Youngevity Reports 2017 Q4 Revenue – Up 6.9% To $41 Million

Youngevity International, Inc.(NASDAQ:YGYI), a leading omni-direct lifestyle company, today reported financial results for the fourth quarter and full year ended December 31, 2017.

Steve Wallach, Chairman and CEO of Youngevity International stated,

We are encouraged by the revenue growth experienced in Q4 and we are optimistic that this growth will continue into 2018.

We made a considerable investment in our global infrastructure over the last several years including 2017 and we believe that we are just beginning to see this investment producing revenues.’

Dave Briskie, President and CFO of Youngevity International stated,

Organic growth, which had been a challenge for us during the first three quarters of 2017 seemed to bounce back in Q4. We expect Q1 to display continued progress.

With our coffee segment revenue up considerably and international markets showing 28.9% revenue increases over 2016, we intend to set our sights on delivering profitability and improvement to our balance sheet.  This will be a main focus of 2018.’

Fourth Quarter 2017 Results

Revenues for the fourth quarter ended December 31, 2017 increased 6.9% to $41,041,000 as compared to $38,403,000 for the fourth quarter ended December 31, 2016. We derived approximately 87% of our revenue from our direct sales and approximately 13% of our revenue from our commercial coffee sales during the quarter.

Direct selling segment revenues increased 2.0% to $35,716,000 in the current quarter as compared to $35,025,000 for the quarter ended December 31, 2016. Commercial coffee segment revenues increased 57.6% to $5,325,000 in the current quarter as compared to $3,378,000 for the quarter ended December 31, 2016. This increase was primarily attributed to increased revenues in our green coffee business.

Gross profit for the fourth quarter ended December 31, 2017 increased 3.7% to $23,833,000 as compared to $22,975,000 for the fourth quarter ended December 31, 2016. Gross profit percentage increase was lower than our revenue percentage increase primarily due to the increase in the green coffee business which carries lower margins. Overall gross profit as a percentage of revenues decreased to 58.1% in the current quarter compared to 59.8% in the same period last year.

Operating loss for the fourth quarter ended December 31, 2017 increased $241,000 to $989,000 as compared to $748,000 for the fourth quarter ended December 31, 2016. This increase was primarily due to increases in operating expenses related to our international expansion and legal fees.

Income tax provision for the fourth quarter ended December 31, 2017 was $5,490,000 as compared to an income tax benefit of $740,000 for the fourth quarter ended December 31, 2016. The Company increased the deferred tax valuation allowance by $3,550,000 for the year ended December 31, 2017. The final income tax provision for the year, combined with the additional valuation allowance discussed above resulted in an income tax provision of $5,490,000 for the fourth quarter ended December 31, 2017.

Net loss for the fourth quarter ended December 31, 2017 was $6,820,000 as compared to a net loss of $507,000 for the fourth quarter ended December 31, 2016. The increase in net loss is primarily due to the income tax provision expense discussed above.

Adjusted EBITDA for the fourth quarter ended December 31, 2017 was $302,000 as compared to  $352,000 for the fourth quarter ended December 31, 2016.

Full Year 2017 Results

Revenues for the year ended December 31, 2017 increased 1.9% to $165,696,000 as compared to $162,667,000 for the year ended December 31, 2016. During the year ended December 31, 2017, we derived approximately 86% of our revenue from our direct sales and approximately 14% of our revenue from our commercial coffee sales.

Direct selling segment revenues decreased by $2,968,000 or 2.0% to $142,450,000 as compared to $145,418,000 for the year ended December 31, 2016. For the year ended December 31, 2017, commercial coffee segment revenues increased by $5,997,000 or 34.8% to $23,246,000 as compared to $17,249,000 for the year ended December 31, 2016. This increase was primarily attributed to increased revenues in our green coffee business and coffee roasting business.

Gross profit for the year ended December 31, 2017 decreased 2.6% to $95,565,000 as compared to $98,137,000 for the year ended December 31, 2016. Gross profit in the direct selling segment decreased by 1.9% to $95,379,000 from $97,219,000 in the prior period primarily as a result of the decrease in revenues discussed above. Gross profit as a percentage of revenues in the direct selling segment increased by approximately 0.1% to 66.9% for the year ended December 31, 2017, compared to 66.8% in the same period last year.

Gross profit in the commercial coffee segment decreased to $186,000 compared to $918,000 in the prior period. The decrease in gross profit in the commercial coffee segment was primarily due to increase in raw material costs in the roasting business and additional costs incurred due to increased direct labor costs, repairs and maintenance, depreciation expense and the lower margin impact from the green coffee business. Overall gross profit as a percentage of revenues decreased to 57.7% in the current quarter compared to 60.3% in the same period last year.

Operating expenses for the year ended December 31, 2017 increased 6.1% to $101,447,000 as compared to $95,622,000 for the year ended December 31, 2016. Sales and marketing expense increased 31.6% to $13,708,000 from $10,413,000 for the year ended December 31, 2016 primarily due to increases in convention and distributor events costs, increased wages and related benefits and increased marketing expenses. The increase in convention cost was primarily due to the 20^th anniversary celebration of the Company. General and administrative expense increased 21.2% to $21,883,000 from $18,061,000 for the year ended December 31, 2016 primarily due to increased legal fees related to litigation, computer and internet related costs, international expansion, investor relations, depreciation, amortization and stock-based compensation costs.

Operating loss for the year ended December 31, 2017 was $5,882,000 as compared to operating income of $2,515,000 for the year ended December 31, 2016.

Total other expense for the year ended December 31, 2017, increased by $965,000 to $4,068,000 as compared to $3,103,000 for the year ended December 31, 2016. Total other expense includes net interest expense, the change in the fair value of derivative liabilities and extinguishment loss on debt.

Income tax provision for the year ended December 31, 2017 was $2,727,000 as compared to an income tax benefit of $190,000 for the year ended December 31, 2016. This increase was primarily due to the increase in deferred tax valuation allowance by $3,550,000 offset by income tax benefit for the year ended December 31, 2017.

For the year ended December 31, 2017, the Company reported a net loss of $12,677,000 as compared to net loss of $398,000 for the year ended December 31, 2016.

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 derivative and extinguishment loss on debt or “Adjusted EBITDA,” decreased to a negative $549,000 for the year ended December 31, 2017 compared to $6,772,000 in 2016.

About Youngevity International, Inc.

Youngevity International, Inc. (NASDAQ:YGYI), is a leading omni-direct lifestyle company — offering a hybrid of the direct selling business model, that also offers e-commerce and the power of social selling. Assembling a virtual Main Street of products and services under one corporate entity, Youngevity 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.

The Company was formed in the course of the summer 2011 merger of Youngevity Essential Life Sciences with Javalution® Coffee Company (now part of the company’s food and beverage division).