Ladies and gentlemen welcome to the LifeVantage’s Q2 Fiscal Year 2016 Conference Call. As a reminder, today's conference call is being recorded. And at this time I'd like to turn the conference over to Mr. John Mills of ICR. Please go ahead sir.

Thank you. Good afternoon, ladies and gentlemen and welcome to LifeVantage Corporation's fiscal second quarter 2016 conference call. On the call today from LifeVantage with prepared remarks are Darren Jensen, Chief Executive Officer; and Mark Jaggi, Chief Financial Officer. By now everyone should have access to the earnings release which went out this afternoon at approximately 4.15 Eastern Time. If you have not received the release, it is available on the Investor Relations portion of LifeVantage’s website at lifevantage.com. This call is being webcast and a replay will be available on the company’s website as well. Before we begin we'd 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 management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of LifeVantage’s most recently filed Form 10-Q and 10-K. These risk factors contain a more detailed discussion of factors that could cause actual results to differ materially from those projected in any forward-looking statements. Please note that during today's call we'll discuss non-GAAP financials measures, including results on adjusted basis. We believe these financials measures can facilitate a more complete analysis and greater transparency into LifeVantage's ongoing results of operations, particularly when comparing underlying results from period-to-period. We have included a reconciliation of these non-GAAP measures with today's release. This also contains time sensitive information that is accurate only as of the date of this live broadcast, February 9, 2016. LifeVantage assumes no obligation to update any forward-looking projection 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 three. Now, I will turn the call over to the company's CEO, Darren Jensen.

Thank you, John and good afternoon everyone. We are pleased to report second quarter top line growth on both the sequential and year-over-year basis. Our revenue was $52 million, which represents 14.6% increase compared to the first fiscal quarter of 2016 and 7.8% increase compared to the prior year period. This also includes 7.3% sequential growth in our Japanese market, which is the first improvement in this market in nearly three years. Improved sales are attributable to execution on our growth strategy including new product launches and enhanced distributor engagement and it affirms that our business is turned around and is moving in the right direction. Adjusted EBITDA increased 7.4% to 4.5 million in the second fiscal quarter of 2016, compared to 4.2 million in the prior year period. We are pleased to continue to generate healthy cash flow as we make strategic investments to better position our business for a long-term growth. While these investments have had an impact on our near-term results, we’re confident that they will also position the company for continued profitable growth. When I joined LifeVantage, the company was in a cost cutting mode rather than a revenue generating mode. Under our new management team, we are focused on executing a growth strategy and have already achieved improved top line performance. We continue to be prudent with our spending, but recognize that certain upfront investments are crucial in order to put LifeVantage on a sustainable growth trajectory. In addition to investing in the various components that are part of our 8 point growth strategy that we’ve discussed at length on previous calls, I would like to briefly discuss an additional area of investment that we made in the second quarter. As those of you that follow our industry are aware, the regulatory environment is constantly…

Thanks, Darren. Good afternoon everyone. For the second quarter ended December 31, 2015 we reported revenue of approximately $52 million. Revenue increased 14.6% on a sequential basis compared to 45.4 million in the first quarter of fiscal 2016 and increase also 7.8% versus revenue of 48.2 million in the second quarter of fiscal 2015. On a sequential basis, revenue in the America increased 15.3% and revenue in the Asia-Pacific region increased to 12.4%. On a year-over-year basis second quarter of fiscal 2016 revenue in the Americas increased 14.3% and revenue in the Asia-Pacific region declined to 9.6% primarily due to lower sales in Japan. However, we are pleased to report that we believe we are seeing stabilization in Japan, and on a sequential basis, sales in the second quarter were actually up 7.3%. Revenue for the quarter was negatively impacted 0.9 million or approximately 1.9% by foreign currency fluctuations. Looking at our customers we ended the second quarter of fiscal 2016 with 67,000 total active distributors. This represents an increase from 64,000 at the end of first quarter of fiscal 2016 and is a testament to our success in improving distributor engagement and attracting new distributors as part of our growth strategy. The number of preferred customers at the end of the second quarter of fiscal 2016 was 117,000, an increase when compared to 114,000 at end of first quarter of 2016. Our gross profit margin and gross profit for the second quarter was 84.9% and 44.2 million respectively, compared to 84.6% and 38.4 million in the first fiscal quarter of 2016, when compared to 85% and 41 million for the second fiscal quarter 2015. Commission and incentive expenses for the second quarter were 52.5% of revenue compared to 48.6% of revenue in the first fiscal quarter of 2016 and…

[Operator instruction] And we will go to Will Hamilton with Manatuck Hill Partners.

Hi guys, just a question on the higher compliance cost you were mentioned earlier, roughly how much was that in the quarter? How much you expect sort of for the year.

You mean the absolute value of the compliance cost?

Yes, that will be helpful.

Well, they come from couple of different places and rather than give you a specific exact amount, somewhere north of couple of hundred thousand dollars so we are in the 300 plus 1000 dollar range on the right now. Fair enough?

Yeah, okay. That’s helpful. And just in terms of the EPS guidance I think previously talked about being at the lower end that range anyway, but have you pulled forward any growth over these growth initiatives or because of the results you are seeing on the top line strengthen them or added other investments just to get a sense there.

You are asking - it sound like you’re asking if we pulled forward growth from future periods is that what the question?

No, I’m sorry, you pulled forward any expenses or add to any of the gross investments because of the results you’re seeing in terms of the top line, obviously the top line reversed nicely and it grew in the quarter which is the first in whatever, five or six quarters, so I was just wondering if you had –pulled stuff forward or increased amount of investments you are doing that lead you to the EPS guidance.

Yeah, the answer is, we have pull forward some. Mostly we’ve added a few things in, so it’s - Frankly we’ve done a lot of incentive work, right, to get started, to get things moving. When we started here we had - last year’s earnings was - last year’s revenue was 190 million, but the reality is, our run rate was below 180 million, probably closer to 175 million. So when we got started and got into Darren’s 8 point plan, we spent all - most of our time in our first quarter just getting that 8 point plan launched in and we did a good job there, so I feel like that really worked well. And as we started seeing some real traction, yeah, we pulled forward a little bit of gas on the fire. So we have added a little bit into those.

So as Mark was saying, this is Darren, when we first started, I think the decline in the sales was little acute than what we had anticipated. As market said, it was probably in the 175 million range of where we started and not in the 190 range. So we feel - that’s why I’m very pleased that we feel comfortable with our revenue guidance still. And as you’ve seen form the second quarter, we feel that we are starting to get some traction with the new programs. The adoption into the distributor for seems to be going well and we remain positive.

All right, yeah, I mean the top line is definitely encouraging and I mean you’re back around 200 million run rate, where do you think you exit the year, this fiscal year in terms of top line run rate.

You mean in terms of revenue.

I would go back to our guidance of - yeah, I go back to our guidance of - right now we just reaffirmed it, somewhere between 195 to 210.

Yeah, the run rate is stronger, right. The run rate is definitely stronger 195 to 210, but having yielded a first quarter of 45 million and stabilized, we don’t want to - we like the run rate, we’ll continue on that run rate and start growing from there, but we’re one half of the way through the year, so.

And the last question from me just on the commission side of things, at a little north of 52% of sales is that sort of a good run rate right now or would you expect it to maybe sort of leverage that in the second half of the year?

I would say that right now a lot of the - as we mentioned earlier that, with that 52% is not going to be permanent, but right now it’s part of the increase due primarily to the faster growth of rank advancements of distributors as well as to our distributor growth initiatives that we have. So as the business continues to accelerate, we already have plans to begin moderating those to a certain extent. I mean, I don’t think we have to keep our foot down as hard on the gas to get it going. So I think we’ll start to see that come back down and - but for - I would say for the next quarter or two, we want to make sure that the growth that we’re seeing on the top line continues, so we’ll continue to, I guess using the analogy, keep our foot down on the pedals for a while, but I wouldn’t say that it’s permanent, no.

Thank you.

[Operator Instructions] And we have no questions holding at this time.

Alright, well, thank you everyone for joining us today. We appreciate your continued interest and loyalty to our company. We look forward to speaking and meeting with many of you over the next few months. Have a good day everyone. Thank you.

And this does conclude today's conference everyone. We thank you for your participation. You may now disconnect.