Good day, ladies and gentlemen, and thank you for standing by. Welcome to today’s conference call to discuss LifeVantage’s Second Quarter of Fiscal 2025 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 call will be Reed Anderson with ICR. As a reminder, today’s conference is being recorded. I would now 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 second quarter of fiscal 2025. 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 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, February 5, 2025. LifeVantage assumes no obligation to update any forward-looking projections that may be made in today’s release or call. Now I would like to 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. We are thrilled to share our second quarter results, which demonstrate the transformational impact our new MindBody GLP-1 System is having on our business. Our performance in Q2 significantly exceeded initial expectations, with revenue of $67.8 million, representing sequential growth of nearly 44% from our first quarter and year-over-year growth of 31%. Profitability metrics also remained strong with gross margins up 190 basis points versus prior year and adjusted EBITDA more than doubling to $6.5 million or 9.6% of revenue. The success of our patent-pending MindBody GLP-1 System since its October launch in the U.S. has been remarkable. While our initial inventory sold out in just 13 days, we continued to take orders throughout the quarter, and I’m pleased to report that by mid-December, we had received additional inventory and cleared our backlog by the end of December. This rapid sellout occurred despite ordering significantly more initial inventory compared to our successful Liquid Collagen launch. More importantly, we have now secured sufficient manufacturing capacity and strengthened our supply chain to meet the continued strong demand we’re seeing with our current capacity significantly higher than our initial launch volumes. Our active accounts metrics are particularly encouraging, including the highest number of enrollments in a quarter since 2019. During Q2, active accounts increased by 23,000 or 25% in the Americas region compared to Q1, including a 13% increase in the number of our independent consultants and a 31% increase in the number of customers. And while the MindBody System has been a catalyst for active accounts growth, we are also seeing very positive early indications of strong cross-selling opportunities across our broader portfolio of activation products. Subscription metrics are also trending up and are currently above 70%, reflecting the initial…

Thank you, Steve, and good afternoon, everyone. Let me walk you through our second 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. Second quarter revenue was $67.8 million, up 31.3% on a year-over-year basis and up 43.5% sequentially from the first quarter. Foreign currency negatively impacted revenue by $300,000 in the second quarter. Excluding the negative impact of foreign currency fluctuations, second quarter revenue was up approximately 31.9% as compared to the prior year period. Revenue in the Americas region increased 46.3% to $57.2 million in the quarter, reflecting exceptionally strong results from the October launch of our MindBody GLP-1 System in the United States. Total active accounts increased 21.1% in the Americas in comparison to the prior year period and was up 25% sequentially from the first quarter. Total average revenue per consultant was also up 33.7% in the Americas in the current quarter. Revenue in our Asia-Pacific and Europe region decreased 15.5% to $10.6 million in the quarter primarily driven by a 13.9% decrease in total active accounts and the negative impact from foreign currency exchange rate fluctuations. Excluding the negative impact from foreign currency fluctuations, which are primarily attributable to Japan, second quarter revenue in our Asia-Pacific and Europe region was down 13.7% as compared to the prior year period. Gross margin was 80.5% in the second quarter, a 190 basis point improvement compared to 78.6% in the prior year period. The increase in gross margin was primarily due to product mix factors including strong sales of our MindBody as well as lower inventory obsolescence and lower inventory-related variance expenses. Commissions and incentive expense as a percentage of revenue was 48% up from 42.1% in…

Thank you. [Operator Instructions] Our first question is from Brooks O’Neil with Lake Street Capital Markets. Please proceed.

Hey, good afternoon guys. This is Aaron on the line for Brooks. Are you able to hear me okay?

Yes.

Cool. So congrats on the strong quarter. I guess, to start, so with the recent focus on sort of attracting more social sellers and micro influencers, how do you plan to continue to scale and sort of build off the solid growth at the back of accounts we saw this quarter. And I guess, second parter to that question, in conjunction, what do the efforts look like around brand awareness?

Yes, thanks. We are – I think, we talked earlier a little bit and in my script, but we are looking to expand, I’d say not just brand awareness, but our product offerings. To-date, in the company, we’ve relied largely on our independent consultants to be that voice and they’ve done a phenomenal job. But we know that our current base of consultants don’t necessarily participate as broadly in the weight management area as our new product would support. And so we are going to be initiating some very proactive advertising outreach to drive a higher awareness around LifeVantage. And LifeVantage, the company and who we are as the activation company, but also targeting some of our key products with MindBody and Collagen and Protandim in particular. And I think that success that we’re seeing with, call it, social sellers is just continuing to build. It’s amazing how they – a lot of these people follow one another and we’ve had circumstances or situations where we have a social seller join us and there are people that are following that individual who then have signed up to join us because they see the benefits of MindBody is really the attraction. But as they get in and we start talking to them a little bit more and they get educated on our other profit – product offerings, they see that this is much bigger than just kind of a one trip pony. So we see that opportunity for sure. We also are excited about what our existing consultant base is doing as well to drive this message through their channels.

Absolutely. No, that’s super helpful. And then this question may be tailored a little bit more towards Carl. Are there any material expenses we should be looking for post this initial launch phase here in the next quarter or two? Understandably, there were some higher expenses this quarter associated with the launch and higher top line number, but maybe just some additional color on potential lumpiness there would be great.

Yes. Sure, Aaron. I can share a few more details. As we look forward here to Q3, we still expect to see some elevated costs, particularly in the – on the incentive line. One of the big increases we had in Q2, we had some existing incentive programs that I talked a little bit about in the script. And the qualification for that pre-existing incentive actually runs through March of this year. And so there will be some continued elevated costs on that incentive line here in Q3, but not to the same extent that we saw in Q2, it will be gradually decreasing a bit. And then ultimately in Q4, we expect that to normalize back down in that, say 44% range. And so that’s the expectation. So outside of the commission and incentive expense, I think the majority of the launch related costs are really behind us.

Awesome. No, that’s super helpful. That’s it for me. Congrats again guys.

Great, thanks Aaron.

Thanks a lot.

Our next question is from Alex Fuhrman with Craig-Hallum Capital Group. Please proceed.

Hey guys, thanks very much for taking my question and congratulations on a really successful launch of the MindBody System. Wanted to ask a little bit about the margins. You called out a couple of headwinds to the margins in the second quarter like some incremental shipping costs and the incentive comp and incentive program related to the GLP-1 program. It seems like despite those headwinds, the flow through to EBITDA on the extra revenue in Q2 was still pretty strong. But the guidance implies that the flow through over the next couple of quarters in the back half of the fiscal year is going to be lower than that. Can you help us understand why that is and what are kind of the puts and takes as you think about incremental margins for the rest of the year?

Yes, I can take a first crack at that Alex. And then Steve, you can add any comments if you’d like. But as we look at the flow through, I think that the flow through actually will be consistent or maybe even slightly better in the back half of the year. As I mentioned in the previous question, we still are anticipating some higher incentive related expenses and elevated just normal commission payout in Q3 and Q4. We’ll also see some elevated related to the variable comp that we have in the SG&A structure. But I think – going forward, I think that the flow through should be similar here in Q3 and Q4 and looking forward beyond into FY2026, that’s where we really expect to see the incremental leverage of that additional flow through running through benefiting adjusted EBITDA and EPS.

Okay. That’s really helpful. And then if I could ask also just on kind of the timing of the launch and how it’s progressed. Obviously a pretty huge impact on revenue just in the first quarter it was launched. Can you give us a sense of how revenues for the total company or for MindBody trended month to month throughout the quarter? I imagine you only had a partial month of selling the new product in October. You had a lot of stock outs to contend with in November. Can you give us a little bit of a sense of kind of how demand played out month to month throughout the quarter and into January?

Yes, I can talk about that, Alex. And we had – October was frankly massive for us. It was the biggest month in the company’s history from a revenue standpoint. And I don’t know, I’d like to think of what would have happened if had we not run out of inventory before the end of the month, but we did. And so all of November and about half of December, we weren’t able to ship product. And our consultants, I think did all they could to continue to enroll and we took orders during that period of time. But it’s hard keeping that same energy around selling a product and then telling people, you’re going to have to wait four, six, eight weeks before you get it. And I think especially around the holidays where people are maybe thinking about spending their money on other things as well. And so I’m super proud of our operations team and accelerating kind of orders that had been in transit and supply chain fixes to get inventory back in stock by the middle of December and happy that we were able to fulfill all of that – all of our backorder by the end of December. So we ended the quarter with virtually zero backlog, which is fantastic. Now I think as it relates to – and so there was – to answer your question, there was a slight decrease month to month to month in the quarter. And January is kind of in line with where we were in December. I think one of the headwinds in January was because of this backorder situation, we had people that could have received and did receive three sets of MindBody in December because they placed an order in October, they placed an order in November and December they joined on a subscription and then they received all three of those systems towards the end of December. And so, when we provided our updated guidance in January – at the beginning of January, and reiterated it, we took that into account that we anticipated January being a little softer because of that inventory – how the inventory was shipped out to our customers.

Okay. That makes a lot of sense. Thank you, Steve. Thanks, Carl.

Yes. Thanks, Alex.

Our next question is from Doug Lane with Water Tower Research. Please proceed.

Yes. Hi. Thank you. Just on the MindBody subscriptions, how has that come in vis-à-vis expectations? Is it mostly subscription now or was it mostly just one off orders?

Yes. Our average subscriptions, Doug, are about 80% of our revenue on a month to month basis. And MindBody is tracking low double digits above that. So there’s more people coming in on subscriptions and it has a higher subscription rate. I think that’s largely due because of our positioning around the product. And we’ve been really careful not to refer to it as a magic pill that you come in and take it for a month and move back to your normal habits. But this is a lifestyle and weight management products. So we strongly encourage people to come in on subscription. And the – one of the other things that I’ve looked at and I’m pleased with is just the people that are – new people that are joining LifeVantage and are signing up with MindBody, over 50% of them are joining with a subscription. And keep in mind, that is also during a period of time where for about eight weeks, we didn’t have product to ship in the quarter. But in the quarter, over 50% of the people came in on a subscription and are new to the company on a subscription and that’s compared to, I guess, it was kind of low 30s when we launched Collagen, and as you know, it was a very successful launch for us as well. But most of the people that we’re buying were existing customers and consultants of our customer base back in two years ago. So we’ve seen a much higher purchase rate of new people coming from the outside with MindBody that we did with Collagen.

And with the science coming out earlier this quarter, how much of the MindBody is now being sold in the stacks versus standalone?

Yes. So I think in the first quarter, we did see a high proportion of standalone units, but it was probably out of the total MB-related revenue in Q2, 80%, 80% to 85% would be standalone, but I think the more recent trends that we’re seeing, if you look in the later – especially in the launch month. But if you look in the later months and where our expectations are going forward, we believe that we’re going to see a higher proportion of MB purchases in the stacks and pack strategy. That would include Nrf2 or Collagen or some other of our products.

Right. That would [indiscernible]

Yes. And as you pointed out, that in vitro results that we talked about at the beginning of the month, it’s pretty staggering that the amplification story about taking MindBody with Protandim. And that’s really something that Protandim is really the anchor of our product strategy. Every time we look at new products, and this is going back five, six years ago when we introduced Protandim Nrf1 and Protandim NAD, we did a study with those products and saw that an amplification when taken with Nrf2. We see the same thing with Collagen. And now that in vitro result reaffirms the same kind of findings with MindBody. So – and that our consultants are used to selling that, going back again to our Tri-Synergizer and then the Collagen. So as Carl said, as time passes, I think we’ll see that percentage increasingly grow to more of a system or a stack approach rather than just an individual product sale of MindBody.

No, that makes sense. You have the same thing, right, with Nrf2 and Liquid Collagen. I think there’s even pending one on that.

So exactly…

I assume there’s science coming out shortly about the three of them, the synergistic benefits of all three have been taken together. Is that fair?

That’s fair. That’s fair. And the other thing that I don’t know if you saw that release from yesterday, but we did release the results of our international MindBody formula. And we’ve started off rolling that out. We expect to have sales internationally starting in Japan towards the end of March and then all of our other international markets in April, but the in vitro results from that product are very consistent, similar to our U.S. formula. And so it’s exciting to have that information corroborating our international formula as well.

Yes, no question. And just one last thing I noticed in the balance sheet. You’re now back to $21.6 million in cash, which is where you were when you declared a special dividend a couple of years ago. So how should we think about the opportunity for a special dividend coming up here?

Yes. I think on that option, Doug, is always on the table. And I think we found that to be a pretty good lever for us in the past. But we’re also balancing that against some of the other internal investments that we feel we want to make in the business as well. As Steve talked earlier in the call, we were talking about investments in brand awareness and maybe other areas in IT related where we can get some real benefits internally. And so we are balancing that. And the other thing we want to make sure we do is we need to shore up and make sure that we’ve got enough inventory worldwide to support the growth that we’re expecting in MB and the successful launches we’re expecting internationally. So we do have some – we want to make sure we’re ahead of the inventory situation, and we don’t run into the same issue we had with the U.S. launch. But overall, though, I think that’s a fair point, and it’s certainly a special dividend is something that is where – is an option for us going forward.

Okay. Thanks, Steve. Thanks, Carl.

Okay. Thanks Doug. Thanks for the question.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Steve for closing remarks.

Yes. Thanks. And I just want to thank you all for joining us today. As we wrap this up, I wanted to extend my appreciation to our employees, our independent consultants all of you stockholders and our very loyal and passionate customer base, and we look forward to updating you with our next results. Thanks a lot.

Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.