LifeVantage Q1 Revenue Up 24.4% To $56 Million

LifeVantage Corporation (NASDAQ:LFVN) reported financial results for its third fiscal quarter ended March 31, 2016.

Third Quarter Fiscal 2016 Highlights:

• Revenue increased 24.4% to $56.2 million, compared to $45.2 million in the third fiscal quarter of 2015 and 8.0% on a sequential basis;
• Revenue in the Americas increased 33.8% when compared to the third fiscal quarter of 2015 and 9.9% on a sequential basis;
• Revenue in Asia/Pacific & Europe continued to improve, rising 1.7% on a sequential basis;
• Adjusted EBITDA increased 54.6% to $5.1 million, compared to $3.3 million in the third  fiscal quarter of 2015;
• Adjusted earnings per diluted share increased 83.0% to $0.14, compared to $0.08 in the third fiscal quarter of 2015;
• Refinanced term loan in March 2016, lowering the interest rate and improving cash flow.

“We are excited about our record revenue performance during the third quarter. We are seeing positive trends in our existing business, leading up to what may be the biggest new product launch in the company’s history with the upcoming May 17^th cyber launch of NRF1,” stated LifeVantage President and Chief Executive Officer Darren Jensen. “We are successfully combining visionary product innovation with a highly duplicatable business opportunity, further enabling our independent distributors to be successful. The results are evident in our sales growth.”

Third Quarter Fiscal 2016 Results

For the third fiscal quarter ended March 31, 2016, the Company reported revenue of $56.2 million, a 24.4% increase compared to $45.2 million for the comparable period in fiscal 2015; and an 8.0% increase compared sequentially to revenue of $52.0 million for the second fiscal quarter ended December 31, 2015. Year-over-year quarterly revenue reflects an increase of 33.8% in the Americas and a decrease in the Asia/Pacific & Europe region of 0.9%.

Commissions and incentives expense for the third fiscal quarter of 2016 was $28.2 million, or 50.2% of revenue, compared to $21.6 million, or 47.9% of revenue, for the same period last year. Selling, general and administrative expense (SG&A) for the third fiscal quarter of 2016 was $14.6 million, or 26.1% of revenue, compared to $14.5 million, or 32.1% of revenue, in the same period last year.

Operating income for the third fiscal quarter of 2016 was $3.6 million, compared to $1.5 million for the third fiscal quarter of 2015. Adjusted EBITDA was $5.1 million for the third fiscal quarter of 2016, compared to $4.5 million for the second fiscal quarter of 2016 and $3.3 million for the prior year period.

Net income for the third fiscal quarter of 2016 was $1.0 million, or $0.07 per diluted share, calculated on 14.1 million fully diluted shares.  This compares to net income for the third fiscal quarter of 2015 of $0.6 million, or $0.04 per diluted share, calculated on 14.0 million fully diluted shares.  Adjusted for a write-off of deferred debt transaction costs of $1.0 million, net of tax, associated with refinancing the Company’s term loan and $0.1 million, net of tax, for executive team transition expenses, adjusted Non-GAAP net income was $2.0 million for the third fiscal quarter of 2016, or $0.14 per diluted share; compared to $1.1 million, or $0.08 per diluted share for the comparable period last year. Non-GAAP adjustments to net income during the third fiscal quarter of 2015 included $0.4 million of executive severance costs and $0.1 million of executive team transition costs, both net of tax.

Fiscal 2016 First Nine Months Results
For the nine months ended March 31, 2016, the Company reported net revenue of $153.5 million, an increase of 5.8% compared to $145.0 million in the prior year period. Revenue in the Americas increased 13.8%, while revenue in Asia/Pacific & Europe decreased 14.6% due predominantly to lower sales in Japan that occurred primarily during the first quarter of fiscal 2016. Revenue for the nine months of fiscal 2016 was negatively impacted $2.7 million, or 1.9%, by foreign currency fluctuation.

Operating income for the first nine months of fiscal 2016 was $9.3 million, compared to $12.3 million for the prior year period. Operating income for the nine months ended March 31, 2016 includes $1.7 million of the previously announced executive transition and one-time expenses. Adjusted EBITDA was $14.1 million for the first nine months of fiscal 2016, compared to $14.3 million for the prior year period. Operating income and Adjusted EBITDA for the nine months ended March 31, 2015 includes the benefit of approximately $2.0 million from proceeds recovered and related to the Company’s December 2012 product recall, partially offset by severance and executive team transition costs of $0.7 million.

Net income for the first nine months of fiscal 2016 was $3.7 million, or $0.26 per diluted share, compared to $6.8 million, or $0.47 per diluted share for the prior year period. On a tax adjusted basis, adjusting for the previously mentioned executive transition and one-time charges during the first nine months of 2016 of $1.1 million and the $1.0 write-off of deferred debt transactions costs for the first nine months of fiscal 2016, adjusted Non-GAAP net income for the nine months ended March 31, 2016 was $5.7 million or $0.41 per diluted share.  On a tax adjusted basis, and adjusting for the one-time insurance benefit for the nine months of fiscal 2015 of $1.4 million partially offset by $0.5 million of severance and executive transition costs, adjusted Non-GAAP net income for the nine months ended March 31, 2015 was $5.9 million or $0.41 per diluted share.

Balance Sheet & Liquidity

The Company generated $6.2 million of cash from operations during the first nine months of fiscal 2016, compared to $9.0 million in the same period last year.  The Company’s cash and cash equivalents at March 31, 2016 were $8.5 million compared to $13.9 million at the end of fiscal year 2015. The Company repaid $11.6 million of debt during the first nine months of fiscal 2016. Additionally, the Company completed the refinancing of its term loan in March 2016.

Fiscal Year 2016 Guidance 

The Company is updating its fiscal year 2016 annual guidance. The Company now expects to generate revenue in the range of $205 million to $210 million in fiscal year 2016, compared to the previous range of $195 million to $210 million. The Company now expects to achieve adjusted Non-GAAP earnings per diluted share in the range of $0.53 to $0.58, compared to the previous range of $0.50 to $0.60. The Company now expects unadjusted GAAP earnings per diluted share in the range of $0.38 to $0.43, taking into account the $1.0 million after-tax write-off, or $0.07 per diluted share, of deferred debt transaction costs associated with refinancing its term loan, compared to the previous range of $0.42 to $0.52.

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) 213-3922 from the U.S. International callers can dial (913) 981-5526. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, May 11, 2016, by dialing (877) 870-5176 from the U.S. and entering confirmation code 8518374, or (858) 384-5517 from international locations, and entering confirmation code 8518374.

There will also 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.