CVSL, the parent company of Longaberger, reported a 45 percent increase in revenue for the second quarter of the year.
The direct-selling company reported revenue of $35.7 million, up from $24.6 million in the second quarter last year.
The operating loss was $2.5 million, compared with a loss of $4.1 million in last year’s second quarter.
“We are very pleased with our second quarter results,” said John Rochon Jr., vice chairman of CVSL. “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.
“We believe these results show that our strategy is working. While we continue to focus on improving the profitability of the companies we own, we intend to be opportunistic about potential acquisitions.”
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.
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.
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.
About The Longaberger Company
The Longaberger Company is America's premier maker of handcrafted baskets and offers a variety of other home and lifestyle products, including pottery and other tableware and accessories. There are approximately 15,000 independent Home Consultants located in the U.S. and Canada who sell Longaberger products directly to customers.
About CVSL Inc.
CVSL is a growing federation of direct-to-consumer companies. Within CVSL, each company retains its own separate brand identity, sales force and compensation plan. 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 UK-based seller of cleaning, health, beauty, home, outdoor and a variety of other products. CVSL also includes Happenings, a lifestyle publication and marketing company.