LifeVantage fiscal third quarter net revenue increases 270% to $10.0 million

LifeVantage Corporation (OTCBB: LFVN), the maker of science-based solutions to oxidative stress, today, reported financial results for the third quarter and first nine months of fiscal 2011 ended March 31, 2011.

Fiscal 2011 Third Quarter Results

For the third quarter of fiscal 2011, the Company reported record net revenue of $10.0 million compared to $2.7 million for the same period last year, an increase of 270% from the prior year period.  On a sequential basis, net revenue increased 35% from the $7.5 million reported for the second fiscal quarter ended December 31, 2010.  

Gross Profit for the third fiscal quarter ended March 31, 2011 increased to $8.4 million compared to $2.3 million for the same period last year, delivering a slight improvement in gross margin to approximately 84%.    

Operating Expenses for the third fiscal quarter of 2011 were $7.6 million compared to $3.6 million for the same period last year and on a sequential basis increased 33% from $5.7 million in the second of fiscal quarter 2011.  The increase on a sequential basis is due primarily to increased sales commissions which are a direct result of the Company's increased revenue, and to greater investment in personnel.

Operating Income improved to $792,000 for the third fiscal quarter of 2011 compared to a loss of $1.3 million in the same period last year.  The third quarter fiscal 2011 operating income of $792,000 represents the third consecutive quarter of achieving operating income.

"We are extremely pleased with our record revenue and operating income for the fiscal third quarter. Our efforts to enhance our business model and the growing awareness of our patented, scientifically proven products enabled us to report the third consecutive quarter of increasing operating income," commented Douglas C. Robinson, Chief Executive Officer of LifeVantage.  "Our continued strong financial performance gives us the confidence to remain optimistic about our outlook for the remainder of fiscal 2011.  As a result, we are increasing our full year revenue guidance. We will continue to focus on driving our top line growth by expanding awareness of the benefits of our products, managing the controllable aspects of our business and improving the overall financial health of our company."

Mr. Robinson concluded, "We believe the investments we are making into our sales and marketing, research, development and support personnel will enable us to increase our reach into new and existing consumer markets as well as introduce new products, leveraging our many years of research towards our goal of helping people around the world achieve improved health and wellness."

Fiscal 2011 First Nine Months Results

For the nine months ended March 31, 2011, net revenue increased 241% to $23.9 million from $7.0 million for the same nine-month period last fiscal year. Gross profit improved to $20.1 million for the first nine months of fiscal 2011 compared to $5.9 million for the same period last fiscal year.  Operating Income increased to $1.7 million for the first nine months of fiscal 2011 compared to a loss of $7.0 million for the same period last year.

Balance Sheet

The Company ended the third quarter of fiscal 2011 with a stronger balance sheet. Its cash, cash equivalents and investments available for sale improved to $4.4 million due to strong revenue growth and leverage in the business as the Company generated $2.4 million of cash flow from operations for the nine months ended March 31, 2011 compared to a cash use from operations of $4.5 million for the same nine-month period last year.

Due to the Company's rapid revenue growth, improving operating income and strengthening balance sheet, management believes it is prudent for the Company to elect to redeem all of the approximate $3.0 million of remaining outstanding convertible debentures.  This optional redemption by the Company is an election to repay the full amount of the outstanding principal and interest of the convertible debentures.  However, the holders have the ability to convert their debentures into Company shares prior to the date the debentures are to be repaid and management expects that the holders likely will elect to convert their debentures into an aggregate of approximately 15 million shares of the Company's common stock in lieu of receiving cash repayment of principal and interest.  The Company expects to deliver the optional redemption notice to the holders of convertible debentures on or about May 18, 2011 and to complete the redemption or holder conversions before the end of the fourth fiscal quarter of 2011.  This optional redemption, among other things, will decrease the Company's quarterly interest expense through the remaining term of the convertible debentures and remove the associated debt from the Company's balance sheet.  

Guidance

The Company is raising its revenue and operating income guidance for the full fiscal year ending June 30, 2011. The Company now expects to achieve revenue for the full fiscal year ending June 30, 2011 in a range of $37 million to $39 million, operating income in a range of $2.5 - $3 million and operating profit of approximately 8%, compared to the previous estimate of approximately $29 million in revenue, operating income of $1.25 million with 5% operating profit.

Carrie McQueen, Chief Financial Officer commented, "We have greatly improved our balance sheet during the first nine months of fiscal 2011, and based on our developing financial strength, we plan to redeem or cause the conversion of the approximately $3 million that remains outstanding under the convertible debentures we issued in 2009 and 2010.  This supports our focus on improving operating income and operating cash flow by reducing our interest expense.  Additionally, we are striving to provide greater transparency in our financial statements, which will be improved by minimizing the complexity and amount of the non-cash derivative accounting affects on our balance sheet and income statement. Once the debentures have been repaid or converted, we expect to enter fiscal 2012 with a strong cash position and no debt."