Q3 2024 LifeVantage Corporation Earnings Call

Operator: Good day, ladies and gentlemen. Thank you for standing by.

Good day, ladies and gentlemen, thank you for standing by welcome to today's conference call to discuss a loved one to chase third quarter of fiscal 'twenty 'twenty four results.

Operator: Welcome to today's conference call to discuss LifeVantage's third 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. Instructions will be provided at the 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.

Reed Alan Anderson: At this time all participants are in a listen only mode.

Reed Alan Anderson: Following the formal remarks, we will conduct a question and answer session.

Reed Alan Anderson: Instructions will be provided at that time for you to queue up.

Reed Alan Anderson: Today's conference will be Reid Anderson with ICR.

Operator: As a reminder, today's conference is being recorded.

Reed Alan Anderson: Now I would like to turn the conference over to Mr. Anderson. Please go ahead Sir.

Reed Alan Anderson: Thank you. Good afternoon, and welcome to LifeVantage Corporation's conference call to discuss results for the third quarter of fiscal 2024. On the call today from LifeVantage with prepared remarks are Steve Fife, President and Chief Executive Officer, and Carl Aure, Chief Financial Officer. By now, everyone should have access to the earnings release, which went out this afternoon at approximately 4.05 p.m. Eastern Time. If you have not received this release, it is available on the Investor Relations portion of LifeVantage's website at www.lifevantage.com. This call is being webcast, and a replay will be available on the company's website as well.

Reed Alan Anderson: Thank you good afternoon, and welcome to Lifevantage Corporation's conference call to discuss results for the third quarter of fiscal 2024.

Reed Alan Anderson: On the call today from Lifevantage with prepared remarks are Steve Fife, President and Chief Executive Officer, and Carl Ray Chief Financial Officer.

Reed Alan Anderson: By now everyone should have access to the earnings release, which went out this afternoon at approximately 405 P M Eastern time.

Reed Alan Anderson: If you have not received this release is available on the Investor relations portion of Lifevantage its website at Www Dot Lifevantage DUC count.

Reed Alan Anderson: This call is being webcast and a replay will be available on the company's website as well before.

Reed Alan Anderson: 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. 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's most recently filed Forms 10-K and 10-Q.

Speaker Change: Before we begin.

Reed Alan Anderson: To remind everyone that our prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions.

Reed Alan Anderson: Statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These.

Reed Alan Anderson: 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 10-Q.

Reed Alan Anderson: 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's 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 live broadcast, May 2nd, 2024. 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 Fife, the President and Chief Executive Officer of LifeVantage.

Reed Alan Anderson: 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 is ongoing results of operations, particularly when comparing underlying operating results from period to period.

Reed Alan Anderson: We 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 live broadcast May <unk> 2020 for Lifevantage assumes no obligation to update any forward looking projections that may be made in today's release or call.

Reed Alan Anderson: Now I will turn the call over to Steve Fife, President and Chief Executive Officer of Lifevantage.

Steven R. Fife: Thanks, Reed, and good afternoon, everyone. Thank you for joining us today. Profitability trends remain very positive in Q3, as we again delivered significant year-over-year improvement in adjusted EBITDA. For the quarter, our adjusted EBITDA was $5.1 million, an increase of 55% from the prior year period, and our adjusted EBITDA margin was up 440 basis points to 10.5% as we continue to optimize our LV360 initiatives and improve productivity despite the persistence of top line headwinds.

Steven R. Fife: Thanks, Reed and good afternoon, everyone. Thank you for joining us today profitability trends remain very positive in Q3, we again delivered significant year over year improvement in adjusted EBITDA.

Steven R. Fife: For the quarter, our adjusted EBITDA was $5 $1 million, an increase of 55% from the prior year period, and our adjusted EBITA margin was up 440 basis points to 10, 5% as we continue to optimize our L. D 360 initiatives.

Steven R. Fife: And improve productivity, despite the persistence of topline headwinds.

Steven R. Fife: While third-quarter revenue levels were below our expectations, January and February were negatively impacted by the timing of certain incentive and promotion activities. For example, we did not repeat an incentive trip that ran last year, and Japan was coming off elevated incentive activities in fiscal Q2 that likely pulled forward some demand. However, we did see trends reverse in the last month of the quarter, and the promising performance in March carried over into April.

Steven R. Fife: While third quarter revenue levels were below our expectations January and February were negatively impacted by the timing of certain incentive and promotional activities.

Steven R. Fife: For example, we did not repeat an incentive trip that ran last year.

Steven R. Fife: And Japan was coming off elevated incentive activities in fiscal Q2.

Steven R. Fife: <unk> pulled forward some demand.

Steven R. Fife: However, we did see trends reverse the last one for the quarter and the promising performance in March carried over into April.

Steven R. Fife: March results, along with continued successes in April, have been driven by a focus on increasing our enrollers, which we define as the number of consultants who sign up or enroll another customer or consultant. We have optimized our LV360 initiatives with a focus on this group, specifically working to ensure new consultants see meaningful income in their first days with LifeVantage, ultimately leading to their retention and enrollment activities. As we've discussed previously, our Evolved Compensation Plan is a modern, forward-looking compensation system that rewards independent consultants generously for their efforts, offering diverse income streams and opportunities to accelerate their path to success. EVOLVE caters to the dynamic needs of modern entrepreneurs and affiliates who are driven to share and sell products with their networks as well as those who also want to build robust, collaborative teams.

Steven R. Fife: March results along with continued successes in April had been driven by a focus on increasing our enroll ours, which we define as the number of consultants, who sign up or enroll another customer or consultant.

Steven R. Fife: We have optimized our Lv 360 initiatives with a focus on this group specifically working to ensure our new consultants see meaningful income in their first days with Lifevantage, ultimately leading to higher retention and enrollment activities.

Steven R. Fife: As we've discussed previously our evolved compensation plan is a modern forward looking compensation system that rewards independent consultants generously for their effort.

Steven R. Fife: Offering diverse income streams and opportunities to accelerate their path to success.

Steven R. Fife: Evolve caters to the dynamic needs of modern entrepreneurs and affiliates, who are driven to share and sell products to their networks as well as those who also want to build robust collaboratively T.

Steven R. Fife: Consultants who earn income in their first week by sharing our differentiated activating products are five times more likely to achieve our first milestone rank than those who do not earn within their first week. Working from these data trends, in Q3, our team optimized the experience for new consultants to help them become enrollers quicker. In addition to a new onboarding journey that guides new consultants through next steps, the optimization also includes a renewed emphasis on free 10% off consultant discount codes for new consultants to share with the first three consultants who join with an enrollment pack.

Steven R. Fife: Consultants, who earn income and their firstly by sharing our differentiated activating products are five times more likely to achieve.

Steven R. Fife: Our first milestone rank than those who did not earn within their first week.

Steven R. Fife: Working from these data trends in Q3, our team optimize the experience for new consultants to help them become and rollers quicker.

Steven R. Fife: In addition to a new Onboarding journey, the guide's new consultants through next steps be optimization also includes renewed emphasis on 310% off consultant discount codes for new consultants to share with.

Steven R. Fife: With the first three consultants, who joined with him and enrolment pack.

Steven R. Fife: And on March 18th, we added free customer discount codes to enrollment packs as well, giving new consultants free 10% off codes to share with their first three customers. Consultant discount codes expire in 30 days, and the customer codes expire in one week, driving urgency to act while also building confidence in sharing LifeVantage and our exceptional product.

Steven R. Fife: And on March 18, we added three customer discount codes to enrollment packs as well, giving new consultants, 310% off codes to share with their first three customers.

Steven R. Fife: Consultant discount codes expire in 30 days and the customer codes expire in one week driving urgency to act, while also building confidence in sharing lifevantage and our exceptional products.

Steven R. Fife: Our drive to increase the number of enrollers is also supported by our continued focus on simple messaging around the three basic behaviors of network marketing, enrolling, retaining, and advancing. As you may recall, we announced the Rise Era Theme and the Rise Era Incentive in January, which enables consultants to earn enticing prizes, including shareable items like luggage and vouchers, based on achievement in enrolling, retaining, and advancing. In March, we simplified qualifications for our Enroll Track to make the Rise Era Incentive even more appealing to all types of enrollers.

Steven R. Fife: Our drive to increase the number of enrollees. Since also supported by our continued focus on simple messaging around three basic behaviors of network marketing.

Steven R. Fife: Enrolling retaining and rank advancing or era.

Steven R. Fife: We also added to the Rise Era Incentive a localized incentive trip, the Rise Retreat. From February through June, the end of our fiscal year, consultants who earn 10 enrollment tracks through the Rise Era Incentive will qualify to travel to their market's destination location, where they will receive exclusive training as well as enjoy on-site activities. This addition puts even greater emphasis on enrollments and the drive to increase active accounts. Many of these Q3 optimizations were announced at Momentum Academy events held throughout March in all of our markets except Japan, which held its Momentum Academy just last week. Our U.S. event was held March 14th through the 16th in Nashville, Tennessee.

Steven R. Fife: As you May recall, we announced the rise erythema and rise their incentives in January which enables consultants to earn enticing prices, including shareable items like luggage and vouchers based on achievement and enroll in retaining and enhancing in March we simplified.

Steven R. Fife: <unk> for our role track to make the riser incentive even more appealing to all types and rollers.

Steven R. Fife: We also added to the riser and set of a localized incentive trip rise retreat.

Steven R. Fife: From February through June the end of our fiscal year consultants, who earn 10 enrollment tracks.

Steven R. Fife: Through the rise era incentive will qualify to travel to their markets destination location, where they will receive exclusive training as well as enjoy onsite activities.

Steven R. Fife: This addition puts even greater emphasis on enrollments and the drive to increase active accounts.

Steven R. Fife: Many of these Q3 optimizations were announced at momentum Academy events held throughout March and all of our markets, except Japan, which.

Steven R. Fife: Held its momentum Academy just last week.

Steven R. Fife: Our U S. C that was held March 14th through the 16th in Nashville, Tennessee.

Steven R. Fife: Momentum Academy 2024 offered attendees an extraordinary chance to advance their business through innovative workshops, seminars, and keynotes encompassing enrollment, retention, and advancement strategies, laying a robust foundation for entrepreneurial growth consistent with our year-long RISE theme. It also showcased the global launch of our revamped TrueScience Activated Skin Care Collection. The launch of this enhanced collection firmly positions LifeVantage as a leader in innovative skin care, delivering on the promise of activating skin health.

Steven R. Fife: Momentum Academy in 2024 offered attendees an extraordinary chance.

Steven R. Fife: To advance their business through innovative workshops, seminars and keynotes encompassing enrollment retention enhancement strategies.

Steven R. Fife: <unk>, a robust foundation for entrepreneurial growth consistent with our year long rise theme.

Steven R. Fife: Momentum Academy also showcase the global launch of our rehab true science activated skincare collection.

Steven R. Fife: The launch of this enhanced collection firmly position lifevantage as a leader in innovative skin care delivering on the promise of activating skin health. This.

Steven R. Fife: This latest offering builds on the successful October 2023 launch of True Renew Daily Firming Complex. The Reimagined TrueScience lineup features TrueNew ® plus three refreshed, reimagined, clean product formulas: TrueClean Refining Cleanser, TrueLift Illuminating Eye Cream, and TrueHydrate Brightening Moisturizer.

Steven R. Fife: Latest offering builds on the successful October 2023 launch of true Bruno Daily Firming complex.

Steven R. Fife: The re imagine true science lineup features true new plus three refreshed re imagined clean product formulas.

Steven R. Fife: True clean refining claims are true left illuminating eye cream and true hydrate brightening moisturizer.

Steven R. Fife: Each is designed with cutting-edge science, including a patented NRF2 ingredient blend, plus additional premium, planet-friendly ingredients proven to support skin health and deliver visible anti-aging results, including brighter skin in as little as seven days. The collection offers advanced solutions for the smart skin care enthusiast. Underscoring our commitment to ensuring LifeVantage consultants have the very best results-driven products to share with customers and grow their businesses. Also, our new TrueScience TrueProtect Daily Mineral Sunstick, a broad-spectrum mineral-based sheer sunscreen, launched in the U.S. as an add-on to the collection.

Steven R. Fife: Each is designed with cutting edge science, including a patented in RF to ingredient blend plus additional premium planet friendly ingredients proven to support skin health and deliver visible anti aging results, including brighter skin in as little as seven days.

Steven R. Fife: The collection offers advanced solutions for the smart skincare enthusiast.

Steven R. Fife: Underscoring our commitment to ensuring lifevantage consultants.

Steven R. Fife: The very best results driven products to share with customers and grow their businesses.

Steven R. Fife: Also our new true science true pretax daily mineral Sands stack, a broad spectrum mineral based share sunscreen launched in the U S. As an add on to the collection.

Steven R. Fife: In addition to new products, the U.S. event saw the launch of new consultant enrollment packs and subscription stacks,highlighting the best of inside activation, which is Protandim Nrf2, outside activation, which is the new TrueScience line, and the best of both, liquid collagen. In addition, new activation videos and a social media content strategy were introduced along with targeted enrollment-packed promotions to help drive growth of customer and consultant enrollment. Momentum Academy was a resounding affirmation of our Rise Up ethos.

Steven R. Fife: In addition to new products the U S. C band saw the launch of new consultant enrollment packs and subscription stacks highlighting the best inside activation, which is from tandem enter F. Two outside activation, which is the new true science line and the best of both.

Steven R. Fife: Liquid collagen.

Steven R. Fife: In addition, new activation videos and social media content strategy.

Steven R. Fife: Introduced along with targeted enrollment pack promotions to help drive growth of customer and consult in enrollments.

Steven R. Fife: Momentum Academy was a resounding affirmation of our rise up ethos.

Steven R. Fife: It was exciting to witness the LifeVantage community come together, fueled by inspiration and armed with actionable insights to propel these entrepreneurs to new levels of success. This event is a pivotal part of our journey upward as we continue to advance our innovation agenda and product activation messaging to empower our consultants. And consultant productivity is trending favorably, helping to offset the overall decline in active accounts during Q3. Revenue per consultant was up over 6% on a year-over-year basis for the quarter, and this was on top of a 15% increase a year earlier. Revenue per consultant has now shown a year-over-year increase in each of the last five quarters.

Steven R. Fife: It was exciting to witness the Lifevantage community come together fueled by inspiration and armed with actionable insights to propel these entrepreneurs to new levels of success.

Steven R. Fife: This event is a pivotal part of our journey upward as we continue to advance our innovation agenda and product activation messaging to empower our consultants.

Steven R. Fife: And consultant productivity is trending favorably helping to offset the overall decline in active accounts during Q3.

Steven R. Fife: Revenue per consultant was up over 6% on a year over year basis for the corner and this was on top of a 15% increase a year earlier revenue per consultant has now shown a year over year increase in each of the last five quarters.

Steven R. Fife: Liquid collagen continues to be a significant contributor to our overall results, and as expected, most of the growth in this product is now being driven by international markets as we cycle through the strong early adoption from the initial launch in the U.S. In the third quarter, revenue attributable to liquid collagen, including the Healthy Glow Essential Stack, which bundles liquid collagen with Protandim NRF2 Synergizer, exceeded $11 million and was up approximately 7% from a year ago.

Steven R. Fife: Liquid college and continues to be a significant contributor to our overall results.

Steven R. Fife: And as expected.

Steven R. Fife: The growth in this product is now being driven by international markets as we cycled the strong early adoption from the initial launch in the U S.

Steven R. Fife: In the third quarter revenue attributable to liquid collagen, including the healthy glow essential stack, which bundles liquid collagen with pro tandem and RF to synergize, our exceeded $11 million and was up approximately 7% from a year ago.

Steven R. Fife: As a percentage of our overall mix, approximately 23% of our Q3 revenue was attributable to liquid collagen, compared with 20% a year earlier. In the U.S., consultant penetration of liquid collagen is strong at 27.8% in the quarter, down from 31.6% during a strong promotional period focused on the Healthy Glow Essential Stack in Q2, but up from 27.2% in Q1. Customer penetration remained flat at 27.2% in the U.S. in Q2 and Q3.

Steven R. Fife: As a percentage of our overall mix approximately 23% of our Q3 revenue was attributable to liquid collagen compared with 20% a year earlier.

Steven R. Fife: In the U S consulting penetration of liquid collagen and strong at 27, 8% in the quarter down from 31, 6% during a strong promotional period focused on the healthy glow essential stack in Q2, but up from 27, 2% in Q1.

Steven R. Fife: John.

Steven R. Fife: Customer penetration remained flat at 27, 2% in the U S in Q2 and Q3.

Steven R. Fife: At the beginning of February, we launched the next phase of our LV360 transformation with the expansion of our Evolved Compensation Plan and Reward Circle Customer Loyalty Program into Canada, Mexico, and our European market. Evolve and Reward Circle were first introduced in the U.S., Japan, Australia, and New Zealand as part of our LV360 initiatives roughly a year ago and have been critical in driving engagement with consultants and customers. In summary, we are making significant progress on our profitability improvement initiatives and are very pleased to have returned adjusted EBITDA margins to double digits in a period when revenue growth remained challenging.

Steven R. Fife: At the beginning of February we launched the next phase of our L. D 360 transformation with the expansion of our evolved compensation plan and reward circle customer loyalty program into Canada, Mexico, and our European markets.

Steven R. Fife: Evolve and reward circles were first introduced in the U S, Japan, Australia, and New Zealand as part of our Lv 360 initiatives roughly a year ago and have been critical in driving engagement with consultants and customers.

Steven R. Fife: In summary, we are making significant progress on our profitability improvement initiatives and are very pleased to have returned adjusted EBITA margins to double digits in a period, where revenue growth remained challenging.

Steven R. Fife: Our broader LV360 initiatives continue to gain traction, and we are excited by the level of engagement we are seeing across the organization. Finally, capital allocation and driving stockholder value remain a key area of focus. In the last quarter, we continued to repurchase shares and again raised the quarterly dividend. Now, I will turn the call over to Carl Aure, our Chief Financial Officer, to review our third quarter financial results.

Carl A. Aure: Our broader L. D 360 initiatives continued to gain traction and we are excited by the level of engagement, we are seeing across the organization.

Carl A. Aure: Finally capital allocation and driving stockholder value remains a key area of focus.

Carl A. Aure: In the last quarter, we continued to repurchase shares and again raised the quarterly dividend.

Carl A. Aure: Now, let me turn the call over to Carl <unk>, Our Chief Financial Officer to review, our third quarter financial results Carl.

Carl A. Aure: Thank you, Steve, and good afternoon, everyone. Let me walk you through our third-quarter financial results. Please note that I will 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.

Carl A. Aure: Thank you, Steve and good afternoon, everyone. Let me walk you through our third quarter financial results. Please note that I will 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.

Carl A. Aure: Third-quarter revenue was $48.2 million, down 10.2 percent on a year-over-year basis, and foreign currency negatively impacted revenue by $800,000. Excluding the negative impact of foreign currency fluctuations, third-quarter revenue was down by $4.7 million, or approximately 8.7 percent, as compared to the prior year period. Revenue in the Americas region decreased 5.9% to $37.2 million in the quarter, primarily driven by a 13.9% decrease in total active accounts, partially offset by higher average revenue per account resulting from changes in product mix and the continued penetration of our TruScience Liquid Collagen product.

Carl A. Aure: Revenue in our Asia-Pacific and Europe region decreased 22.4% to $11 million in the quarter, driven by a 17.1% decrease in total active accounts, the closure of our e-commerce business in China, and the negative impacts from foreign currency exchange rate fluctuations. Excluding the negative impact from foreign currency fluctuations, which were primarily being driven by Japan, third quarter revenue in our Asia-Pacific and Europe region was down 16.1% compared to the prior year period.

Carl A. Aure: Gross margin was 78.9% for the third quarter compared to 80.2% in the prior year period. The decrease in gross margin was primarily driven by a shift in product mix, higher inventory obsolescence and manufacturing-related costs, and higher shipping and warehouse fulfillment expenses during the current period.

Carl A. Aure: Third quarter revenue was $48 2 million down 10, 2% on a year over year basis, and foreign currency negatively impacted revenue by $800000.

Carl A. Aure: Excluding the negative impact of foreign currency fluctuations third quarter revenue was down by $4 7 million or approximately eight 7% as compared to the prior year period.

Carl A. Aure: Commissions and incentive expense in the third quarter decreased by $4.1 million year-over-year. As a percentage of revenue, commissions and incentive expense decreased 340 basis points to 40.9% versus one-year-ago levels, which was primarily driven by changes in sales mix, the timing and magnitude of our various promotional incentive programs, and changes related to our Evolve compensation plan. Non-GAAP Adjusted SG&A Expense was $15 million compared with $17.7 million in the prior year quarter and was down 190 basis points as a percentage of revenue to 31%.

Carl A. Aure: Revenue in the Americas region decreased five 9% to $37 2 million in the quarter, primarily driven by a 13, 9% decrease in total active accounts, partially offset by higher average revenue per account, resulting from changes in product mix and the continued penetration of our true science liquid collagen product.

Carl A. Aure: Yeah.

Carl A. Aure: Revenue in our Asia Pacific and Europe region decreased 22, 4% to $11 million in the quarter driven by a 17, 1% decrease in total active accounts the closure of our e-commerce business in China, and the negative impacts from foreign currency exchange rate fluctuations, excluding the negative impact from four.

Carl A. Aure: Currency fluctuations, which were primarily being driven by Japan third quarter revenue in our Asia Pacific and Europe region was down 16, 1% compared to the prior year period.

Carl A. Aure: Gross margin was 78, 9% for the third quarter compared to 82% in the prior year period. The decrease in gross margin was primarily driven by a shift in product mix higher inventory obsolescence and manufacturing related costs and higher shipping and warehouse fulfillment expenses during the current period.

Carl A. Aure: Commissions and incentive expense in the third quarter decreased by $4 $1 million year over year as a percentage of revenue commissions and incentive expense decreased 340 basis points to 49% versus one year ago levels, which was primarily driven by changes in sales mix, the timing and magnitude of our various <unk>.

Carl A. Aure: Promotional incentive programs and changes related to our evolved compensation plan.

Carl A. Aure: non-GAAP adjusted SG&A expense was 15 million compared with $17 7 million in the prior year quarter and was down 190 basis points as a percentage of revenue to 31%.

Carl A. Aure: Adjusted Non-GAAP Operating Income was $3.4 million, compared with Adjusted Non-GAAP Operating Income of $1.6 million in the prior year period. Adjusted Non-GAAP Net Income was $2.8 million, or $0.21 per fully diluted share, in the third quarter, compared to Adjusted Non-GAAP Net Income of $1 million, or $0.08 per fully diluted share in the prior year period. The third-quarter tax rate was 13.6% compared to 38.6% a year ago, reflecting the favorable impact of discrete items recognized in the quarter.

Carl A. Aure: Adjusted non-GAAP operating income was $3 4 million compared with adjusted non-GAAP operating income of $1 6 million in the prior year period.

Carl A. Aure: Adjusted non-GAAP net income was $2 8 million or <unk> 21 per fully diluted share in the third quarter compared to adjusted non-GAAP net income of 1 million or <unk> <unk> per fully diluted share in the prior year period.

Carl A. Aure: The third quarter tax rate was 13, 6% compared to 38, 6% a year ago, reflecting the favorable impact of discrete items recognized in the quarter for fiscal year 2024, we expect our annual effective tax rate will be approximately 22% to 24%.

Carl A. Aure: For fiscal year 2024, we expect our annual effective tax rate will be approximately 22% to 24%. Adjusted EBITDA for the third quarter was $5.1 million, or 10.5% of revenues, compared to $3.3 million and 6.1% 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.

Carl A. Aure: Adjusted EBITDA for the third quarter was $5 1 million or 10, 5% of revenues compared to $3 3 million and six 1% in the same period a year ago.

Carl A. Aure: 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.

Carl A. Aure: We ended the third quarter in a strong financial position with $17.4 million of cash and no debt. We also recently entered into a new $5 million revolving line of credit on April 12, 2024. Capital expenditures totaled $300,000 in the quarter, and we continue to anticipate total capital expenditures for fiscal year 2024 to be approximately $2.5 million. In addition to maintaining a strong balance sheet, we continue to focus on our capital allocation priorities to drive value for stockholders.

Carl A. Aure: We ended the third quarter in a strong financial position was $17 4 million of cash and no debt. We also recently entered into a new $5 million revolving line of credit on April 12 2024.

Carl A. Aure: Capital expenditures totaled $300000 in the quarter and we continue to anticipate total capital expenditures for fiscal year 2024 to be approximately $2 5 million.

Carl A. Aure: In addition to maintaining a strong balance sheet, we continue to focus on our capital allocation priorities to drive value for stockholders. During the third quarter, we used approximately $1 $9 million in cash to repurchase 292000 common shares under our share repurchase authorization and through the first nine months of fiscal <unk>.

Carl A. Aure: During the third quarter, we used approximately $1.9 million in cash to repurchase 292,000 common shares under our share repurchase authorization. And through the first nine months of fiscal 2024, we have used approximately $4.6 million to repurchase 725,000 shares. As of March 31, 2024, there is $22.3 million remaining under our stock repurchase authorization. We also announced a quarterly cash dividend of $0.04 per common share of stock, a 14.3% increase versus the previous quarterly rate, or approximately $500,000 in the aggregate.

Carl A. Aure: <unk> thousand 24, we have used approximately $4 $6 million to repurchase 725000 shares.

Carl A. Aure: As of March 31, 2024, there is $22 3 million remaining under our stock repurchase authorization.

Carl A. Aure: We also announced a quarterly cash dividend of <unk> <unk> per common share of stock a 14, 3% increase versus the previous quarterly rate or approximately $500000 in the aggregate the.

Carl A. Aure: The dividend will be paid on June 14th 2024 to stockholders of record on May 31.

Carl A. Aure: The dividend will be paid on June 14, 2024, to stockholders of record on May 31. Since the beginning of fiscal 2024, including the latest dividend announcement, we will have paid cash dividends of $0.54 per share, or approximately $6.9 million in the aggregate. So far this fiscal year, we have returned over $11.5 million in total value to our stockholders through share repurchases and dividends. Turning to our fiscal 2024 outlook, we anticipate our fiscal 2024 revenue will be in the range of $202 million to $205 million, a change from the previous range of $207 million to $213 million.

Carl A. Aure: Since the beginning of fiscal 2024, including the latest dividend announcement, we will have paid cash dividends of 54, and a half cents per share or approximately $6 $9 million in the aggregate.

Carl A. Aure: So far this fiscal year, we will have returned over $11 $5 million in total value to our stockholders through share repurchases and dividends.

Carl A. Aure: Additionally, we continue to anticipate adjusted non-GAAP EBITDA in the range of $16 million to $18 million, with adjusted non-GAAP earnings per share in the range of $0.57 to $0.67 per share. Additionally, included in our FY24 guidance is over $2 million of nonrecurring expenses related to an expiring sponsorship agreement and costs associated with the rollout of LV360 to our remaining markets, which will not be incurred in future years. We remain committed to improving our adjusted EBITDA margins and believe we are well on track to reach our long-term target of low double digits. And with that, I will turn the call back over to the operator for questions. Operator?

Carl A. Aure: Turning to our fiscal 2024 outlook, we anticipate our fiscal 2020 for revenue will be in the range of $202 million to $205 million a change from the previous range of 207 to 213 million.

Carl A. Aure: Additionally, we continue to anticipate adjusted non-GAAP EBITDA in the range of 16 million to $18 million with adjusted non-GAAP earnings per share in the range of 57 cents to <unk> 67 per share.

Carl A. Aure: Included in our FY 'twenty for guidance is over $2 million of nonrecurring expenses related to an expiring sponsorship agreement and costs associated with the rollout of Lv 360 to our remaining markets, which will not be incurred in future years.

Carl A. Aure: We remain committed to improving our adjusted EBITDA margins and believe we are well on track to reach our long term target of low double digits and with that let me turn the call back over to the operator for questions operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press the star key and then 2 if you 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 key. The first question we have is from Doug Lane of Water Tower Research. Please go ahead.

Operator: Thank you.

Speaker Change: We will now be conducting a question and answer session.

Douglas Matthai Lane: If you would like to ask a question. Please grace.

Douglas Matthai Lane: And then one on your telephone keypad.

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Operator: The first question, we have is from Doug Lane of which Italian.

Douglas Matthai Lane: Research. Please go ahead.

Douglas Matthai Lane: Yes. Hi. Good afternoon, everybody. Just looking at the numbers versus my expectations here, I know the top line came in a little bit below your expectations company-wide, but I think, particularly the non-U.S. markets came in weaker than I expected, sort of reversing a trend there where it looks like they were getting better sequentially. So, can you go through the international markets and where we are and where the disconnect is between, at least, my expectations and what the results were?

Douglas Matthai Lane: Yes, hi, good afternoon everybody.

Douglas Matthai Lane: Just looking at the numbers versus my expectations here I know the top line came in a little bit below your expectations company wide, but I think particularly the non U S markets came in weaker than I expected sort of reversing a trend there where it looks like they were.

Douglas Matthai Lane: Getting better sequentially. So can you go through the international markets, where we are and where the disconnect is between at least my expectations and what the results were.

Carl A. Aure: Sure, yeah, Doug, thanks for the question. Regarding the international markets, yeah, Q3 was definitely a little softer for us, and in particular, Japan, is where we saw some weakness, especially sequentially quarter over quarter. And then we're also continuing to see just with some of the other Asia-Pacific markets, like the Philippines. We've talked about the Philippines previously. We're still trying to find the right balance of momentum there on the Philippine side. And so, yeah, that one also continues to be, you know, at least underperforming to our expectations.

Speaker Change: Sure, Yes, Doug Thanks for the question regarding.

Douglas Matthai Lane: Regarding the international market share Q3 was definitely a little softer for us in particular in Japan.

Carl A. Aure: Where we saw some weakness, especially sequentially quarter over quarter and then we're also continuing to see just with some of the other Asia Pacific markets with Philippines, We've talked about Philippines. Previously, we're still trying to find the right balance of momentum there in the Philippine side and so that one also continues to be a.

Carl A. Aure: Under at least under performing to our expectations.

Carl A. Aure: However, I mean, I think we're still very optimistic about where Japan is headed ultimately. We just recently had a momentum academy there at the end of March that Steve attended, and I still think we're very optimistic about where things are headed in the future.

Speaker Change: However, I think we're still I think we're optimistic about where Japan is headed ultimately we just recently had our momentum Academy there at the end of.

Carl A. Aure: At the end of March that Steve attended and I still think we're very optimistic about where things are headed in the future.

Carl A. Aure: Okay.

Steven R. Fife: And looking at the fourth quarter sales guidance, you're looking for sequential improvement from being down double digits to being down maybe only, you know, low to mid single digits. So what have you seen so far here in the second quarter that gives you optimism that things, I mean, in the fourth quarter that gives you optimism that trends will, while, you know, still down, will improve sequentially from the third quarter?

Carl A. Aure: And you're looking.

Speaker Change: Looking at the fourth quarter sales guidance, you're looking for a sequential improvement from.

Steven R. Fife: Being down double digits to being down immediately.

Steven R. Fife: Yes, low to mid single digits. So what have you seen so far here in the second quarter that gives you optimism that things I mean in the fall.

Steven R. Fife: Fourth quarter that gives you optimism that trends, while still down will improve sequentially from the <unk>.

Steven R. Fife: Third quarter.

Steven R. Fife: Yeah, you know, Doug, this is Steve, and in our prepared remarks, we talked a little bit about the slow start in the quarter. January and February were really tough for us, and part of it was the timing of some incentives and everything that we had going on last year during the quarter that we didn't start until later in the quarter or are announcing here shortly. So there's some of it that is clearly incentive-driven.

Steven R. Fife: Yeah, Doug This is Steve and I are.

Steven R. Fife: Our prepared remarks, we talked a little bit about the slow start in the quarter January and February were really tough for us.

Steven R. Fife: And part of it was the timing of some incentives in everything that we.

Steven R. Fife: We had going on last year during the quarter that we do.

Steven R. Fife: Didn't start until later in the quarter or announcing here shortly.

Steven R. Fife: Some of it is clearly incentive driven but.

Steven R. Fife: As I mentioned and again in the prepared remarks that our momentum academies, we introduced.

Steven R. Fife: But as I mentioned, and again, in the prepared remarks at our Momentum Academies, we introduced a number of things. We talked about the RISE era and the focus on enrolling, retaining, and advancing. But we also introduced some coupon codes, the lift.

Steven R. Fife:

Steven R. Fife: A number of things, we talked about the rise era and the focus on enrolling retaining and advancing but we also introduce some coupon codes.

Steven R. Fife: We saw a lift with the introduction of the refresh of our True Science line and the announcement of an incentive trip, all of which occurred kind of in the middle of March, let's say. Those events were staggered throughout March, but we can say the middle of March. So we saw a tremendous response to that, to each of those things in March and actually saw a continuation of that with increasing active accounts and activity in April.

Steven R. Fife: The lift we saw a lift with the introduction of the refresh of our true Science line.

Steven R. Fife: And the announcement of an incentive trip.

Steven R. Fife: All of which occurred kind of middle of March let's say those events were staggered throughout March.

Steven R. Fife: We can say the middle of March and so we saw a tremendous response to that to each of those things in March.

Steven R. Fife: And actually saw a continuation of that.

Steven R. Fife: With increasing.

Steven R. Fife: Active accounts in activity in April we don't have final revenue numbers, yet, but in terms of our active growth. Our active accounts, we saw growth both in March and in April.

Steven R. Fife: We don't have final revenue numbers yet, but in terms of active growth, or active accounts, we saw growth both in March and in April. And, you know, I guess at the end of the day, that's what's giving us encouragement, because of how well these initiatives have been received. And also, although much smaller markets for us, you know, we talked about the announcement and the rollout of our Evolved Compensation Plan in Canada, Europe, and Mexico in February.

Steven R. Fife: And I guess the end of the day that is what's giving us encouragement is how well these.

Steven R. Fife: Initiatives have been received and also although much smaller markets for us we talked about the announcement and the rollout of our evolved compensation plan.

Steven R. Fife: In Canada, Europe, and Mexico in February.

Steven R. Fife: And we are seeing growth in all three of those markets.

Steven R. Fife: And we are seeing growth in all three of those markets. In February, March, and April, as they get up to speed and adopt the new compensation plan, they're embracing it. And so there is some encouragement in our international market, and again most recently in those markets where we launched the Evolved Compensation Plan.

Steven R. Fife: In February March and April.

Steven R. Fife: As they get up to speed and adopt the new compensation plan, they're embracing that and so there is there is some encouragement in our international markets.

Steven R. Fife: And again, most recently in those markets going to relaunch the evolved compensation plan.

Carl A. Aure: No, that makes sense. Thanks, Steve. I get that. And then, Carl, I know we talked about the commission and incentive line before. Coming in at 41 percent, it's the lowest I've seen for any quarter that I've at least printed out on my sheet in front of me. Why does it continue to go down, and when do you think it will go back to a more normal, maybe mid-40 percent number?

Speaker Change: No that makes sense thanks, Steve.

Carl A. Aure: I get that.

Carl A. Aure: And then Carl I know you talked about the commission and incentive line before.

Carl A. Aure: Coming in in the quarter at 41%, it's the lowest I've seen for any quarter that I at least printed out on my sheet in front of me.

Carl A. Aure: Why is it continuing to go down and when do you think it will go back to them.

Carl A. Aure: A more normal maybe mid 40% number.

Carl A. Aure: Yeah, as far as Q3 goes, a lot of that low number in Q3 was really related to the timing of the way that some of the incentives and the incentive trip fell for us. As Steve mentioned, we didn't have a similar incentive trip for the first part of Q3, here, and so that's really what's driving it down.

Carl: Yes as far as Q3 goes you had a lot of the that that low number in Q3 was really that's really related to timing.

Carl A. Aure: The way that some of the incentives and the incentive trip sell for us and as Steve mentioned, we didn't have a similar incentive trip for the first part of Q3 here and so that's really what's driving it down. So I think it's a temporary decline we're expecting an add to get back above that 43% level in Q4 Q4, we will have.

Carl A. Aure: So I think it's a temporary decline. We're expecting it to get back above that 43% level in Q4. Q4 will have much heavier promotional activity associated with a few events and promotions that we have running. And for the full year, we're expecting it to be back closer to that 43% level. So that's, I do think it's definitely a temporary decline. We anticipate it to normalize closer to that 30, you know, 43% range. Yep.

Carl A. Aure: Much heavier promotional activity associated with a few events and promotions that we have running and for the full year, we're expecting it to be back up closer to that 43% level. So I do think it's a it's definitely a temporary decline we anticipate it to normalize closer to that 30, 43% range.

Operator: Thank you. Thank you. Okay, thank you. All right. Thanks, Doug.

Speaker Change: Okay. Thank you.

Operator: All right, thanks Doug.

Operator: Alright, Thanks, Doug.

Operator: Yeah.

Steven R. Fife: There are no further questions at this time, and I would like to turn the floor back over to Steve Fife for closing comments.

Operator: There are no further questions at this time I would like to turn the floor back over to Steve Farr for closing comments.

Steven R. Fife: Well, thank you for joining us today. As we conclude, I want to extend my appreciation to our committed employees, outstanding independent consultants, stockholders, and faithful customers. The strength of our distinctive platform coupled with the competitive edge of our business model that empowers individuals to establish businesses on their own terms is complemented by a steadfast leadership team, a diverse range of unique products, an engaged consultant community, and a robust financial position. This collectively emphasizes our strategic positioning for the future, enabling us to pursue long-term goals while we consistently build sustainable value for our stockholders. Thanks so much for joining us, and we'll talk to you next quarter. And that concludes today's conference. Thank you for joining us. You may now disconnect.

Steven R. Fife: Well. Thank you for joining us today is as we conclude I want to extend my appreciation to our committed employees outstanding independent consultants stockholders and faithful customers.

Steven R. Fife: The strength of our distinctive platform coupled with the competitive edge of our business model that empowers individuals to established businesses on their own terms is complemented by a steadfast leadership team a diverse range of unique products and engaged consultant community in a robust financial position.

Steven R. Fife: This collectively emphasizes our strategic positioning for the future, enabling us to pursue long term goals, while we consistently build sustained sustainable.

Steven R. Fife: Sustainable value for our stockholders.

Steven R. Fife: Thanks, so much for joining us and we'll talk to you next quarter.

Operator: And that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Steven R. Fife: And that concludes today's conference.

Steven R. Fife: Thank you for joining US you may now disconnect your lines.

Operator: Uh-huh.

Operator: Hum.

Operator: Hum.

Operator: Mhm.

Operator: [music].

Operator: Uh-huh.

Operator: Oh.