Good day and welcome to today's LifeVantage Fourth Quarter Fiscal 2012 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, it's my pleasure to turn the conference over to John Mills of ICR. You may begin.

Great. Thank you. Good afternoon, ladies and gentlemen, and welcome to LifeVantage Corporation's Fiscal Fourth Quarter 2012 Conference Call. On the call today from LifeVantage are Doug Robinson, President and Chief Executive Officer; Dave Colbert, Chief Financial Officer; Carrie McQueen, a current consultant to the company and former Chief Financial Officer; as well as David Brown, President of LifeVantage Network. By now, everyone should have access to the earnings release which went out this afternoon approximately 4:00 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 the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These questions do not guarantee future performance and therefore undue reliance should not be placed upon them. These statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of LifeVantage's most recently filed 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. LifeVantage assumes no obligation to update any forward-looking projections that may be made in today's release or call. Based on the number of participants on today's call during the Q&A session, we ask that you please limit the number of your questions to a total of 3 before getting back in the queue. And with that, I'd like to turn the call over to the company's CEO, Mr. Doug Robinson. Go ahead, Doug.

Thanks, John, and good afternoon, everyone. On today's call I will briefly review our record Q4 and full-year fiscal 2012 results, then I'll provide a general update in our business and growth initiatives and will discuss the strategic imperatives that will be our primary focus in fiscal 2013. After that, I'll turn the call over to Dave Colbert, our recently appointed Chief Financial Officer, for a more detailed discussion of fourth quarter results and to provide our guidance for fiscal year 2013. First, let me provide a quick review of our financials. We generated record revenue of $44.6 million during the fourth fiscal quarter of 2012, nearly a 200% increase compared to the fourth quarter of last fiscal year. Our operating income for the quarter increased to $7.3 million, which translates to an operating margin of 16.5%. We also generated net income of $4.8 million compared to a loss of $47.2 million in the previous year, due to strong operational results and eliminating all derivative liabilities from our balance sheet. For the full fiscal year 2012, we generated revenue of $126.2 million and operating income of $21.5 million, which translates into an operating margin of 17%. This exceeded our previously issued guidance on our third quarter earnings call. We also strengthened our balance sheet during the quarter, ending Q4 with approximately $25 million in cash and once again finished the quarter having no debt. Over the course of fiscal 2012, we took the necessary steps to improve our overall financial health and eliminated all derivative liabilities. Due to our strong operating results coupled with our improved financial health, I am extremely excited to announce that we have met all listing requirements and have received approval to list our stock on the NASDAQ Capital Market. As some of you may have…

Thank you, Doug. Good afternoon, everyone. I'm excited to be part of the LifeVantage team and look forward to meeting many of you, our shareholders, going forward. As Doug said, we are very pleased with our fourth quarter 2012 results and our ability to end the year on a strong note. This marks LifeVantage's eighth consecutive quarter of generating operating income. Let me review our results in more detail. In the fourth fiscal quarter 2012, we generated record net revenue of $44.6 million, which represented a 197% increase over the fourth fiscal quarter of 2011. On a sequential quarterly basis, our revenue increased 23% from $36.2 million in the third fiscal quarter. Gross profit in the fourth fiscal quarter of 2012 increased to $38.2 million, up from $12.9 million in the same period last year, reflecting our higher sales. Our gross margin in the fourth fiscal quarter of 2012 was 85.6%. In the fourth quarter, general and administrative expenses increased to $5.9 million from $2.4 million in the same period a year ago. The increase reflects higher personnel costs related to our expanding operations. While there will be periodic increases as we continue to build our infrastructure, we expect general and administrative expenses to grow at a slower rate versus our sales and marketing expenses. Our research and development costs increased to $435,000, up from $194,000 in the prior-year period and from $378,000 in the prior quarter. Continued investment in R&D is a priority for our company and we have committed up to 2% of total net sales to the R&D effort. The specific timing and recognition of these expenses will vary depending on the projects we undertake. Total operating expenses for the fourth fiscal quarter of 2012 were $30.8 million, which is 69.1% of revenue. This is a 380-basis-point…

Thanks, Dave. And as we open the call for questions, I just want to reiterate what we said at the top of the call, we actually have 4 of us here to field your questions. In addition to Dave and myself, we also have David Brown, President of LifeVantage Network, as well as Carrie McQueen, our former CFO and now acting as consultant to the company throughout this CFO transition. So with that, we're more than happy to field some questions.

[Operator Instructions] We'll take our first question from David Rossman [ph] with Phoenix Capital Management.

A couple of questions. As a former institutional money manager, I'm always interested in enhancing shareholder value, as I'm sure you guys are. A couple of thoughts. Number one, I note that the current stock repurchase program, which was instituted about a year ago, expires in October. And that was not entirely successful because the stock went up too fast and the parameters under which you arranged to make purchases basically grew by you. Is there going to be an extension of that program in the future? Or what are your plans along those lines? That would be question number one. And if you'd be kind enough to come back to me after you've answered that, I'll have -- I have 1 or 2 other things real quick.

Sure, David. First of all, thanks very much for your comments and obviously thanks very much for your support. It was a pleasure meeting you finally, after speaking on a number of these conference calls. We had an opportunity to meet you at an investor conference in Denver not too long ago. So it's great to put a face with your voice, if you will. With respect to our stock repurchase plan, you're right in that it does -- it is set to expire next month, the month of October. We will, on a regular ongoing basis, evaluate and re-evaluate our best use of cash. And as we just said in our prepared remarks, you're seeing really an accumulated cash balance that's growing quite appreciably on a go-forward basis. For all those reasons, it's a very exciting time. Your point is well-taken, and I can't underscore it enough. We are constantly looking for ways to increase our shareholder value in this company, and we outlined at a very, very high level some of the things that we're looking at on a go-forward basis not only for fiscal '13 but beyond that. But be assured that our management team together with our board is regularly talking about the best ways to use our cash, which might include re-upping a stock buyback plan.

Okay. Second question is, possibility of a cash dividend being issued by the company at some point in 2013.

I guess I would answer exactly the same way --

In the same vein, yes, I got you.

Yes, exactly the same way. But importantly, and I don’t mean to just brush that aside, you're not the only one to have suggested that idea to us. We've socialized it, continue to socialize it amongst our management team, and as you know, we've just gone through a transition of our Chief Financial Officer, so we want to get Dave fully immersed in our business and certainly get his thoughts on this point. But this is something that we've been socializing not only here at the management team but also with our board, and we'll continue to do that on a go-forward basis as well.

Sure. Yes, the reason for the suggestion is that, again, as a former money manager, I can tell you that paying a dividend, even if it's modest, does all kinds of wonderful things for you and it attracts a lot of attention, particularly from institutional investors. My last question is, regarding the growth of the company, the growth seems to have slowed on a percentage basis slightly in Q4. How sustainable do you feel the growth of the company is? And is there any reason why you feel like you might have problems meeting your guidance? And I know that may sound like a stupid question, but is there anything you see on the horizon that might cause problems?

Well, thank you again for that question. We are absolutely bullish on our future. I hope you got that from our prepared remarks, not only how we reflect back on fiscal 2012 which in every way you look at it was a record year, but as we project forward into fiscal '13, that too will be yet another record year in every way you could define the term. So we are very, very bullish on our future. But that said, the reason why I wanted to go through those 7 strategic imperatives is that we are very, very focused in on responsible growth, sustainable growth, profitable growth, so that this company has long-term shareholder value for you and all of our other shareholders, current and future shareholders, so that they can count on LifeVantage being a very, very good investment for years to come. All that said, we have to sustain our operations and grow into this company because it is growing very, very fast. Just look at the last couple of years, where we've been and where we are today, and it's pretty phenomenal, and we're very, very bullish on our future.

Yes, Doug, I apologize if it came out the wrong way. Your guys' growth is phenomenal. I wish my other investments had your growth. They simply slowed slightly from the blistering pace that they were last quarter and you spoiled me. I'm looking for more and better every quarter from you guys, but I do understand the parameters under which you want to manage that growth and build the company in a proper way.

We'll go next to John Vazhar [ph], private investor.

Again, thank you very much for being so transparent, and I appreciate and share with you the excitement that the company is going through. I have 2 questions please, and I got interrupted during waiting for the call, so you may have talked about this but I couldn’t stop the interruption. As far as going from -- to the NASDAQ, did you say when you thought that might happen?

Yes. I'm sorry you missed that, John. Let me be clear, we will be listed on NASDAQ 2 days from now, on September 12, 2012. We will be trading on that day.

Well, I'm a retired stockbroker, so that's great news for yourselves, investors and everyone else. And then when I look at the historical data, I see that income from other periods, there was actually a loss, I don’t know what period I'm looking at, but it's $39.55 million negative, earnings per share minus $0.50. But I thought I heard today that you were positive on net income. Is that true?

Yes, that's correct. What you see on the historical financial statements are the re-evaluations of a derivative liability that was related to warrants on our previous funding raise, and the good news is, is as of the end of third fiscal quarter which ended March 30, the derivative liabilities were completely removed from the balance sheet and the very tail-end of re-evaluating or revaluing those expenses associated with those derivatives will run through the income statement. So when you look at our Q4 and going forward, you'll see no derivative liability impacts or the valuation of those liabilities going forward.

And we'll go next to Steven Martin with Slater Capital Management.

Yes. You talked about some of your initiatives. Can you talk a little more specifically about Japan and some of the foreign markets you're looking at?

Sure, Steve. As I mentioned in the call, we've been in Japan on a not-for-resale basis for the last 2 years. We are in the final stages of transferring to an on-the-ground approach and we expect to launch that officially in our third quarter -- excuse me, the third quarter of this year, calendar year, not fiscal year, just around the corner from now. It's a very exciting market for us, Japan. It's growing very, very fast, actually faster than the United States. It's a market that served well and done right which we're committed to, could in fact be an incredibly material market for us on a go-forward basis. So for all those reasons, we're paying a lot of attention to Japan and our operations there so that we get this right and are upholding all of our promises to our preferred customers and our distributors in that country. We've also recently entered Australia just a few months back. We continue to do business certainly here in the United States, and we're growing that significantly. We're currently in Mexico and have been for a number of years. And we're also in Canada, in certain provinces throughout Canada on a preferred customer basis, not yet as a distributor model up there, but we're also working on that as well. Those are the current markets that we're in. We're looking at future geographic expansion, as I said in my prepared remarks. We think that's one area that bodes very, very well for us as we move forward. We know the efficacy of our products, both Protandim and TrueScience, bode well in many, many markets. It's not germane just to the markets that we're in right now. But I can't say and underscore enough that the markets that we will enter, we're going to enter in a very concerted way. We're looking at regulatory issues, we're looking at the economies, we're looking at our ingredients, the raw ingredients and how those are viewed by those countries that we might consider. We're doing an in-depth market analysis of each market before we enter it. So that when we enter future markets, we know we can hit the ground running and be profitable from day one.

Can we expect then at some point in the future you'll give us a little more geographic breakdown in your press releases and earnings reports?

With respect to future markets?

Yes.

Absolutely.

No, I'm sorry, not with respect to future markets but maybe revenues and distributors, et cetera, within each of those markets.

Well, for the time being, the metrics that we've come out with in this call and in our 10-K, which was released earlier today, these are the metrics that we think are important to best understand our business today and going forward. Once we produce those metrics, we will commit to producing them on a go-forward basis. And to the degree that it makes sense to stretch those and talk about other things, absolutely, we'll make that decision. And our goal is to be transparent.

I'll add to that real quick. In our 10-K, we do have some segmentation analysis in there where it breaks out between the Americas and Asia Pacific and talk about a couple of the larger countries as far as revenues are considered. But our compensation plan is global in nature, so we won't be breaking the compensation plan down on a country-specific basis.

I haven't had a chance obviously to read the 10-K at the same time.

Yup, that's fine.

One last question, now that you're going to be NASDAQ-listed and you're obviously trading substantial volume, the price is up, would you anticipate attending more conferences and investor type events?

Absolutely, Steve. It's a commitment that we've made dating back probably a 1.5 years ago when I became CEO, was a commitment that we made then. It's certainly a commitment that we've kept. And on a go-forward-basis, to your very point, with more institutional funds following us, more of a visibility on NASDAQ, by all means we'll be out meeting with the investor community. As a matter of fact, I'll be at the Imperial Conference in New York City just next week. I believe we speak on the 20th of September. So maybe when we're there in that trip, I can swing in and we can get re-acquainted and touch bases like we did last time I was there.

Absolutely.

And we'll take our next question from Jeff Porter with Porter Capital Management.

Two questions for modeling purposes going forward. What effective tax rate are you expecting for next year? And then also on the operating margin press release guided to 13.8% to 14.7%, and that's sort of lower than we've experienced the last couple of quarters. So maybe you could just break out for me what kind of investments in infrastructure are going to be driving that. Are we moving offices, are we going to larger facilities and just things of that nature in general?

I'll take a stab at that. First off, on the effective tax rate, we're forecasting the effective tax rate in 2013 of around 31%. We ended last year at around 16%. So we will see quite a jump in our ETR. As far as operating margin and what we're projecting going forward in 2013, as we've mentioned a couple of times on the call on our prepared remarks, there's a lot of investment in infrastructure, and you're right, there are investments in office moves, office facilities. Now that's not going to hit the income statement immediately, but we'll see that through some increased depreciation. But we're also investing in IT systems and personnel as well. And it's in Japan, but it's also domestically here. There's a lot of investment really globally, if you want to think of it that way.

Yes, absolutely, Jeff. I would just add to what Dave said, we've made a lot of investments this past fiscal year, fiscal '12, to stay abreast of the growth. And even at that, I think it's incumbent upon us again to grow this company responsibly with sustained growth and profitability to attend to this growth now from an infrastructure standpoint. So largely the people throughout our research and development, throughout marketing, sales, operations, legal. Top to bottom, as I look around this company, we have an aggressive but appropriate strategic and tactical business plan in place for fiscal '13 so that we scale this company effectively so that it is -- it's a good, good strong company for many years to come.

And we'll go next to Barbara Connor [ph] with LifeVantage.

I'm really excited to be both an investor and an independent distributor. I wanted to thank Carrie for being on the executive staff and for all of her hard work, and I have both a comment and question about that. I noticed that the executive staff is very heavily weighted as a male and I'd love to see more females join your ranks. And then the next question I have actually is when we might hear something more about an actual release date for the pet product.

I'd just like to insert a thank you very much. It's been a fabulous time and a great transition to Dave. We do have some fabulous women in the company and in management ranks and hopefully they'll become more visible, maybe not on investor calls but in meetings and other events the company holds. For the pet product, I'll defer to Doug.

Yes. Thanks, Barbara. And I guess I'd reiterate before I move to the pet product our commitment to being a company that reflects who we serve, not only the geographies that we're in but our distributors, our preferred customers, et cetera. So diversity in our management team and in our executive ranks and I'll dare say, in our Board of Directors as well, is something that's near and dear to our hearts. And as we continue to grow this company, we're constantly looking for the best people in all these roles and are ever mindful of the make-up, if you will, the diversity of that. So again, I appreciate your comments, and you're certainly not alone in them. With respect to the pet product, as I said in our prepared remarks, we are in clinical trials and testing right now. It's our commitment for not only this product and on a go-forward basis, but any and all future products to make sure that they're safe and efficacious. And that's exactly what these clinical trials are designed to tell us right now. Only when we know the product is safe and efficacious will we release a product, pet product included. All that said, we do think it's in our near future that we'll be concluding these trials. We're optimistic about the results. But all I can say is stay tuned. We're not going so far as to give an approximate date, but suffice it to say we're feeling very good about the trajectory of that right now.

We appreciate going that extra length to really differentiate us from other products on the market. So that's wonderful.

And we'll take our last question from Ken Catlin [ph], private investor.

I got a question. You mentioned that -- well, Mexico has a version of Protandim without the ashwagandha, it sounds like Japan may have an ashwagandha-free version. And I was curious, a couple of things. If the product works just as well without the ashwagandha, will we see that in the U.S. market? I've seen some customers and distributors had known -- who have had sensitivity issues to Protandim, and it appears that some people may be sensitive to ashwagandha. So if it works just as well without the ashwagandha, will we see an ashwagandha-free or a purified ashwagandha version for the U.S. market?

Ken, this is David. I'll take a stab at that one. In regards to each of our markets, we're going to have a product that not only complies with the regulatory requirements of that market but also meets the demands of our distributors and customers there. And we're sensitive to those demands that are highlighted by the efficacy and safety of the products. So we are very confident that the products we introduced in both Mexico and Japan meet those standards. Going forward, if there is a demand that is -- that can be met with another product, we'll certainly consider that, although that's not currently on the drawing board right now.

All right. Thanks for your question, Ken. And thanks everyone for your participation in today's call. In summary, we're pleased with our strong results in fiscal 2012 and are very, very excited about our future. We look forward to officially listing on the NASDAQ Capital Market later this week, Wednesday, the 12th. Thank you for all your continued interest and support in LifeVantage. And as I said just a moment ago in response to Steve Martin's question, we'll be attending a number of investor events in the coming months, including the meeting just next week, the Imperial Capital Meeting in New York City, and we hope to see many of you there. Thanks very much.

This does conclude today's conference. Thank you for your participation.