Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss LifeVantage's Fourth Fiscal Quarter of 2021 Financial 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 fourth fiscal quarter of 2021. On the call today from LifeVantage with prepared remarks are Steve Fife, Chief Executive Officer and Chief Financial Officer; and Justin Rose, Chief Sales and Marketing 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, August 19, 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 and Chief Financial Officer of LifeVantage.

Thanks, Reed, and good afternoon, everyone. Thank you for joining us today. With me today is Justin Rose, our Chief Sales and Marketing Officer, who will join me with prepared remarks before we turn the call over for Q&A. We are pleased with our fourth quarter results, which showed solid year-over-year earnings growth. We had a 6% sequential improvement in revenue as the momentum that started back in February and March continued to gradually build in the fourth quarter. Fourth quarter adjusted earnings per share of $0.31 increased 11% on a year-over-year basis, and were up 55% sequentially from Q3. In the fourth quarter, we generated revenue of $54.8 million, representing an 8% decline relative to the prior year period, due to the year-over-year reduction in the number of distributors. Importantly, we experienced sequential growth in total active accounts reflecting efforts to drive distributor engagement and increased retention. As we've discussed previously, the lack of in-person interactions due to COVID-19 has been a significant factor negatively impacting our performance over the past year. Accordingly, the gradual return of in-person activities over the past several months has coincided with the positive early indicators, we are seeing in several areas, which Justin will touch on in more detail. Our emphasis on refocusing our messaging and sales efforts around Protandim Nrf2, which I shared with you on the third quarter call is resonating positively across the organization, especially with our leading distributors. The steps we've taken to increase alignment between our management team and top distributors are also helping to drive distributor engagement. Finally, we are improving our messaging and expanding our suite of technology tools to make it easier for our distributors to service existing customers, while optimizing their marketing and conversions around prospects. We are encouraged with the adoption and results…

Thank you, Steve, and it's a pleasure to speak with everyone today. Increasing the total number of active accounts remains our primary goal, and we are pleased with recent progress, expecting momentum to continue building gradually throughout fiscal 2022. The efforts we discussed last quarter to refocus on our core products and to drive renewed engagement in alignment with our distributors are having a positive impact on our results. First, I'll provide you with an update on key action items that we outlined on our last call, aimed at growing customers and distributors. In the latter part of the second quarter, select top distributors started hosting in-person meetings, as a strategy that has proven effective at driving engagement with current and prospective customers. Preliminary results are highly encouraging and one example a distributor had approximately 200 people attend the meeting, and 40% of the prospects purchased our flagship enrollment pack. Over the next several months, we expect in-person meetings to accelerate, reflecting heightened engagement by our top leaders, energized to capitalize on a tighter focus on a sharper message around our core Nrf2 product. Driving second month purchase activity is another important initiative for us. And the artificial intelligent tools we started implementing a few months ago have proven effective in identifying opportunities for increasing sales and mitigating churn. While it's early and we still are fine tuning our algorithms, having this capability is clearly additive. We've also started a welcome call campaign as part of an onboarding process for our new customers and distributors, and early results have also been positive. In June, we rolled out our month of action. It's a distributor incentive program using our proprietary LifeVantage app, which is designed to promote and reward key behaviors proven to drive engagement. We tracked a handful of metrics…

Thank you, Justin. Let me walk you through our fourth quarter financials. Please note, I will be discussing our non-GAAP adjusted results. You can refer to the GAAP to non-GAAP reconciliations in today's press release for additional details. Fourth quarter revenue was $54.8 million down 7.7% on a year-over-year basis. Revenue in the Americas declined 9.6% to $37.7 million, primarily reflecting a 9.8% decrease in total active accounts, primarily in the U.S. This decrease was partially offset by modest increases in both average revenue per account and retention in the region. In Asia Pacific and Europe, fourth quarter revenue decreased 3.3% year-over-year to $17.1 million with total active accounts up 8.5%, the benefit of which were offset by decreases in average revenue per account, primarily in our Greater China region. Japan revenues were down 3.6% versus last year, reflecting continued restrictions and due to COVID-19. Results in Australia and New Zealand were strong up 44.6% compared to last year's fourth quarter due to new leadership in the region. Gross margin was 82.1% in the fourth quarter compared to 84.1% a year earlier. The decrease in gross margin was driven primarily by increased shipping to customer expenses due to COVID-19, decreased fee revenues from fewer in-person events and shifts in geographic and product sales mix. Commission and incentive expenses as a percentage of revenue decreased by 200 basis points year-over-year to 46.7%, reflecting changes in the timing and magnitude of promotional activities. Adjusted SG&A declined $700,000 to $13.6 million due to lower stock and incentive compensation expense. Adjusted operating income was $5.8 million or 10.6% of revenue compared to $6.7 million or 11.3% of revenue for the prior year period. Adjusted net income was $4.3 million or $0.31 per fully diluted share compared to $4.1 million or $0.28 per fully diluted…

Ladies and gentlemen, we will now have our question-and-answer session. [Operator Instructions] First question comes from Doug Lane with Lane Research. Please proceed with your question.

Yes. Hi, good afternoon, everybody. Looking at the 2022 guidance, the revenue looks to be up mid-single digits at the midpoint. I'm wondering what you're contemplating for distributor trends along with the revenue growth, because the distributor trends have been somewhat weak, not really seeing a term there yet? How do you expect distributor growth to play out in 2022?

Yeah, Doug, this is Steve. We've got a number of things lined up to drive distributor enrollments and growth. We started this year with really two primary goals and support an overall focus on increasing our active accounts. The first goal is focused on distributor enrollments and then the second really ties to retention, but it's aligned around the second order purchases specifically. And from a distributor standpoint, we think that getting back to the in-person events is going to be critical for that. Our distributors, a good portion of them dealt very traditionally not necessarily in their living rooms, but in medium-sized group gatherings. And those meetings have already started to take place. We've had a few of them. We have groups coming into our new office. And, between now and our October convention, we have several lined up both to reengage the distributors, as well as further corporate team to help support them as they put new prospects in those rooms. So, that's one of the biggest things. And I think our kind of refocusing back on our core opportunity and led by, Protandim Nrf2 our flagship product, it's a product that's unparalleled with others in the industry, and frankly, it's just in the world, and allowing them to tell that story and utilizing that unique product, in terms of them engaging in the business opportunity are two things that really is what propelled the company back in our growth spurt. And so reengaging and supporting them along those two lines, I think are the biggest opportunities we have. We don't anticipate a lot of growth from our average revenue per account in fiscal ‘22. So, the growth to that midpoint, which is around 6% is really focused on increasing the total number of accounts, both distributors -- and as we focus on distributors, we know that customers come.

Okay, fair enough. And just secondly, looking at your adjusted EBITDA outlook, it's down from this year, despite the positive sales outlook. So where specifically, are you seeing potential margin pressure going in this year?

Yeah, our gross margins, even from ‘20 to ‘21, we talked about are down, a point to two points, primarily driven by increased supply chain costs. And, our forecast for ‘22 doesn't anticipate that that will continue into the year. So, we do see continued modest pressure on our gross margins, clearly not returning to the fiscal ‘20 levels. But we also see -- we're anticipating increased investment, especially in our G&A area to support the revenue growth. Going back to live events, we benefited in fiscal ‘21 by not having those events from a G&A standpoint we know that it adversely affected our top-line revenue from a SG&A standpoint. We didn't incur those costs. And, we're also investing, Justin mentioned, investment in our website, and other marketing tools to again, further support our distributors. So, the increase in our G&A is largely going to support our revenue growth.

Okay, that makes sense. Thanks, Steve.

Great. Thanks, Doug.

Thank you. [Operator Instructions] Our next question comes from Jim Galloway, a private investor. Pleased proceed with your questions.

Thank you for taking my call. I'm very pleased to see that we're focusing back on the core products and Protandim. Wondering, are there any new studies that you see reaching the marketplace, because most of our studies are outdated? The facts are still the same. But is anyone researching the benefit of Nrf2 these days that may help us?

Hey, Jim, this is Justin. Thanks for the question. Yeah, we have some incredible studies. And I think you're going to see even some of our past studies a little bit more prevalent in our communications coming up. But we are putting a big emphasis this next fiscal year on getting back to some of those not only studies but just notices throughout different publications and things that our distributors can turn to, to utilize, to give them a reason to get excited about our story again. So it is part of our strategy moving forward. So I think we're thinking very much aligned there.

Thank you. One last question, the stock market's been going well. We've been not so well. One of the reasons that people do stock repurchases is to improve the value of the stock. Justin, what would $11.9 million do to help you in marketing and growing the company to be spent that way rather than on stock buyback?

Yeah, it's a good question, Jim, and one that we ask ourselves, if not daily, weekly, for sure. We continue to look for opportunities to invest further in the business, and by that I don't just mean M&A opportunities, although, we are active in looking at the ability to grow the business inorganically. But like I just mentioned, in response to Doug's question, we're investing several millions of dollars this next year to drive growth strategies for the business. We're consciously doing that. We're prepared to take a bit of a hit on the EBITDA this next year, in anticipation of building a stronger foundation for future growth. The business still generates a lot of cash, we'll still be very cash flow positive, even after the investments that we plan on making in fiscal ‘22. So we look at that, I think this year, you'll see more activities in terms of building organically. We'll continue to do stock buybacks as we feel like the stock is undervalued at its current level. So it is an appropriate use of cash. But we continue to look at ways to provide even a higher return on that cash that we generate.

Okay. I'm pleased to see we're going back into the Philippines. I remember when we were there, what, three, four or five years ago, and I thought it was going to be a pretty good market for us. So congratulations on restarting the Philippines. China was supposed to be growing a little bit, but I know the relationship with China is not too good between the United States now. Is that affecting our business there?

Yeah, Jim, this is Justin again. First of all, with the Philippines, yeah, we definitely have a lot of energy and excitement. The first time that we were in the Philippines, we were just there as a not for resale model. So this time going in fully, giving our distributors an opportunity to build there is I think going to truly make a big difference from even the experience the first time. And then when it comes to China, yeah, we're going in with an e-commerce model, and so it is a little bit different than I think what some of our competitors that have direct sales licenses are doing right now. And we have not felt too much of a difference in the past little while with the relationship between the U.S. and China. We have seen the e-commerce model start to pick up some momentum here in the last few months, and are very encouraged by the leaders that we have engaged right now that are really pushing that e-commerce model as it's out currently. When it comes to Taiwan, they've had a tough run, especially with the COVID situation. We really run that business through our office there. Most people come in and place orders in office and not having the ability to do that as freely as they have in the past has definitely taken a little bit of toll there as well.

Well, I'm relying on you guys and not selling my shares. So, good luck.

All right, appreciate it, Jim.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Steve Fife, for any closing remarks.

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

Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.