Welcome to today's LifeVantage Third Quarter Fiscal 2012 Conference Call. [Operator Instructions] Hosting today's conference will be John Mills with ICR. As a reminder today's conference is being recorded, and now I'd like to turn the conference over to Mr. John Mills with ICR, Please go ahead, sir.

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

Thanks, John. Good afternoon, everyone. On today's call, I will briefly review our record Q3 results, then I will provide a general update on our business and growth initiatives and will also update you on the investments we're making to our infrastructure to ensure we are positioned to capitalize on the tremendous opportunities ahead of us. After that I will turn the call over to Carrie McQueen, our Chief Financial Officer for a more detailed discussion of third quarter results and provide an update to our increased guidance range for the full fiscal year 2012. First, let me provide a quick review of our financials. We generated record revenue of over $36 million during the third fiscal quarter, a 263% increase, compared to the third quarter of last fiscal year. Our operating income for the quarter increased to $6.4 million, which translates to an operating margin of 17.7%. We also strengthened our balance sheet during the quarter ending Q3 with approximately $17 million in cash and no debt. Our financial performance continues to exceed our expectations, and based on this and our expectations for the final quarter of the fiscal year, we are raising our fiscal 2012 guidance range for revenue and operating income. We are increasing our fiscal year and revenue guidance that we provided last quarter from a range of $105 million to $115 million to new range of $120 million to $125 million. As a reminder, our 2011 fiscal year revenue was $39 million. We're also increasing our operating margin guidance from a range of 13% to 15% to a new range of 16% to 17%. Last fiscal year's operating margin was 9.5%. Our strong performance in the first 9 months of the year underscores the expanding awareness of our products Protandim and TrueScience, growing success of…

Thank you, Doug, for the kind words. To reiterate what Doug said, I do remain committed to the continued growth and success of LifeVantage, and I believe the company has tremendous potential in the coming years. I do regret that I won't be with LifeVantage to participate in the continued growth, but as I'm sure many of you can understand. I'm simply not in a position to move for family and personal reasons. I look forward to helping LifeVantage conduct a search for new CFO, and assisting him or her in the transition in any way that I can. With that said, I'll move on to discuss our very strong third quarter results. As Doug has said, we are very pleased with our third quarter results and our ability to continue to improve our financial performance. We are proud to be reporting our 13th consecutive quarter of net revenue growth and our 7th consecutive quarter of generating operating income. Our results in more detail. In the third fiscal quarter of 2012, we generated record net revenue of $36.2 million, which represented a 263% increase over the third fiscal quarter of 2011. On a sequential quarterly basis, our revenue increased 43% from $25.3 million in the second fiscal quarter of 2012. Gross profit in the third fiscal quarter of 2012 increased to $31.2 million from $8.4 million in the same period last year, reflecting our higher sales. Our gross margin in the third fiscal quarter of 2012 increased to 86.2%. Total operating expenses for the third fiscal quarter of 2012 were $24.8 million, which represents 68.5% of revenue. This is a significant percentage decrease from operating expenses of $7.6 million or 76.2% of revenue in Q3 of fiscal 2011. On a sequential basis, operating expenses as percent of sales were stable.…

[Operator Instructions] And for our first question, we'll go to David Rothman [ph] with Phoenix Capital Management.

I have one question regarding the listing process. Carrie, can you give me a rough -- a very rough guesstimate as to when you expect we will be listed on NASDAQ?

I can tell you that we have been working very hard to make sure that we meet the minimum listing requirements of NASDAQ, which is what allowed us to get our application filed recently. There will be a several-week period of Q&A and comments back and forth between ourselves and NASDAQ, and then subsequent to that when we are prepared to be listed, we'll have a discussion internally about the best time to actually pull the trigger and start trading on NASDAQ.

There's a little bit of discrepancy over the minimum stock price for NASDAQ, could you enlighten me or us?

Yes. The NASDAQ requested of the SEC, several months ago to lower the minimum listing price to a $2 or a $3 hurdle, depending on the specific markets you are applying to, and the SEC approved that request, I believe on April 19th and that was the final requirement that we had not yet met, was the listing price.

So basically, we're in a position now to be listed on NASDAQ, when the company, when LifeVantage determines, after they're through with Q&A, when the company determines that it's best to do so.

Yes. So, 2 things remain. Q&A and comments between NASDAQ and ourselves and make sure that they are comfortable with our company, our financial position and then subsequent to that a decision from the company when the right time is.

Phenomenal. I look forward to talking with you guys in about 4.5 months. Oh, and if you have a chance, we'd like to -- I'd like to ask is there any way that you guys would consider pre-releasing revenue, so that there is not such a long period of time between financial news out on the company?

We, at the very minimum, will make sure that we are through our annual audit process, and make sure that we have our financials in order, the audit complete, the board satisfied, and as you know, the 10-K is a much lengthier document, and we'd like to make sure that we've got our messaging completely nailed down before we release portions of it.

[Operator Instructions] We'll now go to Jeff Porter with Porter Capital.

Can you clarify the situation in Japan? As I understand it, we're selling on a not-for-resale basis? Can we continue to operate the same way as we have been subsequent to their change in their regulations?

Yes, Jeff. This is Doug. Thanks for your question. Thanks, certainly, for your support. The simple answer is yes, for some period of time. In fact that's exactly what we're planning to do, is to stay on a not-for-resale basis while we, a coincident with that, really look in and dive into the regulatory requirements, the changes over there, what have you, all the while assessing our operations. As you heard just now in our prepared remarks, we're growing significantly in Japan, and we're doing everything we can here domestically, but also in country to support that growth, because it is without a doubt a significant and very, very important market for us going forward. So we're paying, very, very close attention to it, and we'll bring forth the requisite organization necessary to grow that market exponentially.

Great, and one more clarification. You said in your prepared remarks that 70% of our sales were for preferred customers, which would imply that they are directly consuming. That seems like a really high number, and I guess is great news in light of the recent scrutiny that other MLMs have been given in the stock market. Do you expect that to continue to be our trend or over time, will that number drop somewhat as our distributor channels grow?

Jeff, let me answer that. This is Carrie. The number that we reported today is something that we've discussed, I think in Q&A previously. And the measurement that we've used is, of new people coming to the company every month, at least 70% of those are coming to the company purely and -- signing up purely for consumption reasons, whether they are preferred customers or retail customers, as opposed to distributors who are interested in or could earn a commission. That number has been consistent for at least 2 to 2.5 years. We expect it to continue, I do think we will see some differences as we go into international markets. Different markets just have different behaviors, but certainly within the U.S. market it's been very consistent and I wouldn't expect that to change.

Well, that's -- from an investor's standpoint, that's fantastic news. Thanks a lot.

[Operator Instructions] We'll now go to Mark Gordon with PMG Enterprises.

Great third quarter, very much looking forward to how things are going to progress in the future. My question has to do with the Mexican market. Doug, you made some comments regarding that and how the milk thistle may not be approved in Mexico. What does that mean for the future sales and will the network marketing channel be the channel that will be able to continue to market this product or are there some other hurdles that we have to get over in Mexico.

Mark, thank you again for your question. It's kind of a multi-pronged approach that we're taking to this. What often happens is, we find ourselves reacting from a management standpoint to various different government entities and regulatory bodies and what have you. My preference is to be much more proactive, but at times we have to react. And in this case, we're reacting to a recent ruling as it's come down in Mexico, on this very ingredient, milk thistle. So, what we're doing and what you can be assured that we're doing is that we're looking at alternatives, we're looking at the efficacy of potential reformulation, such that we know that the product or products that we put forth will be efficacious, and helping this fight against oxidative stress. So we're assessing all of that on a multi-pronged approach from a regulatory standpoint right now, from a science and an R&D standpoint, what have you. It's a little premature to full understand what course of action we're going to take on a go-forward basis, but we are assessing it on multiple fronts. And I have to stress as I said in my prepared remarks, that regardless of our chosen path if you will, it will not be a material development from a revenue standpoint, top line or bottom line as it relates to the Mexico market.

[Operator Instructions] And that concludes today's question and answer session. Mr. Robinson, at this time, I'll turn the conference back to you for any additional or closing remarks.

Well, thank you very much everyone, thank you again for your attention to all things LifeVantage. Obviously, we're very, very excited about our third quarter. And as we are staring very, very closely at the conclusion of fiscal '12 and even planning for fiscal '13, we're very bullish on our future. We will be out in the marketplace at various different investor conferences in the coming months and we hope to see many, if not all of you, at various different venues. So until our next opportunity for our fourth quarter call, again, thank you very much and have a fantastic day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation.