Name: Legacy Education Alliance, Inc. Q1 2015 Earnings Call
Start: 2015-05-18T00:00:00.000Z

Executive Summary

Q1 2015 revenue declined 18.4% year over year to $21.7M as changes in revenue recognition (DVD fulfillment) and lower elite course attendance in North America more than offset international growth; cash sales were flat at $22.7M .
Mix-shift and higher G&A drove an operating loss of $0.7M (EBIT margin -3.2%) and net loss of $0.6M (net margin -2.8%); prior-year included a litigation settlement benefit and had stronger elite attendance, yielding $4.7M net income and $0.30 EPS .
International expansion is accelerating: non-U.S. sales rose to 29.0% of revenue (vs. 24.7% YoY), with new offices opening in Hong Kong and South Africa, partially offsetting North American softness and reducing reliance on the Rich Dad brand .
No formal financial guidance or earnings call transcript was furnished; management expects year-over-year comparisons to normalize by year-end as accounting changes anniversary, and continues to emphasize brand diversification and international growth .

What Went Well and What Went Wrong

What Went Well
- International momentum: non-U.S. sales reached 29.0% of revenue vs. 24.7% a year ago; new offices in Hong Kong and South Africa strengthen the growth platform (“continues to gain momentum”) .
- Marketing efficiency: media spend per registrant improved to $55 from $69 YoY, indicating better customer acquisition efficiency .
- Lower royalties: royalty expense fell $1.0M YoY due to lower 2014 rates (though rates revert in 2015), cushioning the revenue decline .
What Went Wrong
- Accounting-driven revenue headwind: a change in revenue recognition for DVD fulfillment reduced recognized “breakage” revenue by $4.0M, materially pressuring YoY comparisons .
- Attendance softness in North America elite courses (U.S., Canada, U.K.) reduced revenue by $2.2M; overall elite attendance was a key drag .
- Cost mix and higher G&A (+$0.7M) led to negative operating leverage, swinging to a $0.7M operating loss despite total operating costs down only 3.4% YoY .

Metric	Q1 2014	Q1 2015
Revenue ($M)	$26.639	$21.743
Total Operating Costs & Expenses ($M)	$23.285	$22.454
Income (Loss) from Operations ($M)	$3.354	$(0.711)
Net Income (Loss) ($M)	$4.736	$(0.611)
Diluted EPS ($)	$0.30	$(0.03)
EBIT Margin %	12.6%	(3.2%)
Net Income Margin %	17.8%	(2.8%)

Segment	Q1 2014 Revenue ($M)	Q1 2015 Revenue ($M)	Q1 2014 Mix	Q1 2015 Mix
United States	$20.046	$15.434	75.3%	71.0%
Canada	$1.740	$1.468	6.5%	6.7%
U.K.	$4.455	$4.075	16.7%	18.8%
Other Foreign Markets	$0.398	$0.766	1.5%	3.5%
Total	$26.639	$21.743	100.0%	100.0%

KPI	Q1 2014	Q1 2015
Cash Sales ($M)	$22.7	$22.7
Non-U.S. Sales (% of Revenue)	24.7%	29.0%
Rich Dad Brand Revenue (% of total)	89.0%	84.0%
Royalty Expense ($M)	$2.191	$1.201
Media Spend per Registrant ($)	$69	$55
Net Cash from Operating Activities ($M)	$3.311	$0.668

Note: Deferred revenue at period-end was $56.4M at 12/31/2014 and $55.9M at 3/31/2015 .

Metric	Period	Previous Guidance	Current Guidance	Change
Formal financial guidance	2015	None disclosed	None disclosed; press release furnished results only	Maintained (no guidance)

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2015)	Trend
International expansion	2014 focus on expanding into Europe, Africa, Asia; international share 20.6% for 2014	Non-U.S. sales 29.0% of Q1 revenue; new offices (Hong Kong, South Africa)	Improving mix toward international
Brand diversification vs. Rich Dad	Plan to decrease North America reliance; rebrand advanced training to Elite Legacy	CEO reiterated goal to “decrease our reliance on the Rich Dad brand in North America”	Ongoing diversification
Revenue recognition / breakage	Significant breakage revenue recognized in 2014 ($34.1M FY)	Change in DVD fulfillment recognition reduced breakage in Q1 by $4.0M; comps to normalize by year-end	Accounting headwind near term, normalizing later
Marketing efficiency & financing	2014 media spend per registrant improved ($65 vs $71); third‑party financing introduced to aid sales/cash flow	Media spend per registrant improved further to $55 (from $69)	Efficiency gains continuing
Royalty structure/costs	2014 royalty rate halved; $1.3M debt cancelled	Royalty expense down $1.0M YoY; 2015 rates revert to normal	2014 tailwind fading in 2015

“Our focus on international expansion, which began in earnest in 2014, continues to gain momentum… With our new offices opening in Hong Kong and South Africa, we will further strengthen our foundation for long-term growth… and decrease our reliance on the Rich Dad brand in North America.” — Anthony Humpage, CEO .
“We are pleased that we are executing on our strategy, although our results were negatively impacted by certain accounting changes… This impacts year-over-year comparisons, which we expect will normalize by year-end.” — Anthony Humpage, CEO .
Executive overview highlights ongoing plans to access public financing, invest in systems/technology, diversify brands, and expand internationally following the 2014 reverse merger .

The company did not furnish an earnings call transcript for Q1 2015; only a press release (Exhibit 99.1) was filed with the 8‑K item 2.02 . As a result, no public Q&A clarifications are available for this quarter.

Wall Street consensus estimates (S&P Global) were not available for LEAI; thus, no “vs. estimates” comparisons are presented. Benchmarking is provided versus prior-year actuals from company filings .

Accounting-driven revenue headwinds masked steady cash sales and improved marketing efficiency; as recognition changes anniversary, reported revenue should better reflect underlying demand into year‑end per management .
International expansion is a real pivot: mix is shifting toward the U.K. and other markets, lowering North American reliance and mitigating brand concentration risk over time .
Royalty expense tailwinds from 2014 will fade as 2015 rates revert, keeping focus on cost discipline (G&A creep) and mix to protect margins .
Watch elite course attendance in North America—identified as a key pressure point on revenue and profitability this quarter .
Liquidity supported by large deferred revenue and positive but reduced operating cash flow; execution on fulfillment and cost control remains critical .
No guidance or call transcript increases uncertainty; monitor subsequent 10‑Qs/8‑Ks for updates on international scaling, brand diversification, and normalization of comps .