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Joshua Rodriguez
Joshua Rodriguez
Articles (32) 

Will Youngevity International Be the Next Direct Sales Powerhouse?

The company is taking direct sales to the next level

June 08, 2017 | About:

(This article was originally featured on CNA Finance.)

Youngevity International Inc. (YGYID) is achieving growth by building upon an omni-direct "consumer cloud" driven by an independent direct selling network. Despite the Herbalife Ltd. (NYSE:HLF) headline saga, companies that engage in the direct sales business models are far from losing competitive traction. In fact, a small handful, including Youngevity, are experiencing growth through multiple revenue streams and a customer focus enabled by state-of-the-art technologies.

What drives the Youngevity story? At the heart of the matter is a commitment to three key factors: 1. Providing ways to help people improve their physical and emotional wellbeing, through unique products, including best-in-class nutritional products grounded in years of research. 2. Building a culture of belief and a community of like-minded distributors who are looking for achievement in their lives. That success may come in different forms and varying degrees depending on personal goals. 3. Giving back, with a focus on social responsibility that is carried out through the Be the Change Foundation.

Here is a six-minute video that represents both the mission and enthusiasm at Youngevity. It may change the way you look at direct sales companies, and will certainly convey why this company is unique.

Youngevity Your Path to Betterment from Youngevity International on Vimeo.

What has Youngevity already done?

While there may be a tendency to compare Youngevity to Herbalife and its multiyear headline-making battle, investors should know the only real similarity is that the two engage in direct sales business models.

The quick answer is Youngevity has done quite a bit since becoming an OTC-traded company in 2012. It has built out a seasoned leadership team and is experiencing impressive growth as a result of a focused and clear business strategy.

Some of the prioritized initiatives include improving operational efficiencies, developing a core competency in brand acquisition, creating a technology roadmap and developing effective global e-commerce and social selling platforms (youngevitybetausa.com). As a result, annual revenue increased to $163 million in 2016, a staggering 307% increase from just $40 million in 2011. Youngevity is already positioned as a Top 100 Global Direct Selling Company and has recently secured a NASDAQ listing that may open the door to substantial institutional interest.

So even accounting for the revenue growth, the richly experienced leadership team and the NASDAQ uplisting, discerning investors may want to know more.

Since 2012, Youngevity has consummated 16 mergers and acquisitions. These complement and help build the company's portfolio and provide diversification for the consumer products division. They further strengthen the commitment to support socially conscious efforts, with the addition of brands like Good Herbs, Beyond Organic, RESTART Your Life, Sta Natural and Paws Group. One of the most exciting areas for acquisition has been services. Telecare is a direct access portal to doctors and medical care via telephone consultations, and David Allen Capital offers small lending services that can provide same-day loan approval.

The global initiative

While Youngevity is expected to generate organic revenue growth from these accretive acquisitions, some of the significant opportunities continue to be generated from the company's scalable and sustainable global expansion efforts. With just 9% of current revenue recorded from sales outside of the United States, the international market represents a relatively untapped venue to support a global growth strategy. Internationally located, Youngevity has offices in New Zealand, Mexico, Russia and Singapore. This global strategy is intended to extend product and service offerings to countries identified as having immediate and long-term growth opportunities as well as having the ability to serve as a corridor for expansion into neighboring countries.

The company has also secured revenue-generating opportunities in the Eastern regions of the world, with offices in Taiwan, Malaysia, Hong Kong and the Philippines. Global product development and distribution rights have been met with enthusiastic praise from these countries. Future targets will include highly populated countries in Latin America, Southeast Asia and Eastern Europe. Global expansion will serve as an avenue for explosive growth within the next several years.

The culture at Youngevity

Satisfying customers, the markets and the communities it serves is a driving force. Youngevity is attracting motivated and socially-conscious customers, distributors and employees. The company intends to continue to adapt to and address rapidly evolving consumer preferences in the marketplace.

As an example, take a look at company-owned CLR Roasters (clrroasters.com). Café La Rica, one of its brands, has quickly become the fifth best-selling espresso brand in the United States. The coffee roasting operation is based in Miami, Florida and enjoys the capacity to roast up to 10 million pounds of coffee per year in its 50,000 square foot facility. Primarily focused on the CLR brands, Youngevity also extends its offerings by creating private-label package design, marketing opportunities and brand building for commercial customers. CLR Roasters entered the single-serve K-Cup market in 2015 and extended its market presence in national grocery and retail chains throughout the world. CLR Roasters is also served aboard major cruise lines and is the official coffee of the Miami Marlins baseball team - served proudly in its stadium.

Coffee is the connective thread between the business side of the company and the socially-conscious side. Being a vertically integrated coffee company, delivering field to cup production, Youngevity takes both pride in and advantage of its company-owned coffee plantation and state-of-the-art dry processing facility in Matagalpa, Nicaragua. Youngevity plans to purchase a second plantation in the coming months. With CLR Roasters using only sustainable farming methods to foster increased yields, as well as realize cost savings, the brand has become a recognized leader in providing high-quality coffee. In addition to quality, the company is also credited for being U.S. Department of Agriculture Organic, Rainforest Alliance Certified, Fair Trade Certified and Bird Friendly Certified.

Serving as an exemplary model for sustainable and responsible business practices, the CLR Roaster model demonstrates the socially engaged culture at Youngevity. A new generation of consumers are intent on supporting companies like it. 

CLR Plantation | Matagalpa, Nicaragua from Youngevity International on Vimeo.

Youngevity financials at a glance

This is where the story gets even better. While the company has a great fundamental story, the financial details are just as provocative. The growth at Youngevity cannot be understated as it has experienced steady revenue growth since 2012. Although the expenses related to an aggressive merger and acquisition strategy may trickle to the bottom line of the financials in the short term, what remains certain is Youngevity is an EBITDA-positive company, and has been since fiscal 2013. From the company's most recent fiscal 2016 filing, gross revenue exceeded $162 million and produced EBITDA income of $6.77 million.

The balance sheet shows cash on hand and receivables of approximately $3.8 million at the end of fiscal 2016 and $66 million in total assets. Stockholders equity stood at $18.98 million, up 62% from its fiscal 2013 level of $11.7 million.

Youngevity has traded within a tight and arguably undervalued level over the past 52-weeks, with an adjusted high of $6.40 and a low price of $4.60 per share. Average volume is roughly 80,000 shares traded per day, and the company currently has 19.65 million shares outstanding after a 1:20 reverse split. Importantly, insiders own 77% of the company stock, so investors who may become spooked by the split should take comfort in knowing management has a similar incentive in creating value for both themselves and company shareholders. Keep this in mind as well. With Youngevity performing admirably on multiple levels, the promise for institutional and investor interest is magnified once the Nasdaq listing is maintained. With a small float of roughly 4.5 million shares, new acquisition and revenue news may be met with strong upside bias in the trading of shares, as liquidity and demand for shares may have a positive impact on stock price movement.

The Youngevity difference

For investors getting their first look into Youngevity, there is a tide of promising data that should enthuse even the most conservative of investors. Youngevity is a company with an extraordinarily strong leadership team that in less than five years has driven revenue and brand equity significantly higher. Looking ahead, investors should expect more of the same.

The company has proven its ability to drive organic growth, implementing a global expansion plan that is likely to generate explosive revenue opportunities. The merger and acquisition strategy is ongoing and has created accretive cash flow for the company, allowing leadership to intensify its product expansion to both diversify the scope of the business and attract a larger base of both consumers and distributors.

In addition to building its offering through acquisitions, the Youngevity internal product development engine is strong. Examples include a roadmap of compelling nutritional supplements with superior formulations as well as technology-driven products like SNAP2FINISH- a stunning web application that offers photo gifts (beta.snap2finish.com).

Already offering over 5,000 high-quality consumer goods through an updated and user-friendly web portal, Youngevity has developed a business platform designed to provide seamless and efficient development of global commerce. In essence, the company acts as a "parent brand" to a diverse product base, inclusive of food and beverage, wellness, apparel and jewelry, spa and beauty and nutrition and wellness options, with each category being demand-driven throughout the world. Capitalizing on a demand-driven business model, Youngevity has turned a substantial 89% of its revenue through direct sales and has also built an impressive market in its commercial coffee segment, which has driven 11% of the company's total revenues.

Youngevity is fostering a development strategy that is expected to pay long-term rewards for investors. Growth in a global market, taking advantage of technological advances to seamlessly develop new markets and the vision to build a diversified and worldwide brand through socially-conscious means is a testament to the forethought the management team has put into its strategic initiatives. The world has seen a paradigm shift in the way business is conducted, and the prolific use of social media can either become a key ally or foe for an emerging company. For Youngevity, the story is positive, compelling and timely.

Even if investors were to leave the 307% growth in revenue on the side for just a moment, the numerous intrinsic factors at play could surely make up for the difference. In reality, though, the surging revenue growth is important and, combined with the value-driven business model in place, the decision to invest into Youngevity stock should not be a difficult choice to make.

Disclaimer: I/We have no position in any stock mentioned herein nor any plans to open a position within the next 72 hours.


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