Youngevity Reports 2018 Numbers, But The Real Story Is 2019 Guidance

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About: Youngevity International, Inc. (YGYI)
by: Spencer Osborne
Summary

2018 revenues were $162.4 million.

Adjusted EBITDA was up to $7 million.

2018 loss narrowed to $2.6 million.

Guidance for 2019 revenue is between $220 million and $240 million.

The company expects the hemp segment to make up $45-50 million of revenue.

Youngevity International (YGYI) offered up its final 2018 numbers on April 16th. The year offered improvements in many key metrics such as EBITDA, stockholder Equity, more cash on hand, less liabilities, and an improved asset number. While its 2018 revenue numbers fell slightly shy of what was delivered in 2017, the balance sheet showed a dramatic move in the right direction.

Revenue for 2018 was $162.4 million, a number that is slightly less than the $165.7 million of 2017. The overall loss for 2018 was just $2.6 million, a 55% improvement from a loss of $5.7 million in the prior year.

The real story that investors should find compelling is the guidance offered up by the company for 2019. Direct Selling, coffee, and a new hemp segment will combine to deliver revenue between $220 million and $240 million. This would represent an increase of 36% at the low end of guidance and 48% at the high end. Drivers for the increased revenue will come from growth in the coffee segment, thanks to shipments on a coffee deal shipping 41 million pounds a year, and an anticipated $45-50 million from the hemp business.

If you back out the hemp business, the comparable direct selling and coffee segments are expected to deliver between $170 and $195 million. Thus, on an apples to apples basis, there is expected growth over 2018 even without hemp.

An important factor that investors should consider about this guidance is the fact that the company had already seen Q1 numbers when the guidance was established.

Youngevity has already made positive steps in obtaining positive EBITDA, has improved its balance sheet, and could be on the cusp of profits this year. Should Youngevity reach its hemp business revenue guidance, it will have moved from hemp upstart to major player in the space in less than a year. The beauty of the company's strategy in hemp is that it is starting out in the higher-margin sections of the process. Processing, distilling, and refining hemp into fine quality oil, isolates, or distillates is where the bigger profit margins lay. In becoming a major processor, Youngevity can profit from the work of others. While competitors have been trying to buy up acreage and bidding each other up in price, the company took the step to be a supplier of the equipment and processing capabilities.

The key takeaway for investors is an improved balance sheet, an improved debt picture, improved cash, and more assets. Substantial coffee contracts and hemp will be key drivers of 2019, even with coffee prices depressed by about 20%. When Youngevity posts Q1 numbers, watch for more players on the Street to pay more attention. The company has a busy year in front of it, but being busy with numbers that are improving by nice percentages is a great problem to have. All in all, 2018 was the year of getting key numbers to improve, while 2019 will be all about delivering record revenue, record EBITDA, and profits.

Youngevity still represents a value proposition for investors. Trading at less than $6 presents major upside. Look for some volatility related to the news flow of the CBD space, but rest easy in that this company seems very confident in its projections, and as long as it delivers, the stock price will appreciate.

Stay tuned!

Disclosure: I am/we are long YGYI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.