Q1 2025 LifeVantage Corp Earnings Call
Speaker Change: [inaudible]
Speaker Change: Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss life advantages first quarter of fiscal 2025 results.
Speaker Change: At this time, all participants are an a listen only mode. Following the formal remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up.
Speaker Change: hosting today's conference will be Reed Anderson with ICR as a reminder today's conference is being recorded. Now I'd like to turn the call over to Mr. Anderson. Please go ahead, sir. Thank you. Good afternoon and welcome to Life Advantage Corporation's conference call to discuss results for the first quarter of fiscal 2025.
Reed Anderson: On the call today from Life Anage with the Paragraph Marks, our Steve Fife, President and Chief Executive Officer, and Carl Aure, Chief Financial Officer.
Speaker Change: By now, everyone should have access to the earnings release which went out this afternoon at approximately 4.5pm Eastern Time.
Speaker Change: If you have not received the 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.
Speaker Change: 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.
Speaker Change: These statements do not guarantee future performance, and therefore undue reliance should not be placed upon them.
Speaker Change: 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. Please note that during today's call, we will be discussing non-GAAP financial measures, including results, on an adjusted basis.
Speaker Change: Management believes these financial measures can facilitate a more complete analysis and greater transparency into LifeVantage's ongoing results of operations, particularly in comparing underlying operating results from period-to-period. We've included a reconciliation of these non-gap measures with today's release.
Speaker Change: This call also contains time-sensitive information that is accurate only as of the date of this live broadcast, October 29, 2024.
Speaker Change: LifeVantage assumes no obligation to update any overlooking 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.
Steve Fife: Thanks Reed and good afternoon everyone. Thank you for joining us today. It's an incredible time at LifeVantage as we just launched the MindBody GLP-1 system, an amazing innovation targeting consumers searching for an effective sustainable weight management solution.
Steve Fife: This product significantly spans our total addressable market, and the initial response from our consultants and customers has been overwhelming. But before I go deeper into talking about MindBody, let me first give you a quick recap of our latest results.
Steve Fife: which are generally in line with our expectations.
Steve Fife: In the first quarter, we again delivered solid profitability metrics despite lower revenues, which continue to be impacted by macro headwinds, particularly in our international markets.
Steve Fife: Our adjusted EBITDA increased 11% versus last year, and our adjusted EBITDA margin was 9.4%, a 160 basis point improvement compared to last year's first quarter.
Steve Fife: Total revenue was down 8% as lower consultant and customer numbers were partially offset by an increase in revenue per consultant.
Steve Fife: While the overall consumer environment remains challenging, we are highly encouraged by the strong response from consultants and customers to our new product.
Steve Fife: September was a very strong month for us as consultants built excitement in advance of the product launch and October will be the highest bookings month in the company's history.
Steve Fife: and overall enrollments in October are approximately four times our recent monthly averages.
Steve Fife: We believe this momentum will continue to build as fiscal 2025 unfolds.
Steve Fife: There's good reason to be excited about the MindBody GLP-1 system.
Speaker Change: GLP-1 is short for glucagon-like peptide 1, a hormone that works along the gut-brain axis to control digestion and balance blood sugar.
Speaker Change: GLP-1 also supports the health of several organs, including the heart, liver, and kidneys.
Speaker Change: Like many things in our body, production of the GLP-1 hormone declines due to age, poor diet, stress, and other lifestyle factors. This decline can cause cravings, false hunger, and weight gain, among other health concerns.
Speaker Change: You take the MindBody GLP-1 system to help your body make this essential, impactful hormone.
Speaker Change: With this addition to our portfolio, we are once again demonstrating our ability to own health activation at the cellular level.
Speaker Change: When this innovative dual product solution helps your body restore GLP-1 production, the results are truly something you can see and feel.
Speaker Change: The Efficacy of Mind-Body.
Speaker Change: Results from this trial included an outstanding 140% average increase in GLP-1 levels in the body. Participants had an average weight loss of 9 pounds in 8 weeks and up to 25 pounds in 12 weeks.
Speaker Change: Adding to the results, 100% of participants who lost weight did not lose muscle, but did lose up to 27% in visceral fat and 5% total body fat.
Speaker Change: Participants also reported exciting qualitative data as well. 95% had decreased sugar cravings. 96% chose smaller portions. 85% now eat for health instead of emotion.
Speaker Change: Eighty-five percent agreed their food cravings decreased.
Speaker Change: and 82% felt more in control of their relationship with food.
Speaker Change: The clinical trial built upon successful in vitro results which found the mind-body GLP-1 system significantly increased GLP-1 production in L cells by activating key genes.
Speaker Change: The in vitro study also revealed a 38% reduction in DPP-4 gene expression, allowing more GLP-1 to remain active within the body.
Speaker Change: and a 53% increase in GLP-1R expression, which promotes the creation of GLP-1 cell receptors, further enhancing the body's ability to use GLP-1.
Speaker Change: Thanks to the results of this research, the MindBody GLP-1 system is patent pending, ensuring that innovation remains something only LifeVantage and our consultants can deliver.
Speaker Change: The MindBody GLP-1 system is a two-part system made up of NB Core and NB Enhance that is uniquely paired to deliver results leading to total transformation.
Speaker Change: MDCOR is a blend of acacia, lemon bioflavonoids,
Speaker Change: berberine, asperidin, eggplant, and chromium that directly activate GLP-1 in specialized L-cells, promoting fullness through the gut-brain axis.
Speaker Change: It reduces cravings, slows gastric emptying, and balances key hunger hormones.
Speaker Change: It is two capsules taken daily, 30 minutes before consuming any calories.
Speaker Change: and the Enhance combines resistant starches and fibers including potato and tapioca which ferment in the large intestine.
Speaker Change: These fibers act as prebiotics, supporting gut health, providing indirect activation through the priming of L-cells.
Speaker Change: MB Enhance provides 48% of daily dietary fiber with a light vanilla flavor that complements smoothies and other beverages consumed throughout the day.
Speaker Change: Our comprehensive approach provides effective, sustainable weight loss and overall wellness.
Speaker Change: Unlike traditional weight management methods,
Speaker Change: MindBody emphasizes long-term lifestyle changes and a healthier relationship with food. The system helps stop the toxic cycle of trendy fads and yo-yo dieting. With results coming from helping your body, work is designed.
Speaker Change: A press release issued earlier today provides a recap of all these exciting results.
Speaker Change: The new MindBody GLP-1 system was unveiled at our recent MarketConnect event held October 11th and 12th in Kansas City.
Speaker Change: The initial on-site inventory sold out within a couple of hours, so additional inventory was shipped to the event to meet the overwhelming demand. The demand was also reflected in our e-commerce sales exceeding forecast.
Speaker Change: Our initial inventory order of MindBody System is now sold out. We are officially on back order, meaning orders continue to be placed by both consultants and customers with product shipping when we are back in stock in approximately seven weeks.
Speaker Change: The level of demand for this product is many multiples of what we saw when our liquid collagen product was first introduced a couple years ago, giving us a high degree of optimism about future growth potential.
Speaker Change: In addition to MindBody, MarketConnect offered exclusive business training for consultants, emphasizing the new commission bonuses and the latest enhancements to the Evolved Compensation Plan, which will take effect on November 1st.
Speaker Change: We also announced several improvements to the consultant experience, including a new feature that allows the creation of a suggested shopping cart for new consultants joining LifeVantage.
Speaker Change: The event generated significant excitement and was an outstanding success, further energizing our consultant community.
Speaker Change: Regarding the latest updates to the evolved compensation plan, we are rolling out enhancements to offer greater simplicity and increased earning potential for our independent life vantage consultants.
Speaker Change: These enhancements will go live on November 1st, 2024, across the U.S., Japan, Australia, New Zealand, Canada, Mexico, and European markets.
Speaker Change: At the heart of this optimization is the new sharing bonus. This sharing bonus is a simple 10% commission on top of other elements of the compensation plan earned when your new consultant and their customers purchase products.
Speaker Change: We have also reimagined accelerators to help new consultants achieve early income success.
Speaker Change: During the first four months of their business, consultants are eligible to receive double the sharing bonus, up to 20% instead of the standard 10%. Additionally, new consultants earn a bonus upon reaching the key milestone rank of Senior Consultant 1.
Speaker Change: Finally, we continue to focus on enhancing the appeal of our model for entrepreneurs, including making it easier for them to grow and operate their businesses.
Speaker Change: We have recently partnered with Clearwater to offer Life Saanich Healthcare, a health insurance option for consultants.
Speaker Change: Clearwater offers a variety of major medical, health share, and supplemental plans, including holistic and wellness options.
Speaker Change: The response to this offer has been tremendous.
Speaker Change: with many consultants expressing that this partnership removes a large barrier for those looking to go all in on their life vantage business.
Speaker Change: In summary, we are incredibly excited about the launch of our new MindBody GLP-1 system and believe it will be a game changer for our consultants and their businesses.
Speaker Change: It significantly expands LifeVantage's activation story into the rapidly growing category of weight loss.
Speaker Change: We also remain focused on continuing to drive strong financial performance and significant long-term value for our shareholders. Now let me turn the call over to Carl Aure, our Chief Financial Officer, to review our first quarter financial results.
Carl Aure: Thank you, Steve, and good afternoon, everyone. Let me walk you through our first quarter financial results. Please note that I will be discussing our non-GAAP adjusted results. You can refer to the GAAP, the non-GAAP reconciliations, in today's press release for additional details.
Carl Aure: First quarter revenue was $47.2 million, down 8.1% on a year-over-year basis, and foreign currency negatively impacted revenue by approximately $200,000.
Carl Aure: Excluding the negative impact of foreign currency fluctuations, first quarter revenue was down approximately 7.7% compared to the prior year period.
Carl Aure: Revenue in the Americas region decreased 4.2% to $36.9 million in the quarter, due to a 6.1% decrease in total active accounts, partially offset by higher average revenue per account, resulting from changes in product mix and increased shipping charges.
Carl Aure: Revenue in our Asia-Pacific and Europe region decreased 19.7 percent to 10.3 million in the quarter, primarily driven by a 20.5 percent decrease in total active accounts and the negative impact from foreign currency exchange rate fluctuations.
Carl Aure: Excluding the negative impact from foreign currency fluctuations, which are primarily attributable to Japan, first quarter revenue in our Asia Pacific and Europe region was down 18.7% as compared to the prior year period.
Carl Aure: Gross margin was 79.9 percent for the first quarter, just slightly below the 80.2 percent we reported in the prior year period. We are encouraged that we were able to maintain gross margin percentages despite the decrease in revenue.
Carl Aure: We continue to focus on identifying cost savings opportunities across our supply chain to improve our growth margins back above our 80% target.
Carl Aure: Commissions and incentive expense in the first quarter decreased 2.2 million year-over-year. As a percentage of revenue, commission and incentive expense was 43% down 80 basis points versus year-ago levels.
Carl Aure: Non-GAAP adjusted SG&A expense was $14.7 million, compared with $16.6 million in the prior year period, and was 130 basis points lower as a percentage of revenue to 31.1%.
Carl Aure: Adjusted non-GAAP operating income was $2.7 million compared with adjusted non-GAAP operating income of $2.1 million in the prior year period.
Carl Aure: Adjusted non-GAAP net income was $1.9 million, or $0.15 per fully diluted share in the first quarter, compared to adjusted non-GAAP net income of $1.7 million, or $0.13 per fully diluted share in the prior year period.
Carl Aure: We recorded income tax expense of $0.8 million in the first quarter, which translates to an effective rate of approximately 29%, compared to $0.2 million in the prior year period and an effective rate of 24%.
Carl Aure: The increase in our effective tax rates in the current quarter was due to the impact of discrete items.
Carl Aure: Adjusted EBITDA for the first quarter was $4.4 million or 9.4% of revenues compared to $4 million and 7.8% in the same period a year ago.
Carl 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 Aure: Our financial position remains strong with $14.6 million of cash and no debt at the end of the first quarter.
Carl Aure: Capital expenditures totaled $0.3 million in the first quarter, compared to $1.1 million in the same period a year ago. We continue to focus on our capital allocation priorities to drive value for stockholders.
Carl Aure: During the first quarter, we used approximately $1.1 million in cash to repurchase approximately 140,000 shares of common stock under the Stock Repurchase Authorization. And as of September 30, 2024, there is still $19.3 million remaining under the authorization.
Carl Aure: We also announced a quarterly cash dividend of $0.04 per share of common stock, or approximately $500,000 in the aggregate.
Carl Aure: The dividend will be paid on December 16, 2024, to stockholders of record as of December 2, 2024.
Carl Aure: Since the beginning of fiscal 2024, we have returned approximately $15 million in total value to our stockholders through share repurchases and dividends.
Carl Aure: Turning to our Outlook for Fiscal 2025.
Carl Aure: We continue to anticipate our full-year revenue will be in the range of $200 million to $210 million and closer to the upper end of the range based on the early success and demand associated with the MindBody GLP-1 product launch.
Carl Aure: We also expect adjusted non-GAAP EBITDA in the range of $18 million to $21 million, with adjusted non-GAAP earnings per share in the range of $0.70 to $0.80 per share.
Carl Aure: We remain committed to continuing to improve our adjusted EBITDA margins and believe we are well on track to reach our long-term target of low double digits in the near future.
Carl Aure: And with that, let me turn the call back over to the operator for questions. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 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 keys.
Speaker Change: Thank you. Our first question comes from the line of Doug Lane with Water Tower Research. Please proceed with your question.
Speaker Change: Yeah, thanks Doug for the question. We definitely gave that some thought and you know in the comment that I made on the script, I mean we did allude to we do believe that we're going to be at the top end of that range in the guidance.
Speaker Change: You know, and I think the other thing is that we're really only two weeks in to the launch of the MB product that we had, and, you know, we launched it on October the 11th.
Speaker Change: and we were out of inventory within two weeks. And I just think as we've looked through and just with, there's still some uncertainty and, you know, we talked about getting the product back in stock and where we are from a stock-out situation, but I think that was the preliminary thought. We're, you know, I still think that we're highly optimistic about the long-term success of MB, but just due to where things are at, we felt that that was the appropriate range at this point.
Speaker Change: Thank you for your time. Thank you.
Speaker Change: That's fair enough, it is still early days.
Speaker Change: So, Steve, I mean, this is a good problem to have, but you are dealing now with a stock-out situation for a product that is obviously, you've done a good job teasing and promoting and launching. So, what do you think the impact will be of moving into a stock-out situation so quickly among your consultants?
Steve Fife: Yeah, you know, we, we, um,
Steve Fife: I think we have...
Steve Fife: kind of a proof here of the excitement around this product not not just because of
Steve Fife: If I look back in terms of our September activity,
Steve Fife: in September before the product was even available.
Steve Fife: Our enrollments virtually doubled over that of the previous several months.
Steve Fife: And again, that was in advance of the product.
Steve Fife: And what drove that really was, you know, we had a group of 55 people that were kind of our trial group. They had access to the product since about the 20th of August.
Steve Fife: And they were, you know, taking before and after pictures and building their stories. And in September, those stories started getting out there and, you know, drove the excitement around the product and the launch.
Steve Fife: and, you know, fast forward to October 11th, we have an amazing launch. You were there, you were able to see the excitement around it.
Steve Fife: and two weeks later we've sold out and now in my mind and I think the way our consultants are really looking at it is now there's not just 55, but there's thousands of people that have access to the product.
Steve Fife: and they will be able to build their personal stories about the product over the next.
Steve Fife: You know several weeks until the product comes in
Steve Fife: and there is there's no indication from our consultant leadership group right now that anyone is slowing down in terms of talking to people and enrolling people.
Steve Fife: and, you know, the way we've communicated.
Steve Fife: Access to the product, when we do get it, it's going to be, you know, those people that are sign up on a subscription now are going to be the first ones to get product once it comes into inventory.
Steve Fife: So there's still excitement around the product. We have, like I said, thousands more people talking about it than we did in September.
Steve Fife: You know, do I wish we had inventory? Absolutely.
Steve Fife: But I'm really pleased with how our field has embraced this, and they see the demand that, you know, for the product, and I think it's encouraged them as well in terms of what this really can be.
Speaker Change: Yeah, no, there was a lot of excitement at the event, that's for sure. And did you mention what the price of the product is? I assume that it's going to be geared for monthly subscription.
Speaker Change: It is. We sell the two, you know, it's a two-part system. We sell them only in tandem and and that's critical because the efficacy of the products
Speaker Change: And really, you know, all of our studies, our human clinical, our patent that we've filed for are based on the combination of those two products.
Speaker Change: and for the two products at a customer retail price, it's $199.
Speaker Change: at a customer subscription. The price is $179. And for our consultants, it's $159. And that's for a 30-day supply.
Speaker Change: Right, I'm on supply. Got it. And then the launch was in the U.S. at the Kansas City event. What are the plans for launching this product in the markets outside the U.S.? And can you clarify, is this in Canada yet?
Speaker Change: It is in Canada on a NFR and not-for-resale basis.
Speaker Change: So they can, you know, purchase it for personal consumption in Canada. We also have a program where, you know, any person throughout the world
Speaker Change: can actually purchase product. And we're seeing some of the product being purchased, and again, just for personal consumption.
Speaker Change: We do see people throughout the world buying it, especially in Australia and New Zealand right now. Not large quantities, but they're trying to get a jump start on it.
Speaker Change: and our launch.
Speaker Change: It's going to be, it's going to be really kind of dependent on regulatory approval, but we're targeting in the March-April timeframe of next year of 2025.
Speaker Change: to have most of our countries, launching in most of our countries. We know that there's a couple of countries where the regulatory time will be longer than that, but most of our international markets will launch in the March-April timeframe.
Speaker Change: Okay, thank you. That's very helpful.
Speaker Change: Thanks, Doug.
Speaker Change: Thank you. There are no further questions at this time. I'd like to pass the call back over to Steve for closing remarks.
Steve Fife: Thank you, Operator, and 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.
Steve Fife: We are incredibly excited about the overwhelming response to our new MindBody GLP-1 system that significantly expands our total addressable market. This is an amazing innovation targeting customers.
Steve Fife: Searching for an effective, sustainable weight management solution.
Steve Fife: We believe it has the potential to drive significant growth and value creation in the future as we leverage the strength of our distinctive platform along with the competitive edge of our business model that empowers individuals to establish businesses on their own terms.
Steve Fife: Thanks again for joining us and we look forward to updating you with our Q2 results at the end of January. Thanks everyone.
Steve Fife: Thank you very much.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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