LFVN - Earnings call transcript Q1 2019

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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 2019 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. at for provided up. to be will that you time queue Instructions today’s Van Scott will with Hosting be Winkle conference ICR.

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

Scott Van Winkle

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

By from Jensen, Fife, this call p.m. today which LifeVantage everyone Officer. Chief Chief Officer; the remarks release Darren Time. with Eastern access On are afternoon have Steve Executive and Financial earnings X.XX to now, should prepared at the approximately out went

and it’s of on available replay company’s If you’ve at will Web call site the release, well. site the webcast Investor This available LifeVantage’s the a Web Relations portion not be www.lifevantage.com. received as being on is

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

Darren Now, over I company’s CEO, will the to Jensen. the call turn

Darren Jensen

growth sequential good Thank continued and today to sizes. our during had growth. continue basis grew order afternoon quarter a both average pleased net the sales and join quarter good rates member and start to fiscal seeing XX% everyone. you results. on a are active We Scott, first to XXXX year-over-year to I’m strong discuss to higher counts retention and our you, with year-over-year first sequentially, drive We

upon trends our acquisition, the continued range size, are fiscal a quarter. had highest of these momentum, order including guidance drivers discuss strong market quarter believe Greater Taiwan been launches improved have a of completed and most in over the successful to note represent of growth and driving launch first As revenue contributed well increasing which end our We remain revenue our execute momentarily. result of have we on that one the during order continue our low history. the the will last at growth beginning reflection annual our distributor over seen will China Each growth distributor a the The initiatives and Taiwan our as Red our program our size. of average guidance continued our of which key product our XXXX. average sequential we implemented and has year acquisitions. stacks is new contribution on increasing very XXXX outlook and a confidence first from I the initiatives We for in reflects successful customer focused our geographical expansion, revenue to new last initiative that would XXXX focused are the the in to sales of which geographical during key like increase we fiscal year opening Carpet even innovation the as company’s Steve would to to-date. the footprint We

was largest sales. During market of in September, terms Taiwan our third

over coming We China fine quarters. Greater also our to year had tune further China enhancements strategy Mainland this our as we coming programs the

national to the continued market plans develop opportunities in and markets our and operations year. distributor begin groups. quarter Greece, for first of includes; in footprint announced market with Last we half with We was Convention, European additional German to second This Ireland. of the five many France, Spain, at launch the overlap European fiscal during Germany the of the a also expansion new new Austria. our week our given Global These Belgium,

expansion our the of Our demand. nearly introduction product our response through launched positive. from customers newest is Global selling to strong markets overwhelmingly our distributor and by Science driven highly all these during care. inventory. hair our distributor been into saw We leadership being we Convention, response Also successful The True has innovation

new care enter the to expected that to is XXX daily by billion meaning complementary product to favorable over portfolio. our very this category $XX attributes billion line Hair new grow excited promising category product purchase to It is needs XXXX. We such the fits that and our are is typically into well category. it is industry approve. something an used as spouse a We has believe a is non-permission global not

momentum drove into innovation, to launched products first strong good the In to in a our core NrfX markets. continue expand international sales response Australia with recently We our during we addition quarter. customer that

Carpet to our Pace strong new our increase, acquisitions we program, continued member growth. the Setter to distributor As strengthening I are with add with rank within along seeing consistently program And noted, leadership Red retention.

three which of indications more strong activities. and experiencing far continues Each also of of to using not. were Thus contributed LV platform downloads enhancing the those distributors to initiatives count and during early app improved our than these are We of success members we develop is digital adoption the our member quarter. distributor active have are XX,XXX these who first times enrolling than that many the show who it the new are actively as

our As with we of adoption of new XXXX acquisition business distributor availability existing our the drive internationally, last launch new of discussed to product, are new expanded fiscal product our call, development LV driving our of for goals leaders, our platform. on digital and market global

and the results. on which Steve? that, trends. plan are to-date, XXXX over pleased progressing let member both are through to With me active with to results turn We financial with evident initiative and our are ourselves run in it the Steve

Steve Fife

results. of be both year-over-year our another I’m sequential to-date. quarter afternoon, and are We generated note you, revenue results. good to non-GAAP Thank Darren, quarter of everyone. report our and adjusted ahead that and sales will discussing very plan growth I Please the pleased first running

You the to non-GAAP can GAAP reconciliation to in refer detail. press additional today’s for release

benefits increase revenue million, Pacific year-over-year revenue Pacific X.X%, during the margin of changes growth and the X.X% price million, basis Commissions fiscal as Those the promotion Americas X.X% XXXX. second all and reflecting XXX launch Taiwan. Red revenue to XX.X of increased reflecting product million is the XX.X% compared and and the to The sequential representing to when quarter Asia Europe increase XX.X increase quarter a XX.X% a and in reported XX.X increased Setter in in Europe the while increased market to half XX.X% increasing was year-over-year. fourth in Gross XX.X% last on revenue points XXXX program sequential Pace and compared incentive regions fiscal first Asia very the in with sales successful and a to success XX%. percentage our of and expenses was also part of a during the a increased XX.X% mix. increase Carpet First to Revenue year-over-year quarter. year, basis in to Americas due primarily of

during held revenue also and quarter that multiple mix period. variations occurred on We typical incentive each events saw other the based

incentive Our sales ago. will sales SG&A Adjusted fluctuate based percent which XX.X% percent to magnitude of compared of were of a remains target XX.X% on and timing and incentive programs. of promotion the year as a as a commissions and adjusted SG&A XX%

in operating year fiscal income compared to The Adjusted SG&A was of the impact the events Adjusted to increased million expense increased prior a of prior million compared quarter percentage first as stock one compensation increased the a made as price XXXX. increasing to the period. and $X X.X result the expense in fourth timing million contributed the our X.X additions X.X half for improved stock of period. the period. year compared year in reflecting EBITDA increased the XX.X% SG&A than second in prior well total as million basis, quarter, While the distributor three year-over-year stock to to expense two compensation levels during prior and on period of events compared and X.X to due the million staffing dollars year of higher higher approximately

diluted our our as profitability Given stock-based reflection higher the fully be cash we growth price, shares in well resulting an compensation from better this increased EBITDA as a will believe of share year. increase

few XX% I 'XX. we anticipate in While the EBITDA XX%, in reflects discuss a X% adjusted minutes, guidance, our to of fiscal EPS to XX% which growth range adjusted during will growth approximately in

quarter. the federal the benefitting the to to to during and for December items compensation-related due reform significantly corporate effective period. tax which rate discrete reduced prior Our This was rate tax from XX.X%, down the during the mainly rate is XXXX quarter due tax the enacted XX%, year stock

may share or was tax variations million period. rate the items Adjusted subject in $X occurring per income be to fully discrete consistent $X.XX with Our quarters. significant from year prior resulting net future diluted

our release. the all in adjustments I As GAAP noted, press to are earnings non-GAAP reconciled from

balance XX.X of fiscal strong cash the in position to sheet. quarter XXXX the debt. first to with in million compared X.X a financial Turning We ended million of

cash generated note loan. from $XXX,XXX the million invested partner our million relatively we quarter, convertible million term We million X.X a and prior with X.X paid first $X.X X.X in year the on development in period. capital the expenditures, of down issued our roughly consistent technology During to operations

to continue our be million We $X XXXX million. $X.X expenditures anticipate will to capital

guidance. to Turning

XXXX a prior revenue XXX We million. up XXX guidance to to range range XXX XXX of of to million are increasing million our million, from our fiscal

are earnings in guidance We diluted of adjusted the $X.XX share range per $X.XX. our to maintaining

stock-based As stock compensation increase has levels quarter, which higher in increased million of a to year-over-year price first diluted during noted, we June count, higher share end our and the the costs. both led have since shares the X of

We share higher guidance. in that will increased initial the and stock-based reasons are higher million The our we costs was outlook what compensation during be million adjusted unchanged to comp increased than EPS $X.X are fiscal while stock guidance. now is XXXX revenue count estimating our contemplated $X our

items. impact are on which we leverage of these the EBITDA adjusted expecting However, excludes great

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

Operator

Instructions]. [Operator you. Thank

from now first We Steve our will Slater. take from question Martin

open. ahead. go line Your Please is

Steven Martin

progress. major I didn’t expect on first one. get to the guys Congratulations

Darren Jensen

Steve. you, Thank

Steven Martin

quarter top new you you’re details your and are about $X ends of And at of some more talked that the you comfortable million that So quickly? raise to give in markets enough you range. guidance one bit. both seeing? raised the products a by you it and that were much What line Can you little

Darren Jensen

really results And the the that we’re our our countries the came exceeded felt in of in expectations. our expectations product enthusiasm the into Convention launch our gate strong. we out the Yes. QX Taiwan including say second I’d and Convention say hair new of in talked – care geographic sale We our exceeded half the of I’d the about excited. year. just Europe

in a and the And QX, again in so that just on. Convention, what very we’re the October care hair excited largely about we’re trajectory a driven strong start saw by we good

gave confidence. the So us that’s what

Steven Martin

you and your progressing, that’s were ASPs your up how about the you higher. And that and that boost acceptance so talk packaging is? how would Can

Steve Fife

increase quarter. we continued prepared a Darren’s during Yes, size the in I average remarks in think order saw our

And in in increase so with is distributors to during that coupled order contributed our an member strategy saw payoff. counts and We strong revenue customers size is average XX% our the asset really and what continuing that both growth increase the to the quarter.

Darren Jensen

And – go ahead.

Steven Martin

metrics average give that just we or was us much around the can idea if grown, or going play – you an model? order of some is in how what can size it’s to I ask,

Darren Jensen

released it’s those Should much don’t have grown, exactly is you talk how Steve, – much I Darren. do I’m ever think sure is. how this not that it have about we numbers? we

from things. stacks numbers right think the shifting looking looking up, makes those I we’re product but it our sell or model very they’re certain a now back just easy say, concentration that me the bundling on let calculate the to on products average size. up single while on our order been has of pretty successful But to

a as that product also As care hair just released a matter launched was the bundle. of we fact

And great a so actually the selling there were multiple products bundle – was product.

us. When those So know you looking we’re get for up very they what we’ll numbers. it’s a let we are. them, been launch Steve, successful

Steven Martin

Okay.

So turn to side. let’s the expense

commissions you rest commissions SG&A, in soon going to just the you XX, going comments be year? Your back still didn’t is drop they quarter XX%? take of and but about to normal a them you us expected get give the how the to can second to timeframe. or the You said it back to Are

Darren Jensen

we is to that that really paying is think – big The flow. Yes, versus that Carpet this really that’s by great for us. off initial that’s that our ebb I and to quarter a in think program. going the A increase for our is investment driver revenue And candidly that XX% driven investment Red generating money.

we as new And so through program. bring and on it flow that leadership will ebb

Steve Fife

the a little payout. as with people orders company well up can Steve, front typically we greater a it can period, trigger our initially because a of higher rank bonuses, the at payout, out levels higher it growth higher through pays a that, bit get on to see as addition going of XX% few when first achieving certain bit creep little plan compensation the you higher naturally as, In

way So we depending on I for at that an we it be question. the or promotions I previous do have have on. who the can what going think comes promoting in chunky that have it answer time on you out

XX.X% average year. Our up last size is order over

Steven Martin

you been if or quarter, the And higher? has I that lower in fourth have asked question that – would had got that

Steve Fife

Actually same. the

Darren Jensen

that again, Say Steve?

Steven Martin

you answered the have fourth been? that question would answer If that in what had quarter,

Steve Fife

let clarify year, was the the Actually over increase me That just – QX. we that what that. ended our was so

Steven Martin

sequential. the was that so Okay,

Steve Fife

yes. was That sequential,

Steven Martin

Okay.

but – we behind year? you, then, and of how to the a it the rest model you want are the year so what should be to little rest they’re now that to commissions G&A where the understanding look to the going back for the should expenses side on chunky Going those three do the us with of like for events get

Darren Jensen

a really anticipate is from But see I but of to QX. a outlook have on was SG&A right rate as than comp a because as it increase we Convention. we’re cost think about the standpoint the in relatively and And now, in we our in it with the of specifically part our But an variable more will looking is Yes, forecasting at us run flat Conventions challenge stock candidly other our the QX probably dollar going bump, element in ebb would the our we’ll and because than have is little forecasting really same be that comp. bit events. G&A based much Academies. you’ll Elite that,

event have in QX We then in another no event QX. and

Steven Martin

would the and – But that How of you in QX the back so event compare one last the year. year? event saying you’re in have to half

Darren Jensen

It to an last comparable from year will standpoint. event be

Steven Martin

else. for it leave I’ll right, someone All you. Got

Darren Jensen

Steve. Thanks, Great.

Steve Fife

Steve. Thanks,

Operator

questions additional appears [Operator conference like for I’d time. to me. Instructions]. – Jensen, turn back there at any you to It are Mr. the no this pardon further

Steven a We follow-up Mr. Martin. have question from

Your ahead, line go is Please sir. open.

Steven Martin

I we’re Okay. guess --

Darren Jensen

Welcome back, Steve.

Steven Martin

probably is diluted being be aggressive – you the think deliver count about the you is by the going going have how on into recognizing little about great impacted do stock $XX think do with you’re that likelihood that have whim? the if you buyback the to options balance business, a below seeing feel a Recognizing you forward, now pretty deliver, you visibility the little more of to sheet, more more again being and what guys you a what share and job done going

Darren Jensen

did with that trading also in and doing. of back and we but that evaluated well be our this buyback into just me parameters plan set the time have at we quarter are will currently our the quarter, we’re market. that don’t believe not this have purchases as parameters We we a possibility open to of at new we beginning the that like And during so we established purchase windows, looking anything around Yes. our to lead entering

Steven Martin

guys and I you notes, or out revisiting the are did And my Real that that everything Salt and relationships. you come recall find couldn’t issue where whole Where given you coming out? I as Lake, Okay. were on

Steve Fife

Actually of our shortly here made a formal to Board will presentation be Directors.

any working we the we’re that yet. made And so still haven’t through announcement and process

Steven Martin

Thank Okay. and you want very guess leave much I’ll whoever to I question. it ask may a to

Darren Jensen

All right. Thanks, Steve.

Steve Fife

Thanks, Steve.

Operator

[Operator Instructions].

ahead, We sir. next will our take go Please Summerton Will from [ph]. question

Unidentified Analyst

the can’t call now. guys, hog whole Hi, let Steve

distributor well. included also Europe the Pacific Asia sequential question a nice of on The believe year-over-year region in and had as Just I talent. distributors a which pickup terms

areas which as – you that and elaborate areas those just picking guess driving markets? are of see you more I you’re that further three up do can up So two opening

Darren Jensen

Will, you. right. thank All

think that I you see multiple areas. in occurring

that successful in mentioned, As third a we Taiwan. in And terms launch market last revenue. our market we very had represented month largest of

pickup a seeing is leadership drive in groups to and had we’ve join also. Taiwan. area us strong good Europe beginning But we’re that out So also with especially of

seeing Europe, is seeing of So earlier, throughout mentioned there, we as one we’re performing areas I incredibly Asia. our top Protandim, overall we’re both great growth Asia NrfX. in our well products right growth just down now. all of the Australia in great launched And

running. that market up is So and

a overall markets United is Mexico well. Canada. are great. so you’re States, our strong a Actually great doing And really most seeing doing of

but So the area throughout occurring one or that overall world. growth in even is not two just

Steve Fife

we there. Will, during some formally into mind we keep pickup so this Austria in quarter, saw launched And, just real also that

Unidentified Analyst

those Ireland, roughly when France, you And in? Okay. markets; then speaking expect new of Spain, deals Belgium,

Darren Jensen

year. – half have half this second in or in All that we the yes, fiscal of stated back the

Unidentified Analyst

product, missed price I if point the there? this, but what know don’t hair I is And care Thanks. Okay. the

Steve Fife

which shampoo, there’s product hair because you $XXX. a serum is [ph] Well, that use a it on conditioner a is of Selling three the hair the scalp and them. system depends on

Unidentified Analyst

Okay. buy And if you just conditioner? and shampoo

Steve Fife

here. have don’t I prices the

Darren Jensen

I positioned think midrange have the kind it totals in individually of is we the in for $XXX. category Where about hair. $XXX, been premium

competitive. really very been having the that and them And a created distributor they’re technology as so product clean we for has with them positioned NrfX So way good us. excitement, it’s having have [indiscernible] tremendous

Unidentified Analyst

China. is Okay. question just Last on

progressing is I yet provide expected here? don’t around at what for any on you expectations better think contribution forward going you or know I It is or if or it’s least that how numbers it you well. than commented track that --? could

Darren Jensen

Well, the us fine able And as it continuing we’re and but here or we it cross-border mentioned just tune the of control the give for schedule which e-commerce will in to I to region, a seeing side region. program. portion a we be QX, we’ll progressing enhancements that even, a schedule. to as out has company. talk extent, Greater China growth of there. been not look we’re And as I e-commerce especially us very greater beneficial have that of that Taiwan our China ahead to China in my look at with Mainland at is of on for that as the And of we the drive those greater that think And some rolling model out be

question, of answer in schedule. your ahead on to So or schedule

Unidentified Analyst

Thank Okay. you.

Darren Jensen

Thanks, Will.

Operator

from go our [ph]. take next ahead. Ludwig now will We Please Renee question

Unidentified Analyst

right? Yes. me Can you all hear

Darren Jensen

are How Renee? can. We you,

Unidentified Analyst

Good. Thanks.

how great. You the the United with States [Technical Difficulty] I wondered are guys doing

Darren Jensen

United Can the in blurring that out. What the again? was increase for States? you kind number say distributor the You’re of

Unidentified Analyst

Yes.

Darren Jensen

Americas. do Well, we We separately. disclose not States the the disclosed United

Steve Fife

you. up look that We’ll for us a Give second.

we increased a active from distributor standpoint year-over-year distributors. distributors about So X,XXX

Unidentified Analyst

customer can really you in And still retention the high? Okay. see base

Darren Jensen

Setter very good our that very remains program other of this and before both customers. in we’ve our with programs What a retention, Pace doing, as high and the as seeing progressing increase our especially well it and distributors I’ve well. we’re Yes, the we’re Yes. of some that mentioned seen

Unidentified Analyst

Great.

Thank you much. Okay. very

Darren Jensen

Thank you, Renee.

Operator

any I’d are remarks. Jensen, appears closing at no there further this for It turn like conference questions to the time. to or Mr. you back additional

Darren Jensen

joining Thank Thank you. today. for you us

revenue great XXXX a our growth confident business all momentum and pleased Goodbye. wish remain in you We’re the and outlook. improved day. we And with

Operator

This you participation. call. Thank for your concludes today's

You may now disconnect.

LifeVantage (LFVN) 1 Nov 182019 Q1 Earnings call transcript