DALLAS, Aug. 13, 2015 /PRNewswire/ -- CVSL
Inc. [NYSE MKT: CVSL] today announced financial results for its
second quarter of 2015.
Revenue for the quarter was $35.7
million, up from $24.6 million
in the second quarter last year, an increase of 45.2%.
Operating loss was $2.5 million,
compared to a loss of $4.1 million in
last year's second quarter, an improvement of 39.0%.
"We are very pleased with our second quarter results. The
quarter clearly demonstrated the effectiveness of our strategy of
buying companies at favorable prices and then applying our
expertise to strengthen them and increase cash flow," said
John Rochon Jr., Vice Chairman of
CVSL.
"These results compare favorably to our reported and pro forma
first quarter numbers, and to the same period last year. With our
cost management efforts now operating on all cylinders, we feel
very good about the progress we are making on all fronts as we
enter the second half of 2015. We believe these results show
that our strategy is working," Mr. Rochon said.
"While we continue to focus on improving the profitability of
the companies we own, we intend to be opportunistic about potential
acquisitions," he noted.
"Underlining our strategy is our understanding the uniqueness of
this direct-to-consumer sector, which is built on motivation and
incentives in support of the independent sales forces.
Our team knows this sector very well. We realize
that our true 'product' is economic opportunity for the men and
women in our independent sales forces," added Mr. Rochon. "We
believe this understanding and expertise will enable us to fully
leverage our platform of multiple brands in the direct-to-consumer
sector for profitable growth."
Financial Highlights
Total revenue for the second quarter was $35.7 million, compared to $24.6 million in the same quarter a year ago, an
increase of $11.1 million, or 45.2%,
primarily due to the impact of a full quarter of CVSL's acquisition
of Kleeneze at the end of March.
Gross profit increased to $21.8
million, compared to $13.5
million in the same quarter last year, an increase of
$8.3 million, or 61.5% compared to
the same quarter last year.
Gross profit margins increased to 61.0% of total revenue,
compared to 54.9% of total revenue in the same quarter a year
ago. The increase in gross profit margins was primarily a
result of less discounting at The Longaberger Company and the lack
of discounting at Kleeneze that reduced program costs and discounts
as a percentage of revenue.
Operating losses decreased by $1.6
million in the quarter compared to the same period in 2014,
from $4.1 million to $2.5 million, an improvement of 39.0%.
This was primarily due to an improvement in both the
program costs and discounts and SG&A expense.
Operating margins improved to (6.9)% from (16.7)% compared to
the same period last year.
For the first six months of 2015, revenue was $55.0 million compared to $51.3 million in the same period last year, an
increase of $3.7 million, or
7.2%.
For the first six months, gross profit increased from
$27.2 million to $33.4 million, an increase of $6.2 million compared with the same period in
2014. Gross profit margins increased to 60.8% compared to
53.0% for the same six months last year. Gross profit was
partially offset by higher operating expenses, specifically in
commissions and incentives expense.
Operating losses for the first six months remained flat compared
with the same period last year. Operating margins improved to
(12.2)% from (13.4)% compared to the same six-month period last
year.
"These results represent a positive trend toward improved
operating margins as we continue to strengthen the portfolio
businesses and gain additional cost efficiencies from eliminating
redundant overhead. As we've said, our goal is to find
operating synergies among our companies and to constantly leverage
those synergies. This is having a positive effect on our
results," said Mr. Rochon.
Condensed
Consolidated Statements of Operations
|
(in thousands, except
share and per share data)
|
(unaudited)
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenue
|
|
$
|
35,742
|
|
$
|
24,586
|
|
$
|
54,961
|
|
$
|
51,257
|
Program costs and
discounts
|
|
(2,998)
|
|
(5,220)
|
|
(5,160)
|
|
(10,196)
|
Net
revenue
|
|
32,744
|
|
19,366
|
|
49,801
|
|
41,061
|
Costs of
sales
|
|
10,955
|
|
5,863
|
|
16,365
|
|
13,879
|
Gross
profit
|
|
21,789
|
|
13,503
|
|
33,436
|
|
27,182
|
Commissions and
incentives
|
|
12,612
|
|
6,005
|
|
18,480
|
|
12,978
|
Gain on sale of
assets
|
|
(40)
|
|
(141)
|
|
(83)
|
|
(407)
|
Selling, general and
administrative
|
|
10,829
|
|
11,301
|
|
20,269
|
|
20,389
|
Depreciation and
Amortization
|
|
678
|
|
445
|
|
1,308
|
|
1,066
|
Impairment of
Goodwill
|
|
192
|
|
—
|
|
192
|
|
—
|
Operating
loss
|
|
(2,482)
|
|
(4,107)
|
|
(6,730)
|
|
(6,844)
|
Loss on marketable
securities
|
|
—
|
|
58
|
|
7
|
|
552
|
Interest expense,
net
|
|
745
|
|
213
|
|
1,341
|
|
479
|
Loss from operations
before income tax provision
|
|
(3,227)
|
|
(4,378)
|
|
(8,078)
|
|
(7,875)
|
Income tax
provision
|
|
192
|
|
213
|
|
386
|
|
492
|
Net loss
|
|
(3,419)
|
|
(4,591)
|
|
(8,464)
|
|
(8,367)
|
Net loss attributable
to non-controlling interest
|
|
1,726
|
|
1,046
|
|
1,892
|
|
1,686
|
Net loss attributable
to CVSL Inc.
|
|
$
|
(1,693)
|
|
$
|
(3,545)
|
|
$
|
(6,572)
|
|
$
|
(6,681)
|
Basic and diluted
loss per share:
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
34,367,095
|
|
|
24,400,893
|
|
|
34,017,582
|
|
|
24,403,486
|
Loss per common share
attributable to common stockholders, basic and diluted
|
|
$
|
(0.05)
|
|
$
|
(0.15)
|
|
$
|
(0.21)
|
|
$
|
(0.27)
|
The balance sheet improved dramatically from end of year 2014 to
Q2 2015. Working capital improved from ($3.4 million) to $4.1 million; the current ratio
improved from 0.86 to 1.11; the quick ratio improved from 0.16 to
0.46; and the cash ratio improved from 0.11 to 0.18. Most of
the improvement in these liquidity ratios was a result of the
underwritten public offering on March 4,
2015 and the purchase of Kleeneze in March 2015.
Additionally, CVSL wrote down some aged accounts payable.
CVSL
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
|
(Unaudited)
|
|
|
|
|
June 30,
2015
|
|
December 31,
2014
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6,436
|
|
$
|
2,606
|
Marketable
securities
|
|
5,967
|
|
991
|
Accounts receivable,
net
|
|
3,966
|
|
450
|
Inventory,
net
|
|
20,289
|
|
14,759
|
Other current
assets
|
|
3,373
|
|
2,481
|
Total current
assets
|
|
40,031
|
|
21,288
|
Restricted
cash
|
|
3,027
|
|
—
|
Sale leaseback
security deposit
|
|
4,414
|
|
4,414
|
Property, plant and
equipment, net
|
|
8,429
|
|
8,191
|
Leased property,
net
|
|
14,834
|
|
15,361
|
Goodwill
|
|
5,246
|
|
4,095
|
Intangibles,
net
|
|
3,458
|
|
3,558
|
Other
assets
|
|
353
|
|
400
|
Total
assets
|
|
$
|
79,792
|
|
$
|
57,307
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
12,515
|
|
$
|
8,436
|
Related party
payables, net
|
|
635
|
|
127
|
Lines of
credit
|
|
99
|
|
105
|
Accrued
commissions
|
|
4,056
|
|
3,319
|
Accrued
liabilities
|
|
8,316
|
|
5,695
|
Deferred
revenue
|
|
2,490
|
|
2,982
|
Current portion of
long-term debt
|
|
949
|
|
974
|
Accrued taxes
payable
|
|
3,842
|
|
2,693
|
Other current
liabilities
|
|
3,027
|
|
1,409
|
Total current
liabilities
|
|
35,929
|
|
24,652
|
Long-term
debt
|
|
7,015
|
|
4,316
|
Lease
liability
|
|
15,765
|
|
15,774
|
Other long-term
liabilities
|
|
2,353
|
|
3,582
|
Total
liabilities
|
|
61,062
|
|
48,324
|
|
|
|
|
|
Commitments &
contingencies (Note 9)
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Preferred stock, par
value $0.001 per share, 500,000 authorized
|
|
—
|
|
—
|
Common stock, par
value $0.0001 per share, 250,000,000 shares authorized;
34,367,095 and 27,599,012 shares issued and outstanding as of June
30, 2015 and December 31, 2014, respectively
|
|
4
|
|
3
|
Additional paid-in
capital
|
|
55,468
|
|
37,097
|
Accumulated other
comprehensive (loss) income
|
|
174
|
|
321
|
Accumulated
deficit
|
|
(38,730)
|
|
(32,159)
|
Total stockholders'
equity attributable to CVSL Inc.
|
|
16,916
|
|
5,262
|
Stockholders' equity
attributable to non-controlling interest
|
|
1,814
|
|
3,721
|
Total stockholders'
equity
|
|
18,730
|
|
8,983
|
Total liabilities and
stockholders' equity
|
|
$
|
79,792
|
|
$
|
57,307
|
Management Commentary
CVSL's strategy is to provide a platform of multiple brands for
independent sales representatives to pursue earning opportunities
at their own pace, using company-provided e-commerce tools to
enhance their ability to serve customers. CVSL's team is
experienced in the direct-to-consumer sector and uses its expertise
to identify companies for potential acquisition. Once
companies are acquired, CVSL seeks to enhance their performance and
achieve profitability. As CVSL seeks operational efficiencies and
synergies among its companies, each company maintains its own
separate brand, sales force, product line and compensation
plan.
In the second quarter, CVSL management focused on strengthening
the companies within its existing portfolio.
With regard to acquisitions, CVSL said it intends to be
opportunistic and open to making acquisitions at favorable prices
that will further expand the Company's base.
At The Longaberger Company, in the second quarter
management ended excessive discounting of its product line; ended
the practice of operating company-owned factory stores which had
competed with the sales force; provided new executive leadership
with the naming of John Rochon Jr.
as chairman, president and CEO in May; and re-connected the company
with its roots by returning its annual sales convention to
Dresden, Ohio, where the company
was founded. Management believes that Longaberger has made
significant progress in its ongoing recovery effort.
At Kleeneze, CVSL's newest and largest company,
management is focusing on ways to reduce warehouse and other
operational costs. CVSL's chairman, John Rochon Sr., personally addressed the
company's annual sales event in the UK, welcoming members of the
sales network to the CVSL family of companies and reinforcing
CVSL's understanding of the direct selling sector, in contrast to
Kleeneze's former ownership by a catalog company, which had
competed with Kleeneze's sales network.
At Your Inspiration At Home, management says that
recruiting and sales continue to show strong growth, and that the
company, which sells award-winning spice blends and other gourmet
food products, has grown more than eight-fold in annual revenue
since it was acquired by CVSL in August of 2013.
At Agel Enterprises, management notes the value of the
company's global footprint, which provides CVSL with a presence in
more than 40 countries around the world. Management believes
this global footprint can help other CVSL companies and brands over
time by reducing the cost of entry into international markets where
Agel already has a presence. A new skin care product and a
new pro-biotic product are slated for launch at Agel next
month.
CVSL said it expects to move into its new headquarters office
location near downtown Dallas, TX
in November. Management believes the new location will help
the Company attract and retain professional talent. Because
of more efficient use of space in less square footage, the monthly
rent expenses will be substantially the same as CVSL's current
location.
Conference Call
Management will host a conference call to discuss the operating
and financial results and take investor questions at 10
a.m. Eastern Time tomorrow, Friday,
August 14.
Participant Dial-in Number(s):
Participant Toll Free:
888-417-8533
Participant International Toll:
719-325-2429
Participant Passcode: 6697820
A webcast replay of the conference call will be available in the
investor relations section of the Company's website following
completion of the call.
ABOUT CVSL INC. (www.cvsl.us.com)
CVSL is a growing platform of direct-to-consumer brands. Within
CVSL, each company retains its separate identity, sales force,
product line and compensation plan, while CVSL seeks synergies and
efficiencies in operational areas. CVSL companies currently
include The Longaberger Company, a 42-year old maker of
hand-crafted baskets and other home decor items; Your
Inspiration At Home, an award-winning maker of hand-crafted
spices and other gourmet food items from around the world;
Tomboy Tools, a direct seller of tools designed for women as
well as home security systems; Agel Enterprises, a global
seller of nutritional products in gel form as well as a skin care
line, operating in 40 countries; Paperly, which offers a
line of custom stationery and other personalized products; My
Secret Kitchen, a U.K.-based seller of gourmet food products;
Uppercase Living, which offers an extensive line of
customizable vinyl expressions for display on walls in the home;
and Kleeneze, a 95-year old UK-based catalog seller of
cleaning, health, beauty, home, outdoor and a variety of other
products. CVSL also includes Happenings, a lifestyle
publication and marketing company.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements that
involve risks and uncertainties. All statements other than
statements of historical fact contained in this press release are
forward-looking statements. We have attempted to identify
forward-looking statements by terminology including "anticipate,"
"believe," "can," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "project,"
"should," or "will" or the negative of these terms or other
comparable terminology. Although we do not make forward-looking
statements unless we believe we have a reasonable basis for doing
so, we cannot guarantee their accuracy. These statements are based
upon current beliefs, expectations and assumptions. These
statements are subject to a number of risks and uncertainties, as
to CVSL's ability to continue its growth, the recent results
showing that the strategy is working, the intended
acquisition strategy and continued focus on improving the
profitability of the companies, the continued strengthening
of the portfolio businesses and additional cost efficiencies from
eliminating redundant overhead, CVSL's understanding and expertise
enabling it to leverage its platform in its sector for growth,
Longaberger's progress in its recovery effort, the continuing
strong recruiting and sales growth of Your Inspiration At Home,
CVSL's global footprint helping it to reduce the other CVSL's
companies entry into international markets, the new headquarters
location and its impact on the ability to retain young professional
talent and the other risks outlined under "Risk Factors" in
CVSL's Annual Report on Form 10-K/A for its fiscal year ended
December 31, 2014 and those risks
discussed in other documents we file with the Securities and
Exchange Commission, which may cause our actual results, levels of
activity, performance, or achievements expressed or implied by
these forward-looking statements to differ materially from
expectations. Except as required by law, we undertake no obligation
to update or revise publicly any of the forward-looking statements
after the date of this press release to conform our statements to
actual results or changed expectations.
Company
Contact:
|
Investor Relations
Contact:
|
Russell
Mack
|
Ed McGregor/Jody
Burfening
|
Executive Vice
President and Director
|
LHA
|
rmack@cvsl.us.com
|
(212)
838-3777
|
|
emcgregor@lhai.com
|
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SOURCE CVSL Inc.