Blueprint
Exhibit 99.1
Youngevity International, Inc. Reports 2019 Third Quarter and Nine
Months Results
Q3 YTD Consolidated Revenues Up 14.0%
SAN DIEGO, Calif. ---November 18, 2019 -
Youngevity International, Inc. (NASDAQ:
YGYI), a leading
multi-channel lifestyle company, today reported financial results
for the three and nine months ended September 30,
2019.
Steve Wallach, Chairman and CEO of Youngevity International stated,
“Although we have recently made great strides in producing
revenue growth this year, the third quarter posed a number of
challenges as we faced seasonally slower sales for the direct
selling segment and our commercial coffee segment contributed to a
seasonally slower quarter. Additionally, our commercial hemp
segment was still operating on a pre-revenue basis for this
quarter. We enter Q4 with the
anticipation of sales growth contribution coming from our latest
acquisition within the direct selling segment and with Khrysos
Industries beginning to generate revenue which has us anticipating
finishing 2019 year with double digit revenue
growth.”
Dave Briskie, President and CFO of Youngevity International stated,
“We are not pleased with Q3’s performance, however, we
are confident that we made the appropriate moves in Q3 pivoting our
commercial hemp enterprise business model. The decision to expand
Khrysos Industries into an 82,000 square foot, pharma grade, post
processing facility has prolonged the period of time we will
operate our commercial hemp enterprise on a pre-revenue basis,
however, ultimately this decision is expected to accelerate our
ability to compete, scale, and grow profitable revenue as we close
out 2019 and move into 2020”.
Third Quarter 2019 Results
Revenues
for the third quarter ended September 30, 2019 decreased 13.0% to
$34,017,000 as compared to $39,082,000 for the three months ended
September 30, 2018. We derived approximately 89.0% of our
revenue from our direct selling segment and approximately 10.5% of
our revenue from our commercial coffee segment and approximately
0.5% from our commercial hemp segment. Direct selling segment
revenues decreased by $4,024,000 or 11.7% to $30,256,000 in the
current quarter as compared to $34,280,000 for the quarter ended
September 30, 2018. This decrease was primarily attributable to a
decrease in the number of ordering customers, partially offset by
an increase in revenues from distributors due to an increase in the
average order amount per distributor. Commercial coffee segment
revenues decreased by $1,225,000 or 25.5% to $3,577,000 in the
current quarter as compared to $4,802,000 for the quarter ended
September 30, 2018. This decrease was attributed to lower revenues
in our green coffee and roasted coffee businesses. During the three
months ended September 30, 2019, there were no revenues related to
the new 2019 green coffee contract that began shipping in January
2019 as the Company sold most of the green coffee purchased under
this contract during the first half of 2019. For the three months
ended September 30, 2019, the Company’s new commercial hemp
segment recorded $184,000 in revenues.
Gross
profit for the third quarter ended September 30, 2019 decreased
approximately 16.8% to $19,738,000 as compared to $23,712,000 for
the three months ended September 30, 2018. Gross profit in the
direct selling segment decreased by 16.4% to $19,749,000 from
$23,622,000 in the same period last year primarily as a result of
the decrease in revenues discussed above and an increase in
inventory reserve expense of $691,000. Gross profit as a percentage
of revenues in the direct selling segment decreased to 65.3% for
the three months ended September 30, 2019, compared to 68.9% in the
same period last year. Gross profit in the commercial coffee
segment decreased to a loss of $163,000 compared to a profit of
$90,000 in the same period last year. The decrease in gross profit
in the commercial coffee segment was primarily due to the decrease
in revenues discussed above. Gross profit in the commercial hemp
segment was $152,000. Overall gross profit as a percentage of
revenues decreased to 58.0%, compared to 60.7% in the same period
last year, primarily due to the decrease in revenues discussed
above and the increase in inventory reserve expense of
$691,000.
Operating
expenses increased 12.3% to $28,217,000 as compared to $25,118,000
for the three months ended September 30, 2018.
Distributor
compensation paid to our independent distributors in the direct
selling segment decreased 13.0% to $13,122,000 from $15,076,000 for
the three months ended September 30, 2018 primarily as a result of
the decrease in revenues.
Total
sales and marketing expense increased 11.9% to $4,432,000 from
$3,962,000 for the three months ended September 30, 2018. In the
direct selling segment, sales and marketing expense increased by
7.0% to $4,009,000 in the current quarter from $3,747,000 for the
same period last year, primarily due to increased convention costs,
partially offset by lower marketing costs. In the commercial coffee
segment, sales and marketing expense increased by $40,000 to
$255,000 in the current quarter compared to $215,000 in the same
period last year, primarily due to increased advertising and
compensation expense. Sales and marketing expense was $168,000 in
the commercial hemp segment.
Total
general and administrative expense increased 174.8% to $10,663,000
in the current quarter from $3,880,000 for the same period last
year. In the direct selling segment, general and administrative
expense increased by 114.3% to $6,615,000 in the current quarter
from $3,087,000 for the same period last year. This increase was
primarily due to an increase in legal, accounting, computer expense
and non-cash equity-based compensation expense of $1,476,000 which
was partially offset by a decrease in intangible amortization
expense of $171,000. In addition, the contingent liability
revaluation adjustment in the current quarter was a reduction in
expense of $478,000 compared to a reduction in expense of
$2,618,000 for the same period last year. In the commercial coffee
segment, general and administrative costs increased by $1,126,000
or 142.0% to $1,919,000 in the current quarter compared to $793,000
in the same period last year. This was primarily due to an increase
in wages, warehouse storage costs and profit-sharing expense of
$863,000, compared to a profit-sharing benefit of $247,000 in the
same period last year. General and administrative expense was
$2,129,000 in the commercial hemp segment, mostly related to wages,
supplies and general office costs.
For the
three months ended September 30, 2018, our direct selling segment
recorded a loss on impairment of intangible assets related to our
acquisition of BeautiControl whereby the underlying intangible
assets were impaired and recorded a loss on impairment of
intangible assets of approximately $2,200,000.
Other expense for the third quarter ended September 30, 2019
decreased by $7,417,000 to other income of $472,000 as compared to
other expense of $6,945,000 for the three months ended September
30, 2018.
Net interest expense decreased by $298,000 to $1,109,000 for the
three months ended September 30, 2019, compared to
$1,407,000
for the same period
in the prior year.
Change in fair value of derivative liabilities increased by
$7,995,000 to $2,457,000 in other income for the three months ended
September 30, 2019 compared to $5,538,000 in other expense for the
same period in the prior year and we also recorded a non-cash loss
on modification of warrants of $876,000 in the current
quarter.
Net loss for the third quarter ended September 30, 2019 was
$7,874,000 as compared to net loss of $8,410,000 for the three
months ended September 30, 2018. The reason for the decrease in net
loss when compared to the prior period was due to the decrease in
total other expense of $7,417,000 and the increase in income tax
benefit of $192,000, offset by the increase in operating loss of
$7,073,000.
Earnings before interest, income taxes, depreciation and
amortization (“EBITDA”) as adjusted to remove
the effect of equity-based compensation expense, the loss on
impairment of intangible assets, the loss on modification of
warrants and the change in the fair value of the warrant
derivatives or "Adjusted EBITDA,"
decreased to negative $4,444,000 for the quarter ended September
30, 2019, compared to $2,670,000 in the same period last
year.
Nine Months Ended September 30, 2019 Results
Revenues for the nine months ended September 30, 2019 increased
14.0% to $144,004,000 as compared to $126,331,000
for the same period last
year. During the nine months ended September 30, 2019, we
derived approximately 66.5% of our revenue from our direct selling
sales and approximately 33.1% of our revenue from our commercial
coffee sales and approximately 0.4% from our commercial hemp
segment. Direct selling segment decreased by $10,637,000 or 10.0%
to $95,800,000 as compared to $106,437,000 for the same period last
year. This decrease was attributed to a decrease of $11,058,000 in
revenues from existing business, partially offset by revenues from
new acquisitions of $421,000. The decrease in existing business was
primarily due to a decline in the number of ordering distributors
and customers, partially offset by an increase in average order
amount per distributor. Commercial coffee segment revenues
increased by $27,785,000 or 139.7% to $47,679,000 as compared to
$19,894,000 for the same period last year. This increase was
primarily attributed to increased revenues during the first half of
2019 related to the new 2019 green coffee contract that began
shipping in January 2019 for approximately $250 million over 5
years. Our new commercial hemp segment recorded $525,000 in
revenues.
Gross profit decreased approximately 2.2% to $72,509,000 as
compared to $74,106,000 for the same period last year. Overall
gross profit as a percentage of revenues decreased to 50.4%
compared to 58.7% in the same period last year, primarily due to
increased revenues from the lower margin commercial coffee segment.
Gross profit in the direct selling segment decreased by 11.8% to
$64,744,000 from $73,444,000 in the prior period primarily as a
result of the decrease in revenues discussed above and the increase
in expense related to inventory adjustments. Gross profit as a
percentage of revenues in the direct selling segment decreased to
67.6% for the nine months ended September 30, 2019, compared to
69.0% in the same period last year. Gross profit in the
commercial coffee segment increased to $7,635,000 compared to
$662,000 in the prior period. The increase in gross profit in the
commercial coffee segment was primarily due to the increase in
revenues from our new 2019 green coffee contract discussed above.
Gross profit as a percentage of revenues in the commercial coffee
segment increased to 16.0% for the nine months ended September 30,
2019, compared to 3.3% in the same period last year. Gross profit
in the commercial hemp segment of $130,000 was related to the
February 12, 2019 acquisition of Khrysos Industries,
Inc.
Operating expenses increased 23.7% to $92,541,000 for the nine
months ended September 30, 2019, as compared to $74,835,000 for the
same period last year. This increase included an increase of
$12,892,000 in non-cash equity-based compensation expense related
to stock options issued in the first quarter of the current year.
Excluding the increase in equity-based compensation expense, the
increase in our operating expense would have been
6.4%.
Distributor compensation paid to our independent distributors in
the direct selling segment decreased 9.8% to $42,509,000 for the
nine months ended September 30, 2019 from $47,141,000 for the same
period last year. This decrease was primarily attributable to the
decrease in revenues. Distributor compensation as a percentage of
direct selling revenues increased slightly to 44.4% for the nine
months ended September 30, 2019 as compared to 44.3% for the same
period last year.
Total sales and marketing expense increased 6.6% to $11,237,000 for
the nine months ended September 30, 2019 from $10,537,000 for the
same period last year. This increase included an increase of
$471,000 in equity-based compensation expense in the first quarter
of the current year. Excluding the increase in equity-based
compensation expense, sales and marketing expense would have
increased by 2.2%. In the direct selling segment, sales and
marketing expense increased by 3.3% to $10,213,000 for the nine
months ended September 30, 2019, compared to $9,888,000 for the
same period last year. This increase included an increase of
$471,000 in equity-based compensation expense. Excluding the
increase in equity-based compensation expense, sales and marketing
expense would have decreased by 1.5%. In the commercial coffee
segment, sales and marketing costs increased by 25.1% to $812,000
for the nine months ended September 30, 2019, compared to $649,000
for the same period last year, primarily due to increased
advertising costs and compensation expense. Sales and marketing
expense were $212,000 in the commercial hemp segment for the nine
months ended September 30, 2019.
Total general and administrative expense increased 159.4% to
$38,795,000 for the nine months ended September 30, 2019 from
$14,957,000 for the same period last year. This increase
included an increase of $12,421,000 in equity-based compensation
expense in the first quarter of the current year. Excluding the
increase in equity-based compensation expense, the increase in
general and administration expense would have been 76.3%. In the
direct selling segment, general and administrative expense
increased by 132.0% to $29,112,000 for the nine months ended
September 30, 2019 from $12,547,000 for the same period last year.
This increase included an increase of $10,995,000 in equity-based
compensation expense in the first quarter of the current year.
Excluding the increase in equity-based compensation expense,
general and administrative expense would have increased by 44.4%.
This increase was primarily due to an increase in accounting and
computer consulting fees. In addition, equity issuance costs were
$3,982,000 in the current period, compared to none for the same
period last year and the contingent liability revaluation
adjustment in the current period resulted in a reduction in expense
of $911,000 compared to a reduction in expense of $4,076,000 for
the same period last year. In the commercial coffee segment,
general and administrative costs increased by 156.9% to $6,192,000
for the nine months ended September 30, 2019 compared to $2,410,000
in the same period last year. This increase included an increase of
$1,425,000 in equity-based compensation expense in the first
quarter of 2019. Excluding the increase in stock-based compensation
expense, general and administration expense in the commercial
coffee segment would have increased by 97.8%. This was primarily
due to an increase in wages, incentives, warehouse storage costs
and profit-sharing expense of $1,331,000, compared to a
profit-sharing benefit of $719,000 in the same period last year.
General and administrative expense was $3,491,000 in the commercial
hemp segment, and was mostly related to wages, supplies and general
office costs.
For the nine months ended September 30, 2018, the Company’s
direct selling segment recorded a loss on impairment of intangible
assets related to the Company’s acquisition of BeautiControl
whereby the underlying intangible assets were impaired and
recorded a loss on impairment of intangible assets of approximately
$2,200,000.
Total other expense decreased by $10,174,000 to $210,000
for the nine months ended September
30, 2019 as compared to other expense of $10,384,000 for the same
period last year. Net interest expense decreased by $990,000
to $3,678,000 for the nine months ended September 30, 2019,
compared to $4,668,000 for the same period last year. Change in
fair value of derivative liabilities increased by $8,978,000 to
$4,344,000 in other income for the nine months ended September 30,
2019 compared to $4,634,000 in other expense for the same period
last year. The Company recorded a non-cash loss on
modification of warrants of $876,000 for the three months ended
September 30, 2019 as a result of modification of the warrant terms
of certain holders. For the nine months ended September 30,
2018, the Company recorded a non-cash extinguishment loss on debt
of $1,082,000 as a result of the triggering of the automatic
conversion of the 2017 Notes associated with our July 2017 Private
Placement to common stock. There was no loss on debt extinguishment
for the nine months ended September 30, 2019.
For the
nine months ended September 30, 2019, the Company recorded an
income tax benefit of $61,000 as compared to an income tax
provision of $219,000 for the nine months ended September 30,
2018.
We
reported an increase in net loss of $8,849,000 to a net loss of
$20,181,000 for the nine months ended
September 30, 2019 as compared to a net loss of $11,332,000
for the same period last year. The reason for the increase in net
loss was due to the increase in operating loss of $19,303,000,
offset by the decrease in other expense of $10,174,000 and an
increase in income tax benefit of $280,000. The primary reason for
the increase in operating loss was the increase of $12,966,000 in
non-cash equity-based compensation expense and non-cash equity
issuance costs of $3,982,000.
Earnings before interest, income taxes, depreciation and
amortization (“EBITDA”) as adjusted to remove
the effect of equity-based compensation expense, the loss on
impairment of intangible assets, the loss on modification of
warrants, the change in the fair value of the warrant derivatives
and the loss on extinguishment of debt or "Adjusted EBITDA," decreased to $567,000 for
the nine months ended September 30, 2019, compared to $6,393,000 in
the same period last year.
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, equity-based compensation expense, change in the fair
value of the warrant derivative, non-cash impairment loss and debt
extinguishment or modification 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 $7,270,000 at September 30, 2019 versus
$2,879,000 at December 31, 2018
●
Total assets were $141,185,000 at September 30, 2019 versus
$75,973,000 at December 31, 2018
●
Total
liabilities were $85,012,000 at September 30, 2019 versus
$52,998,000 at December 31, 2018
●
Total
stockholders’ equity was $56,173,000 at September 30, 2019
versus $22,975,000 at December 31, 2018
Conference Call Information
Youngevity
International will host a conference call today, at 4:15 PM Eastern
Standard Time, (1:15 PM Pacific Standard Time), to discuss its
financial results, quarterly and yearly highlights and business
outlook.
All interested parties can
participate in the conference call by dialing
1-877-870-4263 (Toll Free)
or
1-412-317-0790 (international)
and refer to the “Youngevity International Call”. The
webcast will be accessible in the Investors section
of the Company’s website at https://ygyi.com/.
The archived webcast will be available for replay on the Youngevity
website approximately one day after the event.
About Youngevity International, Inc.
Youngevity International, Inc.
( NASDAQ : YGYI ),
is a multi-channel lifestyle company operating in three 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 sales growth
contribution coming from our latest acquisition within the direct
selling segment and with Khrysos Industries beginning to generate
revenue, finishing 2019 year with double digit revenue growth and
the decision to expand Khrysos Industries into an 82,000 square
foot, pharma grade, post processing facility accelerating our
ability to compete, scale, and grow profitable revenue as we close
out 2019 and move into 2020. 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 grow sales through our latest
acquisition within the direct selling segment and by Khrysos
Industries beginning to generate revenue, our ability to finish
2019 year with double digit revenue growth, our ability to leverage
the capabilities of Khrysos Industries’ 82,000 square foot,
pharma grade, post processing facility to accelerate our ability to
compete, scale, and grow profitable revenue, our ability to develop
and grow our 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), 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, except share and per share amounts)
(Unaudited)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$34,017
|
$39,082
|
$144,004
|
$126,331
|
Cost
of revenues
|
14,279
|
15,370
|
71,495
|
52,225
|
Gross
profit
|
19,738
|
23,712
|
72,509
|
74,106
|
Operating
expenses
|
|
|
|
|
Distributor
compensation
|
13,122
|
15,076
|
42,509
|
47,141
|
Sales
and marketing
|
4,432
|
3,962
|
11,237
|
10,537
|
General
and administrative
|
10,663
|
3,880
|
38,795
|
14,957
|
Loss
on impairment of intangible assets
|
-
|
2,200
|
-
|
2,200
|
Total
operating expenses
|
28,217
|
25,118
|
92,541
|
74,835
|
Operating
loss
|
(8,479)
|
(1,406)
|
(20,032)
|
(729)
|
Interest
expense, net
|
(1,109)
|
(1,407)
|
(3,678)
|
(4,668)
|
Change
in fair value of warrant derivative liability
|
2,457
|
(5,538)
|
4,344
|
(4,634)
|
Loss
on modification of warrants
|
(876)
|
-
|
(876)
|
-
|
Extinguishment
loss on debt
|
-
|
-
|
-
|
(1,082)
|
Total
other income (expense)
|
472
|
(6,945)
|
(210)
|
(10,384)
|
Loss
before income taxes
|
(8,007)
|
(8,351)
|
(20,242)
|
(11,113)
|
Income
tax (benefit) provision
|
(133)
|
59
|
(61)
|
219
|
Net
loss
|
(7,874)
|
(8,410)
|
(20,181)
|
(11,332)
|
Preferred
stock dividends
|
(85)
|
(92)
|
(127)
|
(137)
|
Accretion
of discount from beneficial conversion feature on preferred
stock
|
-
|
(1,386)
|
-
|
(1,386)
|
Net
loss attributable to common stockholders
|
$(7,959)
|
$(9,888)
|
$(20,308)
|
$(12,855)
|
|
|
|
|
|
Net
loss per share, basic
|
$(0.27)
|
$(0.46)
|
$(0.70)
|
$(0.61)
|
Net
loss per share, diluted
|
$(0.27)
|
$(0.46)
|
$(0.75)
|
$(0.61)
|
|
|
|
|
|
Weighted
average shares outstanding, basic
|
30,035,182
|
21,686,085
|
28,924,305
|
20,986,151
|
Weighted
average shares outstanding, diluted
|
30,039,676
|
21,686,085
|
29,003,331
|
20,986,151
|
Reconciliation of Non-GAAP Measure
Adjusted EBITDA to Net (Loss) Income
(In thousands - unaudited))
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|
|
|
|
|
Net
loss
|
$(7,874)
|
$(8,410)
|
$(20,181)
|
$(11,332)
|
Add/Subtract:
|
|
|
|
|
Interest,
net
|
1,109
|
1,407
|
3,678
|
4,668
|
Income
tax (benefit) provision
|
(133)
|
59
|
(61)
|
219
|
Depreciation
|
617
|
463
|
1,694
|
1,365
|
Amortization
|
1,249
|
724
|
2,505
|
2,416
|
EBITDA
|
(5,032)
|
(5,757)
|
(12,365)
|
(2,664)
|
Add/Subtract:
|
|
|
|
|
Equity
based compensation
|
2,169
|
689
|
16,400
|
1,141
|
Loss
on impairment of intangible assets
|
-
|
2,200
|
-
|
2,200
|
Loss
on extinguishment of debt
|
-
|
-
|
-
|
1,082
|
Loss
on modification of warrants
|
876
|
-
|
876
|
-
|
Change
in the fair value of warrant derivative
|
(2,457)
|
5,538
|
(4,344)
|
4,634
|
Adjusted
EBITDA
|
$(4,444)
|
$2,670
|
$567
|
$6,393
|
Contacts:
Youngevity International, Inc.
Dave
Briskie
President
and Chief Financial Officer
1 800
982 3189 X6500
Investor Relations
YGYI
Investor Relations
800.504.8650
investors@ygyi.com
Media Relations
Trendlogic
PR
800.992.6299
contact@trendlogicpr.com