Mannatech, Incorporated
(NASDAQ: MTEX), a global health and
wellness company committed to transforming lives to make a better
world, today announced financial results for its second quarter of
2017.
Second Quarter Results
Second quarter net sales for 2017 were $47.7 million, a decrease
of $1.1 million, or 2.3% as compared to $48.8 million in the second
quarter of 2016. Income (loss) from operations was $2.8 million for
the second quarter 2017, as compared to $(0.1) million in the same
period in 2016. Net income (loss) was $1.8 million, or $0.65 per
diluted share, for the second quarter 2016, as compared to $(1.3)
million, or $(0.49) per diluted share, for the second quarter
2016.
For the three months ended June 30, 2017, our net sales declined
3.5% on a constant dollar basis (see Non-GAAP Financial Measures,
below) as compared to the same period in 2016. Excluding the
effects due to the translation of foreign currencies into U.S.
dollars, net sales would have declined $1.7 million for the three
months ended June 30, 2017.
For the three months ended June 30, 2017, Mannatech’s operations
outside of the Americas accounted for approximately 59.1% of
Mannatech’s consolidated net sales.
Second quarter 2017 Asia/Pacific net sales decreased by $1.6
million, or 6.1%, to $24.7 million, as compared to $26.3 million
for the same period in 2016. This decrease was primarily due to a
9.0% decrease in revenue per active independent associate and
member, which was partially offset by a 3.2% increase in the number
of active independent associates and members. During the three
months ended June 30, 2017, the loyalty program increased sales by
$0.3 million, as compared to the same period in 2016. Foreign
currency exchange had the effect of increasing revenue by $0.4
million for the three months ended June 30, 2017, as compared to
the same period in 2016. The currency impact is primarily due to
the strengthening of the Korean Won and Taiwanese Dollar, which was
partially offset by the weakening of the Japanese Yen and Chinese
Yuan (Renminbi).
EMEA net sales remained the same at $3.5 million for the three
months ended June 30, 2017 and 2016. During this comparative
period, the number of active independent associates and members in
EMEA increased 1.0%, which was partially offset by a 1.0% decrease
in revenue per active independent associate and member. Foreign
currency exchange had the effect of increasing revenue by $0.2
million when the three-month period ending June 30, 2017 is
compared to the same period in 2016. The currency impact is
primarily due to the strengthening of the South Africa Rand, which
was partially offset by the weakening of the British Pound and the
Euro.
For the three months ended June 30, 2017, net sales in the
Americas increased by $0.5 million, or 2.6%, to $19.5 million, as
compared to $19.0 million for the same period in 2016. This
increase was primarily due to a 12.1% increase in revenue per
active independent associate and member, which was partially offset
by an 8.5% decline in the number of active independent associates
and members. During the three months ended June 30, 2017, the
loyalty program in the Americas increased sales by $0.4 million, as
compared to the same period in 2016.
Commission expenses for the three months ended June 30, 2017
decreased by 5.7%, or $1.1 million, to $18.3 million, as compared
to $19.4 million for the same period in 2016. For the three months
ended June 30, 2017, commissions as a percentage of net sales
decreased to 38.5% from 39.7% for the same period in 2016. During
the first quarter, we recorded commission expense on the pre-launch
in certain Asia/Pacific markets of new products that were available
after our annual convention held in April 2017.
Incentive costs for the three months ended June 30, 2017
decreased by 30.0%, or $0.3 million, to $0.7 million, as compared
to $1.0 million for the same period in 2016. The decrease was due
to a decline in the number of qualified individuals within the
Americas attending incentive trips. For the three months ended June
30, 2017, incentives as a percentage of net sales decreased to 1.3%
from 2.1% for the same period in 2016.
The number of new and continuing active independent associates
and members who purchased our packs or products during the twelve
months ended June 30, 2017 and 2016 were approximately 218,000
and 222,000, respectively. Recruitment of new independent
associates and members decreased 6.7% during the three months ended
June 30, 2017 as compared to the same period in 2016. The number of
new independent associate and member positions held by individuals
in our network for the three months ended June 30, 2017 was
approximately 26,500, as compared to 28,400 for the same period in
2016.
For the three months ended June 30, 2017, selling and
administrative expenses increased by $0.3 million, or 2.5%, to
$10.0 million, as compared to $9.7 million for the same period in
2016. Our marketing related costs increased $0.4 million due to
increased expenses in respect of our Mannafest event held in Las
Vegas. During the second quarter, we recorded severance charges of
$0.2 million, which were partially offset by decreases in other
payroll costs stemming from fewer employees and a $0.1 million
decrease in stock based compensation expense. Selling and
administrative expenses, as a percentage of net sales, for the
three months ended June 30, 2017 increased to 20.9% from 19.9% for
the same period in 2016.
For the three months ended June 30, 2017, other operating costs
decreased by $1.5 million, or 18.8%, to $6.7 million, as compared
to $8.2 million for the same period in 2016. For the three months
ended June 30, 2017, other operating costs as a percentage of net
sales decreased to 14.0% from 16.8% for the same period in 2016.
The decrease was due to a $0.7 million decrease in travel and
entertainment costs, a $0.3 million decrease in accounting and
auditing fees, a $0.3 million decrease in legal and consulting fees
and a $0.2 million decrease in bad debt expense.
As of June 30, 2017, our cash and cash equivalents
increased by 24.0%, or $6.9 million, to $35.6 million from $28.7
million as of December 31, 2016. Our inventory balance at
June 30, 2017 was $10.9 million, compared to $12.0 million at
December 31, 2016, reflecting sales at our successful
Mannafest event in Las Vegas, Nevada, in April.
Our accounts payable balance at June 30, 2017 increased to
$6.1 million, compared to $5.2 million at December 31, 2016,
due to incentive costs. At June 30, 2017, our commissions and
incentives payable increased to $9.7 million from $8.8 million at
December 31, 2016, due to timing of our commission payments.
During the second quarter of 2017, we paid dividends of $0.3
million and repurchased approximately $0.1 million of our
stock.
Non-GAAP Measures
In addition to results presented in accordance with GAAP, this
press release and related tables include certain non-GAAP financial
measures, including a presentation of constant dollar measures. We
disclose operating results that have been adjusted to exclude the
impact of changes due to the translation of foreign currencies into
U.S. dollars, including changes in: Net Sales, Gross Profit, and
Income from Operations.
We believe that these non-GAAP financial measures provide useful
information to investors because they are an indicator of the
strength and performance of ongoing business operations. The
constant currency figures are financial measures used by management
to provide investors an additional perspective on trends. Although
we believe the non-GAAP financial measures enhance investors’
understanding of our business and performance, these non-GAAP
financial measures should not be considered an exclusive
alternative to accompanying GAAP financial measures. Please see the
accompanying table entitled "Non-GAAP Financial Measures" for a
reconciliation of these non-GAAP financial measures.
Conference Call
Mannatech will host a conference call to discuss the quarter’s
results with investors on Wednesday, August 9, 2017 at 9 a.m.
CDT, 10 a.m. EDT. The live call will be webcast and can be accessed
on Mannatech’s website at http://ir.mannatech.com.
For those unable to listen to the live broadcast, a replay will
be available shortly after the call. The toll-free replay number is
(855) 859-2056 (International (404) 537-3406); the Conference ID to
access the call is 62143919.
Individuals interested in Mannatech’s products or in exploring
its business opportunity can learn more at Mannatech.com.
MANNATECH, INCORPORATED AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
amounts)
ASSETS
June 30, 2017(unaudited)
December 31,2016
Cash and cash equivalents $ 35,561 $ 28,687 Restricted cash 1,514
1,510 Accounts receivable, net of allowance of $507 and $463 in
2017 and 2016, respectively 405 298 Income tax receivable 3 1,587
Inventories, net 10,868 11,961 Prepaid expenses and other current
assets, net 2,659 3,483 Deferred commissions 3,233
3,229
Total current assets 54,243
50,755 Property and equipment, net 3,234 3,611 Construction
in progress 1,294 1,012 Long-term restricted cash 6,776 6,429 Other
assets 3,617 4,013 Long-term deferred tax assets, net 5,595
5,368
Total assets $
74,759 $ 71,188 LIABILITIES
AND SHAREHOLDERS’ EQUITY Current portion of capital leases $
392 $ 357 Accounts payable 6,130 5,223 Accrued expenses 5,139 5,605
Commissions and incentives payable 9,679 8,799 Taxes payable 1,528
1,040 Current notes payable 843 801 Deferred revenue 8,326
8,156
Total current liabilities
32,037 29,981 Capital leases, excluding current
portion 182 261 Long-term deferred tax liabilities 30 29 Long-term
notes payable 286 567 Other long-term liabilities 1,413
1,465
Total liabilities 33,948
32,303 Commitments and contingencies
Shareholders’ equity: Preferred stock, $0.01 par value,
1,000,000 shares authorized, no shares issued or outstanding — —
Common stock, $0.0001 par value, 99,000,000 shares authorized,
2,753,789 shares issued and 2,711,372 shares outstanding as of June
30, 2017 and 2,758,275 shares issued and 2,688,790 shares
outstanding as of December 31, 2016 — — Additional paid-in capital
35,293 38,190 Retained earnings 7,202 7,331 Accumulated other
comprehensive income 3,482 1,834 Treasury stock, at average cost,
42,417 shares as of June 30, 2017 and 69,485 shares as of December
31, 2016, respectively (5,166 ) (8,470 )
Total
shareholders’ equity 40,811
38,885 Total liabilities and shareholders’
equity $ 74,759 $ 71,188
MANNATECH,
INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS – (UNAUDITED)
(in thousands, except per share
information)
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017
2016 Net sales $ 47,686 $
48,810 $ 88,327 $ 89,518 Cost of
sales 8,786 10,100 17,548
18,489
Gross profit 38,900
38,710 70,779 71,029 Operating expenses:
Commissions and incentives 18,994 20,417 36,075 36,034 Selling and
administrative expenses 9,978 9,730 18,632 18,322 Depreciation and
amortization expense 453 477 955 920 Other operating costs
6,656 8,198 14,332 15,329
Total operating expenses 36,081 38,822 69,994 70,605
Income (loss) from operations 2,819 (112
) 785 424 Interest income 19 23 48 11 Other
income (expense), net (9 ) (1,037 ) 32
(703 )
Income (loss) before income taxes 2,829
(1,126 ) 865 (268 ) Income tax
provision (1,034 ) (206 ) (317 ) (472 )
Net income (loss) $ 1,795 $
(1,332 ) $ 548 $
(740 ) Earnings (loss) per common share: Basic
$ 0.66 $ (0.49 ) $
0.20 $ (0.27 ) Diluted
$
0.65 $ (0.49 ) $
0.19 $ (0.27 )
Weighted-average common shares outstanding: Basic
2,711 2,707 2,706
2,701 Diluted
2,778
2,707 2,775
2,701
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), we disclose operating results that have been adjusted to
exclude the impact of changes due to the translation of foreign
currencies into U.S. dollars, including changes in: Net Sales,
Gross Profit, and Income from Operations. We refer to these
adjusted financial measures as constant dollar items, which are
non-GAAP financial measures. We believe these measures provide
investors an additional perspective on trends. To exclude the
impact of changes due to the translation of foreign currencies into
U.S. dollars, we calculate current year results and prior year
results at a constant exchange rate, which is the prior year’s
rate. Currency impact is determined as the difference between
actual growth rates and constant currency growth rates.
Three-month period ended
(in millions, except percentages)
June 30, 2017 June 30,
2016 Constant $ Change GAAP
Measure:
Total $
Non-GAAP
Measure:
Constant $
GAAP
Measure:
Total $
Dollar Percent Net Sales $ 47.7 $ 47.1
$ 48.8 $ (1.7 ) (3.5 )% Product 40.3 39.8 40.1 (0.3 ) (0.7 )% Pack
6.0 5.9 7.5 (1.6 ) (21.3 )% Other 1.4 1.4 1.2 0.2 16.7 % Gross
Profit 38.9 38.4 38.7 (0.3 ) (0.8 )% Income (loss) from Operations
2.8 2.5 (0.1 ) 2.6 (2,600.0 )%
Six-month period
ended
(in millions, except percentages)
June 30, 2017 June 30, 2016 Constant $ Change
GAAP
Measure:
Total $
Non-GAAP
Measure:
Constant $
GAAP
Measure:
Total $
Dollar Percent Net Sales $ 88.3 $ 86.8 $ 89.5 $ (2.7
) (3.0 )% Product 74.1 72.9 73.8 (0.9 ) (1.2 )% Pack 11.7 11.4 13.2
(1.8 ) (13.6 )% Other 2.5 2.5 2.5 — — % Gross Profit 70.8 69.6 71.0
(1.4 ) (2.0 )% Income (loss) from Operations 0.8 0.2 0.4 (0.2 )
(50.0 )%
About Mannatech
Mannatech, Incorporated offers a full body wellness experience
through its global network of independent associates and members.
With more than 20 years of experience and operations in 26 markets,
Mannatech is committed to transforming lives. For more information,
visit Mannatech.com.
Please Note: This release contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally can be identified by use
of phrases or terminology such as “may,” “will,” “should,” “could,”
“would,” “expects,” “plans,” “intends,” “anticipates,” “believes,”
“estimates,” “approximates,” “predicts,” “projects,” “potential,”
and “continues” or other similar words or the negative of such
terminology. Similarly, descriptions of Mannatech’s objectives,
strategies, plans, goals or targets contained herein are also
considered forward-looking statements. This release should be read
in conjunction with all of its filings with the United States
Securities and Exchange Commission and Mannatech cautions its
readers that these forward-looking statements are subject to
certain events, risks, uncertainties, and other factors. Some of
these factors include, among others, Mannatech’s inability to
attract and retain associates and members, increases in
competition, litigation, regulatory changes, and its planned growth
into new international markets. Although Mannatech believes that
the expectations, statements, and assumptions reflected in these
forward-looking statements are reasonable, it cautions readers to
always consider all of the risk factors and any other cautionary
statements carefully in evaluating each forward-looking statement
in this release, as well as those set forth in its latest Annual
Report on Form 10-K, and other filings filed with the United States
Securities and Exchange Commission, including its current reports
on Form 8-K. All of the forward-looking statements contained herein
speak only as of the date of this release.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170808005339/en/
Mannatech, IncorporatedDonna Giordano, 972-471-6512Manager,
Executive Office
Administrationir@mannatech.comwww.mannatech.com
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