LifeVantage's earnings recover as China market starts to come online
Network marketing activities are regulated differently in China than in many countries. Rather than try to set up something akin to a multi level marketing organization within the country that would comply with the rules, LifeVantage has chosen a cross-border e-commerce model. In this model, supplement products will be marketed by social media influencers and shipped to consumers via Hong Kong.
CEO Darren Jensen LifeVantage has been doing business inside of Mainland China for five months now, and while the rollout is going slightly slower than planned, he anticipates it will become one of the company’s top markets.
“Mainland China is a brand new model for us and we are about five months into it. And it’s really a slower build until we get the new model built in and we attract the right mix of social marketers,” Jensen told analysts on an earnings call. A transcript is available on the site seekingalpha.com.
LifeVantage, which is based in the Salt Lake City suburb of Sandy, was founded on a supplement called ProTandim, which is a blend of extracts of milk thistle, bacopa, ashwagandha, green tea and turmeric. The company also markets other supplements such as energy powders, an omega-3 offering and a probiotic supplement.
LifeVantage seems to be recovering from multiple earnings shocks the company absorbed starting about two years ago. In response to a formal Sarbanes Oxley whistleblower complaint filed by a former employee, the company put new accounting procedures into place to more accurately reflect sales to distributors and to end users. The company also reformed procedures to take into account the new regulatory landscape in the US following the agreement between category leader Herbalife and teh US Federal Trade Commission. That settlement, which included a $200 million fine for Herbalife, created fallout throughout the industry.
In LifeVantage’s case, revenue dropped by as much as 20% year over year as the company struggled to put the new compensation plan into place and retain distributors at the same time.
The worst seems to be over. For its fourth quarter of 2018, LifeVantage reported revenue of $54.0 million, an increase of 6.7% as compared to $50.6 million in the fourth quarter of fiscal 2017. Revenue in the Americas for the fourth quarter increased 4.7% compared to the fourth quarter of fiscal 2017 and revenue in the Asia/Pacific & Europe region increased 13.3% compared to the fourth quarter of fiscal 2017.
For the full year, the company brought in $203.2 million, an increase of 1.9% over 2017. Earnings per diluted share were 41 cents, compared to 11 cents the year previously.
The company’s revenues still have not recovered fully. The record quarterly revenue came in the third quarter of 2016 when the company brought in $56.2 million.