LifeVantage stock: flexible quarter, new dividend policy (NASDAQ: LFVN)

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Mixed 3Q22 results beat market expectations

Life advantage (NASDAQ:LFVN) reported lackluster third quarter results for the quarter ended March [the company operates on a June fiscal year end] which managed to exceed Street’s expectations. The company published a quarterly report earnings of $0.12 per share, 9.1% higher than the average street expectation of $0.11. This represents a 40% decline in earnings from $0.20 per share in the same period a year earlier. The company reported quarterly sales of $50.0 million, which was in line with analysts’ consensus estimate of $50.1 million, down 3.0% from $51.6 million. the same period last year. The sales decline was driven by the Americas, which fell 8.2% year-over-year, but was partially offset by revenue growth in Asia/Pacific and Europe, which increased by 9.3%. Revenue growth was impacted by international restrictions that hampered the company’s ability to host in-person meetings. Gross profit margin fell 220 basis points year-on-year from 82.9% due to higher inventory obsolescence costs, higher shipping costs and product mix changes. products and geography. Adjusted EBITDA decreased 13.7% year-over-year due to an increase in adjusted SG&A expenses. Adjusted net income and EPS fell 13.9% year-on-year and 8.0% year-on-year, respectively. Adjusted EBITDA was $3.4 million for the third quarter of Fiscal 2022, down 29.2%, compared to $4.8 million for the comparable period of Fiscal 2021.

Commenting on the results, Steve Fife, CEO of LifeVantage, said: “Business levels improved in the third quarter, but remained challenging. We are encouraged by recent trends and continue to expect our continued efforts to transform our business to lead to accelerated sales growth and profits going forward I am pleased with our early progress on key initiatives to strengthen alignment between product development and marketing as well as the evolution of our digital strategy We are advancing our customer-centric narrative with more accurate messaging and proprietary digital tools, improving experiences across the results engagement lifecycle for all stakeholders.”

Valuations and target price

On a P/E basis, the stock is at 6.5x FY06/23 and 5.3x FY06/24 on our EPS estimates of $0.70 and $0.85 respectively. Additionally, the absence of debt and a net cash to market capitalization of 21% provides investors with a safety cushion. Ongoing share buybacks further tell us that the company’s stock is undervalued.

The company is trading at an ex-cash P/E [market cap minus net cash, divided by EPS excluding interest income after tax] by about 4.6x for the current FY06/2023e. So, we multiply 12.4x times $0.70 to arrive at $8.69, then add back net money of $1.31, which brings us to our unchanged price target of $10.00, i.e. 121% increase.

Orientation 2022 reiterated

To reflect third-quarter results, the company lowered its fiscal 2022 guidance. Revenue for fiscal 2022 is now estimated to be between $204 million and $207 million. [previous guidance of $212-$220 million]. Adjusted EBITDA for fiscal 2022 is now expected to be around $15 million [previous guidance of $18-$20 million]. The range of adjusted earnings per share is now estimated between $0.52 and $0.56 [previous guidance of $0.67 to $0.71]. This orientation reflects the current trends of the company.

29% net cash and debt-free balance sheet

LifeVantage has demonstrated its ability to generate strong free cash flow. The company generated $5.2 million of cash from operations in the first nine months of fiscal 2022, compared to $7.9 million in the same period of fiscal 2021. Cash and cash equivalents as of March 31, 2022 were $17.8 million or $1.31 per debt-free share, which is 29% of market capitalization.

Share buybacks and new quarterly dividend policy

During the third quarter, the company spent $1.7 million in cash to repurchase approximately 326,000 common shares at $5.21 per share under its stock repurchase authorization. At the end of the last quarter, there remains $28.1 million available under authorization.

The company announced its first quarterly dividend of $0.03 per common share, which equates to an annualized dividend yield of 2.6%. This decision demonstrates the company’s commitment to increasing shareholder value as well as its confidence in future business prospects.

Steve Fife, CEO of LifeVantage, said, “Based on our strong balance sheet and positive long-term outlook, we have launched a quarterly dividend of $0.03, underscoring our confidence in our business model to drive results. strong and increase shareholder value.

Conclusion

LifeVantage is a company focused on scientifically supported product development in the area of ​​personal and wellness products, with an emphasis on nutrigenomics. We are excited about the company’s ability to generate growth, its strong free cash flow generation and the 21% net cash on its balance sheet. These factors, coupled with cheap valuations and ongoing share buybacks, we believe, make the stock attractive to investors at its current price.

We value LifeVantage shares at 12.4x P/E, arriving at a target price of $10.00. This represents a 121% increase from current stock levels.

About Warren Dockery

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