DALLAS, Nov. 9, 2015 /PRNewswire/ -- CVSL Inc.
[NYSE MKT: CVSL] today announced financial results for its third
quarter of 2015.
Revenue for the quarter was approximately $37.0 million, up from approximately $24.0 million in the third quarter last year, an
increase of 54.0%. Gross profit margin increased from
54.4% to 59.8%.
"The third quarter was another successful quarter for CVSL,"
said Vice Chairman John Rochon
Jr. "With revenues up again, combined with positive
trends for both earnings per share and the measures of EBITDA
presented in our Form 10-Q, we can see that our strategy of
improving and strengthening the companies in our portfolio of
brands is continuing to work. Our core business is showing
good improvement as our turnaround efforts are having a positive
effect. We believe that we are now in the position of using
CVSL's earnings primarily to fund growth in the future, rather than
to fund losses as was the case earlier in our development," Mr.
Rochon said.
"On a pro forma basis, excluding shares that are no longer
issued and outstanding, our year-to-date earnings per share
improved from $(0.50) to $(0.23).
This is further proof that our strategy is working. We expect
this trend to continue."
Commenting on the balance sheet, Mr. Rochon said, "We continue
to be highly encouraged by the strength of CVSL's balance sheet. A
strong cash position, with minimal third party debt relative to the
size of our balance sheet, allows us to use our cash for strategic
improvements that we believe will have a positive impact on income
going forward."
Financial Highlights
Total revenue for the third quarter was approximately
$37.0 million, compared to
approximately $24.0 million in the
same quarter a year ago, an increase of $13.0 million, or 54.0%, primarily due to our
acquisition of Kleeneze in March of 2015, in addition to organic
growth, especially in the gourmet food products segment.
Gross profit increased to $22.1
million, compared to $13.1
million in the same quarter last year, an increase of
$9.0 million, or 69.1% compared to
the same quarter last year.
Gross profit margin increased to 59.8% of total revenue,
compared to 54.4% of total revenue in the same quarter a year
ago. The increase in gross profit margin was primarily a
result of less discounting at Longaberger and the lack of
discounting at Kleeneze that reduced program costs and discounts as
a percentage of revenue and increased gross margin.
Operating loss decreased by $1.4
million in the quarter compared to the same period in 2014,
from $5.8 million to $4.4 million, an improvement of 23.6%.
This was primarily due to gain in cost efficiencies due
to eliminating redundant overhead.
Operating margin improved to (11.9)% from (24.0)% compared to
the same period last year.
For the first nine months of 2015, revenue was $91.9 million, compared to $75.3 million in the same period last year, an
increase of $16.6 million, or
22.1%.
For the first nine months, gross profit increased from
$40.2 million to $55.5 million, an increase of $15.3 million compared with the same period in
2014. Gross profit margins increased to 60.4% compared to
53.5% for the same nine months last year.
Operating loss for the first nine months of 2015 was
$11.1 million compared with
$12.6 million the same period last
year. Operating margin improved to (12.1)% from (16.7)%
compared to the same nine-month period last year.
"These results represent continuing, clear progress," said Mr.
Rochon. "We firmly believe that our strategy is sound and that our
continuing good financial results are proof that CVSL is very much
on the right track."
CVSL Inc. Condensed Consolidated Statements of
Operations
(in thousands, except
share and per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Revenue
|
$ 36,954
|
|
$ 24,017
|
|
$ 91,915
|
|
$ 75,274
|
|
Program costs and
discounts
|
(4,044)
|
|
(4,380)
|
|
(9,203)
|
|
(14,577)
|
|
|
Net
revenue
|
32,910
|
|
19,637
|
|
82,712
|
|
60,697
|
|
Costs of
sales
|
10,823
|
|
6,573
|
|
27,188
|
|
20,452
|
|
|
Gross
profit
|
22,087
|
|
13,064
|
|
55,524
|
|
40,245
|
|
Commissions and
incentives
|
11,999
|
|
5,801
|
|
30,479
|
|
18,779
|
|
Gain on sale of
assets
|
(532)
|
|
(633)
|
|
(615)
|
|
(1,040)
|
|
Selling, general and
administrative
|
13,014
|
|
12,556
|
|
34,479
|
|
32,751
|
|
Depreciation and
amortization
|
920
|
|
555
|
|
2,228
|
|
1,419
|
|
Share based
compensation expense
|
1,087
|
|
544
|
|
(109)
|
|
941
|
|
Impairment of
goodwill
|
-
|
|
-
|
|
192
|
|
-
|
|
|
Operating
loss
|
(4,401)
|
|
(5,759)
|
|
(11,130)
|
|
(12,605)
|
|
Loss (gain) on
marketable securities
|
2
|
|
(108)
|
|
9
|
|
444
|
|
Gain on
acquisition
|
-
|
|
-
|
|
(2,819)
|
|
-
|
|
Interest expense,
net
|
564
|
|
713
|
|
1,906
|
|
1,192
|
|
|
Loss from operations
before income tax provision
|
(4,967)
|
|
(6,364)
|
|
(10,226)
|
|
(14,241)
|
|
Income tax
provision
|
(29)
|
|
298
|
|
356
|
|
789
|
|
|
Net loss
|
(4,938)
|
|
(6,662)
|
|
(10,582)
|
|
(15,030)
|
|
Net loss attributable
to non-controlling interest
|
1,043
|
|
1,039
|
|
2,935
|
|
2,725
|
|
Net loss attributable
to CVSL Inc.
|
$ (3,895)
|
|
$ (5,623)
|
|
$ (7,647)
|
|
$ (12,305)
|
|
Basic and diluted
loss per share:
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
34,367,095
|
|
49,628,683
|
|
32,842,579
|
|
49,638,935
|
|
Loss per common share
attributable to common stockholders, basic and
diluted
|
$ (0.11)
|
|
$
(0.11)
|
|
$ (0.23)
|
|
$ (0.25)
|
|
Proforma weighted
average common shares outstanding
|
34,367,095
|
|
24,398,241
|
|
32,842,579
|
|
24,387,950
|
|
Proforma loss per
common share attributable to common stockholders, basic and diluted
(see Note 2)
|
$ (0.11)
|
|
$
(0.23)
|
|
$ (0.23)
|
|
$ (0.50)
|
The balance sheet improved from end of year 2014 to Q3
2015. Working capital improved from $(3.4) million to $2.7 million; the current ratio
improved from 0.9 to 1.1; the quick ratio improved from 0.3 to 0.5;
and the cash ratio improved from 0.1 to 0.3. Most of the
improvement in these liquidity ratios was a result of our equity
raise in 2015, and the acquisition of Kleeneze which further
improved our working capital.
CVSL
Inc.
Condensed
Consolidated Balance Sheets
(in
thousands)
Management
Commentary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
2015
|
|
2014
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
5,431
|
|
$
2,606
|
|
|
Marketable
securities, at fair value
|
|
3,538
|
|
991
|
|
|
Accounts receivable,
net
|
|
4,034
|
|
450
|
|
|
Inventory,
net
|
|
21,508
|
|
14,759
|
|
|
Other current
assets
|
|
3,016
|
|
2,482
|
|
|
|
Total current
assets
|
|
37,527
|
|
21,288
|
|
Restricted
cash
|
|
2,923
|
|
-
|
|
Sale leaseback
security deposit
|
|
4,414
|
|
4,414
|
|
Property, plant and
equipment, net
|
|
8,417
|
|
8,191
|
|
Leased property,
net
|
|
14,697
|
|
15,361
|
|
Goodwill
|
|
3,720
|
|
4,095
|
|
Intangibles,
net
|
|
5,693
|
|
3,558
|
|
Other
assets
|
|
331
|
|
400
|
|
|
|
Total
assets
|
|
$
77,722
|
|
$
57,307
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
13,467
|
|
$
8,541
|
|
|
Related party
payables, net
|
|
574
|
|
127
|
|
|
Accrued
commissions
|
|
4,465
|
|
3,319
|
|
|
Accrued
liabilities
|
|
8,967
|
|
4,612
|
|
|
Deferred
revenue
|
|
2,830
|
|
2,982
|
|
|
Current portion of
long-term debt
|
|
1,121
|
|
974
|
|
|
Accrued taxes
payable
|
|
3,144
|
|
2,693
|
|
|
Other current
liabilities
|
|
246
|
|
1,404
|
|
|
|
Total current
liabilities
|
|
34,814
|
|
24,652
|
|
|
Deferred tax
liability
|
|
763
|
|
-
|
|
|
Long-term debt, net
of current portion
|
|
6,688
|
|
4,316
|
|
|
Lease liability, net
of current portion
|
|
15,751
|
|
15,774
|
|
|
Other long-term
liabilities
|
|
2,328
|
|
3,582
|
|
|
|
Total
liabilities
|
|
60,344
|
|
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
September 30, 2015 and December 31, 2014, respectively
|
14
|
|
3
|
|
|
Additional paid-in
capital
|
|
56,293
|
|
37,097
|
|
|
Accumulated other
comprehensive income
|
|
105
|
|
321
|
|
|
Accumulated
deficit
|
|
(39,806)
|
|
(32,159)
|
|
|
|
Total stockholders'
equity attributable to CVSL Inc.
|
|
16,606
|
|
5,262
|
|
|
Stockholders' equity
attributable to non-controlling interest
|
772
|
|
3,721
|
|
|
Total stockholders'
equity
|
|
17,378
|
|
8,983
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
77,722
|
|
$
57,307
|
Management Commentary
CVSL's strategy continues on track, to be a platform of multiple
consumer brands where independent sales representatives can pursue
earning opportunities at their own pace, using company-provided
e-commerce tools to enhance their ability to serve customers.
CVSL's team has many years of experience in the direct-to-consumer
sector and uses its expertise to identify companies for potential
acquisition.
CVSL works to enhance the performance of companies it acquires.
CVSL does so by finding operational efficiencies and synergies
among its companies "behind the scenes," while allowing each
company to maintain its own separate brand, sales force, product
line and compensation plan.
In the third quarter, CVSL management concentrated on
strengthening the companies within its existing portfolio.
One of the most important aspects of this continues to be
cost control, finding and eliminating duplicative and excessive
SG&A costs in all areas of the CVSL companies.
CVSL's strategy is to be increasingly diversified, which
management believes reduces risk. Management believes that
CVSL may be the most diversified direct selling company in the
sector. CVSL's diversification takes many forms, including multiple
product lines, both male and female sales forces, multiple
geographic markets, different types of companies including both new
and established companies, varying compensation plans, etc.
CVSL said it intends to be opportunistic and continually open to
making acquisitions at favorable values that will further expand
the Company's revenue and profits.
Following are comments about CVSL's four largest companies,
excluding Betterware, which was acquired after the end of the
quarter.
At The Longaberger Company, in the third quarter
management emphasized hands-on leadership in the sales field.
Longaberger's chairman, John Rochon
Jr. travelled extensively, meeting with Longaberger sales
leaders and Home Consultants in their home communities, receiving
their suggestions and re-connecting the company with those who sell
its products.
Continued progress was made in improving the supply chain and
product delivery times. Longaberger continued to reduce its
SG&A costs during the quarter and there was a continued
beneficial effect of having ended Longaberger's past policy of
excessive discounting. Longaberger also ended the practice of
indiscriminately offering free shipping.
Longaberger reduced barriers to entry by re-recruiting lapsed
members of its popular Collectors Club, a special program for its
most loyal customers. Across the Longaberger sales force,
headcount was up and terminations rates were down. Management
believes that Longaberger is continuing to make significant
progress in its ongoing recovery effort.
At Kleeneze, improvement was achieved during the quarter
in sales, recruiting and retention. During the third quarter,
Kleeneze took additional steps to enhance e-commerce activity
within its sales network, by using social media groups and pages to
post product information and to support it with payment and
shipping tools including a distributor linked interactive
catalogue, in order to stimulate new avenues for sales and
recruiting.
Management focused on ways to reduce warehouse and other
operational costs and believes that with the subsequent acquisition
of Betterware Ltd., there will be important synergies and
efficiencies to be gained as well as an enhanced position in the UK
home shopping market. Betterware and Kleeneze complement each
other operationally and not only are positioned well in the UK and
Ireland, but serve as a
springboard for expansion into additional markets.
Management believes that improved product sourcing, progress in
supply chain, product delivery times and efficiencies within
distribution have the opportunity to make our gross margins within
the home décor segment continually more attractive.
At Your Inspiration At Home, which sells award-winning
spice blends and other gourmet food products, management says that
sales and recruiting continued their robust growth and that the
company's upward trajectory is continuing. In August, an
innovation called The Flavour Stack™ was unveiled. It is an
auto-ship product that provides recipes and pre-measured spices for
different gourmet meals each month.
At Agel Enterprises, a new skin care product and a new
probiotic product were introduced at the company's annual
convention in Lyon, France in
September. John Rochon Jr.
attended and addressed the convention.
The skin care product is called Caspi™ and management believes
it is one of the most innovative breakthroughs the skin care
category has seen. Caspi was developed by a team of cosmetic
chemists and it uses stem cell extract from fine Siberian Sturgeon
caviar, combined with 24 karat gold, to give skin a healthier, more
youthful appearance.
The probiotic product is called Agel BIO™ and delivers the
benefits of a probiotic to the body in a suspension gel, which
allows for better absorption in the intestine. When Agel
introduced it in September, the reaction among the sales force was
very enthusiastic.
One of management's areas of emphasis at Agel is strengthening
the link between sales and production, to improve the way the
company tracks sales demand in its various markets and then better
anticipating inventory needs. The aim is to keep product
flowing to customers wherever they are in the world.
Conference Call
Management will host a conference call to discuss the operating
and financial results and take investor questions at
4:30 p.m. Eastern Time Tuesday, November
10, 2015.
To participate in the conference call, please dial 800-210-9006
approximately 10 minutes prior to the call. Please use conference
passcode 6904364.
For international callers in Australia, please dial 1 800 094 765, and for
callers in the United Kingdom,
please dial 0 800 404 7656. International callers should also use
conference passcode 6904364.
A live webcast of the conference call will be available at
http://www.visualwebcaster.com/event.asp?id=102982. Please register
for the webcast 15 minutes prior to the start of the call to
download and install any necessary audio software.
An audio 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;
Kleeneze, a 95-year old UK-based catalog seller of cleaning,
health, beauty, home, outdoor and a variety of other products, and
Betterware, a UK-based home catalog seller. 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 and include
statements regarding CVSL's ability to continue its growth, the
recent results showing that the strategy is working, the strategy
continuing on track, the intended opportunistic 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, the belief that CVSL may be
one of the most diversified direct selling companies in the
sector, 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, the Betterware
acquisition resulting in synergies and efficiencies as well
as enhanced UK position, the intent to be opportunistic with regard
to acquisitions, improved product sourcing, progress in
supply chain, product delivery times and efficiencies within
distribution making our gross margins within the home décor segment
more attractive, CVSL's global footprint helping it to
reduce the other CVSL's companies entry into international markets,
and Caspi™ being one of the most
innovative breakthroughs the skin care category has seen in
decades. These statements are subject to a number of risks
and uncertainties including CVSL's ability to
successfully implement its strategy 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.
Note: These measures are not defined by GAAP and the
discussion of EBITDA, Adjusted EBITDA and Adjusted Operating EBITDA
is not intended to conflict with or change any of the GAAP
disclosures described above. Management considers these measures in
addition to operating income to be important to estimate the
enterprise and stockholder values of the Company, and for making
strategic and operating decisions. In addition, analysts, investors
and creditors use these measures when analyzing our operating
performance, financial condition and cash generating ability.
Neither Adjusted EBITDA nor Adjusted Operating EBITDA should not be
construed as a substitute for net income (loss) (as determined in
accordance with GAAP) for the purpose of analyzing our operating
performance of financial position, as Adjusted EBITDA and Adjusted
Operating EBITDA are not defined by GAAP.
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SOURCE CVSL Inc.