Good day, ladies and gentlemen. Thank you for standing by. Welcome to today’s conference call to discuss LifeVantage’s First Quarter of 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. [Operator Instructions] Hosting today’s conference will be Reed 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 2022. On the call today from LifeVantage with prepared remarks are Steve Fife, Chief Executive Officer, Justin Rose, Chief Sales and Marketing 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 Factors 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, November 04, 2021. 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 Fife, the Chief Executive Officer of LifeVantage.

Thanks, Reed and good afternoon, everyone. Thank you for joining us today. With me is Justin Rose, our Chief Sales and Marketing Officer and Carl Aure, our newly appointed Chief Financial Officer, who will join me with prepared remarks before we turn the call over for Q&A. First quarter results were in line with our expectations and we made further progress on key initiatives around core products, engagement, and activation. Revenues of 53.2 million were down 2.9% year-over-year and on a sequential basis. We maintained high levels of profitability with adjusted EBITDA of 5.8 million or 10.9% of revenue. Moreover, adjusted earnings per share were $0.23 put in us firmly on track with the annual guidance we introduced coming out of the fourth quarter. We continue to believe that the steps we have been taking to re-accelerate growth through focusing on our core Protandim Nrf2 Synergizer, stronger alignment between corporate and our distributors, leveraging digital tools and new product innovation will start to drive increases in the number of total active accounts over the next several quarters. While the level of in-person activities is nowhere near what it was pre-COVID, which has continued to impact our results, trends are definitely moving in the right direction, which should bode well for our results, as we move into calendar 2022. Our recent global convention was a huge success with in-person attendance exceeding 1500 participants plus we estimate another 10,000 participated virtually from approximately 15 different countries. This was our first major event in over 18 months with large in person attendance, something we believe is critical to our focus on re-accelerating growth over the next year. Moreover, leading up to the convention, there were multiple smaller meetings where distributors, customers, and prospects, typically in groups of 50 to 150, gathered to learn…

Thank you, Steve and it’s a pleasure to speak with everyone today. We continue to focus on leveraging digital tools and technology to help our distributors drive growth and manage their businesses more efficiently. Let me start with comments on the proprietary LifeVantage app, which is designed to promote and reward key behaviors proven to drive engagement and has continued to gain traction with our distributors. The app was recently updated to support prospecting through popular social media channels, including Facebook, Instagram, and TikTok. The number of distributors who use the app daily has more than doubled in the last 12 months. And when a distributor shares a cart with a potential consumer through the app, an average of 27% of those potential consumers end up purchasing a product. And of these new consumers, 80% of the orders result in subscriptions, which is approximately 10% higher than our historical average. Our data analysis rebuilds that distributors who frequently put in the time and effort into their business and use the app regularly earn two to three times more in commissions and have two to three times more consumer enrollments than those distributors not using the app. At our global conventions last month, we introduced an innovative product called IC Bright, a unique soft gels supplement with lutein, zeaxanthin, omega-3s, and other nutrients designed to support your eye and brain health. It provides essential nutrients for healthy eyes and vision that may be missing from a person’s normal diet. These nutrients support healthy retinas by storing macular pigment, which is important for filling filtering out the high energy blue light that frequently is associated with eye fatigue and dry eyes. A growing body of research is also finding that these nutrients can help support brain health too. One study found that…

Thank you, Justin. Before I go over the financials in more detail, let me first say how excited I am to join LifeVantage. I’ve spent much of my career in the direct selling industry focused on health and wellness. LifeVantage is truly recognized for having one of the most unique products on the market and has an outstanding platform to support future significant growth. Now, on to the first quarter results. Please note that I will be discussing our non-GAAP adjusted results. You can refer to the GAAP to non-GAAP reconciliation in today’s press release for additional details. First quarter revenue was 53.2 million, down 2.9% on a year-over-year basis. Revenue in the Americas declined 5.8% compared to the prior year period to 36.4 million driven by a 9.4 decreased in total active accounts, partially offset by higher revenues per account stemming from new product launches and LTOs. Revenue in our Asia Pacific and Europe region was 16.8 million, representing an increase of 3.9% compared to the prior year period, and reflecting an 8.9% increase in total active accounts. We experienced strong double-digit growth in Australia, New Zealand as well as greater China, while revenues in Japan decreased 5.6% in each case as compared to the prior year period. Japan revenues were negatively impacted by 4.5% during the quarter due to foreign currency exchange rate fluctuations and on a constant currency basis, revenues in Japan decreased by 1.1%. Revenues in Japan continue to be negatively impacted by restrictions around in-person meetings due to the pandemic. Gross margin was 82.3% in the first quarter compared to 82.9% as compared to the prior year period. The 60 basis point decrease in gross margin was due to increased inventory obsolescence expenses, higher costs for shipping, and shifts in geographic and product sales mix.…

Thanks, Carl and Justin. In summary, we continue to make progress on key initiatives, and are encouraged by recent trends in activity and engagement with our top distributors. Consumers’ interest in health and wellness is as strong as ever and we have a broad portfolio of high quality, innovative products proven to help optimize health and improve performance at all stages of life. In addition, we offer an incredible opportunity for individuals to earn supplemental income through their business building efforts. Our corporate team and distributor leadership are aligned. Our financial condition is solid with a strong cash position and profitability, and we remain committed to driving value for all stakeholders. Lastly, I want to reiterate our enthusiasm for the upcoming launch in the Philippines, as the favorable dynamics in this market are creating tremendous excitement with our global leaders who want to participate in this new compelling opportunity. Now, let me turn the call back to the operator to facilitate questions. Operator?

[Operator Instructions] The first question comes from Doug Lane with Lane Research. Please go ahead.

Yes, hi, good afternoon, everybody. I’m just trying to think through the remaining three quarters of the fiscal year here and trying to get a feel for what would impact any given quarter. And so first thing, obviously is Philippines this quarter, from a geographic expansion standpoint. Are there any other new geographies that you’re planning to enter this fiscal year?

Doug, this is Steve. How you doing?

Hi, Steve.

Yes, the Phil Philippine for sure has launched. We’re looking at one other country that might come in towards the very end of the year but I would doubt that it would have a material impact on our fiscal 22 results.

Okay, that’s helpful. And then I would move them into live events now that they’re back on the table here. You mentioned your global convention, are there any other sizable live events for the remainder of this fiscal year?

Yeah, Hey, Doug, this is Justin. Our next big event will be in the US in February, we’ll be doing an Elite Academy, which we expected to do probably pretty similar to what we did in our global convention, maybe a little bit less since it’s North America specific. But each market also has individual events going on, as the world starts opening up a little bit. So we will see smaller gatherings in some of our international markets as well.

Now, is the Elite Academy going to be 1500 people as well or is it less than that?

We’re actually building it out because it will be a hybrid event, so we’re building it out to be about 2000 in person and then we’re hoping to get anywhere from 2000 to 3000 online as well.

Got it. And the – of the new stacks that you’re launching, is there any particular one that’s going to generate outsized excitement that I should think about and which quarter might that be if there is?

Yeah, Doug, I’d say we launched a new product at convention called IC Bright and that stack -- we’ve created a stack around it, I think you’ll start to see momentum. We’re really excited about the reception that we’ve had with that product launch. And as Justin said, we’ve got a lot of fatigue -- eye fatigue, right now in society with everything that we’re doing online and so we expect that that stack will be a driver for us.

Okay. So that’s already been rolled out. Okay, that makes sense. And then turning to the -- I mean, you have very high gross margins and even though they were down, they weren’t down that much. So in an inflationary world, your position as well as probably anybody, but can you give us a little update on what you think about pricing? Taking pricing, have you taken pricing -- what do you think about using pricing to offset some of these pressures?

Yeah, we’ve talked a little bit internally about that. We were fortunate, I’d say, back at the very beginning of COVID to shore up our supply chain. We probably purchased, probably -- I mean, at the time, maybe even well, ahead of where we thought we should be, but we wanted to be conservative. So, we locked in prices on a lot of our major raw material 18 months, two years ago. And so we’re not feeling the squeeze from a raw standpoint, but obviously, like everyone else, the supply chain around the delivery logistics piece we’re getting hit with, and we’ll continue to monitor that to see if we have to do some price modifications but right now, we’re comfortable with where we are.

I mean, it’s been a while since we’ve been in this situation, but how much pricing flexibility do you think you have? What are the impediments to taking pricing increases here?

Well, our products, we think are competitively priced right now but if we feel a lot of pressure on our margins and you saw we were down about 500 basis points -- 50 basis points in our margins last quarter, if we continue to see that margin pressure, we’ll look at it but right now, we think we can manage it through just our cost management.

Okay, fair enough [indiscernible] have high gross margins. So last thing I really want to talk about Steve and Justin is the distributor count in the US, which is down double-digits now for two quarters and just down for four quarters. So what kind of efforts are you making to stop the declines there and start growing the distributor account in the United States?

Yeah, we have a couple things that we’re really focused on. We’ve really been focused on our promotional calendar with the consumer, with the end consumer, the customer, and you’re going to see a little bit more engagement with encouraging [ph] are filled to bring in distributors as well. So we’ve been working on -- focusing on distributor enrollments now for quite a while in the last, I guess, six to nine months and we feel like that is going to be key to getting things re-accelerated from a growth standpoint. So we will continue to put gas on that fire.

I’d say, I mean, we talked a little bit also just about how pivotal and important our global convention was. And, I mean, not just symbolically but the feeling of people finally getting back together, we did a number of we call them road to convention in person meetings. And, and those were really powerful, in that it just started to give people an opportunity that wanted to get out and to kind of reengage with their peers and the community at LifeVantage. And we are -- we do monthly -- we call them LifeVantage academies, so these are training, both an opportunity meeting for new prospects as well as training for existing distributors. And those are taking place in five different cities now, I think on a on a monthly basis. And then we’re also continuing with in-person meetings in a road to Croatia. Croatia is our next incentive trip, so we’re in a qualification period now that runs through June. And these meetings are distributor lead. Corporate is there to kind of support but it’s the distributors that are actually taking the reins and getting out and organizing and inviting and bringing in people within their teams or within the geographic locations. So it says distributors are starting to get back into activity.

Well, that’s true. You haven’t had live events for over a year here, so the US event in February should definitely help. Right.

That’s right. That’s right. And we’re a company that I think still builds around and benefits from those live events, especially from a distributor standpoint, our distributor.

Yeah, makes sense. All right. That’s all for me. Thank you.

Thanks, Doug.

[Operator Instructions] This concludes our question and answer session. I would like to turn the conference back over to Steve Fife, for any closing remarks.

Thank you, operator and thank you for joining us today. In closing, I’d like to take this opportunity to thank all of our employees for their hard work, and dedication and as well as our outstanding team of distributors and loyal customers. We remain confident in our business model and are focused on delivering the LifeVantage products our customers depend on. We look forward to updating you on our next call. Have a great day. Thanks.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.