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| 8-K - CURRENT REPORT - Youngevity International, Inc. | ygyi8k_11132018.htm |
Exhibit 99.1
Youngevity
International Announces Third Quarter 2018 Results
Shareholder
Conference Call Today at 1:00 PM EST, 10:00AM
PST
SAN
DIEGO, CA--(November 13, 2018) - Youngevity
International, Inc. (NASDAQ: YGYI ), a
leading omni-direct lifestyle company, today reported financial
results for the third quarter and nine months ended September 30,
2018.
Steve
Wallach, CEO and Co-Founder of Youngevity stated, “The third
quarter’s revenue was negatively impacted by supply chain
challenges experienced predominantly in our international markets
and a policy change implemented by our finance company within the
coffee segment, however, despite these challenges, our year to date
numbers continue to improve over last year in key financial metrics
including Revenue, Operating Income and Adjusted
EBITDA.”
Youngevity
President and CFO, Dave Briskie stated, “We are not satisfied
with our sliding revenue for the third quarter, however we are
pleased to see our margins as a percentage of revenue showing
significant progress this quarter. We have been eliminating
promotions that drive top line revenue at the expense of profits
and we are seeing a positive trend toward our stated goal of
improving operating profits and Adjusted EBITDA in 2018. We intend
to focus the balance of this year on improving our balance sheet,
driving international growth, and positioning the coffee segment to
execute its significant green coffee contract that we anticipate
will greatly impact the performance of the coffee segment in
2019.”
THIRD QUARTER 2018 FINANCIAL RESULTS
For the
three months ended September 30, 2018, our revenues decreased 12.0%
to $39,082,000 as compared to $44,395,000 for the three months
ended September 30, 2017. We derived approximately 88% of our
revenue from our direct selling sales and approximately 12% of our
revenue from our commercial coffee sales. Direct selling revenues
decreased by $3,674,000 or 9.7% to $34,280,000 as compared to
$37,954,000 for the same period last year. We attribute this
decrease primarily to a general weakness in North America direct
selling business and supply chain challenges that predominantly
negatively impacted revenues in the international markets. In
addition, the Company changed its promotion strategy whereby it has
significantly reduced promotions that impacted top line revenues
through discounting while maintaining commission levels. The
promotion in the current quarter targeted products with higher
gross margins and utilized incentives that had less costly impact
on profitability. For the three months ended September 30, 2018,
commercial coffee segment revenues decreased by $1,639,000 or 25.4%
to $4,802,000 as compared to $6,441,000 for the three months ended
September 30, 2017. This decrease was primarily attributed to a
decrease of $2,458,000 in green coffee sales, offset by an increase
of $819,000 in roasted coffee sales. The decrease in green coffee
sales was primarily due to our domestic finance company no longer
willing to fund the green coffee business, which caused a temporary
disruption in sales.
For the
three months ended September 30, 2018, gross profit decreased
approximately 8.0% to $23,712,000 as compared to $25,764,000 for
the three months ended September 30, 2017. Overall gross profit as
a percentage of revenues increased to 60.7%, compared to 58.0% in
the same period last year. Gross profit as a
percentage of revenues in the direct selling segment increased to
68.9% for the three months ended September 30, 2018, compared to
67.1% in 2017, primarily due to the price increases on certain
products that went into effect on January 1, 2018 and changes to
our product sales mix and no commensurate increase in related
expenses.
For the
three months ended September 30, 2018, our operating expenses
decreased 8.9% to $25,118,000 as compared to $27,581,000 for the
three months ended September 30, 2017.
Distributor compensation expense decreased 13.3% to $15,076,000
from $17,391,000 for the same period last year. This decrease was
primarily due to the lower revenues discussed above. Distributor
compensation as a percentage of direct selling revenues decreased
to 44.0% for the three months ended September 30, 2018 as compared
to 45.8% for the same period last year. This was primarily
attributable to the price increases reflected in revenues, which
did not impact commissionable base revenues.
Sales and marketing expense decreased 2.7% to $3,962,000 from
$4,074,000 for the same period last year. In the direct selling
segment, sales and marketing costs decreased by 3.6% to $3,747,000
in the current quarter from $3,887,000 for the same period last
year. This was primarily due to lower compensation costs and lower
convention costs in the current quarter compared to the same
quarter last year.
General and administrative expense decreased 36.6% to $3,880,000
from $6,116,000 for the same period last year primarily due to
the contingent liability revaluation which resulted in a benefit of
$2,618,000 for the three months ended September 30, 2018 compared
to a benefit of $340,000 for the same period last year. This
benefit included a $2,200,000 adjustment to our contingent
liability related to one of our acquisitions due to a substantial
decrease in projected revenues. General and administrative expense
also decreased due to lower legal expense and compensation expense,
offset by increases in depreciation and amortization expense and
investor relations expense.
We recorded a $2,200,000 loss on impairment of intangible assets
for the three months ended September 30, 2018, related to
the same acquisition for which the Company had a significant
revaluation of the contingent liability discussed
above.
Operating loss decreased to a loss of $1,406,000 compared to a loss
of $1,817,000 for the same period last year.
Total other expense increased by $6,404,000 to $6,945,000 as
compared to $541,000 for the same period last year. Net interest
expense decreased by $345,000 to $1,407,000 compared to $1,752,000
for the same period last year. Change in fair value of derivative liabilities
increased by $7,057,000 for the three months ended September 30,
2018 to a $5,538,000 expense compared to a benefit of $1,519,000
for the same period last year. Various factors are considered
in the pricing models we use to value the warrants including our
current stock price, the remaining life of the warrants, the
volatility of our stock price, and the risk-free interest rate. The
increase in the change in fair value of the warrant derivative was
primarily due to the increase in the Company’s stock
price.
We reported a net loss of $8,410,000 as compared to net loss of
$1,068,000 for the same period last year. The increase in net loss was a result of the increases in other expense
discussed above and the decrease in gross profit, offset by a
decrease in operating expense. In addition, we recorded an income
tax expense of $59,000 in the current quarter compared to an income
tax benefit of $1,290,000 for the same period last
year.
Adjusted EBITDA
EBITDA (earnings before interest, income taxes, depreciation and
amortization) as adjusted to remove the effect of stock
based compensation expense, the
non-cash loss on impairment of intangible assets, the non-cash loss
on extinguishment of debt and the change in the fair value of the
warrant derivative or "Adjusted EBITDA," increased to $2,670,000
for the three months ended September 30, 2018 compared to a
negative $359,000 for the three months ended September 30, 2017. A
reconciliation of Adjusted EBITDA to net loss is set forth
below.
Fiscal 2018 First Nine Months Results
For the nine months ended September 30, 2018, our revenues
increased 1.3% to $126,331,000 as compared to $124,655,000 for the
same period last year. We derived approximately 84% of our
revenue from our direct selling sales and approximately 16% of our
revenue from our commercial coffee sales. For the nine months
ended September 30, 2018, direct selling segment revenues
decreased by $297,000 or 0.3% to $106,437,000 as compared to
$106,734,000 for the same period last year. Commercial coffee
segment revenues increased by $1,973,000 or 11.0% to $19,894,000
for the nine months ended September 30, 2018, as compared to
$17,921,000 for the same period last year. This increase was
primarily attributed to increased revenues from our roasted coffee
business and green coffee business.
Gross profit increased approximately 3.3% to $74,106,000 for the
nine months ended September 30, 2018 as compared to $71,732,000 for
the same period last year. Overall gross profit as a percentage of
revenues increased to 58.7%, compared to 57.5% in the same period
last year. This increase was primarily due to the price
increases in the direct selling segment on certain products that
went into effect on January 1, 2018 and changes to our product
sales mix and no commensurate increase in related
expenses.
For the nine months ended September 30, 2018, our operating
expenses decreased 2.3% to $74,835,000 as compared to $76,625,000
for the same period last year. Distributor compensation decreased
4.8% to $47,141,000 from $49,496,000 for the same period last year.
Distributor compensation as a percentage of direct selling revenues
decreased to 44.3% for the nine months ended September 30, 2018 as
compared to 46.4% for the same period last year. This decrease was
primarily attributable to the price increases reflected in
revenues, which did not impact commissionable base revenues. Sales
and marketing expense decreased by $113,000 to $10,537,000 from
$10,650,000 for the same period last year. General and
administrative expense decreased 9.2% to $14,957,000 from
$16,479,000 for the same period last year primarily due to a
benefit of $4,076,000 from the contingent liability revaluation for
the nine months ended September 30, 2018 compared to a benefit of
$1,020,000 for the same period last year. The revaluation in the
current year included a $2,200,000 adjustment to our contingent
liability in the current quarter related to one of our acquisitions
due to a substantial decrease in projected revenues and a
$1,246,000 benefit in the second quarter of the current year as a
result of eliminating the contingent liability related to an
acquisition due to breach of the asset purchase agreement by the
seller. Legal expense, IT related costs and workers compensation
expense also decreased for the nine months ended September 30,
2018. These decreases in general and administrative expense were
offset by increases in depreciation and amortization costs,
investor relations, stock-based compensation, accounting costs and
increases in costs related to operations in Russia, Mexico, Taiwan,
Colombia and New Zealand.
Operating loss decreased by $4,164,000 to an operating loss of
$729,000 for the nine months ended September 30, 2018 as compared
to an operating loss of $4,893,000 for the same period last
year.
Total other expense increased by $6,657,000 to $10,384,000 as
compared to $3,727,000 for the same period last year. Net
interest expense increased by $461,000 to $4,668,000 compared to
$4,207,000 for the same period last year. Change in fair value
of derivative liabilities increased by $5,422,000 to $4,634,000
expense compared to a benefit of $788,000 for the same period last
year. Various factors are considered in the pricing models we
use to value the warrants including our current stock price, the
remaining life of the warrants, the volatility of our stock price,
and the risk-free interest rate. The increase in the change in fair
value of the warrant derivative was primarily due to the increase
in the Company’s stock price. We recorded a non-cash
extinguishment loss on debt of $1,082,000 for the nine months ended
September 30, 2018 as a result of the triggering of the automatic
conversion of the 2017 Notes associated with our July 2017 Private
Placement to common stock.
We reported a net loss of $11,332,000 for the nine months ended
September 30, 2018, as compared to a net loss of $5,857,000 for the
same period last year, as a result of the increase in other expense
discussed above, offset by increases in gross profit and decreases
in operating expense. In addition, we recorded an income tax
expense of $219,000 for the nine months ended September 30, 2018 as
compared to an income tax benefit of $2,763,000 for the same period
last year.
Adjusted EBITDA
EBITDA (earnings before interest, income taxes, depreciation and
amortization) as adjusted to remove the effect of stock based
compensation expense, the loss on impairment of intangible assets,
the non-cash loss on extinguishment of debt and the change in the
fair value of the warrant derivative or "Adjusted EBITDA,"
increased to $6,393,000 for the nine months ended September 30,
2018 compared to a negative $851,000 for the same period last year.
A reconciliation of Adjusted EBITDA to net loss is set forth
below.
Conference Call Information
Management will host a conference call today at 1:00 PM Eastern
Standard Time (10:00 AM Pacific Standard Time), to discuss the
Company's third quarter financial results, for the quarter ended
September 30, 2018. All interested parties can attend the event by
clicking https://InstantTeleseminar.com/Events/111640440
fifteen minutes prior to the start of the call, or by dialing 206
402 0100 and entering the access code 634174# at least five minutes
prior to the start of the call. International and alternative
numbers are available at https://InstantTeleseminar.com/Local/?eventid=111640440
The
conference call will be recorded and available for replay shortly
after the conclusion of the call. An archived replay of the call
will be available for approximately 3 months on the Company’s
newly launched Investor Relations website: https://ygyi.com/
Non-GAAP Financial Measure - Adjusted EBITDA
This
news release includes information on Adjusted EBITDA, which is a
non-GAAP financial measure as defined by SEC Regulation
G.
Management
believes that Adjusted EBITDA, when viewed with our results under
GAAP and the accompanying reconciliations, provides useful
information about our period-over-period growth. Adjusted EBITDA is
presented because management believes it provides additional
information with respect to the performance of our fundamental
business activities and is also frequently used by securities
analysts, investors and other interested parties in the evaluation
of comparable companies. We also rely on Adjusted EBITDA as a
primary measure to review and assess the operating performance of
our Company and our management team.
Adjusted
EBITDA is a non-GAAP financial measure. We calculate adjusted
EBITDA by taking net income, and adding back the expenses related
to interest, income taxes, depreciation, amortization, stock based
compensation expense, loss on impairment of intangible assets, the
non-cash loss on extinguishment of debt and the change in the
fair value of the warrant derivative, as each of those elements are
calculated in accordance with GAAP. Adjusted EBITDA should not be
construed as a substitute for net income (loss) (as determined in
accordance with GAAP) for the purpose of analyzing our operating
performance or financial position, as Adjusted EBITDA is not
defined by GAAP. A reconciliation of Adjusted EBITDA to net loss is
provided in the tables at the end of this press
release.
About Youngevity International, Inc.
Youngevity International, Inc.
( NASDAQ : YGYI ),
is a leading omni-direct lifestyle company -- offering a hybrid of
the direct selling business model, that also offers e-commerce and
the power of social selling. Assembling a virtual Main Street
of products and services under one corporate entity, Youngevity
offers products from the six top selling retail categories:
health/nutrition, home/family, food/beverage (including coffee),
spa/beauty, apparel/jewelry, as well as innovative
services. The Company was formed in the course of the summer
2011 merger of Youngevity Essential Life Sciences with
Javalution® Coffee Company (now part of the company's food and
beverage division). For investor information, please
visit YGYI.com. Be
sure to like us on Facebook and
follow us on Twitter.
Safe Harbor
Statement
This
release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In some
cases, forward-looking statements can be identified by terminology
such as "may," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates," and
similar expressions, and includes statements such as seeing a
positive trend toward our stated goal of improving operating
profits and Adjusted EBITDA in 2018, focusing the balance of this
year on improving our balance sheet, driving international growth,
and executing the significant green coffee contract to greatly
impact the performance of the coffee segment in 2019. These
forward-looking statements are based on management's expectations
and assumptions as of the date of this press release and are
subject to a number of risks and uncertainties, many of which are
difficult to predict that could cause actual results to differ
materially from current expectations and assumptions from those set
forth or implied by any forward-looking statements. Important
factors that could cause actual results to differ materially from
current expectations include, among others, our ability to improve
operating profits and Adjusted EBITDA in 2018, our ability to
improve our balance sheet, drive international growth, and position
the coffee segment to execute its significant green coffee contract
greatly impacting the performance of the coffee segment in 2019,
our ability to continue our coffee segment growth, our ability to
leverage our platform and global infrastructure to drive organic
growth, our ability to improve our profitability, expand our
liquidity, and strengthen our balance sheet, our ability to
continue to maintain compliance with the NASDAQ requirements, the
acceptance of the omni-direct approach by our customers, our
ability to expand our distribution, our ability to add additional
products (whether developed internally or through acquisitions),
our ability to continue our financial performance, and the other
factors discussed in our Annual Report on Form 10-K and our
subsequent filings with the SEC, including subsequent periodic
reports on Forms 10-Q and 8-K. The information in this release is
provided only as of the date of this release, and we undertake no
obligation to update any forward-looking statements contained in
this release on account of new information, future events, or
otherwise, except as required by law.
Table
Follows
Youngevity International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In
thousands)
(Unaudited)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
|
Revenues
|
$39,082
|
$44,395
|
$126,331
|
$124,655
|
|
Cost
of revenues
|
15,370
|
18,631
|
52,225
|
52,923
|
|
Gross
profit
|
23,712
|
25,764
|
74,106
|
71,732
|
|
Operating
expenses
|
|
|
|
|
|
Distributor
compensation
|
15,076
|
17,391
|
47,141
|
49,496
|
|
Sales
and marketing
|
3,962
|
4,074
|
10,537
|
10,650
|
|
General
and administrative
|
3,880
|
6,116
|
14,957
|
16,479
|
|
Loss
on impairment of intangible assets
|
2,200
|
-
|
2,200
|
-
|
|
Total
operating expenses
|
25,118
|
27,581
|
74,835
|
76,625
|
|
Operating
loss
|
(1,406)
|
(1,817)
|
(729)
|
(4,893)
|
|
Change
in fair value of warrant derivative liability
|
(5,538)
|
1,519
|
(4,634)
|
788
|
|
Interest
expense, net
|
(1,407)
|
(1,752)
|
(4,668)
|
(4,207)
|
|
Extinguishment
loss on debt
|
-
|
(308)
|
(1,082)
|
(308)
|
|
Total
other expense
|
(6,945)
|
(541)
|
(10,384)
|
(3,727)
|
|
Loss
before income taxes
|
(8,351)
|
(2,358)
|
(11,113)
|
(8,620)
|
|
Income
tax provision (benefit)
|
59
|
(1,290)
|
219
|
(2,763)
|
|
Net
loss
|
(8,410)
|
(1,068)
|
(11,332)
|
(5,857)
|
|
Preferred
stock dividends
|
(92)
|
(3)
|
(137)
|
(9)
|
|
Accretion
of discount from beneficial conversion feature on preferred
stock
|
(1,386)
|
-
|
(1,386)
|
-
|
|
Net
loss attributable to common stockholders
|
$(9,888)
|
$(1,071)
|
$(12,855)
|
$(5,866)
|
|
|
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.46)
|
$(0.05)
|
$(0.61)
|
$(0.30)
|
|
|
|
|
|
|
|
Weighted
average shares outstanding, basic & diluted
|
21,686,085
|
19,678,577
|
20,986,151
|
19,655,312
|
Reconciliation of Non-GAAP Measure
Adjusted EBITDA to Net (Loss) Income
(In thousands - unaudited)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
Net
loss
|
$(8,410)
|
$(1,068)
|
$(11,332)
|
$(5,857)
|
|
Add:
|
|
|
|
|
|
Interest,
net
|
1,407
|
1,752
|
4,668
|
4,207
|
|
Income
taxes (benefit) provision
|
59
|
(1,290)
|
219
|
(2,763)
|
|
Depreciation
|
463
|
419
|
1,365
|
1,183
|
|
Amortization
|
724
|
712
|
2,416
|
2,047
|
|
EBITDA
|
(5,757)
|
525
|
(2,664)
|
(1,183)
|
|
Add:
|
|
|
|
|
|
Stock
based compensation - stock awards and warrant issuance
|
470
|
327
|
922
|
812
|
|
Stock
awards for advisory services
|
219
|
-
|
219
|
-
|
|
Loss
on impairment of intangible assets
|
2,200
|
-
|
2,200
|
-
|
|
Loss
on extinguishment of debt
|
-
|
308
|
1,082
|
308
|
|
Change
in the fair value of warrant derivative
|
5,538
|
(1,519)
|
4,634
|
(788)
|
|
Adjusted
EBITDA
|
$2,670
|
$(359)
|
$6,393
|
$(851)
|
Contacts:
Youngevity International, Inc.
Dave
Briskie
President
and Chief Financial Officer
1 800
982 3189 X6500
Investor Relations
YGYI
investor relations
800.504.8650
investors@ygyi.com
Media Relations
Trendlogic
PR
800.992.6299
contact@trendlogicpr.com