Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's Conference Call to discuss LifeVantage's Third Quarter of Fiscal 2024 Results. At this time, all participants are in a listen-only mode. Following the formal remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up. 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 third quarter of fiscal 2024. On the call today from LifeVantage with prepared remarks are Steve Fife, President and Chief Executive 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 this release, 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'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 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 May 2, 2024. LifeVantage assumes no obligation to update any forward-looking projections that may be made in today's release or call. Now I will turn the call over to Steve Fife, the President and Chief Executive Officer of LifeVantage.

Thanks, Reed and good afternoon, everyone. Thank you for joining us today. Profitability trends remain very positive in Q3 as we again delivered significant year-over-year improvement in adjusted EBITDA. For the quarter, our adjusted EBITDA was $5.1 million, an increase of 55% from the prior year period. And our adjusted EBITDA margin was up 440 basis points to 10.5% as we continue to optimize our LV360 initiatives and improved productivity despite the persistence of top-line headwinds. While third quarter revenue levels were below our expectations January and February were negatively impacted by the timing of certain incentive and promotion activities. For example we did not repeat in the incentive trip that ran last year and Japan was coming off elevated incentive activities in fiscal Q2 that likely pulled forward some demand. However, we did see trends reverse the last month of the quarter and the promising performance in March carried over into April. March results along with continued successes in April have been driven by a focus on increasing our enrollers, which we define as the number of consultants who sign up or enroll another customer or consultant. We have optimized our LV360 initiatives with the focus on this group, specifically working to ensure new consultants see meaningful income in their first days with LifeVantage, ultimately leading to their retention and enrollment activities. As we've discussed previously, our evolved compensation plan is a modern forward-looking compensation system that rewards independent consultants generously for their efforts offering diverse income streams and opportunities to accelerate their path to success. Evolve caters to the dynamic needs of modern entrepreneurs and affiliates who are driven to share and sell products to their networks as well as those who also want to build a robust collaborative team. Consultants who earn income and they're firstly by…

Thank you, Steve and good afternoon, everyone. Let me walk you through our third quarter financial results. Please note, that 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. Third quarter revenue was $48.2 million, down 10.2% on a year-over-year basis and foreign currency negatively impacted revenue by $800,000. Excluding the negative impact of foreign currency fluctuations, third quarter revenue was down by $4.7 million or approximately 8.7% as compared to the prior year period. Revenue in the Americas region decreased 5.9% to $37.2 million in the quarter, primarily driven by a 13.9% decrease in total active accounts, partially offset by higher average revenue per account, resulting from changes in product mix and the continued penetration of our TrueScience liquid collagen products. Revenue in our Asia-Pacific and Europe region decreased 22.4% to $11 million in the quarter, driven by a 17.1% decrease in total active accounts, the closure of our e-commerce business in China, and the negative impacts from foreign currency exchange rate fluctuations. Excluding the negative impact from foreign currency fluctuations, which were primarily being driven by Japan, third quarter revenue in our Asia-Pacific and Europe region was down 16.1% compared to the prior year period. Gross margin was 78.9% for the third quarter compared to 80.2% in the prior year period. The decrease in gross margin was primarily driven by a shift in product mix, higher inventory obsolescence and manufacturing related costs, and higher shipping and warehouse fulfillment expenses during the current period. Commissions and incentive expense in the third quarter decreased by $4.1 million year over year. As a percentage of revenue, commissions and incentive expense decreased 340 basis points to 40.9% versus one year ago levels, which was primarily driven by…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question we have is from Doug Lane of Water Tower Research. Please go ahead.

Yes. Hi. Good afternoon, everybody. Just looking at the numbers versus my expectations here, I know the top line came in a little bit below your expectations company-wide, but I think particularly the non-US markets came in weaker than I expected sort of reversing a trend there, where it looks like they were getting better sequentially. So, can you go through the international markets, where we are and where the disconnect is between at least my expectations and what the results were?

Sure. Yeah, Doug, thanks for the question. Yeah, regarding the international markets, Q3 was definitely a little softer for us, in particular in Japan is where we saw some weakness, especially sequentially quarter-over-quarter. And then we're also continuing to see just with some of the other Asia-Pacific markets with Philippines. We've talked about Philippines previously. We're still trying to find the right balance of momentum there in the Philippines side. And so that one also continues to be at least underperforming to our expectations. However, I mean, I think we're still -- I think we're optimistic about where Japan is headed ultimately. We just recently had a Momentum Academy there at the end of March that Steve attended. And I still think we're very optimistic about where things are headed in the future.

And looking at the fourth quarter sales guidance, you're looking for sequential improvement from being down double digits to being down maybe only low to mid-single digits. So what have you seen so far here in the second quarter that gives you optimism that things -- I mean, in the fourth quarter that gives you optimism that trends will -- while still down will improve sequentially from the third quarter?

Yeah, Doug, this is Steve. In our prepared remarks, we talked a little bit about the slow start in the quarter. January and February were really tough for us and part of it was the timing of some incentives and everything that we had going on last year during the quarter that we didn't start until later in the quarter, or are announcing here shortly. So there's some of it -- that is clearly incentive driven. But as I mentioned and again, in the prepared remarks, at our Momentum Academies, we introduced a number of things. We've talked about the Rise ERA and the focus on enrolling retaining and advancing, but we also introduced some coupon codes, the lift -- we saw a lift with the introduction of the refresh of our TrueScience line and the announcement of an incentive trip, all of which occurred kind of middle of March, let's say and those events were staggered throughout March, but we could say the middle of March and so, we saw a tremendous response to that to each of those things in March on and actually saw a continuation of that with increasing active accounts and activity in April. We don't have final revenue numbers yet. But in terms of our active growth or active accounts, we saw growth look both in March and in April. And I guess the end of the day, that's what's giving us encouragement is how well these initiatives have been received. And also, although much smaller markets for us, we talked about the announcement and the rollout of our evolved compensation plan in Canada, Europe and Mexico in February. And we are seeing growth in all three of those markets in February, March and April, as they get up to speed and adopt the new compensation plan. There are embracing minutes. And so there's there is some encouragement in our international markets. And again, most recently in those markets we've launched the off compensation plan.

No, that makes sense. Thanks, Steve. I like I get that. And then Carl, I know we talked about the commission and incentive line before coming into the quarter at 41% is the lowest I've seen for any quarter that I have at least printout of my sheet in front of me. Why is it continue to go down? And when do you think it will go back to a more normal maybe mid-40% number?

Yeah, as far as Q3 goes, a lot of the -- but that low number in Q3 was really -- that's really related to timing of the way that some of the incentives and the incentive trip sell for us. As Steve mentioned, we didn't have a similar incentive trip for the first part of Q3 here. And so that's really what's driving it down. So I think it's a temporary decline. We're expecting that to get back above that 43% level in Q4. Q4 will have much heavier promotional activity associated with a few events and promotions that we have running. And for the full year, we're expecting it to be back up closer to that 43% level. So, that's I do think it's a it's definitely a temporary decline. We anticipated to normalize closer to that 30% -- 43% range.

Yes. Okay. Thank you.

Thanks, Doug.

There are no further questions at this time. And I would like to turn the floor back over to Steve Fife for closing comments.

Well, thanks for joining us today. And as we conclude, I want to extend my appreciation to our committed employees, outstanding independent consultants, stockholders and faithful customers. The strength of our distinctive platform coupled with the competitive edge of our business model that empowers individuals to establish businesses on their own terms. It's complemented by a steadfast leadership team, a diverse range of unique products and engaged consultant community and a robust financial position. This collectively emphasizes our strategic positioning for the future, enabling us to pursue long term goals, while we consistently build sustain sustainable value for our share stockholders. Thanks so much for joining us and we'll talk to you next quarter.

That concludes today's conference. Thank you for joining us. You may now disconnect your lines.