SAN DIEGO, April 16, 2019 /PRNewswire/ -- Youngevity
International, Inc. (NASDAQ: YGYI), a leading multi-channel
lifestyle company, today reported financial results for the fourth
quarter and full year ended December 31,
2018.
Steve Wallach, Chairman and CEO
of Youngevity International stated, "We are encouraged by the
improvement in our gross margins and the significant turnaround in
Adjusted EBITDA over 2017. We are seeing revenue
stabilization in the direct selling segment and we anticipate a
return to revenue growth in 2019. This is expected to be primarily
driven by our commercial coffee segment and our new commercial hemp
reporting segment. We are providing annual revenue guidance
for 2019 in the range of $220 million
and $240 million which represents a
projected annual growth rate between 35% and 48% over 2018.
This revenue guidance includes estimated annual revenue
contribution from our new reporting commercial hemp segment
between $45 Million and $50 Million for 2019."
Dave Briskie, President and CFO
of Youngevity International stated, "We cut our operating losses by
over 50% for the year ended 2018 and closed out the year by
achieving significant improvements to our balance sheet. As
we closed out 2018 total assets increased by over $3.5 million while total liabilities decreased by
approximately $12 million improving
stockholders' equity by over $15.5
million. Returning to profitability remains a key
focus of the business for 2019."
Fourth Quarter 2018 Results
Revenues for the fourth quarter ended December 31, 2018 decreased 12.0% to $36,114,000 as compared to $41,041,000 for the fourth quarter ended
December 31, 2017. We derived
approximately 90% of our revenue from our direct sales and
approximately 10% of our revenue from our commercial coffee sales
during the quarter. Direct selling segment revenues decreased
9.2% to $32,418,000 in the current
quarter as compared to $35,716,000
for the quarter ended December 31,
2017. Commercial coffee segment revenues decreased 30.6% to
$3,696,000 in the current quarter as
compared to $5,325,000 for the
quarter ended December 31, 2017. This
decrease was primarily attributed to timing of shipments in our
green coffee business.
Gross profit for the fourth quarter ended December 31, 2018 decreased 12.2% to $20,926,000 as compared to $23,833,000 for the fourth quarter ended
December 31, 2017. Gross profit in
the direct selling segment decreased 10% to $21,466,000 as compared to $23,857,000 for the fourth quarter ended
December 31, 2017. Gross Profit in
the commercial coffee segment was a loss of $504,000 in the current quarter, compared to a
loss of $24,000 for the fourth
quarter ended December 31, 2017.
Overall gross profit as a percentage of revenues decreased to 57.9%
in the current quarter compared to 58.1% in the same period last
year.
Operating loss for the fourth quarter ended December 31, 2018 increased $919,000 to $1,908,000 as compared to $989,000 for the fourth quarter ended
December 31, 2017. This increase was
primarily due to the lower gross profit and the loss of
$975,000 on impairment of intangible
assets in the current quarter, offset by decreases in distributor
compensation expense, sales and marketing expenses and general and
administrative expenses.
Other expense for the fourth quarter ended December 31, 2018 increased to $6,633,000 as compared to other expense of
$341,000 for the fourth quarter ended
December 31, 2017. This increase was
primarily due to the loss in debt exchange of $4,706,000, the change in the fair value of
warrant derivative of negative $11,000 in the current quarter, compared to a
gain of $1,237,000 for the same
period in the prior year and the increase in interest expense by
$338,000 in the current
quarter.
Income tax provision for the fourth quarter ended December 31, 2018 was $197,000 as compared to an income tax provision
of $5,490,000 for the fourth quarter
ended December 31, 2017. The income
tax provision in the fourth quarter ended December 31, 2017 included an increase of
$3,550,000 in the deferred tax
valuation allowance.
Net loss for the fourth quarter ended December 31, 2018 was $8,738,000 as compared to a net loss of
$6,820,000 for the fourth quarter
ended December 31, 2017. The increase
in net loss is primarily due to the increases in operating loss and
other expense discussed above, partially offset by the decrease in
income tax provision expense discussed above.
Adjusted EBITDA for the fourth quarter ended December 31, 2018 increased to $620,000 as compared to $302,000 for the fourth quarter ended
December 31, 2017.
Full Year 2018 Results
Revenues for the year ended December 31,
2018 decreased 2.0% to $162,445,000 as compared to $165,696,000 for the year ended December 31, 2017. During the year ended
December 31, 2018, we derived
approximately 85% of our revenue from our direct sales and
approximately 15% of our revenue from our commercial coffee
sales. Direct selling segment revenues decreased by
$3,595,000 or 2.5% to $138,855,000 as compared to $142,450,000 for the year ended December 31, 2017. This decrease was primarily
attributed to a decrease of $11,002,000 in revenues from existing business,
offset by revenues from new acquisitions of $7,457,000. We attribute the decrease from
existing business primarily to a general decline in net sales in
North America in the direct
selling business as well as a decline in new distributors. The
Company also changed its promotion strategy by targeting products
with higher gross margins and utilized incentives that had less
costly impact on profitability. For the year ended December 31, 2018, commercial coffee segment
revenues increased by $344,000 or
1.5% to $23,590,000 as compared to
$23,246,000 for the year ended
December 31, 2017. This increase was
primarily attributed to an increase of $1,048,000 revenues from the Company's roasted
coffee business, offset by a decrease of $704,000 in green coffee business.
For the year ended December 31,
2018, gross profit decreased approximately 0.6% to
$95,032,000 as compared to
$95,565,000 for the year ended
December 31, 2017. Overall gross
profit as a percentage of revenues increased to 58.5%, compared to
57.7% in the same period last year. Gross profit in the direct
selling segment decreased by 0.5% to $94,910,000 from $95,379,000 in the prior period primarily as a
result of the lower revenues in the current year offset by 6.6%
decrease in cost of sales. Gross profit as a percentage of revenues
in the direct selling segment increased by approximately 1.4% to
68.4% for the year ended December 31,
2018, compared to 67.0% in the same period last year. This
increase was primarily due to the price increases on certain
products that went into effect on January 1,
2018 and changes to our product sales mix. Gross profit
in the commercial coffee segment decreased by 34.4% to $122,000 compared to $186,000 in the prior period. The decrease in
gross profit in the commercial coffee segment was primarily due to
additional costs related to the roasted coffee business and
inventory reserve expense. Gross profit as a percentage of revenues
in the commercial coffee segment decreased by 0.3% to 0.5% for the
year ended December 31, 2018,
compared to 0.8% in the same period last year.
Operating expenses for the year ended December 31, 2018 decreased 3.7% to $97,669,000 as compared to $101,447,000 for the year ended December 31, 2017. Distributor compensation as a
percentage of direct selling revenues decreased to 44.0% for the
year ended December 31, 2018 as
compared to 46.2% for the year ended December 31, 2017. This decrease was primarily
attributable to the price increases reflected in 2018 revenues,
which did not impact commissionable base revenues. Sales and
marketing expense decreased by $310,000 to $13,398,000 from $13,708,000 for the year ended December 31, 2017. This was primarily due to
reduction in compensation expense, distributor events and
convention costs for the year ended December
31, 2018 as compared to the same period last year, offset by
an increase in advertising and promotion costs in the commercial
coffee segment. General and administrative expense decreased 8.6%
to $20,009,000 from $21,883,000 for the year ended December 31, 2017 primarily due to a benefit of
$6,600,000 from the contingent
liability revaluation for the year ended December 31, 2018 compared to a benefit of
$1,664,000 for the year ended
December 31, 2017. Legal expense, IT
related costs and consulting costs also decreased for the year
ended December 31, 2018. These
decreases were offset by increases in depreciation and
amortization costs, repairs and maintenance costs, investor
relations, stock-based compensation, accounting costs and increases
in costs related to operations in Mexico, Russia, New
Zealand, Taiwan and
Colombia as well as increased bad
debt expense and repairs and maintenance costs, and compensation
and finance costs in the commercial coffee segment. For the year
ended December 31, 2018, we recorded
a loss on impairment of intangible assets of approximately
$2,550,000 and $625,000 related to our acquisitions of
BeautiControl and Future Global Vision, Inc., respectively.
For the year ended December 31,
2018, operating loss decreased by $3,245,000 to an operating loss of $2,637,000 as compared to an operating loss of
$5,882,000 for the year ended
December 31, 2017. This was primarily
due to the decrease in operating expenses of $3,778,000 offset by the decrease in gross profit
of $533,000 discussed above.
For the year ended December 31,
2018, total other expense increased by $12,949,000 to $17,017,000 as compared to $4,068,000 for the year ended December 31, 2017. Net interest expense increased
by $799,000 for the year ended
December 31, 2018 to $6,584,000 compared to $5,785,000 for the year ended December 31, 2017. Change in fair value of
derivative liabilities increased by $6,670,000 for the year ended December 31, 2018 to a $4,645,000 expense compared to a benefit of
$2,025,000 for the year ended
December 31, 2017, as a result of the
change in our stock price when compared to the prior period. We
recorded a non-cash extinguishment loss on debt of $1,082,000 for the year ended December 31, 2018 as a result of the triggering
of the automatic conversion of the 2017 notes associated with our
July 2017 Private Placement to common
stock. We also recorded a non-cash loss on debt conversion of
$4,706,000 as a result of one of the
investors in our July 2014 private
placement having conversion their 2014 note for shares of common
stock.
Income tax provision for the year ended December 31, 2018 was $416,000 as compared to an income tax provision
of $2,727,000 for the year ended
December 31, 2017. The income tax
provision in the fourth quarter ended December 31, 2017 included an increase of
$3,550,000 in the deferred tax
valuation allowance.
For the year ended December 31,
2018, the Company reported a net loss of $20,070,000 as compared to net loss of
$12,677,000 for the year ended
December 31, 2017. The primary reason
for the increase in net loss when compared to the prior period was
due to the non-cash increase in Change in fair value of derivative
liabilities by $6,670,000 discussed
above, the non-cash loss on debt exchange of $4,706,000, increase of $774,000 in non-cash loss on extinguishment of
debt and the increase of $799,000 in
interest expense, offset by the decrease of $3,245,000 in operating expenses and the decrease
of $2,311,000 in income tax
expense.
EBITDA (earnings before interest, income taxes, depreciation and
amortization) as adjusted to remove the effect of stock-based
compensation expense, the change in the fair value of the warrant
derivatives, non-cash loss on impairment of intangible assets and
non-cash loss on extinguishment of debt or "Adjusted EBITDA,"
increased to $7,013,000 for the year
ended December 31, 2018, compared to
negative $549,000 in 2017.
Non-GAAP Financial Measure - Adjusted EBITDA
This news release includes information on Adjusted EBITDA, which
is a non-GAAP financial measure as defined by SEC Regulation G.
Management believes that Adjusted EBITDA, when viewed with our
results under GAAP and the accompanying reconciliations, provides
useful information about our period-over-period growth. Adjusted
EBITDA is presented because management believes it provides
additional information with respect to the performance of our
fundamental business activities and is also frequently used by
securities analysts, investors and other interested parties in the
evaluation of comparable companies. We also rely on Adjusted EBITDA
as a primary measure to review and assess the operating performance
of our company and our management team.
Adjusted EBITDA is a non-GAAP financial measure. We calculate
adjusted EBITDA by taking net income (loss), and adding back the
expenses related to interest, income taxes, depreciation,
amortization, stock-based compensation expense, change in the fair
value of the warrant derivative, non-cash impairment loss and debt
extinguishment gain or loss, as each of those elements are
calculated in accordance with GAAP. Adjusted 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 or financial position, as Adjusted EBITDA is not
defined by GAAP. A reconciliation of Adjusted EBITDA to Net Loss is
presented in the table at the end of this press release.
BALANCE SHEET HIGHLIGHTS:
Cash & cash equivalents were $2,879,000 at December 31,
2018 versus $673,000 at
December 31, 2017
Total assets were $75,973,000 at
December 31, 2018 versus $72,389,000 at December
31, 2017
Total liabilities were $52,998,000
at December 31, 2018 versus
$64,938,000 at December 31, 2017
Total stockholders' equity was $22,975,000 at December
31, 2018 versus $7,451,000 at
December 31, 2017
Conference Call Information
Youngevity International will host a conference call today at
1:00 p.m. Eastern Daylight Time
(10:00 Pacific Daylight Time) to
discuss its financial results, quarterly and yearly highlights and
business outlook.
All interested parties can attend the event by clicking
https://InstantTeleseminar.com/Events/114922488 fifteen
minutes prior to the start of the call, or by dialing 206 402
0100 and entering the access code 634174# at least five minutes
prior to the start of the call. International and alternative
numbers are available at
http://YourConferenceLine.com/Local/?eventid=114922488
The conference call will be recorded and available for replay
shortly after the conclusion of the call. An archived replay of the
call will be available for approximately 3 months on the Company's
newly launched Investor Relations website: https://ygyi.com/
About Youngevity International, Inc.
Youngevity International, Inc.
( NASDAQ : YGYI ), is an multi-channel
lifestyle company operating in 3 distinct business segments
including a commercial coffee enterprise, a commercial hemp
enterprise, and a multi-vertical omni direct selling
enterprise. The Company features a multi country selling
network and has assembled a virtual Main Street of products and
services under one corporate entity, YGYI offers products from the
six top selling retail categories: health/nutrition, home/family,
food/beverage (including coffee), spa/beauty, apparel/jewelry, as
well as innovative services. For investor information, please visit
YGYI.com. Be sure to like us on Facebook and follow us on
Twitter
Safe Harbor Statement
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. In
some cases, forward-looking statements can be identified by
terminology such as "may," "should," "potential," "continue,"
"expects," "anticipates," "intends," "plans," "believes,"
"estimates," and similar expressions, and includes statements
regarding returning to revenue growth in 2019 primarily driven by
our commercial coffee segment and our new commercial hemp reporting
segment, the $220 Million to
$240 Million estimated revenue for
2019 and the $45 Million to
$50 Million estimated revenue
contribution from the commercial hemp segment for 2019. These
forward-looking statements are based on management's expectations
and assumptions as of the date of this press release and are
subject to a number of risks and uncertainties, many of which are
difficult to predict that could cause actual results to differ
materially from current expectations and assumptions from those set
forth or implied by any forward-looking statements. Important
factors that could cause actual results to differ materially from
current expectations include, among others, our ability to generate
$45 Million to $50 Million in revenue in 2019 through new
commercial hemp segment, our ability to drive revenue in our
commercial coffee segment, our ability to continue our
international growth, our ability to leverage our platform and
global infrastructure to drive organic growth, our ability to
return to profitability, expand our liquidity, and strengthen our
balance sheet, our ability to continue to maintain compliance with
the NASDAQ requirements, the acceptance of the omni-direct approach
by our customers, our ability to expand our distribution, our
ability to add additional products (whether developed internally or
through acquisitions), our ability to achieve $220 Million to $240
million in revenue for 2019, and the other factors discussed
in our Annual Report on Form 10-K for the year ended December 31, 2018 and our subsequent filings with
the SEC, including subsequent periodic reports on Forms 10-Q and
8-K. The information in this release is provided only as of the
date of this release, and we undertake no obligation to update any
forward-looking statements contained in this release on account of
new information, future events, or otherwise, except as required by
law.
Table follows
Youngevity
International, Inc. and Subsidiaries
|
|
|
|
|
Condensed
Consolidated Statements of Operations
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
$
36,114
|
|
$
41,041
|
|
$
162,445
|
|
$
165,696
|
Cost of
revenues
|
15,188
|
|
17,208
|
|
67,413
|
|
70,131
|
Gross
profit
|
20,926
|
|
23,833
|
|
95,032
|
|
95,565
|
Operating
expenses
|
|
|
|
|
|
|
|
Distributor
compensation
|
13,946
|
|
16,360
|
|
61,087
|
|
65,856
|
Sales and
marketing
|
2,861
|
|
3,058
|
|
13,398
|
|
13,708
|
General and
administrative
|
5,052
|
|
5,404
|
|
20,009
|
|
21,883
|
Loss on
impairment of intangible assets
|
975
|
|
-
|
|
3,175
|
|
-
|
Total operating expenses
|
22,834
|
|
24,822
|
|
97,669
|
|
101,447
|
Operating
loss
|
(1,908)
|
|
(989)
|
|
(2,637)
|
|
(5,882)
|
Interest
expense, net
|
(1,916)
|
|
(1,578)
|
|
(6,584)
|
|
(5,785)
|
Change in fair
value of derivative liabilities
|
(11)
|
|
1,237
|
|
(4,645)
|
|
2,025
|
Loss on debt
conversion
|
(4,706)
|
|
-
|
|
(4,706)
|
|
-
|
Extinguishment
loss on debt
|
-
|
|
-
|
|
(1,082)
|
|
(308)
|
Total other expense
|
(6,633)
|
|
(341)
|
|
(17,017)
|
|
(4,068)
|
Net loss before
income taxes
|
(8,541)
|
|
(1,330)
|
|
(19,654)
|
|
(9,950)
|
Income tax
provision
|
197
|
|
5,490
|
|
416
|
|
2,727
|
Net loss
|
$
(8,738)
|
|
$
(6,820)
|
|
$
(20,070)
|
|
$
(12,677)
|
Deemed dividend on
preferred stock
|
(1,890)
|
|
-
|
|
(3,276)
|
|
-
|
Preferred stock
dividends
|
(14)
|
|
(3)
|
|
(151)
|
|
(12)
|
Net loss attributable
to common stockholders
|
$
(10,642)
|
|
$
(6,823)
|
|
$
(23,497)
|
|
$
(12,689)
|
|
|
|
|
|
|
|
|
Basic loss per
share
|
$
(0.46)
|
|
$
(0.35)
|
|
$
(1.09)
|
|
$
(0.65)
|
Diluted loss per
share
|
$
(0.46)
|
|
$
(0.35)
|
|
$
(1.09)
|
|
$
(0.68)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding, basic
|
23,386,248
|
|
19,723,285
|
|
21,589,226
|
|
19,672,445
|
Weighted average
shares outstanding, diluted
|
23,386,248
|
|
19,723,285
|
|
21,589,226
|
|
19,751,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Measure
|
|
|
|
|
|
Adjusted EBITDA to
Net Loss
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net loss
|
$
(8,738)
|
|
$
(6,820)
|
|
$
(20,070)
|
|
$
(12,677)
|
Add:
|
|
|
|
|
|
|
|
Interest
|
1,916
|
|
1,578
|
|
6,584
|
|
5,785
|
Income
taxes
|
197
|
|
5,490
|
|
416
|
|
2,727
|
Depreciation
|
454
|
|
373
|
|
1,819
|
|
1,556
|
Amortization
|
463
|
|
735
|
|
2,879
|
|
2,782
|
EBITDA
|
(5,708)
|
|
1,356
|
|
(8,372)
|
|
173
|
Add:
|
|
|
|
|
|
|
|
Stock based
compensation
|
636
|
|
(158)
|
|
1,777
|
|
654
|
Fair value of
warrants
|
-
|
|
341
|
|
-
|
|
341
|
Loss on
impairment of intangible assets
|
975
|
|
-
|
|
3,175
|
|
-
|
Loss on
extinguishment of debt
|
-
|
|
-
|
|
1,082
|
|
308
|
Change in the
fair value of warrant derivatives
|
11
|
|
(1,237)
|
|
4,645
|
|
(2,025)
|
Loss on debt
conversion
|
4,706
|
|
-
|
|
4,706
|
|
-
|
Adjusted
EBITDA
|
$
620
|
|
$
302
|
|
$
7,013
|
|
$
(549)
|
Contacts:
Youngevity International, Inc.
Dave Briskie
President and Chief Financial Officer
800.982.3189 ext.6500
Investor Relations
YGYI Investor Relations
800.504.8650
investors@ygyi.com
Media Relations
Trendlogic PR
800.992.6299
contact@trendlogicpr.com
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SOURCE Youngevity International, Inc.