Lifevantage Corporation

Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss LifeVantage's first quarter fiscal 2023 results. At this time, all participants are in 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 call will be Reid Anderson with ICR. As a reminder, today's conference is being recorded. And now I would like to turn the conference over to Mr. Anderson. Please go ahead, sir.

Thank you. Good afternoon and welcome to LifeVantage Corporation's conference call to discuss results for the first quarter of fiscal 2023. On the call today from LifeVantage with prepared remarks are Steve Feith, President and Chief Executive Officer, and Carl Aure, 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 replay 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 LifeManage'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, November 2, 2022. LifeVantage assumes no obligation to update any forward-looking projections that may be made in today's release or call. Now I will turn the call over to Steve Fife, the President and Chief Executive Officer of LifeVantage.

Thanks, Reid, and good afternoon, everyone. Thank you for joining us today. First quarter results demonstrated continued momentum across our strategic initiatives around innovation and engagement. Revenue of $51.8 million was down 2.7% from the prior year period, but included $2.7 million of FX headwind. Excluding the negative impact of foreign currency, revenue was up approximately 2.3% on a year-over-year basis. While the operating environment remains challenging, we are seeing positive signs in several areas, including our U.S. business, where revenue was up 1.1% versus the prior year period, as a decline in the number of customers was more than offset by higher average revenue per account due to strong results from new product launches. We also continue to be encouraged by recent results in our international markets. Revenue in our APAC Europe region increased over 7% versus a year ago, excluding the impact of currency fluctuation, reflecting an 18.2% increase in the number of active independent distributors in this region, in part driven by continued momentum from our recent launch in the Philippines. Sales of the new collagen product we launched in June far exceeded our initial expectations. 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 damage damaging effects 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. Quarterly revenue for the product exceeded our sales forecast by 127%. Liquid collagen was placed on backorder intermittently in the quarter due to depleted inventory and extended fulfillment delays. Backorder status places the liquid collagen part of the order in a queue, which is then fulfilled as inventory becomes available. Any other products in the order are shipped immediately. The cost associated with the backorder periods has had an impact on our margins due to the associated split shipping costs. As of today, I am pleased to say we are off backorder. Liquid collagen penetration rates continue to climb in Q1. Customer penetration was 18.2% and distributor penetration reached 25.3%. with a blended penetration of 20.3% for the quarter. This is up from the 10.6% blended rate as of August 15th, which we reported on our fourth quarter call. Consumer acquisition reached 17.9% with just over $1 million of collagen revenue coming from new customers' accounts in the quarter. In the first quarter, we also launched several personal care products as LTOs in Japan. We also expanded distribution of our Protandim product line with Protandim NAD launching in Japan and Australia. This launch has also allowed us to introduce the Protandim TriSynergizer in these markets, which has been a top performing product stack in the US. We are encouraged by a 28.9% penetration rate of NAD amongst distributors in Japan since its launch in mid-September through October 31st and look forward to continued results in the coming months. Differentiating ourselves as the activation company, the company with products purposely designed to restore key processes or functions that have slowed down due to things like age, diet, and environmental stress has also resonated across social media. This strong company and product messaging led to a 70% increase in total engagement across all social media channels in Q1, up from an already strong Q4 where the buildup and launch of liquid collagen contributed to an increase there. Total brand impressions also increased 20% and video views on socials rose an outstanding 122%, both compared to Q4. Being the activation company is also driving energy and excitement in our field. This excitement has continued from our Activate 2022 event through the activate your summer tour that included 18 locations across the United States. Distributors led these events where they focus on our activation message and the opportunity to earn an income. The MVP and college and cash promotions married together have helped drive growth. We also continue to see increasing trends in distributor enrollments. With this consistent activity, we have also seen tremendous rank advancement movement amongst our distributors in the United States and globally. In August, there were three rank advancement to our Elite Pro 7 rank, and in September, we tripled that with nine elite rank advancements, including a new Pro 8 in Japan and a new Pro 10 in the United States. We anticipate strong rank advancement trends to continue as we finish qualifications for our upcoming elite retreat. Globally, we launched an MVP promotion, which provides a unified message in all of our markets. Japan launched with a better than expected adoption and ended their first month with a higher conversion rate than the United States. This behavior will continue to drive success in the market. In October, our global convention in Phoenix helped keep momentum strong early in the second quarter as we launched our activation message globally around four activation paths, three representing the core benefits of our products and one for our business opportunity. The three product paths are called Optimize Health, Achieve More, and Look Radiant. We are calling our business path Evolve Possibilities. By defining these activation paths, we've made it simpler for distributors to guide customers to the life advantage products that are right for them with the conversation centered around the wants and needs of the customer. Each of our product activation paths are centered around key product activation stories as well as the recommended products every customer on that path should build their regime around. Activation paths are also represented in the distributor enrollment experience. Three new enrollment packs were launched at our global convention, one for each of the three product paths. We are also bringing back seasonal favorites, Spiced Plum and Peppermint Stick, as Axio LTOs in the US this quarter, along with the Daily Wellness LTO, Daily Wellness Lemon Ginger, in the United States and Japan. ProTandem NAD is expected to launch in Mexico in the second quarter, and we also expect to launch Axio in Australia and New Zealand by the end of November. Looking into early third quarter, our next major event, a virtual event we are calling Rock the Rhythm, will be in January. This event will serve as a kickoff to the new calendar year with many exciting announcements that will set the stage for the future of LifeVantage. Finally, profitability is also poised to improve as we recently implemented globally a mid single digit price increase that will serve to alleviate margin pressures stemming from inflationary factors. In summary, our transformational strategy, emphasizing people, products, and consumer experiences, continue to gain traction. By becoming more dynamic and more inclusive, we are driving better outcomes for our customers and significantly enhancing the entrepreneurial opportunities for our distributor. The company remains committed to investments that will drive retention and repeatable revenue growth. The strength of our balance sheet, including nearly $18 million in cash with no debt, allows us to continue investing in our future while also returning value to our shareholders. Now, let me turn the call over to Carl Owry, our Chief Financial Officer, to review our first quarter financial results.