CVSL Q2 Report Blows Away Estimates & Q3 Looking Strong

August 17, 2015 at 1:30 am 1 comment

CVSL impressed in every way with its Q2 report late Thursday evening, with major upside surprises on the top and bottom lines and eye-popping margin improvements. CVSL management made a statement with this report, in a tacit response to short sellers, traders and other Wall Street naysayers who had pushed the shares down to levels that essentially rendered a judgement that the CVSL model could not work. Revenue for the quarter was $35.7 million, up from $24.6 million in the second quarter last year, an increase of 45.2% and significantly ahead of our expectations for $30 million. Operating loss was $2.5 million, compared to a loss of $4.1 million in last year’s second quarter, an improvement of 39.0%. 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.

Key takeaways from the reported results – the geo-political issues that negatively impacted Agel in Q1 were not a factor in Q2 and the revenue production rebounded with a 17.2% sequential gain in revenue. Despite the distractions of the Longaberger CEO’s departure during the early part of the quarter, in the back half of the quarter Longaberger’s results rallied significantly and led to the company’s first sequential revenue gain (4% over Q1) in many years. Additionally, the “Your Inspiration at Home” business has continued to grow like wildfire and has now grown 8 fold since it was acquired by CVSL two years ago. In each instance, the thing that is becoming much clearer is that the adjustments made by CVSL with each of these businesses are starting to have a very positive impact on each division’s performance.

The only thing more bullish than the reported numbers for CVSL was the discussion of the company’s performance since the end of Q2. During the Q&A session following management’s prepared remarks, Mr. Rochon was asked if Longaberger’s late Q2 momentum had continued into July to which he replied that the company seems to have regained its confidence and seemed to turn a corner in its revival. Additionally, he stated “…Last month the recruiting at Longaberger was the best in a decade….leading to a stunning revenue result for July”. Additionally, management discussed the excitement building around Agel’s new skin care line that will launch next month. While they were not willing to make any predictions as to sales or revenue impact on Q3, Mr. Rochon called the product “Stunning….takes the best of my work in the 40 years I have been in the industry”.

Thus, we are seeing significant momentum in two of CVSL’s largest divisions, momentum unlike anything seen in the company’s three years of existence. This is occurring at a time when the stock is still trading at an enormous discount to its slower growing peers in the direct sales space and still down about 90% from the levels it was trading at when many of the questions that were answered in this report began to surface. We believe CVSL at $1.63 is an aberration that will be corrected soon and that the days of CVSL trading below $2 per share are numbered.

Advertisements

Entry filed under: Uncategorized.

CVSL – Projections as Q2 On Deck Remark Media Acquires Vegas.com But At What Price?

1 Comment Add your own

  • 1. Tim Cunningham  |  August 18, 2015 at 4:08 pm

    Have to believe a move to $5 over the next 12 months is assured now unless some unforeseen event happens.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Enter your email address to follow this blog and receive notifications of new posts by email.