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| 8-K - 8-K - Lifevantage Corp | a8-kq3financials.htm |
LifeVantage Announces Third Quarter Fiscal Year 2015 Results
Revenue During First Nine Months of Fiscal Year 2015 in the Americas Increased 2.8%
Repurchased $9.9 Million of Common Stock in First Nine Months of Fiscal Year 2015
Reduced Long-Term Debt by $3.5 Million in First Nine Months of Fiscal Year 2015
Reaffirms Fiscal Year 2015 Outlook Range
Salt Lake City, UT, May 6, 2015, LifeVantage Corporation (NASDAQ: LFVN) today reported financial results for its third quarter and nine months ended March 31, 2015.
Third Quarter Fiscal 2015 Highlights:
• | Revenue was $45 million compared to $55 million in the prior year period; |
• | Revenue in the Americas increased by 1% compared to the prior year period; |
• | Adjusted EBITDA was $3.3 million, compared to $5.7 million in the prior year period; |
• | Identified annual cost structure savings of approximately $4 million. |
Dave S. Manovich, Executive Vice Chairman of LifeVantage stated, "We are very pleased with our recently announced appointment of Darren Jensen as our next President and Chief Executive Officer. Throughout the transition to a new CEO, we have focused on taking the necessary steps to help us reignite top and bottom line growth. We have identified approximately $4 million in annual cost reductions. Approximately $1.3 million has already been implemented through headcount reductions and the remaining $2.7 million will be implemented in selling, general and administrative expense reductions over the course of fiscal 2016. Upon joining the company in mid-May, Mr. Jensen will have the flexibility to further shape, drive and articulate the Company’s strategic initiatives.”
Mr. Manovich continued, “While our year-to-date revenue in the Americas grew approximately 3% compared to the prior year, our Asia Pacific revenue declined 28%. We are not pleased with these current revenue trends and remain committed to improving the level of engagement with our strong distributor base and expanding awareness and understanding of our full product lineup.”
Third Quarter Fiscal 2015 Results
For the third fiscal quarter ended March 31, 2015, the Company reported revenue of $45.2 million, compared to $55.1 million for the same period in fiscal 2014. Revenue includes an increase of 1% in the Americas, and a decrease in the Asia/Pacific region of 45%. The year-over-year decline in the Asia/Pacific region is primarily due to Japan’s lower volume, negative foreign currency exchange and a benefit in the prior year period from customers accelerating purchasing in advance of announced price increases that went into effect on April 1, 2014. Revenue for the quarter was negatively impacted $1.8 million, or 3%, by foreign currency fluctuation.
Commissions and incentives for the third fiscal quarter of 2015 were $21.6 million, or 47.9% of revenue, compared to $26.8 million, or 48.6% of revenue, in the same period last year. Selling,
general and administrative expenses (SG&A) for the third fiscal quarter of 2015 were $14.5 million, or 32.1% of revenue, compared to $15.4 million, or 27.9% of revenue, in the same period last year. SG&A expenses in the third fiscal quarter of 2015 include $1.2 million in one-time expenses, including CEO severance costs, the engagement of an executive search firm and one-time investments in new sales events.
Operating income for the third fiscal quarter of 2015 was $1.5 million, compared to $4.5 million in the third fiscal quarter of 2014.
Net income for the third fiscal quarter of 2015 was $0.6 million, or $0.01 per diluted share, calculated on 97.7 million fully diluted shares. This compares to net income in the third fiscal quarter of 2014 of $2.5 million, or $0.02 per diluted share, calculated on 106.6 million fully diluted shares. Adjusted EBITDA was $3.3 million for the third fiscal quarter of 2015, compared to $5.7 million in the prior year period. Adjusted EBITDA excludes the CEO severance and related executive search firm expenses.
Fiscal 2015 First Nine Months Results
For the nine months ended March 31, 2015, the Company reported net revenue of $145.0 million, compared to $157.9 million in the prior year period. Revenue in the Americas increased 3%, while revenue in the Asia/Pacific region decreased 28% due primarily to lower sales in Japan. Revenue for the first nine months of fiscal 2015 was negatively impacted $4.0 million, or 7%, by foreign currency fluctuation.
Operating income for the first nine months of fiscal 2015 was $12.3 million, compared to $14.7 million in the prior year period.
Net income for the first nine months of fiscal 2015 was $6.8 million, or $0.07 per diluted share, compared to $9.0 million, or $0.08 per diluted share in the prior year period. Additionally, Adjusted EBITDA was $14.3 million for the first nine months of fiscal 2015, compared to $18.4 million in the prior year period.
Balance Sheet & Liquidity
The Company generated $9.0 million of cash flow from operations in the first nine months of fiscal 2015. Cash flow benefited from a one-time cash settlement of approximately $2 million in the first quarter. The Company's cash and cash equivalents at March 31, 2015 were $15.4 million, compared to $20.4 million at the end of fiscal year 2014. The Company repaid $3.5 million of debt during the first nine months of fiscal 2015. In addition, during the first nine months of fiscal 2015 the Company has returned $9.9 million to shareholders by repurchasing a total of 7.6 million shares. Inventory increased $2.0 million compared to June 30, 2014, which is related to the Company’s recent product launches, TrueScience and Axio, as well as the recent decline in revenue. On a sequential basis, inventory decreased $1.2 million highlighting the Company’s inventory control efforts.
Fiscal Year 2015 Guidance
The Company is reaffirming its guidance for fiscal year 2015. The Company expects to generate revenue in the range of $185 million to $195 million in fiscal year 2015. The Company has modeled Japan to decline by approximately 35% with the remaining countries collectively impacting revenue from a negative 3.0% at the bottom end of our range, to a positive 2% at the top end of our range,
on a year-over-year basis. The Company expects its operating margin to be in the range of 7% to 9% and earnings per diluted share in the range of $0.07 to $0.08, based on an estimated 100 million diluted shares and a 33% effective tax rate.
Conference Call Information
The Company will hold an investor conference call today at 2:30 p.m. Mountain time (4:30 p.m. Eastern time). Investors interested in participating in the live call can dial (888) 256-9128 from the U.S. International callers can dial (913) 312-1430. A telephone replay will be available approximately two hours after the call concludes and will be available through Friday, May 8, 2015, by dialing (877) 870-5176 from the U.S. and entering confirmation code 9503189, or (858) 384-5517 from international locations, and entering confirmation code 9503189.
There also will be a simultaneous, live webcast available on the Investor Relations section of the Company's web site at http://investor.lifevantage.com/events.cfm. The webcast will be archived for approximately 30 days.
About LifeVantage Corporation
LifeVantage Corporation (Nasdaq:LFVN), is a science based network marketing company that is dedicated to visionary science that looks to transform health, wellness and anti-aging internally and externally at the cellular level. The company is the maker of Protandim®, the Nrf2 Synergizer® patented dietary supplement, the TrueScience™ Anti-Aging Skin Care Regimen, Canine Health, and the AXIO™ energy product line. LifeVantage was founded in 2003 and is headquartered in Salt Lake City, Utah.
Forward Looking Statements
This document contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as "believe," "hopes," "intends," "estimates," "expects," "projects," "plans," "anticipates," "look forward to" and variations thereof, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include, but are not limited to, statements we make regarding our future revenue, operating income, operating margins, earnings per share, cash flow from operations, our expansion and investment in new and existing international markets, our future results of operations in Japan and future investment and growth. Such forward-looking statements are not guarantees of performance and the Company's actual results could differ materially from those contained in such statements. These forward-looking statements are based on the Company's current expectations and beliefs concerning future events affecting the Company and involve known and unknown risks and uncertainties that may cause the Company's actual results or outcomes to be materially different from those anticipated and discussed herein. These risks and uncertainties include, among others, those discussed in greater detail in the Company's Annual Report on Form 10-K and the Company’s Quarterly Report on Form 10-Q under the caption "Risk Factors," and in other documents filed by the Company from time to time with the Securities and Exchange Commission. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this document. All forward-looking statements are based on information currently available to the Company on the date hereof, and the Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this document, except as required by law.
About Non-GAAP Financial Measures
We define Non-GAAP EBITDA as earnings before interest expense, income taxes, depreciation and amortization and Non-GAAP Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization, stock compensation expense and other income, net. Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
We are presenting Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA because management believes that they provide additional ways to view our operations when considered with both our GAAP results and the reconciliation to net income, which we believe provides a more complete understanding of our business than could be obtained absent this disclosure. Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are presented solely as a supplemental disclosure because: (i) we believe it is a useful tool for investors to assess the operating performance of the business without the effect of these items; (ii) we believe that investors will find this data useful in assessing shareholder value; and (iii) we use Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA internally as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA has limitations and you should not consider these measures in isolation from or as an alternative to the relevant GAAP measure of net income prepared in accordance with GAAP, or as a measure of profitability or liquidity.
The tables set forth below present Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA which are non-GAAP financial measures to Net Income, our most directly comparable financial measure presented in accordance with GAAP.
Investor Relations Contact:
Cindy England (801) 432-9036
Director of Investor Relations
-or-
John Mills (646) 277-1254
Partner, ICR INC
LIFEVANTAGE CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(In thousands, except per share data) | As of | |||||||
ASSETS | March 31, 2015 | June 30, 2014 | ||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 15,353 | $ | 20,387 | ||||
Accounts receivable | 1,258 | 1,317 | ||||||
Income tax receivable | 3,490 | 4,681 | ||||||
Inventory | 10,899 | 8,826 | ||||||
Current deferred income tax asset | 158 | 158 | ||||||
Prepaid expenses and deposits | 3,699 | 4,604 | ||||||
Total current assets | 34,857 | 39,973 | ||||||
Property and equipment, net | 6,239 | 6,941 | ||||||
Intangible assets, net | 1,913 | 2,014 | ||||||
Deferred debt offering costs, net | 1,164 | 1,353 | ||||||
Long-term deferred income tax asset | 1,285 | 1,285 | ||||||
Other long-term assets | 1,468 | 2,433 | ||||||
TOTAL ASSETS | $ | 46,926 | $ | 53,999 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 2,723 | $ | 2,854 | ||||
Commissions payable | 6,719 | 7,594 | ||||||
Other accrued expenses | 6,154 | 7,554 | ||||||
Current portion of long-term debt | 9,200 | 4,700 | ||||||
Total current liabilities | 24,796 | 22,702 | ||||||
Long-term debt | ||||||||
Principal amount | 18,100 | 26,125 | ||||||
Less: unamortized discount | (905 | ) | (1,052 | ) | ||||
Long-term debt, net of unamortized discount | 17,195 | 25,073 | ||||||
Other long-term liabilities | 2,105 | 2,234 | ||||||
Total liabilities | 44,096 | 50,009 | ||||||
Commitments and contingencies - Note 6 | ||||||||
Stockholders' equity | ||||||||
Preferred stock - par value $.001 per share, 50,000 shares authorized; no shares issued or outstanding | - | - | ||||||
Common stock - par value $.001 per share, 250,000 shares authorized and 96,985 and 102,173 issued and outstanding as of March 31, 2015 and June 30, 2014, respectively | 97 | 102 | ||||||
Additional paid-in capital | 117,248 | 115,244 | ||||||
Accumulated deficit | (114,321 | ) | (111,240 | ) | ||||
Accumulated other comprehensive loss | (194 | ) | (116 | ) | ||||
Total stockholders’ equity | 2,830 | 3,990 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 46,926 | $ | 53,999 | ||||
LIFEVANTAGE CORPORATION AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||||||||||
(Unaudited) | |||||||||||||||
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue, net | $ | 45,155 | $ | 55,064 | $ | 145,035 | $ | 157,930 | |||||||
Cost of sales | 7,552 | 8,459 | 20,717 | 24,212 | |||||||||||
Gross profit | 37,603 | 46,605 | 124,318 | 133,718 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions and incentives | 21,637 | 26,760 | 69,406 | 77,558 | |||||||||||
Selling, general and administrative | 14,481 | 15,378 | 42,572 | 41,457 | |||||||||||
Total operating expenses | 36,118 | 42,138 | 111,978 | 119,015 | |||||||||||
Operating income | 1,485 | 4,467 | 12,340 | 14,703 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (748 | ) | (1,160 | ) | (2,341 | ) | (1,996 | ) | |||||||
Other income (expense), net | (13 | ) | (118 | ) | (56 | ) | 391 | ||||||||
Total other income (expense) | (761 | ) | (1,278 | ) | (2,397 | ) | (1,605 | ) | |||||||
Income before income taxes | 724 | 3,189 | 9,943 | 13,098 | |||||||||||
Income tax expense | (151 | ) | (695 | ) | (3,182 | ) | (4,066 | ) | |||||||
Net income | $ | 573 | $ | 2,494 | $ | 6,761 | $ | 9,032 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.01 | $ | 0.02 | $ | 0.07 | $ | 0.08 | |||||||
Diluted | $ | 0.01 | $ | 0.02 | $ | 0.07 | $ | 0.08 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 96,069 | 101,594 | 97,785 | 107,385 | |||||||||||
Diluted | 97,725 | 106,578 | 99,793 | 113,717 | |||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustment | 1 | 103 | (78 | ) | (363 | ) | |||||||||
Other comprehensive income (loss), net of tax | $ | 1 | $ | 103 | $ | (78 | ) | $ | (363 | ) | |||||
Comprehensive income | $ | 574 | $ | 2,597 | $ | 6,683 | $ | 8,669 | |||||||
LIFEVANTAGE CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||
Revenue by Region | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Nine Months ended March 31, | ||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Americas | $ | 32,901 | 73% | $ | 32,641 | 59% | $ | 104,397 | 72% | $ | 101,557 | 64% | |||||||||||||
Asia/Pacific | 12,254 | 27% | 22,423 | 41% | 40,638 | 28% | 56,373 | 36% | |||||||||||||||||
Total | $ | 45,155 | 100% | $ | 55,064 | 100% | $ | 145,035 | 100% | $ | 157,930 | 100% | |||||||||||||
Active Independent Distributors (1) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
March 31 | |||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||
Americas | 44,000 | 67% | 43,000 | 59% | |||||||||||||||||||||
Asia/Pacific | 22,000 | 33% | 30,000 | 41% | |||||||||||||||||||||
Total | 66,000 | 100% | 73,000 | 100% | |||||||||||||||||||||
Active Preferred Customers (2) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
March 31 | |||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||
Americas | 93,000 | 82% | 106,000 | 79% | |||||||||||||||||||||
Asia/Pacific | 21,000 | 18% | 28,000 | 21% | |||||||||||||||||||||
Total | 114,000 | 100% | 134,000 | 100% | |||||||||||||||||||||
(1) Active Independent Distributors have purchased product in the prior three months for retail or personal consumption. | |||||||||||||||||||||||||
(2) Active Preferred Customers have purchased product in the prior three months for personal consumption only. | |||||||||||||||||||||||||
LIFEVANTAGE CORPORATION AND SUBSIDIARIES | |||||||||||||||
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA | |||||||||||||||
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net income | $ | 573 | $ | 2,494 | $ | 6,761 | $ | 9,032 | |||||||
Interest Expense | 748 | 1,160 | 2,341 | 1,996 | |||||||||||
Provision for income taxes | 151 | 695 | 3,182 | 4,066 | |||||||||||
Depreciation and amortization | 573 | 530 | 1,738 | 1,527 | |||||||||||
Non-GAAP EBITDA: | 2,045 | 4,879 | 14,022 | 16,621 | |||||||||||
Adjustments: | |||||||||||||||
Stock compensation expense | 536 | 694 | 1,505 | 2,169 | |||||||||||
Other (income) expense, net | 13 | 118 | 56 | (391 | ) | ||||||||||
Other adjustments* | 717 | - | (1,283 | ) | - | ||||||||||
Total adjustments | 1,266 | 812 | 278 | 1,778 | |||||||||||
Non-GAAP Adjusted EBITDA | $ | 3,311 | $ | 5,691 | $ | 14,300 | $ | 18,399 | |||||||
*Total adjustments for the three months ended March 31, 2015 include approximately $0.6 million for CEO severance expenses and $0.2 million for search firm expenses associated with search for a new CEO. Total adjustments for the nine months ended March 31, 2015 include $0.6 million for CEO severance expenses and $0.2 million for search firm expenses associated with search for a new CEO along with a $2.0 million reduction for a one-time pretax benefit from settlement proceeds. | |||||||||||||||