Lifevantage Corporation

Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss LifeVantage's fourth quarter and full fiscal year 2022 results. At this time, all participants are in a listen-only mode. Following the formal remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up. Hosting today's conference will be Reed Anderson with ICR. As a reminder, today's conference call is being recorded. And now I would like to turn the conference call over to Mr. Anderson. Thank you, sir. Please go ahead.

Thank you. Good afternoon and welcome to LifeVantage Corporation's conference call to discuss results for the fourth quarter and full fiscal year 2022. On the call today from LifeVantage with prepared remarks are Steve Fyfe, Chief Executive Officer, and Carl Alray, Chief Financial Officer. By now, everyone should have access to the earnings release, which went out this afternoon at approximately 4.05 p.m. Eastern Time. If you have not received the release, it is available on the investor relations portion of LifeVantage's website at www.lifevantage.com. This call is being webcast, and a reply will be available on the company's website as well. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factor section of LifeVantage's most recently filed forms 10-K and 10-Q. Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis. Management believes these financial measures can facilitate a more complete analysis and greater transparency into LifeVantage's ongoing results of operations, particularly when comparing underlying operating results from period to period. We've included a reconciliation of these non-GAAP measures with today's release. This call also contains time-sensitive information that is accurate only as of the date of this live broadcast, August 23, 2022. LifeVantage assumes no obligation to update any forward-looking projection that may be made in today's release or call. Now, I will turn the call over to Steve Feith, the Chief Executive Officer of LifeVantage.

Thanks, Reid, and good afternoon, everyone. Thank you for joining us today. With me is Carl Owry, our Chief Financial Officer, who will join me with prepared remarks before we turn the call over for Q&A. Fourth quarter results were in line with our expectations and we are very pleased with early progress on key initiatives around innovation and driving engagement across our base of customers and independent distributors. Revenue of $51 million was within our guidance range and down 7% from prior year, reflecting a challenging operating environment, including $2 million of FX headwind. Excluding the impact of currency, Revenue was down approximately 3% on a year-over-year basis. On a sequential basis, fourth quarter revenue rose approximately 2% and was up over 4%, excluding the negative impact of foreign currency. We also delivered 100 basis points of improvement in gross margin on a sequential basis. Profitability in the quarter was impacted as COVID-related cost savings primarily from events and travel savings realized in the past couple of years, are now coming back into play as we build to a new normal business model. These costs come back in advance of the anticipated revenue they are expected to drive. The company remains committed to investments that will drive retention and repeatable revenue growth. The strength of our balance sheet including $20 million in cash and no debt, allows us to continue investing in our future while also providing shareholders a return through our dividend and repurchase programs. So a bit more about our quarterly revenue. Results in our international markets continue to show solid momentum in the fourth quarter. Our APAC Europe region revenue increased 4% sequentially compared to the third quarter and was up over 11% excluding the negative impact of foreign currency aided by an 8% increase in active independent distributors. As a market, the Philippines continues to gain traction from leaders globally. We held our grand opening in June, which brought more excitement to the distributors force in country. Since then, we have seen an increased focus on leadership rank advancements, which is encouraging for long-term market stability. We are also seeing a strong response to our new collagen product, which launched in June in conjunction with Activate 2022, our recent distributor meeting in Salt Lake City. This is a liquid-based product that activates the body's collagen production replenishes depleting collagen levels, and maintains those levels by reducing collagen breakdown in the body. It also helps protect against the damaging effect of oxidative stress caused by free radicals. Our unique formulation of proprietary ingredients has been clinically shown to deliver visible support to skin health and hydration in eight weeks or less. including skin that looks smoother, softer, and has improved elasticity. Based on early results, we are very excited about the potential for our liquid collagen product to drive customer and distributor activity, as well as revenue growth. Month two revenue for liquid collagen exceeded the launch month, evidencing exceptionally strong follow through relative to the typical ramp for new products. July outsold our product forecast and June revenue by 70%. In June, our customer to distributor rate ratio of liquid collagen purchases was one customer for every 1.38 distributors. July shows us shifting to customer acquisitions leading for this new product with 1.08 customers for every one distributor. Liquid collagen is also proving to be a must have for current active accounts. As of August 15th, customer penetration of liquid collagen is 9.6% and distributor penetration is 12.3%. for a blended rate of 10.6%, making it one of our top performing products in this important metric. Liquid collagen also helped propel the execution of our new social strategy to attract more customers to our brand with more compelling, engaging content. We saw a 73% engagement increase on Instagram with the launch of TrueScience Liquid Collagen at Activate 2022, with engagement across all social channels also up significantly year over year. The product was launched with several hundred shareable tools, including graphics and videos, designed to help independent distributors create curiosity amongst consumers and build their business. Also fueling attraction to the product was our customer trial, where over 100 participants received liquid collagen six weeks prior to launch and tracked their product experience with before and after images, as well as testimonial videos. This content was extremely influential in the early success of the product as efficacy was clearly demonstrated through the images gathered within the test group. In the US, we also launched a product-focused series called Activate Thursday for distributors and customers alike. This call, which lives on social media, discusses various aspects of our products and their unique differentiators. The series generated our highest performing post of the calendar year. We are looking forward to several big product launches for our international markets in Q2 of fiscal 2023. Japan will be launching ProTandem NAD, and our Australia market will be adding both ProTandem NAD and Axio to their available products. Successful strategies used for the US event and product launch will serve as guides for these launches, as well as other Q1 and Q2 initiatives. Plans to launch liquid collagen in many of our international markets for later this fiscal year are in progress. Activate 2022 was also a huge success in that intensified distributor engagement and deepened our organizational alignment around the core focus areas. There were three general sessions, activate your business, activate your confidence and your activation plan. that provided a new template for future gatherings with an increased focus on aligned promotions and incentives, social experiences, and training enhancements. Activate 2022 also gave us an opportunity to share our key differentiator of activation and how our product strategy will continue to demonstrate that message. The Activate 2022 event ended with an RSL experience where distributors celebrated the college and launch at our annual title night match. Our MVP qualifiers had additional recognition by participating in the opening ceremonies. Activate 2022 set the stage for our eminent global convention in Phoenix, Arizona being held this October. Promotions and incentives have been carefully designed to bridge us through the summer, leading the field into convention with strong activity. We continue to focus on our MVP promotion, which bolsters our and company message. The MVP builder program has provided a blueprint for distributors to build strong organizations based on repeat product purchases while enhancements to MVP seller program helps increase the income opportunity to customer gatherers. Global Convention also gives us the opportunity to reinforce our Activate Wellness message with our international audience, building upon the momentum the US is experiencing with that message. We continue to transform our business model to be more agile, more inclusive, and create multiple pathways to entrepreneurial success, focusing on the three core areas that underpin our growth strategy, people, products, and consumer experience. Let me share some additional updates relative to progress we are making with our digital initiatives. During the quarter, our digital team delivered a coupon code, which allows newly enrolled distributors to share a discount code with three new enrolling customers or independent distributors. Simplified our subscription management process and enhanced our independent distributors' ability to share LifeVantage branded content with their team and customers, as well as improving reporting capabilities to help distributors track and achieve incentive goals. In coming quarters, digital efforts around shopping experience will intensify refocusing homepage and site navigation on shopping and the discovery of LifeVantage products, as well as aligning the user's experience across mobile platforms. We're also working to simplify mobile responsive subscription management online to make it easier for customized subscriptions. Now let me turn the call over to Carl, our Chief Financial Officer to review our fourth quarter financial results.