of the plan and so we were very.
Clear with expectations and how they could optimize the plan.
Going on to now our second and third launches in the remaining markets that we have I'm, even more optimistic because.
People in these countries, let's just say the Philippines is one example.
Or Canada.
<unk> been able to witness and see the benefits that have come to the plan in the U S market.
Many of the top leaders in the U S. Also have organizations in those international markets and so I think we have.
Jumpstart if you will we've also been putting in place promotions in those markets that had been running and will continue to run that will help kind of amendment.
Some of the behavioral changes that will come through the comp plan changes in those markets. So people are already starting to build and see the benefit of some of those changes that they will experience. So I and we remain very optimistic that the adoption and benefits.
That we are seeing in the U S will be accelerated and in our international markets as we roll this out.
Okay, and talking about <unk>, specifically yet.
Iterative process right I mean, it takes a while to have it fully implemented in any given market and then its not been rolled out to all your markets yet so.
Basically give us an idea of what inning do you think the quality implementation is in and how long do you expect before its fully implemented globally.
Yes.
So we launched evolve in the U S, Japan, Australia, and New Zealand in March on March one of this year.
And we had a six month transition plan in place for all of our consultants during that subsequent six months. So we are officially out of transition and in the full plan.
Adoption and utilization of the plan in those four markets.
And so now it's in that transition period really is to give those leaders time to adjust to the nuances of the new plant in many of our leaders have been around for 510 years and built their business a certain way and we wanted to allow them to have.
<unk> to kind of retool their messaging to optimize this new plant.
Our phase two markets, which are Canada, Mexico and Europe.
We will launch in February of next year, and then all of the remaining markets in Asia will launch towards the end of our fiscal year. So by the end of our fiscal year <unk>.
All of the countries that we currently operate on will be operating under the new evolve planned.
Some of them will still be in kind of a transitional period, but I think it's safe to say if you fast forward a year from now.
It will be fully implemented and full plan operation. So we'll be through transitions and all of the countries a year from now.
Okay. Great. That's helpful. And then I think you mentioned in your comments that literally collagen is up to 28, 1% penetration rate and that goes up quarter. After quarter here, where do you think that can ultimately get to when you would be when you would consider.
<unk> to be fully penetrated.
Yes.
And not to skip over that too quickly, but the 28% penetration rate is really high and so we're we're pleased with that I think it is.
30%, 35% is a very realistic.
It's our target to where we think that that can that can comments as again, it's launching in additional countries now.
And.
A few months ago, we announced a new study that we have that.
Articulate the benefits.
Of of our.
Our liquid collagen when taken with our pro tandem and RF to synergize theirs.
And that that again has gave a boost to us and especially in this stack. There are pack that we call. It our healthy glow stack, which combined those two products together. So we think there is still legs to grow on the penetration front both.
As people get more and more used to it as well as our launches.
Countries with it.
Okay, that's helpful and putting some perspective on that number and just one more from me and that is Carl I noticed that commissions and incentives were down as a percentage of sales is this onetime in the quarter or is there going to be a.
A step function down from the new comp plan going in.
Yes, that's a good question Doug is one of the big pieces to that in the quarter is with respect to promotional spend.
One of the things that we had and if you look prior to the implementation of evolve is that we have much higher promotional related spend and in particular in the comparable quarter last year, we had a specific promotion running around collagen to help boost the.
The success of collagen and so.
That number really is heavily influenced by the level of promotional activities that we have during the course of the quarter and then the other thing thats impacting just the that as a percentage of revenue as we have and we have some higher non condition of all revenue in the quarter related to shipping related changes in some of the other price.
Increases that we've taken are influencing that percentage and so overall the base comp isn't significantly different but it's really the timing and the overall sales mix that is influencing that percentage this quarter.
Got it alright, thank you.
Alright, Thanks, Doug Thanks, Doug.
Thank you and there are no further questions at this time I would like to turn it back to Steve for closing remarks.
Thanks, operator, and thank you for joining us today to conclude I would like to express my gratitude to the dedicated employees.
Exceptional independent consultants shareholders and loyal customers. Our recent results underscore the strength of our platform and the competitive edge of our business model and enabling individuals to establish their businesses on their own terms.
With our steadfast leadership team an array of distinctive products.
Actively engaged consultant community in a robust financial position, we are primed to achieve substantial growth enhanced profitability and create substantial value for our shareholders. Thank you.
Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.