Lifevantage Corp
For the period ended Sep 30, 2024. Filed Oct 29, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 29, 2024
LFVN$5.22+3.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0000849146-24-000047
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-29.
0000849146-24-000121
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 67 current paragraphs.
36 unchanged; 28 reworded; 2 added; 13 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
We sell our products both individually and in stacks. A stack consists of multiple products bundled together that are designed to achieve a specific result. In fiscal year 2024, our stack strategy evolved with a focus on the brand message of Activation with three stacks that tell the unique LifeVantage Activation story from an inside-out approach. This builds upon the synergistic benefits that were demonstrated in fiscal year 2023 with our Healthy Glow Essentials stack. The Inside-Out Activation Duo features Nrf2 Synergizer® and TrueScience® TrueRenew Daily Firming Complex. This duo activates antioxidants for good health on the inside and a cleaner, kinder retinol alternative for skin that looks and feels healthy and youthful on the outside. The LifeVantage Activation Essentials Stack contains Nrf2 Synergizer® TrueScience® Liquid Collagen, and TrueScience® TrueRenew Daily Firming Complex. Finally our Healthy Glow + Activated Skin Care Collection contains Nrf2 Synergizer®, TrueScience® Liquid Collagen, and the full Activated Skin Care Collection. We continue to offer other popular packs such as the Vitality Stack (Protandim® NRF1 Synergizer®, Protandim® Nrf2 Synergizer®, LifeVantage® Omega+ and LifeVantage® ProBio), the Ultimate Stack (Vitality Stack + Protandim® NAD Synergizer® and PhysIQ Prebiotic), and the Protandim® Tri-Synergizer™ (Protandim® NRF1 Synergizer®, Protandim® Nrf2 Synergizer®, and Protandim® NAD Synergizer®).
Current report
Income Tax Expense. We recognized income tax expense of $0.8 million for the three months ended September 30, 2024, as compared to $0.2 million for the three months ended September 30, 2023. The effective tax rate for the three months ended September 30, 2024 was 29.2% compared to 24.1%for the three months ended September 30, 2023.
Removed paragraphs (13)
Previous report
COVID-19 Influence on Business Operations and Work Environment
Previous report
We maintain both virtual and in person business operations in hybrid form, which started in 2020 as a result of the COVID-19 pandemic. We have continued to provide successful virtual events and trainings for our independent consultants and have been successful in conducting day to day business operations both in person, and over virtual platforms. During the COVID-19 pandemic, we implemented and continue to operate, a hybrid model with our employees working from home a few days a week and in the office a few days a week. We believe that this has worked well for employee productivity. We remain focused on being digital first and committed to increasing our investments in digital technologies and tools for independent consultants and employees to function effectively in the current hybrid working environment.
Previous report
We sell our products both individually and in stacks. A stack consists of multiple products bundled together that are designed to achieve a specific result. The Vitality Stack includes four of our nutrigenomics products — Protandim® NRF1 Synergizer®, Protandim®Nrf2 Synergizer®, LifeVantage® Omega+ and LifeVantage®ProBio. This product stack was designed to provide a foundation for wellness, supporting healthy organs, including the brain, heart, eyes, and other vitals. With the Ultimate Stack, we added Protandim® NAD Synergizer® and PhysIQ™ Prebiotic to our Vitality Stack to support gut health and increase sirtuin activity, supporting increased health, focus, energy, mental clarity and mood. The Protandim® Tri-Synergizer® consists of our Protandim® NRF1 Synergizer®, Protandim® Nrf2 Synergizer® and Protandim® NAD Synergizer®, and was designed to effectively and synergistically reduce oxidative stress, support mitochondria function, increase sirtuin activity, and target cell signaling pathways to fight the effects of aging. We also offer stacks that directly support the following consumer needs: immune support, heart health, energy, well-being, eye health, cognition and memory, metabolism, gut health, skin care, and hair care.
Previous report
Three and Nine Months Ended March 31, 2024 and 2023
Previous report
Income Tax Expense. We recognized income tax expense of $0.3 million and $7,000 for the three and nine months ended March 31, 2024, respectively, as compared to income tax expense of $0.6 million and $0.9 million for the three and nine months ended March 31, 2023, respectively.
Previous report
Credit Facility
Previous report
On March 30, 2016, we entered into a loan agreement (the "2016 Loan Agreement") and a security agreement (the "Security Agreement"). The 2016 Loan Agreement provides for a term loan in an aggregate principal amount of$10.0 million (the "2016 Term Loan") and a revolving loan facility in an aggregate principal amount not to exceed$2.0 million (the "2016 Revolving Loan," and collectively with the 2016 Term Loan, the 2016 Loan Agreement and the Security Agreement, the "2016 Credit Facility" and together with the amendments described below, the "Credit Facility"). During the fiscal year ended June 30, 2020, we repaid, in full, the balance of the 2016 Term Loan.
Previous report
On May 4, 2018 and February 1, 2019, we entered into loan modification agreements (“Amendment No. 1” and “Amendment No. 2”, respectively). These loan modification agreements amended certain financial covenants and the available borrowing amount under the 2016 Revolving Loan.
Previous report
On April 1, 2021, we entered into a loan modification agreement ("Amendment No. 3"), which further amended the Credit Facility, as previously amended, to provide for an available borrowing amount of$5.0 million, a revised maturity date from March 31, 2021 to March 31, 2024, and a modified variable interest rate based on the one-month United States Treasury Rate, plus a margin of 3.00%, with an interest rate floor of 4.00%. Amendment No. 3 also revised the debt (total liabilities) to tangible net worth ratio (as defined in Amendment No. 3) covenant to require that the company maintain this ratio not in excess of 2.00 to 1.00, measured as of the end of each fiscal quarter, and revised the definition and calculation of the minimum fixed charge coverage ratio (as defined in Amendment No. 3). There were no other changes to the minimum fixed charge coverage ratio of 1.10 to 1.00 or the minimum working capital of$6.0 million as set forth in previous amendments.
Previous report
We entered into a loan modification agreement ("Amendment No. 4"), effective September 30, 2022, which further amended the Credit Facility. Amendment No. 4 revised the calculation of the minimum fixed charge coverage ratio (as defined in Amendment No. 4) and allowed us to declare and pay dividends, up to $500,000 per quarter, through September 30, 2023. There were no other changes to the covenants or revolving loan facility as set forth in Amendment No. 3.
Previous report
On August 28, 2023, we received approval, without modifying Amendment No. 4, to declare and pay a one-time cash dividend of $0.40 per share of common stock, to be paid on September 22, 2023. We also received approval to declare and pay dividends, up to $750,000 per quarter, through September 30, 2024.
Previous report
On March 31, 2024, the Credit Facility reached the maturity date and no further loan modifications were entered into. As of March 31, 2024, there was no balance outstanding on this Credit Facility.
Previous report
During thethree and nine months ended March 31, 2024 we recognized expenses of approximately $0.4 million and $0.7 million, respectively, related to obsolete and slow-moving inventory. During thethree and nine months ended March 31, 2023 we recognized expenses of approximately $0.3 million and $0.7 million, respectively, related to obsolete and slow-moving inventory.
Reworded paragraphs (28)
Previous wording
LifeVantage Corporation (the “Company,”, “we,” “us,” or “our”) is a company focused on nutrigenomics, the study of how nutrition and naturally occurring compounds affect human genes to support good health. We are dedicated to helping people achieve their health, wellness and financial goals. We provide quality, scientifically validated products to customers and independent consultants aswell as a financially rewarding commission-based direct sales opportunity to our independent consultants. We engage in the identification, research, development, formulation and sale of advanced nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, skin and hair care, bath & body, and targeted relief products. We currently sell our products to customers and independent consultants in two geographic regions that we have classified as the Americas region and the Asia/Pacific & Europe region.
Current wording
LifeVantage Corporation (the “Company,” “we,” “us,” or “our”) is a company focused on nutrigenomics, the study of how nutrition and naturally occurring compounds affect human genes to support good health. We are dedicated to helping people achieve their health, wellness and financial goals. We provide quality, scientifically-validated products to customers and independent consultants aswell as a financially rewarding commission-based direct sales opportunity to our independent consultants. We engage in the identification, research, development, formulation and sale of advanced nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, and skin and hair care products. We currently sell our products to customers and independent consultants in two geographic regions that we have classified as the Americas region and the Asia/Pacific & Europe region.
Previous wording
•Our products, including our flagship Protandim® family of scientifically validated dietary supplements, LifeVantage® Omega+, ProBio, IC Bright®, Daily Wellness, Rise AM, Reset PM, and D3+ dietary supplements, our line of Nrf2 enhanced TrueScience® skin, hair, bath & body, and targeted relief products, Petandim®, our companion pet supplement formulated to combat oxidative stress in dogs, Axio®, our nootropic energy drink mixes, and PhysIQ™, our smart weight management system;
Current wording
•Our products, including our flagship Protandim® family of scientifically validated dietary supplements, LifeVantage® Omega+, ProBio, IC Bright®, Rise AM, Reset PM, Daily Wellness, D3+, and PhysIQ Fat Burn and Prebiotic dietary supplements, our line of TrueScience® skin and hair care products and Liquid Collagen, Petandim®, our companion pet supplement formulated to combat oxidative stress in dogs, and AXIO®, our nootropic energy drink mixes;
Previous wording
As a result, it is vital to our success that we leverage our product development resources to develop and introduce compelling and innovative products and provide opportunities for our independent consultants to sell these products in a variety of markets. We sell our products in the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany, Taiwan, Austria, Spain, Ireland, Belgium, New Zealand, Singapore, and the Philippines. We sold our products in China through a China approved cross-border e-commerce business model until March 15, 2023, at which time we closed our e-commerce business in China. In addition, we sell our products in a number of countries for personal consumption only. Entering a new market requires a considerable amount of time, resources and continued support. If we are unable to properly support an existing or new market, our revenue growth may be negatively impacted.
Current wording
As a result, it is vital to our success that we leverage our product development resources to develop and introduce compelling and innovative products and provide opportunities for our independent consultants to sell these products in a variety of markets. We sell our products in the United States, Mexico, Japan, Australia, Hong Kong, Canada, Thailand, the United Kingdom, the Netherlands, Germany, Taiwan, Austria, Spain, Ireland, Belgium, New Zealand, Singapore, and the Philippines. In addition, we sell our products in a number of countries for personal consumption only. Entering a new market requires a considerable amount of time, resources and continued support. If we are unable to properly support an existing or new market, our revenue growth may be negatively impacted.
Previous wording
Our products are the Protandim® line of scientifically-validated dietary supplements, LifeVantage® Omega+, ProBio, IC Bright®, Rise AM, Reset PM, D3+ and Daily Wellness dietary supplements, TrueScience®, our line of skin, bath & body, targeted relief, and hair care products, Petandim®, our companion pet supplement formulated to combat oxidative stress in dogs, AXIO®, our nootropic energy drink mixes, and PhysIQ™ our smart weight management system. The Protandim® product line includes Protandim® NRF1 Synergizer®, Protandim® Nrf2 Synergizer®, and Protandim® NAD Synergizer®. The Protandim® NRF1 Synergizer® is formulated to increase cellular energy and performance by boosting mitochondria production to improve cellular repair and slow cellular aging. The Protandim® Nrf2 Synergizer® contains a proprietary blend of ingredients and has been shown to combat oxidative stress and enhance energy production by increasing the body’s natural antioxidant protection at the genetic level, inducing the production of naturally-occurring protective antioxidant enzymes, including superoxide dismutase, catalase, and glutathione synthase. The Protandim® NAD Synergizer® was specifically formulated to target cell signaling pathways involved in the synthesis and recycling of a specific molecule called NAD (nicotinamide adenine dinucleotide), and it has been shown to double sirtuin activity, supporting increased health, focus, energy, mental clarity and mood. Use of the three Protandim® products together, marketed as the Protandim® Tri-Synergizer®, has been shown to produce synergistic benefits greater than using the single products on their own. LifeVantage® Omega+ is a dietary supplement that combines DHA and EPA Omega-3 fatty acids, omega-7 fatty acids, and vitamin D3 to support cognitive health, cardiovascular health, skin health, and the immune system. LifeVantage® ProBio is a dietary supplement designed to support optimal digestion and immune system function. LifeVantage® Daily Wellness is a dietary supplement designed to support immune health. IC Bright® is a dietary supplement to help support eye and brain health, reduce eye fatigue and strain, support cognitive functions and may help support normal sleep patterns. Our Nrf2 enhanced TrueScience® line of anti-aging skin, hair, and bath & body products includes TrueScience® Perfecting Lotion, TrueScience® TrueRenew Daily Firming Complex, TrueScience® TruePout Advanced Lip Duo, TrueScience® TrueClean Refining Cleanser, TrueScience® TrueLift Illuminating Eye Cream, TrueScience® TrueHydrate Brightening Moisturizer, TrueScience® Hand Cream, TrueScience® TrueProtect Daily Mineral Sunstick, TrueScience® Invigorating Shampoo, TrueScience® Nourishing Conditioner, TrueScience® Scalp Serum, and TrueScience® Liquid Collagen. TrueScience® Liquid Collagen activates, replenishes, and maintains collagen to support firmness and elasticity from within. Petandim® is a supplement specially formulated to combat oxidative stress in dogs …
Excerpt shortened here; the source contains the full paragraph.
Current wording
Our products are the Protandim® line of scientifically validated dietary supplements, LifeVantage® Omega+, ProBio, IC Bright®, Rise AM, Reset PM, D3+, Daily Wellness, and PhysIQ Fat Burn and Prebiotic dietary supplements, TrueScience®, our line of skin and hair care products and Liquid Collagen, Petandim®, our companion pet supplement formulated to combat oxidative stress in dogs, and AXIO®, our nootropic energy drink mixes. The Protandim® product line includes Protandim® NRF1 Synergizer®, Protandim® Nrf2 Synergizer®, and Protandim® NAD Synergizer®. The Protandim® NRF1 Synergizer® is formulated to increase cellular energy and performance by boosting mitochondria production to improve cellular repair and slow cellular aging. The Protandim® Nrf2 Synergizer® contains a proprietary blend of ingredients and has been shown to combat oxidative stress and enhance energy production by increasing the body’s natural antioxidant protection at the genetic level, inducing the production of naturally occurring protective antioxidant enzymes, including superoxide dismutase, catalase, and glutathione synthase. The Protandim® NAD Synergizer® was specifically formulated to target cell signaling pathways involved in the synthesis and recycling of a specific molecule called NAD (nicotinamide adenine dinucleotide), and it has been shown to double sirtuin activity, supporting increased health, focus, energy, mental clarity, and mood. Use of the three Protandim® products together, marketed as the Protandim® Tri-Synergizer®, has been shown to produce synergistic benefits greater than using the single products on their own. LifeVantage® Omega+ is a dietary supplement that combines DHA and EPA Omega-3 fatty acids, omega-7 fatty acids, and vitamin D3 to support cognitive health, cardiovascular health, skin health, and the immune system. LifeVantage® ProBio is a dietary supplement designed to support optimal digestion and immune system function. LifeVantage® Daily Wellness is a dietary supplement designed to support immune health. IC Bright® is a dietary supplement to help support eye and brain health, reduce eye fatigue and strain, support cognitive functions, and may help support normal sleep patterns. PhysIQ Fat Burn is a dietary supplement designed to support weight management, and PhysIQ Prebiotic is a dietary supplement designed to support a healthy digestive tract. Our Nrf2 enhanced TrueScience® line of anti-aging skin and hair care products includes TrueScience® TrueClean Refining Cleanser, TrueScience® TrueRenew Daily Firming Complex, TrueScience® TrueLift Illuminating Eye Cream, TrueScience® TrueHydrate Brightening Moisturizer, TrueScience® TrueTone Perfecting Lotion, TrueScience® TrueProtect Daily Mineral Sunstick SPF 30, TrueScience® Perfecting Lotion, TrueScience® Hand Cream, TrueScience® Invigorating Shampoo, TrueScience® Nourishing Conditioner, TrueScience® Scalp Serum, and TrueScience® Liquid Collagen. TrueScience® Liquid Collagen activates, replenishes, and …
Excerpt shortened here; the source contains the full paragraph.
Previous wording
Revenue. We generated net revenue of $48.2 million and $53.7 million during the three months ended March 31, 2024 and 2023, respectively. We generated net revenue of $151.2 million and $159.2 million during thenine months ended March 31, 2024 and 2023, respectively. Foreign currency fluctuations negatively impacted our revenue $0.8 million, or 1.5% and $1.3 million, or 0.8%, during the three and nine months ended March 31, 2024, respectively.
Current wording
Revenue. We generated net revenue of $47.2 million and $51.4 million during the three months ended September 30, 2024 and 2023, respectively. Foreign currency fluctuations negatively impacted our revenue by $0.2 million, or 0.4%, during the three months ended September 30, 2024.
Previous wording
Americas. The following table sets forth revenue for the three and nine months ended March 31, 2024 and 2023 for the Americas region (in thousands):
Current wording
Americas. The following table sets forth revenue for the three months ended September 30, 2024 and 2023 for the Americas region (in thousands):
Previous wording
Revenue in the Americas region for the three and nine months ended March 31, 2024 decreased $2.3 million, or 5.9%, and $0.8 million, or 0.7%, respectively, from the prior year periods. Total Active Accounts decreased 13.9% in the region compared to the prior year period. The average revenue per account increased due to changes in our product sales mix, driven primarily by our new TrueScience®Liquid Collagen product. Total TrueScience®Liquid Collagen related revenue, including the product when sold as part of a bundle, was approximately $9.3 million and $29.7 million for the three and nine months ended March 31, 2024, respectively, compared to approximately $9.9 million and $26.3 million in the prior year periods, respectively.
Current wording
Revenue in the Americas region for the three months ended September 30, 2024 decreased $1.6 million, or 4.2%, from the prior year period. Total Active Accounts decreased 6.1% in the region compared to the prior year period. The average revenue per account increased due to changes in our product sales mix and increased shipping charges. Revenue related to our TrueScience®Liquid Collagen product, including the product when sold as part of a bundle, declined slightly to approximately $9.7 million for the three months ended September 30, 2024 compared to approximately $10.0 million in the prior year period.
Previous wording
Asia/Pacific & Europe. The following table sets forth revenue for the three and nine months ended March 31, 2024 and 2023 for the Asia/Pacific & Europe region and its principal markets (in thousands):
Current wording
Asia/Pacific & Europe. The following table sets forth revenue for the three months ended September 30, 2024 and 2023 for the Asia/Pacific & Europe region and its principal markets (in thousands):
Previous wording
Revenue in the Asia/Pacific & Europe region decreased $3.2 million, or 22.4% and $7.1 million, or 16.4%, for the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods. Total Active Accounts in the region decreased 17.1% compared to the prior year period. Decreases in total Active Accounts, the closure of our e-commerce business in China, along with negative impacts from foreign currency exchange rate fluctuations, have contributed to the overall decrease in revenue within the Asia/Pacific & Europe region.
Current wording
Revenue in the Asia/Pacific & Europe region decreased $2.5 million, or 19.7%, for the three months ended September 30, 2024, as compared to the prior year period. Total Active Accounts in the region decreased 20.5% compared to the prior year period. Decreases in total Active Accounts, along with negative impacts from foreign currency exchange rate fluctuations, have contributed to the overall decrease in revenue within the Asia/Pacific & Europe region.
Previous wording
Overall, revenue in the Asia/Pacific & Europe region was negatively impacted by foreign currency exchange rate fluctuations in the amount of approximately $0.9 million, or 6.3% and $1.5 million, or 3.5%, during the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods, mainly due to currency fluctuations in Japan. Revenue in Japan was negatively impacted by foreign exchange rate fluctuations in the amount of approximately $0.8 million, or 9.3% and $1.4 million, or 6.0%, during the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods. On a constant currency basis, revenue in Japan decreased 14.5% and 5.2% for the three and nine months ended March 31, 2024, respectively, as compared to the prior year periods. The decrease in revenue on a constant currency basis in Japan during nine months ended March 31, 2024 was due to our Active Accounts in that region increasing their purchases in September 2022, ahead of price increases that went into effect on October 1, 2022. The decrease was offset by increases in the average revenue per account, primarily from TrueScience®Liquid Collagen related revenue which started selling in Japan in March 2023. Revenue related to TrueScience®Liquid Collagen was approximately $0.8 million and $3.7 million for the three and nine months ended March 31, 2024, respectively.
Current wording
Overall, revenue in the Asia/Pacific & Europe region was negatively impacted by foreign currency exchange rate fluctuations in the amount of approximately $0.1 million, or 1.0%, during the three months ended September 30, 2024, as compared to the prior year period, mainly due to currency fluctuations in Japan. Revenue in Japan was negatively impacted by foreign exchange rate fluctuations in the amount of approximately $0.2 million, or 2.3%, during the three months ended September 30, 2024, as compared to the prior year period. Negative foreign exchange rate fluctuations in Japan were partially offset by gains in other markets. On a constant currency basis, revenue in Japan decreased 18.2% for the three months ended September 30, 2024, as compared to the prior year period. The decrease in revenue on a constant currency basis in Japan during three months ended September 30, 2024 was due to a 13.8% decrease in our Active Accounts in that region. The decrease was coupled with a decrease in the average revenue per account, primarily from a decrease in TrueScience®Liquid Collagen related revenue. Revenue related to TrueScience®Liquid Collagen was approximately $0.6 million for the three months ended September 30, 2024 compared to $1.1 million in the prior year period.
Previous wording
Globally, our sales and marketing efforts continue to be directed toward strengthening our core business through our fiscal year initiatives and building our worldwide revenue. In March 2024, we launched our TrueScience® TrueClean Refining Cleanser, TrueLift Illuminating Eye Cream, and TrueHydrate Brightening Moisturizer, which, together with the launch of TrueRenew Daily Firming Complex in October 2023, resulted in the completion of the launch of our new TrueScience® Activated Skin Care Collection. We also launched TrueScience®TrueProtect Daily Mineral Sunstick. During fiscal year 2024, we launched our TrueScience®Liquid Collagen in our Philippines, Canada, Mexico, and Europe markets. Revenue related to these products has offset decreases in our Active Accounts in these regions by increasing our overall average revenue per account. We have seen and continue to expect that these product launches will help drive revenue growth globally through increased average order size and increased ability to attract and retain new independent consultants and customers with a compelling product lineup.
Current wording
Globally, our sales and marketing efforts continue to be directed toward strengthening our core business through our fiscal year initiatives and building our worldwide sales. In October 2023, we relaunched our TrueScience® Skin Care line with entirely new branding premium packaging, and improved formulas. Rebranded as the TrueScience® Activated Skin Care Collection, this line includes TrueClean Refining Cleanser, TrueRenew Daily Firming Complex, TrueLift Illuminating Eye Cream, and TrueHydrate Brightening Moisturizer. This was a global launch in all markets. In the United States, we also launched TrueScience® TrueProtect Daily Mineral Sunstick, a broad-spectrum, 30 SPF mineral sunscreen that addresses the appearance of sun-induced hyperpigmentation and wrinkles as it protects against future damage. In October 2024, we launched our MindBody GLP-1 System TMin the United States. This is a dual-product solution designed to balance hunger hormones, build healthier habits, and help individuals reach and maintain their ideal weight. We will continue the refinement and expansion of our product offerings internationally during fiscal year 2025 and beyond. We expect this expansion will continue to drive revenue growth globally through increased average order size and increased ability to attract and retain new independent consultants and customers with a compelling product lineup.
Previous wording
Cost of Sales. Cost of sales were $10.2 million and $10.6 million for the three months ended March 31, 2024 and 2023, respectively, resulting in gross profit percentages of 78.9% and 80.2%, respectively. Cost of sales were $31.4 million and $32.3 million for thenine months ended March 31, 2024 and 2023, respectively, resulting in gross profit percentages of 79.2% and 79.7%, respectively. The increase in cost of sales as a percentage of revenue is primarily due to a shift in product mix, changes in raw material and manufacturing related costs, shipping to customer expenses, and warehouse fulfillment expenses during three and nine months ended March 31, 2024.
Current wording
Cost of Sales. Cost of sales were $9.5 million and $10.2 million for the three months ended September 30, 2024 and 2023, respectively, resulting in gross profit percentages of 79.9% and 80.2%, respectively. The increase in cost of sales as a percentage of revenue is primarily due to a shift in product mix, changes in raw material and manufacturing related costs, shipping to customer expenses, and warehouse fulfillment expenses during the three months ended September 30, 2024.
Previous wording
Commissions and Incentives. Commissions and incentives expenses during the three months ended March 31, 2024 were $19.7 million or 40.9% of revenue as compared to $23.8 million or 44.3% of revenue for the three months ended March 31, 2023. Commissions and incentives expenses during thenine months ended March 31, 2024 were $63.9 million or 42.3% of revenue as compared to $71.2 million or 44.7% of revenue for thenine months ended March 31, 2023. The decrease in commissions and incentives expenses as a percentage of revenue compared to the prior year periods is due to changes in sales mix, timing and magnitude of our various promotional and incentive programs, and decreases in commission expenses as a result of the change to our Evolve Compensation Plan in March 2023 in the United States, Australia, New Zealand, and Japan markets, as well as in Canada, Mexico, and Europe markets in February 2024.
Current wording
Commissions and Incentives. Commissions and incentives expenses during the three months ended September 30, 2024 were $20.3 million, or 43.0%, of revenue as compared to $22.5 million, or 43.8%, of revenue for the three months ended September 30, 2023. The decrease in commissions and incentives expenses as a percentage of revenue compared to the prior year period is due to changes in sales mix and the timing and magnitude of our various promotional and incentive programs.
Previous wording
Commissions and incentives expenses, as a percentage of revenue, may fluctuate in future periods based on ability to hold incentive trips and events and the timing and magnitude of compensation, incentive and promotional programs.
Current wording
Commissions and incentives expenses, as a percentage of revenue, may fluctuate in future periods based on our ability to hold incentive trips and events and the timing and magnitude of compensation, incentive and promotional programs.
Previous wording
Selling, General and Administrative. Selling, general and administrative expenses during the three months ended March 31, 2024 were $16.4 million or 34.0% of revenue as compared to $17.7 million or 33.0% of revenue for the three months ended March 31, 2023. Selling, general and administrative expenses during the nine months ended March 31, 2024 were $54.5 million or 36.0% of revenue as compared to $54.0 million or 33.9% of revenue for the nine months ended March 31, 2023. The increase in selling, general and administrative expenses as a percentage of revenue during the three and nine months ended March 31, 2024 compared to the prior year periods is primarily due to increased proxy contest related expenses. These increases have been partially offset by decreases in event costs, endorsement agreements, employee compensation related expenses, office lease and professional services expenses.
Current wording
Selling, General and Administrative. Selling, general and administrative expenses during the three months ended September 30, 2024 were $14.8 million, or 31.4%, of revenue as compared to $18.0 million, or 35.0%, of revenue for the three months ended September 30, 2023. The decrease in selling, general and administrative expenses as a percentage of revenue during the three months ended September 30, 2024 compared to the prior year period is primarily due to decreased proxy contest related expenses and the termination of our endorsement agreement with Real Salt Lake in December 2023.
Previous wording
Total Other Income (Expense). During thethree months ended March 31, 2024 we recognized total net other expense of $13,000 as compared to income of $0.1 million for thethree months ended March 31, 2023. During thenine months ended March 31, 2024 we recognized total net other income of $0.2 million as compared to expense of $0.2 million for thenine months ended March 31, 2023. Total net other income (expense) for the three and nine months ended March 31, 2024 and 2023 consisted primarily of interest income, offset by foreign currency gains and losses.
Current wording
Total Other Income. During thethree months ended September 30, 2024 we recognized total net other income of $8,000 as compared to $0.1 million for thethree months ended September 30, 2023. Total net other income for the three months ended September 30, 2024 and 2023 consisted primarily of interest income, offset by foreign currency gains and losses.
Previous wording
The change in the effective tax rate for the nine months ended March 31, 2024 compared to the prior year period was primarily due to changes in taxable income and the impact of discrete items.
Current wording
The change in the effective tax rate for the three months ended September 30, 2024 compared to the prior year period was primarily due to changes in taxable income and the impact of discrete items.
Previous wording
Our primary liquidity and capital resource requirements are to finance the cost of our planned operating expenses and working capital (principally inventory purchases), fund capital expenditures, and service our debt, which includes any outstanding balances under a credit facility. We have generally relied on cash flow from operations to fund operating activities and we have, at times, incurred long-term debt in order to fund stock repurchases and strategic transactions.
Current wording
Our primary liquidity and capital resource requirements are to finance the cost of our planned operating expenses and working capital (principally inventory purchases), fund capital expenditures, and service our debt, which includes any outstanding balances under our credit facility. We have generally relied on cash flow from operations to fund operating activities and we have, at times, incurred long-term debt in order to fund stock repurchases and strategic transactions.
Previous wording
As of March 31, 2024, our available liquidity was $17.4 million, which consisted of available cash and cash equivalents. This represents a decrease of $4.2 million from the $21.6 million in cash and cash equivalents as of June 30, 2023.
Current wording
As of September 30, 2024, our available liquidity was $14.6 million, which consisted of available cash and cash equivalents. This represents a decrease of $2.3 million from the $16.9 million in cash and cash equivalents as of June 30, 2024.
Previous wording
During the nine months ended March 31, 2024, our net cash provided by operating activities was $9.6 million as compared to $3.1 million during the nine months ended March 31, 2023.
Current wording
During the three months ended September 30, 2024, our net cash used by operating activities was $0.6 million as compared to net cash provided by operating activities of $4.8 million during the three months ended September 30, 2023.
Previous wording
During the nine months ended March 31, 2024, our net cash used in investing activities was $2.0 million, as a result of the purchase of fixed assets. During the nine months ended March 31, 2023, our net cash used in investing activities was $2.6 million, as a result of the purchase of fixed assets.
Current wording
During the three months ended September 30, 2024, our net cash used in investing activities was $0.3 million, as a result of the purchase of fixed assets. During the three months ended September 30, 2023, our net cash used in investing activities was $1.1 million, as a result of the purchase of fixed assets.
Previous wording
Cash used in financing activities during the nine months ended March 31, 2024 was $11.7 million as a result of our payment of cash dividends, repurchases of common stock, and shares purchased as payment of tax withholding upon vesting of equity awards, partially offset by proceeds from stock issued under our employee stock purchase plan. Cash used in financing activities during the nine months ended March 31, 2023 was $1.0 million as a result of our repurchase of common stock, and shares purchased as payment of taxwithholding upon vesting of equity awards, partially offset by proceeds from stock issued under our employee stock purchase plan and stock option exercises.
Current wording
Cash used in financing activities during the three months ended September 30, 2024 was $1.8 million as a result of our payment of cash dividends, repurchases of common stock, and shares purchased as payment of tax withholding upon vesting of equity awards, partially offset by proceeds from stock issued under our employee stock purchase plan. Cash used in financing activities during the three months ended September 30, 2023 was $6.7 million as a result of our payment of cash dividends, which consisted of a special one-time dividend, the repurchase of common stock, and shares purchased as payment of taxwithholding upon vesting of equity awards, partially offset by proceeds from stock issued under our employee stock purchase plan and stock option exercises.
Previous wording
At March 31, 2024 and June 30, 2023, the total amount of our foreign subsidiary cashwas $7.6 millionand $6.2 million, respectively. The federal tax reform legislation that was passed into law during December 2017 enacted a 100% dividend deduction for greater than 10% owned foreign corporations. Therefore, in the future, if needed, we expect to be able to repatriate cash from foreign subsidiaries without paying additional U.S. taxes.
Current wording
At September 30, 2024 and June 30, 2024, the total amount of our foreign subsidiary cashwas $7.2 millionand $7.3 million, respectively. The federal tax reform legislation that was passed into law during December 2017 enacted a 100% dividend deduction for greater than 10% owned foreign corporations. Therefore, in the future, if needed, we expect to be able to repatriate cash from foreign subsidiaries without paying additional U.S. taxes.
Previous wording
At March 31, 2024, we had working capital (current assets minus current liabilities) of $15.3 million, compared to working capital of $24.7 million at June 30, 2023. We believe that our cash and cash equivalents balances and our ongoing cash flow from operations will be sufficient to satisfy our cash requirements for at least the next 12 months. The majority of our historical expenses have been variable in nature and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances and future cash flow from operations are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds, which may not be available on terms that are acceptable to us, or at all. Our 2024 Credit Facility (as defined below), provides for a revolving line of credit in an aggregate principal amount not to exceed $5.0 million. We would also consider realigning our strategic plans including a reduction in capital spending and expenses.
Current wording
At September 30, 2024, we had working capital (current assets minus current liabilities) of $16.7 million, compared to working capital of $15.3 million at June 30, 2024. We believe that our cash and cash equivalents balances and our ongoing cash flow from operations will be sufficient to satisfy our cash requirements for at least the next 12 months. The majority of our historical expenses have been variable in nature and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances and future cash flow from operations are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds, which may not be available on terms that are acceptable to us, or at all. Our 2024 Credit Facility (as defined below), provides for a revolving line of credit in an aggregate principal amount not to exceed $5.0 million. We would also consider realigning our strategic plans including a reduction in capital spending and expenses.
Previous wording
On March 31, 2023, we filed a shelf registration statement on Form S-3 (the “2023 Shelf Registration”) with the SEC that was declared effective on April 6, 2023, which permits us to offer up to $75 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time. Our 2023 Shelf Registration is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include, among other purposes, working capital, capital expenditures, other corporate expenses and acquisitions of assets, licenses, products, technologies or businesses.
Current wording
On March 31, 2023, we filed a shelf registration statement on Form S-3 (the “2023 Shelf Registration”) with the Securities and Exchange Commission (“SEC”) that was declared effective on April 6, 2023, which permits us to offer up to $75 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time. Our 2023 Shelf Registration is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include, among other purposes, working capital, capital expenditures, other corporate expenses and acquisitions of assets, licenses, products, technologies or businesses.
Previous wording
In the event we borrow under the Line of Credit, interest will be payable commencing May 31, 2024, and then on the last day of each month thereafter until payment in full of all principal outstanding under the Line of Credit, with all unpaid principal and interest due on April 12, 2027 (the “Expiration Date”). The Line of Credit will bear interest at a rate per year equal to the sum of (i) the greater of the Term SOFR Daily Floating Rate (as defined in the Loan Agreement) or 0.00%, plus (ii) 2.00%. Amounts under the Line of Credit may be repaid and re-borrowed from time to time until the Expiration Date.
Current wording
In the event we borrow under the Line of Credit, interest will be payable commencing on the last day of each month following such borrowing until payment in full of all principal outstanding under the Line of Credit, with all unpaid principal and interest due on April 12, 2027 (the “Expiration Date”). The Line of Credit will bear interest at a rate per year equal to the sum of (i) the greater of the Term Secured Overnight Financing Rate Daily Floating Rate (as defined in the Loan Agreement) or 0.00%, plus (ii) 2.00%. Amounts under the Line of Credit may be repaid and re-borrowed from time to time until the Expiration Date.
Previous wording
We use the fair value approach to account for stock-based compensation in accordance with current accounting guidance. We recognize compensation costs for awards with performance conditions when we conclude it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each balance sheet date and adjust compensation costs based on our probability assessment. For awards with market-based performance conditions, the cost of the awards is recognized as the requisite service is rendered by the employees, regardless of when, if ever, the market-based performance conditions are satisfied.
Current wording
We use the fair value approach to account for stock-based compensation in accordance with current accounting guidance. We recognize compensation costs for awards with performance conditions when we conclude it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each balance sheet date and adjust compensation costs based on our probability assessment.
Previous wording
We operate in and file income tax returns in the U.S. and numerous foreign jurisdictions with complex tax laws and regulations, which are subject to examination by tax authorities. The complexity of our global structure requires specialized knowledge and judgment in determining the application of tax laws in various jurisdictions. Years open to examination contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions, and tax credits. We account for uncertain tax positions in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
Current wording
We operate in and file income tax returns in the U.S. and numerous foreign jurisdictions with complex tax laws and regulations, which are subject to examination by tax authorities. The complexity of our global structure requires specialized knowledge and judgment in determining the application of tax laws in various jurisdictions. Years open to examination contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions, and tax credits. We account for uncertain tax positions in accordance with Accounting Standards Codification 740, Income Taxes. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Three Months Ended September 30, 2024 and 2023