LFVN - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to today's conference call to discuss LifeVantage's first quarter fiscal 2018 financial results. At this time, all participants are in a listen-only mode.

Following the formal remarks, we will conduct a question-and-answer session and instructions will be provided at that time for you to queue up. Hosting today's conference will be Scott Van Winkle with ICR.

conference recorded. today's reminder, a is being As And over to would like the conference to turn Mr. now, I Van Winkle. Please go ahead, sir.

Scott Van Winkle

the to Thank you to results XXXX. call welcome gentlemen. and of for discuss and good LifeVantage afternoon, Corporation's ladies first fiscal quarter And conference

from call prepared with Executive today Jensen, Financial Officer. remarks Fife, and Steve On Chief Darren Chief LifeVantage the are Officer;

update call call. that release. LifeVantage in Management analysis as forward-looking period a these XXXX. facilitate live LifeVantage's or contains today's period. reconciliation inherent response obligation These note November that These of of the basis. this discuss of may Before of measures a projections current of contain may forward-looking remarks to do today's any recently This LifeVantage's we from information operations, underlying we'll results financial financial our no make forward-looking including future therefore and that discussion additional prepared also ongoing most performance begin, uncertainties, questions. date including broadcast, in risk and based that more upon materially Form we'd not assumes forward-looking detailed could section undue We've in particularly that complete everyone greater the like Please to made These to and these statements guarantee those today's of with results transparency an those a not and results XX-Q accurate release to reliance the factors on differ in of results adjusted and Company's from statements are measures filed call, more involve statements contain measures, can time-sensitive be XX-K. on risks included actual be comparing to cause operating statements. the management is factors only non-GAAP management non-GAAP your any them. identified during believes remind and Risk into expectations statements when X, placed Factors projected should

to the I'd Now like to Jensen. Darren CEO, the Company's over call turn

Darren Jensen

everyone. on our these to exciting revenue distributors brief share adding Scott, geographical and you, products focused are as at quarter of Each Fiscal transformational you and with good to the afternoon start today Thank results new I'm is and LifeVantage. on initiatives year. many initiatives you expansion, pleased underway made off solid through driving progress a and plan XXXX customers. we for on first

in our a highlight the in the quarter first length call, As decrease financials. a XX.X fourth activities on of on quarter, to our to revenue for to first want we quarter. Steve fourth I then brief the update I'll and initiatives compared review through for million modest a We run generated and detailed our over turn quarter our the results time

Protandim quarter in quarter our relatively that also first due some revenue we're We of including catastrophic delay markets the fourth expected the quarter the four stronger consistent the disruptions Mexico for the to faced with City. seasonal with causing launch in late given unfortunate softening of disasters be official our during the But event natural of earthquake impacted to from summer. Mexico

initiatives this on Turning six XXXX and introductions impact anticipate to fiscal key these the initiatives. our thus building We've of during our we call, implemented and the progresses. planned discussed initiatives significant progress an fourth these made far quarter update the conference on for eight We've as initiatives, of year. key launched,

Academy to flows. logistics began the last event. model. Mainland the that e-commerce China through have rather site. is We business without technologies, and at First, People our ground compensated marketers. products, model They on order a model training of that be Elite We're testing providing an of site marketers for can e-commerce and disruptive social become already we initial I'm to Initiating growth assessing just generate by social on and not in-country and the social commenced powered from refer their as model, become us then system believe marketers. China test new could pleased this deployed social the money which a our prime from and Recall the sales have to this including sales report future platform a test this long-term new week outside to these works channels marketers site third-party site, model to with opportunity to social markets. of direct we selling be marketers. the a United China this shipped How and commercial e-commerce also training directly of are our the and that the model opportunity China doorstep. purchase product can promoting to nationals the social they These by the We selling Chinese that is, current the the a for to the compensated provide method on but see customers enhanced any in gives disruption visit are purchase e-commerce States business Chinese evolve micro-entrepreneur of with selling and e-commerce one marketing this fulfillment model opportunities. affiliated in

where quarter the program, this program family. join the ahead first with selling of in When strong program and experienced investment. Second, which with revenue our to already this growth designed leaders past, Recall thought the our would success we Carpet success return is direct that -- we is the LifeVantage and encountered and incentivize to pleased utilized of we be. attract on we accelerated it we during Red are

look excited We leaders the get now to these engaged. to program and new reignite are sales

is we incorporate the and technologies Orlando training marketing and across our are to field culture, support tools building. Elite our introduced Academy the initiative bio-hacking which instill and At successful to our and last key bio-hacking nutrigenomic Another we our in week, into event materials. stories

emerging this trend. culture around differentiated a building are We

we This Activated and Essentials Protandim during Academy. our combination of Omega-X, across our become a be Company. product including and was of culture our superior a D future our Protandim that average our un-rivals primary to Stack additional creating our the the also marketplace at ProBio is that product, which Elite Vitamin NrfX, size. released the we last comprehensive protocol is should are line strategies, Omega+ our stack stacks introduced Vitality Academy, bio-hacking order a Omega-X is and Stack will to customers, our Stack. NrfX, Turning The launched support combination the and and the new Vitality Elite week Vitality increase to distributors provides solution in

of new to is artificial efficiencies to preferred assist simplifies revolutionary a finding platform the we its launched our the test This This developed app. first and for communications is platform our is and our them distributors new technology and event, week's last believe beta of for to kind intelligence in in onboard ways the with distributors that selling This app which a create them. LifeVantage platform we new During significant also space for new interact through with customers. have pioneering us customers. distributors, tailor our we available in a app integrates Phase processes customers partnership direct of I company is for

with Microsoft the finish end this track expect rollout to ERP touching we're substantial our Finally, XXX, fiscal by a on deploying implementing progress we initiative, on global corporate Dynamics sixth to process of made and the system on our XXXX. of have upgrade and

running run we've can Company as hit on initiative. look you more to continue the marketplace trends see the to are consumer transformational year's medical to develops it the focus and the forward each As through Steve? me let that, this the Steve on results. updating and that capitalize to future ground to plan driving with you We'll financial LifeVantage. With positioning on for over

Steve Fife

good afternoon Darren, you, Thank and everyone.

remained decrease prior is incentives products compared as Asia-Pacific sequentially a million the fiscal remained million, QX. relatively from while XXXX. XX.X% to gross year-over-year of of that XX% to in while in a executive X.X to the represent XX.X% expenses revenue a expenses in a as in geographic fourth fourth percentage sales at quarter representing and the and European of incentive XX.X% period. for and this XX.X% of & The prior decline million, continue X% adjusted relatively non-GAAP was versus was first was we increased in costs, XX.X% legal period First Revenue expense sales Americas basis recruiting during of anticipate On to sales transition and and of a excluding ago. non-recurring and Commissions a could and expenses Japan. target. a into of and litigation margin million function year fourth million the percentage trend X.X compared decreased quarter, consistent region when quarter consistent expenses as class-action mix sequential also XX% to down sales the revenue compared of Commissions XX.X the XX.X% X.X% the XX.X% quarter SG&A X% and other quarter XX expenses, $XX,XXX year with including XX.X the X.X% the The growth sequentially SG&A during of team XX.X%. fourth our year period. percentage in the quarter in XX.X%

prejudice part. Operating the prior payment Adjusted aforementioned the million X.X fiscal million. the from As in non-GAAP previously compared an and adjusted million year On X.X now announced, to quarter in on was concluded for account filed adjustments, the year of of and XXXX down prior million the and million our last operating income shareholder first was first is taking million period. million fourth dismissed quarter income X.X EBITDA the X.X X.X year into in financial basis the X quarter litigation without with the was any was class-action period. in consideration quarter X.X for fourth

share first or or fiscal or quarter $X.X million excludes per On year per the fourth the in per compared per fully period. million net in and fully or aforementioned $X.XX share prior year the per of the in million non-GAAP the net $X.XX income tax, fully period. which the share to net in X.X net compared diluted million income fully diluted $X.X $X.XX of year share million X.X fully income adjusted or diluted $X.XX X.X diluted basis $X of diluted share quarter to per XXXX, was $X.XX fully fiscal million quarter costs fourth and $X.XX prior was or diluted During share

of which first cash with of $X.X million Turning XXXX to a and cash. million the quarter in increase debt, net fiscal the represents $X.X sheet, $XX.X million balance of ended we

to levels $X.X sequential million make the down of second improvements as our to position a We as continue declined quarter are million of planned anticipate the product in We increase launches. end year-over-year. the inventory during inventory inventory a result do quarter and the fourth $XX.X million from $X.X

During million in and invested $X.X the operations of first cash from quarter, $X.X expenditures. we million generated capital

digital and to our CapEx investments to XXXX, we anticipating our business efforts. systems support in $X including core of fiscal upgrades million technology transformation support are range For the to our

business engaging classification quarters rather in as joining Before let and I turn reflects the purchasers. that practices our appropriately with you the to are we the should preferred are will over activities, see each reclassifying network the quarters. seeing coming accounts guidance, customers’ some as begun about process the changes customer the we ensure is distributor begin that Consistent me correspond across activities. not coming but have and change channel, precedence, This over are we distributors to marketing occur and classification acting LifeVantage in distributors to with highlight

The to As reclassification have see distributor the rebalancing close XXXX of preferred a impact sales. to let through fiscal result, customer our remainder guidance. year. accounts you me a does reiteration that, distributor a not an our on and With customer the of with of preferred the should fiscal of expect

We revenue anticipate of the earnings expect range range $X.XX to $XXX per $X.XX. the fully in of million. $XXX million continue to share We diluted in to

the facilitate Now, let call to back the operator me questions. Operator? turn to

Operator

with sir. Please And take Instructions] Management. go ahead. Martin Yes, our will from [Operator question first Capital Steven we Slater

Steven Martin

increases? you give So, acceleration expected your some you quarters. And year. and how It to the the quarter Can of implies this for when that of we expect year-over-year over us all the see you we guidance should progress? reiterated three an rest next

Steve Fife

Steven. this Steve, is

China. our we that last that anticipate growth call, of each most during Red And the to QX fiscal going sequential are those As Carpet will do XXXX. as about remainder take probably centered product our really we the program, growth that our of be talked out there immediately around in we've laid started traction launches in initiative here, to drive

Steven Martin

going in of But and sort on now quarter, But that quarter December I was your XXXX basis, to expect it's quarter you're year-over-year increase a was you're the second year-over-year your a should seasonal to a -- we show recognized December going slow worst have -- quarter. quarter?

Steve Fife

our million, would Yes, build hope that would us of so. 'XX. on quarter to of XX expect would first QX We ahead put which I -- at we

Steven Martin

of couple preferred order increase re-classes year-over-year going to metrics, day to because we and in have the is your you're about when sequential to to talk sequential just about show to in going talked this and distributors and going have on we sequential those you on, Can I show one things, know are going see of If grow a you -- the business, to at you're increases? -- end customers.

Darren Jensen

to program. aggressive of affected our were products have distributor into changes the Steve, Darren that well primarily had we these China believe most go I some And have we of recruiters the as that put new of to policy aggressively year I the starting numbers, that take, the those back and this our to program reengage Jensen. our driver to of new already at some to With some numbers into that seeing that last as flattening that of had the really with that groups. that, been the is I'm place, to by looking with when think distributor is the -- main most of we you some markets rollout we're

of along numbers, business. So, with increases the in see in into we increase also distributors would to number the in the our quarterly coming begin

Steven Martin

of whole Can XX you've how over announced about and run markets of you of the some that Can they're new last progressing? -- new you talk through markets a some months? the bunch

Darren Jensen

-- Europe This out more but there typically people with of have last that's is se, Europe -- those Asian very in in three so stable, the selling do are. jumpers to to They're the break I the Asia the once. experience UK, and comes per Europe recently as in about the are of of like then in very just it a we is different from but opposed other jump we Germany. they're where at groups Europe. think it built when of have products. have And more some slower area the been Netherlands, my coming don't numbers you like an that market about -- they're I large side not serious the been team most is at we've most what that least

out European would continue I had especially of been to markets. growth, sales very join reasonable been European to we're seeing program, into new that the in will the Red -- some see good phase. continue I the only cross-border leaders we've really we've The into testing in growth So at actually coming which business, e-commerce going we’re through that model drive to our that I continue the a there. very And believe China, announced Carpet that other increase our expect would and we've number of commercial has market

number the do now. of model, we people limit participate so can right And into that that

Steven Martin

about… what And Okay.

Steve Fife

sequential in that. good Germany Netherlands just it's and very on so is obviously, I early seen the growth we’ve would just days that, in add to U.K.,

Steven Martin

and Okay, Mexico Japan? in

Steve Fife

growing, Both sequentially.

Steven Martin

know the Mexico issue. whole got whole tax by selling and Yes, very I the because disrupted issue

Darren Jensen

but we Protandim Yes, disrupted the has had very market earthquake that also our the strong. there down been launch,

Steven Martin

Okay. And last? Japan

Steve Fife

Yes. Japan grew sequentially. X%

Steven Martin

Oh! That’s great. great. That’s

Steve Fife

Yes, Japan doing very well. is

Steven Martin

I’m sorry.

Steve Fife

I is very said, Japan doing well.

Steven Martin

applaud the inventory. reduction I wanted in for to the continued

more Now you out? that settles where you a do time think inventory the little there, had

Darren Jensen

excess continue and launched. the of couple the raw the I year anticipate it’s mentioned million that by the Yes, of should a to more goods But year, build are we currently associated anticipate some my had we get at we the the big of we’ve that today. we than we probably QX, to as a and end depleted that most in that down, the couple I opportunity, end build going with be go lower especially remarks I a have that fully we products still ago year finish the to during will think dollars of up million prepared raw would and new end be this dollars. by

Steven Martin

the SG&A, one it of is one little is part Okay. And fix. on G&A more variable last a obviously portion and

you've out with sort rest of over launches. the year? of the little a Now that done specifically some have you portion and the G&A these the How do you to more SG&A shake expect time, of

Steve Fife

as I some I there But there mentioned, would and stable, in think would big think consider what is fairly I changes that. core you to that. it you G&A, variability I of don't expect

Steven Martin

Okay.

the get be So leverage can gross margin, able get if the we over the should and quarters increases hold to next the some at G&A level? three we sales

Steve Fife

our the and anticipate revenue incremental exactly of question growth That’s back coming leverage. do through have first with We because off number that to goes profitability QX trending right. your will around, guidance. it our of really the And

Operator

Next question Enterprises. comes from Jim Galloway with Galloway

Jim Galloway

the I of added way now on the to margin a half to couple to of just a is people The get able on ranks. revenue couple on see of business. China higher a One this channel? gross sale Are gross structured Just questions. goes we in we’re margin the distribution greater bonuses and different we commissions,

Steve Fife

Sorry, Jim, you… of could last you repeat part that, the

Darren Jensen

Yes, just part. the last

Jim Galloway

new are in we this the get channel to China, margin? a able higher distribution On gross

Darren Jensen

First of higher any bonuses didn't first people. that, let Jim. to answer our me the We level part add

coming if impact -- our of would modifications consistent. due rules we've greatly would some to see, [indiscernible] of changes But I As reasons case we or massive are payout. have our time-to-time had any made life. the you commissions out regulatory to make urban of From for overall holding instance not the say can anything that

Now moving on to…

Jim Galloway

some to seeing fund the dedicated What these pro ranks, shareholders? XXX,XXX XXX,XXX liked would of that go I where bonuses to the for and was superior like XX and a XX pro the to like talking is money have about I

Darren Jensen

to XX%, when right modifications and is bonus because would do payout design for that some a like reasons. at other in that, whenever part that our also now we build that we did we So models we made because of regulatory

overall and has steady, we've seen that in number. payments the So overall, remained -- commission the the

that, we not amount how pie total that up of So, of the now which we're is as that money, increased. as think divide isn't material I paying

Now, moving over to China…

Steve Fife

on the China gross than from Specifically the should that higher profit our accretive it standpoint. be existing business gross that China will but margin gross modestly anticipate our be question, margin, we on

Jim Galloway

about $XXX the Now, and times, containing There years-and-years, big me I we've worth there retention, guys buy customer and promotional tell for opened content with the how talking products, there. along shipments. does bullet zero about the had didn't keep to nothing products. get and products with But no in last you over of hour information? promotional was inserts contention and I I've $XXX within we was of worth absolutely at having about that it I go talked package

Darren Jensen

been but What products through been insider we've marketing well training. within through for stacks marketing of of found materials we circles our it put through these as of packages and selling, media of by we're in been lot some in cross putting has flyers as better social groups packages in we Where our grouping the have doing that close way that and us. making greater and not providing returns best inroads the we systems, packages, better them call is and some obviously distributor of have do a inside of and we've

than they're when just out. to paper simply more the a So lot into a found effective in shipped we putting packages, be these

Jim Galloway

showed How we Can you hovering up in for this time? X,XXX growing? many people Orlando many, we've many on been information are Elite Because Academy? give years, the at us some

Darren Jensen

which the we to the it depends what that, in is. hold location With Yes. as attendance on meeting the really

don't around lowest of attended area highest is years -- center country is. for why Typically, or have country. Orlando, in area venues three We attended typically I in We that more advance. these know the Nashville the the is typically booked out around our our instance,

people we pretty us. it, for So, Elite hold had we our which is area at the for Orlando are changing Orlando good where around around Academy, the of Academy Elite X,XXX mix this

going February the plan I our number, but just programs which had X,XXX enrolled in begun time have for enrolled to best people have this don’t Elite -- -- upwards come to think week have end more next is is I new up well to Elite already I Indianapolis, the Academy in attract over Indianapolis, already a We the we the we X,XXX left it’s to which our exact be by in that last the what potentially but isn’t and Academy and to Academy. of when of for, for week, is. fully Elite to paid year people this is expect goal go also to

that to be So giving the went at a of pricing part we better the strategies lot comes expect event. advance promoting this higher, and to

a So we're dialed it getting now. I in think lot better

Operator

We’ll go with take and Diane from question our next Donovan [Vantage].

Unidentified Analyst

less expect I stock decrease share? price see and to some When increase the per can in

Darren Jensen

that price? Repeat can a time. see When more you stock Okay. one higher

Unidentified Analyst

this of When price the do trend? LifeVantage going seeing trend think up you and we're to down stop share seeing start for per

Darren Jensen

a you. really of it distributor, where -- that but Well, revenue, you're look direct it driven with price you're to really selling, by if to, it’s down at of know depends don't lot comes of a I if and lot the typically, when I a down distributor, that's I there And it that affect mean a stock. comes factors is

for messengers simply the We’re Company.

the expand stock. as and the in that business of the grow distributors stock think up. our turn factor And I the drive and in So drives price main that's more of probably our become the successful growth

Unidentified Analyst

I At we even when know don’t it from that but had point, back split. reverse was, that. hasn’t a some come

know So I or because with think I reverse began split don’t of the… the XX-K the

Darren Jensen

five at I of like was back. When the least a with split, I has at the year the joined the Company, No, the -- company time actually, when I right reverse few split, we ago, started the it around $X.XX. of reverse stock think come were price

what would so mean we're higher seven XXX, we and be about than were time. at times XX So I that

-- on we that? where were any ended five something. other today, I So But know I that's mean we don't questions at

Operator

like conference does conclude I'd today's Darren turn closing for the that to question-and-answer Jensen gentlemen back and session. remarks. to ladies And

Darren Jensen

I about against happening made better you you that We've today. everyone call. us you Company everyone. forward future. to to transformation for Thank a updating joining day. initiatives on our LifeVantage. share you have for next all the We XXXX And our the the at our hope Thank position excitement wonderful excellent look progress

Operator

and today's gentlemen. conference. does you thank That conclude for ladies We you participation. Thank your

may You now disconnect.

LifeVantage (LFVN) 8 Nov 172017 Q3 Earnings call transcript