LifeVantage (NASDAQ:LFVN) reported muted third quarter results for the quarter ended March [the company operates on a June fiscal year end] which managed to surpass Street expectations. The company reported quarterly earnings of $0.12 per share, which were 9.1% higher than the street's average expectation of $0.11. This represents a 40% drop in earnings from $0.20 per share in the same period previous year. The company reported quarterly sales of $50.0 million, which were in line with the analyst consensus estimate of $50.1 million which were down by 3.0% from $51.6 million in the same period last year. The decline in sales 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 9.3%. Revenue growth was hit by restrictions internationally that hindered the company's ability to host in-person meetings. Gross profit margin fell 220 bps YoY from 82.9% due to increased inventory obsolescence costs, higher shipping expenses, and mix shifts related to product and geography. Adjusted EBITDA was down 13.7% YoY on higher adjusted SG&A expenses. Adjusted net income and EPS fell 13.9% YoY and 8.0% YoY respectively. Adjusted EBITDA was $3.4 million for the third quarter of fiscal 2022 fell by 29.2% compared to $4.8 million for the comparable period in fiscal 2021.
Commenting on the results, Steve Fife, CEO of LifeVantage said, "Activity levels improved in the third quarter but remained challenged. We are encouraged by recent trends and continue to expect that our ongoing efforts to transform our business will lead to accelerating sales and earnings growth in the future. I'm pleased with our early progress on key initiatives aimed at strengthening the alignment between product development and marketing as well as the evolution of our digital strategy. We are advancing our customer-focused narrative with sharper messaging and proprietary digital tools, improving experiences across the lifecycle of engagement and helping drive stronger outcomes for all stakeholders."
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, no debt and net cash to market cap of 21% provide investors with a safety cushion. Ongoing stock buybacks further indicate to 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] of around 4.6x for the current FY06/2023e. So, we multiply 12.4x times $0.70 to arrive at $8.69, and then we add back net cash of $1.31, which gets us to our unchanged price target of $10.00, or 121% upside.
To reflect third-quarter outcomes, the business has lowered its fiscal 2022 guidance. Revenue for fiscal 2022 is now estimated to range between $204 and $207 million [previous guidance of $212-$220 million]. Adjusted EBITDA for fiscal 2022 is now expected to be in the range of approximately $15 million [previous guidance of $18-$20 million]. The adjusted earnings per share range is now estimated to be $0.52 to $0.56 [previous guidance of $0.67 to $0.71]. This guidance reflects the current trends in the business.
LifeVantage has demonstrated the ability to generate solid free cash flows. The company generated $5.2 million of cash from operations during the first nine months of fiscal 2022 compared to $7.9 million in the same period in fiscal 2021. Cash and cash equivalents at March 31, 2022 were $17.8 million or $1.31 per share with no debt which is 29% of the market capitalization.
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 share repurchase authorization. At the end of the last quarter, there remains $28.1 million available under the authorization.
The company has announced its first quarterly dividend of $0.03 per common share which is equal to 2.6% annualized dividend yield. This decision demonstrates the company's commitment to increasing shareholder value as well as its confidence in the future business outlook.
Steve Fife CEO of LifeVantage said, "Based on our strong balance sheet and positive long-term outlook, we have initiated a quarterly dividend of $0.03, underscoring our confidence in our business model to deliver strong results and increase shareholder value."
LifeVantage is a company focused on developing scientifically-backed products in the personal product and wellness space with a focus on nutrigenomics. We are enthused by 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 stock buybacks, we believe, make the stock attractive to investors at its current price.
We value LifeVantage's stock at 12.4x P/E, arriving at a target price of $10.00. This represents a 121% upside from current stock levels.
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