LifeVantage Corporation (NASDAQ:LFVN)
Q1 2014 Earnings Call
November 7, 2013 4:30 PM ET
John Mills – IR
Doug Robinson – President and CEO
Dave Colbert – CFO
Alec Jaslow – Midtown Partners
Matt Schwarz – Maze Investments
Steven Martin – Slater
Good day, and welcome to today’s LifeVantage First Quarter Fiscal Year 2014 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to your host for today’s call, John Mills of ICR. You may begin.
Thank you. Good afternoon, ladies and gentlemen, and welcome to the LifeVantage Corporation’s fiscal first quarter 2014 conference call. On the call today from LifeVantage are Doug Robinson, President and Chief Executive Officer; and Dave Colbert, Chief Financial Officer.
By now, everyone should have accessed to the earnings release which went out this afternoon at approximately 4:00 pm 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 the 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 management and involve inherent risk and uncertainties, including those identified in the Risk Factors section of LifeVantage’s most recently filed 10-K and 10-Q. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements.
This call also contains time-sensitive information that is accurate only as of the date of this live broadcast November, 7, 2013. LifeVantage assumes no obligation to update any forward-looking projection that may be made in today’s release or call. Based on the number of participants on today’s call, during the Q&A session, we ask that you please limit the number of your questions to three.
And with that, I’d like to turn the call over to the company’s President and CEO, Mr. Doug Robinson. Go ahead, Doug.
Thanks, John, and good afternoon, everyone. On today’s call, I’ll briefly recap our first quarter results and then discuss our progress on the initiatives we have implemented to position our business for long-term success. Our financial results were in line with our expectations.
We generated revenue of $51.3 million, which is similar to the same period last year when factoring in the devaluation of the yen. Excluding the devaluation of the yen we would have achieved revenue growth of approximately 4% compared to the same period last year.
Operating margins improved on a sequential basis and we generated net income of $3.3 million. The metric that we started providing on our last call, is the 90-day retention rate of our preferred customers and distributors. These retention rates were approximately 49% for preferred customers and approximately 53% for distributors as of September 30. We continue to improve our balance sheet and end of the first quarter with more cash on hand as compared to the end of fiscal year 2013. Based on our first quarter results and our outlook for the remainder of the year we are reiterating our fiscal year 2014 annual revenue, operating margin and earnings per share guidance.
On the operational side of our business, we implemented and achieved a tremendous amount in the past few months including the recent launch of My LifeVenture partnering with the leading financial institution to complete the modified Dutch auction for our shares, entering into a new long-term branding opportunity, expanding our geographic reach, continuing to pursue new product development both internally and externally and implementing a U.S. shipping price increase.
We’ve accomplished a tremendous amount of operational initiatives in a short amount of time. However, we’re not claimed to the fact that we have experienced five quarters of consistent revenue levels. We have an intense sense of urgency to implement meaningful programs to get the lift in revenue that we desire and expect. Our distributors and investors also expect this growth. We recognized we’ve been in the network marketing industry just over four years and the industry rewards companies that are growth oriented.
In just a few years we have transformed our company into a $200 million global wellness company with a mission to expand our product offerings with great science-based products. We also offer superior business opportunities for our distributor team.
On our last call I outlined a three key areas of focus for 2014 that we believe will drive revenue growth and improve profitability. These three key initiatives include one, strengthening our distributor and preferred customer culture to promote growth. Two, new product development and three, expanding our reach geographically to new markets.
I’ll take a few moments to discuss our progress on each initiative. First, strengthening our distributor and preferred customer culture to drive growth and retention in the markets we currently operate in. we recently implemented My LifeVenture the significant incentive program for our distributors it rewards them for successfully selling product and progressing in seniority.
Let me describe what the My LifeVenture program is and whether it has been designed to accomplish? This program is intended to fuel a burning desire in a mid-level ranks. Specifically those distributors who are in the 4, 5 and 6 ranks to advance quickly to achieve our Elite Pro 7 status and maintain that rank without slipping back. By elevating to Elite Pro 7 they’re able to achieve freedom, personally, professionally and financially.
This is typically the stage where distributors were able to go full-time with their own business. For those that achieved the Elite Pro 7 rank and hold that rank for 12 consecutive months we reward them with the keys and title a Jeep Wrangler, one of the best symbols of freedom. This program is a market differentiator for us, we’re building a generational company in LifeVantage.
My LifeVenture is designed to create, solidify and differentiate us from the myriad of other network marketing companies both old and new. And simply, this is an investment and our future.
We fully launched My LifeVenture in July in the U.S. and in August in Japan. Early feedback has been positive. Historically, distributors driving for the Elite Pro 7 rank work extremely hard to get there. keep in mind, as I distributor at the rank 4, 5 or 6 sales efforts are usually in a part-time basis while maintaining a full-time job elsewhere. It’s not unusual for distributor who finally ascends to an Elite Pro 7 rank to relax and breathe a sigh of relief and as a result, see their status step back to a Pro 6 and possibly stag your back and forth between Pro 6 and Elite Pro 7 for a period of time. This program in sense tends to stabilize and continue to grow. It drives positive growth behavior. Since the program was launched in July we’re seeing higher stabilization of the Elite Pro 7 ranks. Simply put, we’re not seeing newly ranked Elite Pro 7’s slide back to Pro 6. I’m attributing this to My LifeVenture requirements.
Our competitive, distributor compensation program and our collaborative and entrepreneurial culture is what attracts distributors to our business. We recently released the average income levels our distributors earned by rank. We believe our average commission levels throughout our 10 ranks demonstrated competitive advantage for us and provides a significant recruiting tool for our distributors. This information highlights the early benefits of our compensation plan and it’s now available on our corporate website, I would encourage all of you to review it.
Building upon these great marketing and incentive programs a few weeks ago we probably announced our first major branding sponsorship related to one of the fastest growing sports in the United States we entered into a long-term jersey-front partnership with Real Salt Lake at Major League Soccer. We’re very excited to partner with such a respected professional sports organization.
The partnership will formally go into effect on January 1, 2014 with the LifeVantage logo permanently displayed in the front of the Real Salt Lake jersey beginning next Major League Soccer season. Major League Soccer continues to grow in popularity and now the LifeVantage brand will benefit from high impact exposure in stadiums, on television, in advertising, soccer video games and through player appearances across the United States as well as around the world.
In the U.S. there an estimated 92 million annual viewers of Major League Soccer. Importantly, this isn’t a Salt Lake City or local market deal. This sponsorship reach is beyond Salt Lake City and provides exposure across North America and will provide benefits to our key markets I mean Asia-Pacific region as well.
This sponsorship will be a major component of our marketing and sales strategy by building a brand awareness, strengthening the company’s name and increasing industry credibility. This illustrates our long-term commitment to expanding our brand recognition and supporting our distributor sales efforts through investments such as this.
As you may know, sports teams develop a following from fans but as people and fanatical well identifying with the team on and off the field. They purchased license here to support promoting the team. Our LifeVantage logo will now be included on the [indiscernible] purchases and our brand will be spread internationally with Real Salt Lake fans helping our distributors reach new customers in our domestic and global markets. Our customers and/or employees have a new sense of pride in an invigorating level of excitement around this partnership.
With respect to our second key growth initiative we remain focused on new product development. For several months we’ve been engaged in a national search for New Chief Science Officer. In previous calls and in response to many of your questions on our progress with this important search I’ve said repeatedly we will not sacrifice quality for haste.
We have interviewed embedded a number of highly qualified candidates for this role and are close to finalizing this lengthy search. What’s on Board our new CSO will be joined by our experienced research and product team that is developing new products internally. Further, we are also evaluating external product opportunities that we believe will fit with our mission and message.
In addition to our existing product categories dietary supplements in Skin Care we are expanding our product research in this sports nutrition, healthy weight management and ultra-wellness foods. We will continue to provide appropriate updates on our new product efforts.
Turning to our third initiative. We continue to expand our geographic reach. In December 2012 we launched in Hong Kong, six months later and June of this year we launched Canada and beginning next month we will begin selling our products for personal consumption to individuals and distributors in the Philippines. From our experiences in Japan and Hong Kong, we know that our products and business model resonate well in Asian markets. According to the World Federation of Direct Selling Associations the Philippines is one of the fastest-growing direct selling markets in the world. Our distributors, pre-enrollment sign-ups have exceeded our expectations and we’re excited for the upcoming launch.
Our team is continually evaluating new markets where our products and business model will be successful. We’re also examining how we can be more successful in the markets we currently operate in, for example, as you may recall, we removed Protandim from the Mexican market approximately a year and a half ago due to changes in Mexican laws. We’re now aggressively looking for ways to expand our presence in Mexico through a new product registration to relaunch Protandim to comply with new laws in that country. We performed significant due diligence to ensure that we fully understand the regulatory environment, and other issues. We’re proud of our growing global footprint and look forward to announcing our entrants in the new markets with a regular cadence over the next several years.
Focusing on each of these initiatives and others, will help us continue to evolve as a company and achieve our long-term growth initiatives. While we work on our three primary growth initiatives we’ve also made progress on improving our capital structure. As many of you are aware we entered into a new credit facility on October 18, and completed a modified Dutch auction on October 31, by repurchasing over 16 million shares.
With this our cumulative cash payments returned to shareholders through repurchases has reached $50 million during this calendar year. The $50 million of repurchases accounts to approximately 20 million shares. These repurchases is a part of our larger plan to reduce our overall share count to a target level of approximately 70 million to 80 million shares. With these 2013 repurchasing initiatives our estimated shares outstanding now stands at approximately $102 million.
As I mentioned, we have experienced consistent revenue levels for the past five quarters. We are not satisfied with this. Let me repeat that. We are not satisfied with this performance. We are a growth-oriented company and we haven’t experienced a lift in revenue since the first quarter of fiscal 2013. This is the reason we are aggressively implementing revenue growth initiatives as I just discussed. Again, the reality of the situation is that we are just over four years old in the network marketing industry as a delicate balance between building this company responsibly for the future or being flat in revenue for five quarters. We’re very attentive to the bottom-line but realized we needed to invest in our company in order to ensure its long-term success.
We’re now over $200 million in revenue. We operate in six, soon to be seven countries. We have a target list of additional country launches and product initiatives. And quoted to operate effectively and efficiently we needed to look ahead and invest in our company.
In just a few years we have transformed this company into a global player in health and wellness and to ensure we are positioned successfully achieve our next level of growth, it was necessary to invest in the foundation of our business in fiscal 2013.
To provide some perspective, in fiscal 2012 we were a $126 million company operating with a $40 million revenue infrastructure from the prior year. Investments were necessary in fiscal 2013 to support our business today that exceeds $200 million in revenue. I’m confident and pleased with the level of investments made to-date. We anticipate the future operating expenses will be in line with future revenue growth. As we have and will continue to do going forward, we will closely evaluate expenses and investments into our operations.
So what have we invested in over the past year? First, with respect to strengthening our distributor initiatives we’ve expanded our global distributor compliance. We’ve increased our distributor tool such as adding LifeVantage University. We continually upgraded our marketing materials and as I just discussed we’ve added a key cultural program. We’ve added two Elite academies in our Japanese market and we’ve also upgraded our distributor back-office systems that will enable us to expand our business with more distributors, greatly expanded programs and promotions and yet more countries.
With respect to our product development and operational initiatives we’ve implemented a more robust supply chain and manufacturing planning system including enhancing our quality control processes and team.
We’ve upgraded to a global accounting and ERP system. We’ve augmented our global internal audit controls for financial, operational and technology processes. We’ve created domestic and international corporate tax strategies. We’ve initiated a treasury function in order to manage foreign exchange risk and banking relationships in seven countries and counties.
We have a marketing and sales infrastructure than includes new media strategies. We engaged a third-party to conduct an audit but in turn enriched risk management systems. We’re relocating a research and development lab from Denver to Salt Lake to better facilitate our corporate R&D focus.
We’re also consolidating our Salt Lake City corporate locations from 2 to 1 and we established in office and staff in Tokyo to support our Asia-Pacific regional emphasis. We are constantly striving to have a responsible balance between operational support and profitability.
During the tail end of fiscal 2013 and into the first fiscal quarter of 2014 we reduced our corporate headcount by 25 positions. We believe that our current employee base is sufficient to achieve the results that we are projecting for this year. To be clearer, our management team is constantly evaluating the appropriate balance between fiscal prudence and growth. We’re beginning to achieve operating leverage with these investments as our first fiscal quarter 2014 operating margin has improved compared to the third and fourth quarters of fiscal 2013.
With that I’d like to now turn the call over to Dave Colbert to review our financial results in more detail.
Thank you, Doug, and good afternoon, everyone. As Doug mentioned earlier, in the first fiscal quarter of 2014, the company reported net revenue of $51.3 million, compared to $52.9 million for the same period in fiscal 2013. Revenue for the quarter was negatively impacted by foreign currency fluctuation of 7.4% were $3.9 million. Excluding this foreign exchange impact revenue growth was approximately 45 year-over-year. Also of note, our auto-ship revenue or recurring revenue for the current quarter was 59% of overall revenue. This is an increase when compared to the prior year quarter of 45%.
Gross profit in the first fiscal quarter of 2013 was $43.5 million, compared to $45.1 million in the same period last year. Our gross margin in first fiscal quarter of 2014 was 84.8% compared to 85.2% in the same period last year.
Operating income for the first fiscal quarter of 2014 was $5.1 million. This compares to $6.9 million in the prior year quarter. Operating income in the first fiscal quarter of 2014 was 9.9% compared to 13.1% in the prior year period. The decline in operating margin for the first quarter of 2014 is primarily due to higher operating expenses that included investments in our internal resources that Doug just outlined. I believe it’s important to look at how our operating margins are trending.
On a sequential basis, our operating margins improved from both the third and fourth fiscal quarters of fiscal 2013. There is a quick reminder, in Q4 of fiscal 2013 we experienced one-time expenses about $1.7 million for the retirement of Dr. McCord, and $1.6 million for the launch of My LifeVenture.
Net income for the first quarter of fiscal year 2014 was $3.3 million, or $0.03 per diluted share. This compares to net income of $4.2 million, or $0.03 per diluted share for the prior year period. Now looking to our balance sheet. We continued to strengthen our balance sheet in the first quarter. As of September 30, we had cash and cash equivalents of $28 million up from $26.3 million at the end fiscal year 2013.
We generated $4.9 million of cash flow from operations in the first quarter of fiscal year 2014, compared to $0.9 million in the same period a year ago. In the first quarter of fiscal year 2014, we completed the $5 million stock repurchase program that was implemented in May of fiscal 2013 by repurchasing 1.1 million shares for $2.9 million related to this program.
In addition, we announced the completion of our modified Dutch auction on October 31. The company repurchased approximately 16.3 million shares of its common stock at a purchase price of $2.45 per share, for an aggregate cost of $40 million. The shares repurchased represented approximately 14% of the company’s total shares outstanding as of September 13, 2013.
We funded the $40 million modified Dutch auction through a financing agreement on October 18, provided by TCW Special Situations, LLC. The Financing Agreement provides for a senior secured credit facility in an aggregate principal amount of $67 million, of which $47 million was funded and $20 million is available post-close under certain terms and conditions for general corporate purposes. The Term Loan is a five year loan maturing on October 18, 2018 and the principal amount is repayable in consecutive quarterly installments beginning with the calendar quarter ending March 31, 2014. The initial interest rate is LIBOR based and currently is 8.75%.
The combination of the credit facility and modified Dutch auction initially addresses the strategy of reducing our shares outstanding and strengthening our capital structure. We enacted this strategy of a share buyback with debt for several reasons. First, we are aggressively modifying our capital structure by reducing the number of shares outstanding. We’re using the strength of our balance sheet to make an immediate impact on our capital structure. Second, we have solid cash flow and we have the ability to fund our working capital needs internally to support international growth and new product introductions. And last, at the present time we believe the most advantageous way to return cash to shareholders is in the form of stock repurchases.
The benefit of reduction in share count is offset by the increase in ongoing interest expense. The net result is no change in our projected earnings per share. As the debt balances reduced and our net income grows we will begin to experience an accretive impact to EPS.
Now I’ll discuss our full year fiscal 2014 guidance.
We are reaffirming our fiscal year 2014 revenue, operating margin and EPS guidance. We continue to expect to generate revenue in the range of $225 million to $235 million in fiscal year 2014. This is an 8% to 13% year-over-year growth rate. On a GAAP basis we expect to generate operating income in the range of $20.5 million to $23.5 million. This equates to an operating margin of 9% to 10% compared to an operating margin of 5.8% in fiscal 2013. We also expect to generate earnings per diluted share in the range of $0.09 to $0.11 based on an estimated weighted average diluted shares outstanding of $111 million.
Now at this point I’d like to turn the call back over to Doug for some closing comments.
Thanks, Dave. We are aggressively addressing our flat quarters of revenue performance and closely engaged with our distributor leadership both in the United States and Japan to increase our revenue. I believe we are a great company. We have great products. We have strong operational platforms. We have the great distributor base and we have great opportunities for product and country expansion. We’re poised to grow the top line again this year and we believe we’re on track to achieve our annual outlook of revenue growth and improvements in our operating margin.
And at this point, I’d like to open the call for any questions.
Thank you. (Operator Instructions) And we’ll take our first question from Alec Jaslow with Midtown Partners.
Alec Jaslow – Midtown Partners
Hey guys, how are you?
Hey Alec, how are you?
Alec Jaslow – Midtown Partners
Good, thanks. I’m just wondering I know on the last call there was a question about operating margins and there was a potential to maybe get in the mid-teens by the end of next year and I’m just wondering if you think that still possible or and that if you could also talk about timing for the infrastructure spend that you’ve discussed in the past and when that might happen?
Let me, thanks for your questions Alec. Let me hit the second half of your question first. Really what I outlined in terms of our operational expenses and infrastructure spend is largely behind us, we did as I explained we were chasing revenue coming out of fiscal 2012 and into fiscal 2013 we had an infrastructure that clearly could not support the size of the company and the growth and so we started to add in all the areas that I outlined really much if not all of those examples are truly behind us.
As the company grows and grows again, we will scale in areas directly related to that growth like in distributor support, call center support sales and sales management support in areas like that, but it will be directly related to our growth. With respect to operating margins, we’re bullish on the company on a go-forward basis we know that we got these improvements and uplift in terms of our operating margin certainly versus fiscal 2013 we’re seeing sequential quarter growth at the end of fiscal 2013 and now into first quarter of fiscal 2014, we think that’s absolutely directionally where we need to be going. And we’re not going to be satisfied as a management team until we continue to grow that operating margin significantly on a go-forward basis.
Alec Jaslow – Midtown Partners
Okay, great. And another question I had was about the Canine Health product I was just wondering if it’s met your expectations so far or just in comparison to other products you’ve rolled out when you first rolled them out?
Yeah we introduced Canine Health in January of this year so it’s really it’s not even a year yet. Personally I’m not satisfied with what the sales are of that yet it’s about 2.5% of our revenue. It’s a tremendous product, there is not another product like it on the market. I think we can support that product much more than we have in terms of our marketing messaging and we intend to do that. but I’m bullish on that product as well simply put, it’s basically Protandim for our Canine that’s for our extended family members and for those of us myself included who have pet dogs that have been Canine Health the results are pretty amazing. So I’m bullish on that product on a go-forward basis, but no, to be very clear with your question, we haven’t been begun to satisfy the expectations of that product yet on a go-forward basis.
Alec Jaslow – Midtown Partners
Okay, great. Thanks very much, that’s all I have at this time.
Alec Jaslow – Midtown Partners
And we’ll go next to Matt Schwarz at Maze Investments.
Matt Schwarz – Maze Investments
Unidentified Company Speaker
Matt Schwarz – Maze Investments
Here you highlighted some great initiatives to drive top and bottom-line in the future, can you help me understand your confidence level in the current guidance may be by helping me understand your approach or your methodology to formulating the guidance and also wanted to spend that you start to see improvements on the initiative?
Yeah Matt, thanks again for the questions. What we’re trying to do internally and certainly what we’re trying to message to you and others on call like this is the focus that we have on getting the belief lifted with our 65,000 plus distributors, our sales force for terms and purposes between the United States and Japan in particular two largest markets. And so to reiterate we’re strengthening our distributor and proffered customer culture to promote that growth partner in center with that is the My LifeVenture cultural program, upon the center is also the recent branding announcement with our partnership which we Real Salt Lake in getting the name of the LifeVantage out there domestically and internationally to support our distributors.
Beyond that we believe we’ve got a tremendous base scientifically validated products, we’ve set the bar very high for ourselves at LifeVantage and we believe our new product development both internally and as well as externally is going to be critically important to our growth on a go-forward basis. And then lastly, expanding our geographic reach and I’ll highlight two things with respect to that last point. Not just new countries and as I said, in December we went into Hong Kong and June we went into Canada next month we’re about to ready to launch into the Philippines.
We’ve got other countries on a short-listed consideration largely either here in the America’s hemisphere or in Asia-Pacific where we have our two centers of infrastructure. But also the markets that we’re currently in we hit barely scratched the surface in terms of penetration, saturation in the markets that we’re currently in and so we’re working very closely with the Field Advisory Boards those are the leadership Boards if you will of our field distributors, both here in the U.S. and again in Japan to get the lift and to get back going on the business of building this business. And it’s with all of those initiatives and the confidence that we have in working with our distributors that we’re confident that our guidance is appropriate and then we will get the lift and we’ll get this company back on track for the growth that it deserves and that you deserve as our shareholders.
Matt Schwarz – Maze Investments
Okay, great. That’s all and thank you.
(Operator Instructions) And we’ll go next to [Eric Weisenberger].
Yeah, thank you, can you hear me all right?
I can Eric, how are you?
Fine, thanks. I have three quick questions, one is, for those of us who tendered restricted shares we were told that we were allowed to do so, but I noticed that those have not been either paid by the company or the excess shares that are going to be returned have not hit the accounts, I noticed that the accounts did settle for non-restricted shares, when is the company going to make the payment on the restricted shares and will we get back non-restricted shares for those whose shares that are been returned?
Yeah we’ve been instructed by computer share that the physical checks for payment were made mailed on the system and also the shares were also mailed on the shift as well. Electronic payments DCG I’m sorry, DTC was paid out on the first. So all of that has been, all that administrative work has been taken care of computer share.
And are they going to return restricted shares or non-restricted?
Okay. Second question is, what are you – I noticed your facility as for $67 million, $47 million was funded at that time of the auction, what is – what are your plans – what have you got – what are you thinking about for the excess?
At the present time we don’t have any specific plans for the $20 million excess. It was really based on a multiple of our EBITDA, our trailing 12 months EBITDA and what we’re projecting going forward. So we’re able to get some flexibility in our facility, but the present time we don’t have any plan for it.
And thirdly, how you mentioned, Doug mentioned getting the shares down to the 70 million to 80 million range from 10.3 or whatever it is 10.11 how you plan to do that which is like a 25% drop are you going to have to further auctions?
Yeah it’s actually our current shares outstanding on $102 million, and to get down to the 70 million to 80 million share range it’s going to be a steady cadence of share repurchases at the appropriate time the management team, the Board were constantly evaluating the proper time to go out into the market and either do repurchase or a tender. So, to get to that level we will have a steady cadence of repurchases to get to the 70 million to 80 million range.
And we’ll go next to Steven Martin with Slater.
Steven Martin – Slater
Steven Martin – Slater
You talked about returning to growth this year can you give us some quarterly guidance as to when we should expect that?
Steve we don’t provide quarterly guidance, we only provide annual guidance and then on these quarterly calls we address that quarterly – excuse me that annual guidance. So obviously through one quarter we’re reiterating our guidance for the year that has the range of between 8% and 13% growth. And as we’ve said and I’ll repeat here we are very confident that we will return the growth, the belief we believe in our strategies that we’re putting in place, the communication and the partnership that we have with our Field Advisory Board, the leaders in the field much of what we’ve – what we either have done certainly what we have done we’ve embedded with them, but many of the things that we’re talking about on a go-forward basis were appropriate we also met with our Field Advisory Boards again domestically here in the U.S. as well as over in Japan and we’re very encouraged by what we have in our pipeline, what we’re hearing from them and the discipline that we have to put all of this together. So, adding all of that up, that’s why we’re bullish about our guidance for the balance of the year and returning this company to the growth that it deserves.
Steven Martin – Slater
Okay. Can you talk specifically you and I have had discussions and I know you talked about new products, it’s been a while and other than the Canine product you’ve talked about buying them, you’ve talked about developing them, can you give us an update on with some detail about what your plans or how close you are there something?
Yeah let me, that’s a delicate question, because obviously we’re not prepared to make an announcement outright on a new product or products. But sufficed to say we had been working for quite some time on exciting new products that we know our field, our distributors will be excited about, our preferred customers will benefit greatly from and ultimately the company will benefit from.
We are in – in the final stages of some development with respect to our next launch and I think you should stay tuned very closely tuned to a press release sometimes soon for the release of yet our next product and product release. That’s I’m sorry for being a bit optimistic here Steve but we’re just prepared today literally today to make announcement, but we know that it’s been a long drum roll, but partly that is due to the high standards that we have with our scientifically validated products. So stay tuned.
Steven Martin – Slater
One last one, can you talk a little bit about what’s going in Japan now that you’ve changed your sales methodology you did last year?
Yeah. So I think what you’re referring to is when we move from the not-for-resale model to an on-the-ground model. We went through and we talked about this in previous calls, the headwinds of a couple of things they’re what you’re specifically referring to is that move to an on-the-ground model that is now behind us, it was an administrative challenge to say the least late last year, late last calendar year October, November, December it was effective on January 1.
That’s largely behind us we’ve made another change rather recently in the marketplace David Toda who was heading up our Japan Operations has taken on a different responsibility and important responsibility of the company as our Chief Marketing Officer, in doing that it left the void in that marketplace for leadership. And what I asked one of our long-standing executives someone that’s been here almost since day one and certainly since day one since we moved into the network marketing channel Kirby Zenger to take on that market on an interim basis and return that market to growth.
And so Kirby is spending – has been spending most of his time over the last two months in particular in Japan working with the Field Advisory Board to get them reinvigorated so that that market also grows and grows significantly going forward. As you’re well known, if you can tell from our numbers Japan represents about 40% of our revenue it’s a huge market for us and one that has and again from looking at the numbers you’ve seen that it’s lagged. So we are emphasizing and putting the proper boots on the ground there to reinvigorate that market as well.
Steven Martin – Slater
All right, thank you very much.
Thanks very much Steve.
This does conclude today’s question-and-answer session. I’d now like to turn the call back over to Mr. Doug Robinson for any additional or closing remarks.
Thank you very much everyone. And thank you for your attention, your continued support of LifeVantage. As you just heard from some of our questions we’ve got some important announcements here in our near future please stay tuned for those. And we look forward to seeing you at Investor Conferences in the coming quarter in our next call at the end of this incumbent quarter. Thank you very much.
This does conclude today’s conference. Thank you for your participation.
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