LifeVantage Announces Second Quarter Fiscal Year 2014 Results

LifeVantage Announces Second Quarter Fiscal Year 2014 Results         Revenue in Americas Increases 7.2% Compared to Prior Year Period     Company Plans New Product Launch in April 2014 at its Global Convention   Expands Senior Management with Appointments of Chief Sales Officer and Chief                                Science Officer    Company Reiterates Fiscal 2014 Operating Margin and EPS Guidance; Updates                       Fiscal 2014 Revenue Guidance Range  SALT LAKE CITY, Feb. 6, 2014 (GLOBE NEWSWIRE) -- LifeVantage Corporation (Nasdaq:LFVN), a company dedicated to helping people achieve healthy living through a combination of a compelling business opportunity and scientifically validated products, today reported financial results for the fiscal 2014 second quarter and six months ended December 31, 2013.  Fiscal 2014 Second Quarter Highlights:    oNet revenue of $51.5 million, negatively impacted by $3.6 million of     year-over-year foreign currency fluctuation;   oIncreased revenue in the Americas 7.2% compared to prior year;   oHired Chief Sales Officer and Chief Science Officer;   oBegan Real Salt Lake Major League Soccer marketing sponsorship;   oAchieved operating income of $5.2 million and net income of $3.3 million;     and   oPlanned product launch date for April.  Douglas C. Robinson, President and Chief Executive Officer of LifeVantage stated, "During the second quarter, we have taken significant steps to reignite growth by: (1) enhancing our management team with the additions of a new Chief Sales Officer and a new Chief Science Officer, (2) beginning our sports marketing sponsorship, (3) expanding our geographic reach and (4) continuing to strengthen our distributor culture with improved marketing programs. These initiatives contributed to our year-over-year sales increase in the Americas of 7.2% and increased sales in Hong Kong."  Mr. Robinson continued, "These steps have us better positioned for future growth.However, the second quarter strength we experienced in certain regions was offset by foreign currency fluctuations, primarily the Yen, coupled with slower than expected improvement in Japan. We remain committed to returning this important market to strong and sustainable growth.In addition, after extensive product testing, we are preparing to launch new products in April 2014 at our Global Convention to further strengthen our markets."  Fiscal 2014 Second Quarter Results  For the second fiscal quarter ended December 31, 2013, the Company reported net revenue of $51.5 million, compared to $53.4 million for the same period in fiscal 2013. Revenue growth of $2.3 million, or 7.2%, in the Americas and $1.9 million from Hong Kong was offset by lower sales in Japan. Revenue for the quarter was negatively impacted $3.6 million, or 6.7%, by foreign currency fluctuation.  Gross profit for the second fiscal quarter ended December 31, 2013 was $43.6 million, compared to $38.8 million for the same period last year, delivering a gross margin of 84.6%, compared to 72.5% in the prior year period. Gross profit for the second fiscal quarter of last year included the impact of approximately $5.9 million of one-time costs associated with the Company's product recall in that period.  Operating income for the second fiscal quarter of 2014 was $5.2 million, compared to $0.5 million in the same period last year, including one-time expenses.Operating margin for the current quarter was 10.0%.  Net income for the second fiscal quarter of 2014 was $3.3 million, or $0.03 per diluted share.This compares to net income in the second fiscal quarter of 2013 of $209 thousand, or $0.00 per diluted share, including one-time expenses.  Fiscal 2014 First Six Months Results  For the six months ended December 31, 2013, the Company reported net revenue of $102.9 million, compared to $106.3 million in the prior year. Revenue in the Americas increased $4.5 million, or 7%, and Hong Kong contributed $3.6 million.Revenue for the first six months of fiscal 2014 was negatively impacted $7.5 million, or 7.0%, by currency fluctuation and continued softness of the Japan market.  Operating income for the first six months of fiscal 2014 was $10.2 million, for an operating margin of 10.0%, compared to $7.3 million, for an operating margin of 6.9%, in the prior year period, including one-time expenses.  Net income for the first six months of fiscal 2014 was $6.5 million, or $0.06 per diluted share, compared to $4.4 million, or $0.03 per diluted share in the prior year period, including one-time expenses.  Balance Sheet & Liquidity  The Company's cash and cash equivalents at December 31, 2013 were $34.5 million, compared to $26.3 million at the end of fiscal year 2013 and $28.0 million at September 30, 2013. The Company generated $6.9 million of cash flow from operations in the first six months of 2014 compared to $6.4 million in the first six months of fiscal 2013.  The Company announced that it entered into a Financing Agreement on October 18, 2013, with a fund managed by TCW Special Situations, LLC. The Financing Agreement provides for a senior secured credit facility in an aggregate principal amount of up to $67 million, of which $47 million was funded at closing. On October 31, 2013, the Company also announced that it completed a modified Dutch auction which was funded with proceeds received under the credit facility. The Company repurchased an aggregate of 16,326,530 shares of its common stock at a purchase price of $2.45 per share, for an aggregate cost of $40 million. The shares repurchased in the modified Dutch auction represented approximately 13.9% of the Company's total shares outstanding as of September 13, 2013.  Fiscal Year 2014 Guidance  The Company is updating its annual revenue guidance. The Company expects to generate revenue in the range of $205 to $220 million in fiscal year 2014 compared to the previous range of $225 to $235 million.The Company is reiterating its previous GAAP operating margin of 9% to 10% and the Company is also reiterating its GAAP earnings per diluted share in the range of $0.09 to $0.11, based on estimated weighted average diluted shares outstanding of 111 million.  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) 349-9617 from the U.S.International callers can dial (719) 325-2207.A telephone replay will be available approximately two hours after the call concludes and will be available through Saturday, February 8, 2014, by dialing (877) 870-5176 from the U.S. and entering confirmation code 6572357, or (858) 384-5517 from international locations, and entering confirmation code 6572357.  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), a leader in Nrf2 science and the maker of Protandim®, the Nrf2 Synergizer® patented dietary supplement, TrueScience® Anti-Aging Cream and LifeVantage® Canine Health, is a science based network marketing company. LifeVantage is dedicated to visionary science that looks to transform wellness and anti-aging internally and externally with products that dramatically reduce oxidative stress at the cellular level. 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, product launches 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 Adjusted Gross Profit as Gross Profit as determined in accordance with GAAP excluding certain costs associated with the product recall included in GAAP cost of sales.We define Adjusted Gross Margin as gross margin as determined in accordance with GAAP (gross profit as a percentage of sales, net) excluding the costs associated with the product recall.We define Adjusted Operating Income as Operating Income excluding certain costs associated with the product recall.We define Adjusted Net Income as Net Income excluding certain costs associated with the product recall and the applicable tax impacts associated with these items.Adjusted EPS is calculated based on Adjusted Net Income and the weighted average number of common and potential common shares outstanding during the period.Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS may not be comparable to similarly titled measures reported by other companies.  We are presenting Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS because management believes that excluding the product recall costs from the relevant GAAP measures, when viewed with our results under GAAP and the accompanying reconciliations provides useful information about our period-over-period growth and profitability and provides additional information that is useful for evaluating our operating performance.Each ofAdjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS is 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; and (ii) we use Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS internally as a benchmark to evaluate our operating performance or compare our performance to that of our competitors.The use of Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS has limitations and you should not consider these measures in isolation from or as an alternative to the relevant GAAP measures, including gross profit, gross margin, operating income, net income or net income per diluted share prepared in accordance with GAAP, or as a measure of profitability or liquidity.  The tables set forth below present a reconciliation of Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS, all of which are non-GAAP financial measures, to Gross Profit, Operating Income, Net Income, and Diluted EPS, our most directly comparable financial measures presented in accordance with GAAP.  LIFEVANTAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)                                                                 (In thousands, except per share data)          As of ASSETS                                         December 31, 2013 June 30, 2013 Current assets                                                   Cash and cash equivalents                      $34,454         $26,299 Accounts receivable                            873               1,789 Income tax receivable                          651               2,150 Inventory                                      9,843             10,524 Current deferred income tax asset              2,885             2,885 Prepaid expenses and deposits                  4,161             2,294 Total current assets                           52,867            45,941                                                                 Long-term assets                                                 Property and equipment, net                    5,279             5,692 Intangible assets, net                         1,731             1,747 Deferred debt offing costs, net                1,472             -- Long-term deferred income tax asset            730               730 Other long-term assets                         1,315             1,374 TOTAL ASSETS                                   $63,394         $55,484 LIABILITIES AND STOCKHOLDERS' EQUITY                             Current liabilities                                              Accounts payable                               $2,805          $5,171 Commissions payable                            7,183             7,564 Other accrued expenses                         7,230             7,831 Short-term portion of debt                     4,700             -- Total current liabilities                      21,918            20,566                                                                 Long-term debt                                                   Principal amount                               42,300            -- Less: unamortized discount                     (1,145)          -- Long-term debt, net of unamortized discount    41,155            -- Other long-term liabilities                    869               973 Total liabilities                              63,942            21,539                                                                 Commitments and contingencies                                    Stockholders' equity                                             Preferred stock - par value $.001,50,000 shares authorized; no shares issued or         --              -- outstanding Common stock - par value $.001, 250,000 shares authorized; 103,898 and 117,088 issued and     104               121 outstanding as of December 31, 2013 and June 30, 2013, respectively Additional paid-in capital                     113,014           110,413 Accumulated deficit                            (113,087)        (76,476) Accumulated other comprehensive loss           (579)            (113) Total stockholders' equity                     (548)            33,945 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $63,394         $55,484   LIFEVANTAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)                                                                                           For the three months ended For the six months ended                            December 31,               December 31,                           2013          2012         2013         2012 (In thousands, except per                                        share data) Sales, net                 $51,538     $53,438     $102,866   $106,297 Cost of sales              7,944        8,799        15,753      16,606 Product recall costs       --          5,879       --         5,879 Gross profit               43,594        38,760       87,113       83,812                                                                 Operating expenses:                                              Sales and marketing        29,785        29,593       60,027       59,133 General and administrative 7,561         7,495        14,962       15,404 Research and development   584           742          891          1,257 Depreciation and           498           443          997          681 amortization Total operating expenses   38,428        38,273       76,877       76,475 Operating income           5,166        487         10,236      7,337                                                                 Other income (expense),                                          net: Interest and other income  (365)        (16)        (327)       (1) (expense), net Total otherincome         (365)        (16)        (327)       (1) (expense) Net income before income   4,801        471         9,909       7,336 taxes Income tax expense         (1,519)      (262)       (3,371)     (2,963) Net income                 $3,282      $209       $6,538     $4,373 Net income per share:                                            Basic                      $0.03       $0.00      $0.06      $0.04 Diluted                    $0.03       $0.00      $0.06      $0.03 Weighted average shares                                          outstanding: Basic                      105,770       113,449      110,218      112,158 Diluted                    112,392       127,131      117,363      126,046                                                                 Other comprehensive loss,                                        net of tax: Foreign currency           (192)        68          (466)       63 translation adjustment Other comprehensive loss   $(192)      $68        $(466)     $63 Comprehensive income       $3,090      $277       $6,072     $4,436   LIFEVANTAGE CORPORATION Sales by Region (Unaudited)                                                                                  Three months ended              Six months ended                December 31,                    December 31,               2013             2012           2013            2012 (In thousands)                                                      Americas       $34,418  67%   $32,112 60%  $68,916  67%  $64,419  61% Asia/Pacific   17,120    33%   21,326   40%  33,950    33%  41,878    39% Total Net      $51,538  100%  $53,438 100% $102,866 100% $106,297 100% Sales                                                                                                                                                     LIFEVANTAGE CORPORATION                                                Active Independent Distributors                                         ^(1)               (Unaudited)                                                                                                                               December 31,                                                           2013             2012                                    Americas       43,000     62%   35,000    64%                           Asia/Pacific   26,000     38%   20,000    36%                           Total          69,000     100%  55,000    100%                                                                                                           LIFEVANTAGE CORPORATION                                                Active Preferred Customers^(2)                                         (Unaudited)                                                                                                                               December 31,                                                           2013             2012                                    Americas       110,000    81%   116,000   82%                           Asia/Pacific   25,000     19%   25,000    18%                           Total          135,000    100%  141,000   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 Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Profit: (Unaudited)                         For the three months ended  For the six months ended                          December 31,                December 31,                         2013          2012          2013         2012 (In thousands)                                                  GAAP Gross profit        $43,594     $38,760     $87,113    $83,812                                                                Adjustments:                                                    Cost of sales associated (525)        5,879        (525)       5,879 with product recall Total adjustments        (525)        5,879        (525)       5,879 Non-GAAP Adjusted gross  $43,069     $44,639     $86,588    $89,691 profit                                                                Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income:                                                                                        For the three months ended  For the six months ended                          December 31,                December 31,                         2013          2012          2013         2012 (In thousands)                                                  GAAP Operating income    $5,166      $487        $10,236    $7,337                                                                Adjustments:                                                    Costs associated with                                           product recall: Cost of sales            (525)        5,879        (525)       5,879 General and              --          71           --         71 administrative Total adjustments        (525)        5,950        (525)       5,950 Non-GAAP Adjusted        $4,641      $6,437      $9,711     $13,287 operating income                                                                Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Adjusted Earnings Per Share:                                                                                        For the three months ended  For the six months ended                          December 31,                December 31,                         2013          2012          2013         2012 (In thousands)                                                  GAAP Net income          $3,282      $209        $6,538     $4,373                                                                Adjustments:                                                    Costs associated with                                           product recall: Cost of sales            (525)        5,879        (525)       5,879 General and              --          71           --         71 administrative Tax impact of            179          (2,358)      179         (2,358) adjustments Total adjustments        (347)        3,592        (347)       3,592 Non-GAAP Adjusted net    $2,936      $3,801      $6,192     $7,965 income                                                                Diluted shares           112,392       127,131       117,363      126,046                                                                Non-GAAP Adjusted diluted net income per   $0.03       $0.03       $0.05      $0.06 share  CONTACT: Investor Relations Contact:          Cindy England (801) 432-9036          Director of Investor Relations          -or-          John Mills (310) 954-1105          Senior Managing Director, ICR, LLC  company logo