Natural Health Trends Reports Second Quarter 2019 Financial Results
August 07 2019 - 9:00AM
Natural Health Trends Corp. (NASDAQ: NHTC), a leading
direct-selling and e-commerce company that markets premium quality
personal care, wellness and “quality of life” products
under the NHT Global brand, today announced its financial results
for the second quarter ended June 30, 2019.
Second Quarter 2019 Financial
Highlights
- Revenue of $23.4 million decreased 54% compared to $50.9
million in the second quarter of 2018 and increased 21% compared to
$19.3 million in the first quarter of 2019.
- Gross profit was $18.0 million compared to $40.5 million in the
second quarter of 2018, and $14.1 million in the first quarter of
2019. As a percent of total revenue, gross profit was 77% compared
to 80% in the second quarter of 2018 and 73% in the first quarter
of 2019.
- Operating loss was $4,000 compared to operating income of $10.1
million in the second quarter of 2018, and operating loss of $2.7
million in the first quarter of 2019.
- Net income was $397,000, or $0.04 per diluted share, compared
to $9.0 million, or $0.80 per diluted share, in the second quarter
of 2018, and a net loss of $1.9 million, or $0.17 per diluted
share, in the first quarter of 2019.
- The number of Active Members1 decreased 10% to 78,280 at
June 30, 2019, compared to 87,340 at March 31, 2019, and
decreased 16% compared to 93,000 at June 30, 2018.
1 Natural Health Trends defines Active Members
as those that have placed at least one product order with the
Company during the preceding twelve-month period.
Year-to-Date 2019 Financial
Highlights
- Revenue of $42.8 million decreased 59% compared to $103.3
million in the first six months of 2018.
- Gross profit was $32.1 million compared to $82.7 million in the
first six months of 2018. As a percent of total revenue, gross
profit was 75% compared to 80% in the first six months of
2018.
- Operating loss was $2.7 million compared to operating income of
$20.2 million in the first six months of 2018.
- Net loss was $1.5 million, or $0.14 per diluted share, compared
to net income of $17.8 million, or $1.58 per diluted share, in the
first six months of 2018.
Management Commentary
“While we continued to face challenges in China that placed
significant pressure on our top-line, we were pleased with the high
level of commitment shown by our members through the difficult
operating environment,” commented Chris Sharng, President of
Natural Health Trends Corp. “As a result, our second quarter
revenue was up 21% compared to the first quarter of 2019. Though
the Chinese government’s 100-day campaign expired in late April,
there has been no official conclusion to formally end the program.
As such, we continued our voluntary suspension of member activities
in China through the entirety of the second quarter as our
cooperation with the Chinese government is a top priority. We
continue to believe this proactive approach is the best way to
position our company for longer-term success and support the
actions taken by the Chinese government to protect Chinese
consumers.”
Mr. Sharng further commented, “We are encouraged by our progress
in other key markets, especially Latin America, led by Peru;
Southeast Asia; India and Europe. Further, we deployed several
different promotions throughout the quarter to encourage product
purchases which were very well received by our members.”
Balance Sheet and Cash Flow
- Net cash used in operating activities was $3.7 million,
including a $1.7 million installment payment on tax payables
arising from the 2016 Tax Reform Act effect, compared to $11.4
million in the first quarter of 2019, and net cash provided by
operating activities of $5.3 million in the second quarter of 2018.
For the first six months of 2019, net cash used in
operating activities was $15.1 million, compared to net
cash provided by operating activities of $16.5 million in the
first six months of 2018.
- Total cash and cash equivalents were $108.1 million as of
June 30, 2019, down from $132.7 million as of December 31,
2018.
- The Company repurchased 612,729 shares of its common stock at
an average price of $10.90 for a total of $6.7 million during the
second quarter of 2019. As of June 30, 2019, $25.3 million of
the stock repurchase program remained available for future
purchases, inclusive of related estimated income tax.
Second Quarter 2019 Financial Results Conference
Call
Management will host a conference call to discuss the second
quarter 2019 financial results today, Wednesday, August 7, 2019 at
11:30 a.m. Eastern Time. The conference call details are as
follows:
| Date: |
Wednesday, August 7, 2019 |
| Time: |
11:30 a.m. Eastern Time / 8:30
a.m. Pacific Time |
| Dial-in: |
1-877-407-0789
(Domestic)1-201-689-8562 (International) |
| Conference
ID: |
13691790 |
| Webcast: |
http://public.viavid.com/index.php?id=134956 |
For those unable to participate during the live broadcast, a
replay of the call will also be available from 2:30 p.m. Eastern
Time on August 7, 2019 through 11:59 p.m. Eastern Time on August
21, 2019 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671
(international) and referencing the replay pin number:
13691790.
About Natural Health Trends Corp.
Natural Health Trends Corp. (NASDAQ: NHTC) is an international
direct-selling and e-commerce company operating through its
subsidiaries throughout Asia, the Americas, and Europe. The
Company markets premium quality personal care products under the
NHT Global brand. Additional information can be found on the
Company’s website at www.naturalhealthtrendscorp.com.
Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Forward-looking statements in this press
release do not constitute guarantees of future performance.
Such forward-looking statements are subject to risks and
uncertainties that could cause the Company’s actual results to
differ materially from those anticipated. Such risks and
uncertainties include the risks and uncertainties detailed under
the caption “Risk Factors” in Natural Health Trends Corp.’s Annual
Report on Form 10-K filed on April 26, 2019 with the Securities and
Exchange Commission. The Company assumes no obligation to
update any forward-looking information contained in this press
release or with respect to the announcements described herein.
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED BALANCE
SHEETS(In thousands, except share
data)
| |
June 30, 2019 |
|
December 31, 2018 |
| |
(Unaudited) |
|
|
|
ASSETS |
|
|
|
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
108,106 |
|
|
$ |
132,653 |
|
|
Inventories |
10,343 |
|
|
12,165 |
|
|
Other current assets |
6,127 |
|
|
5,369 |
|
| Total current assets |
124,576 |
|
|
150,187 |
|
| Property and equipment, net |
887 |
|
|
934 |
|
| Operating lease right-of-use
assets |
3,796 |
|
|
— |
|
| Goodwill |
1,764 |
|
|
1,764 |
|
| Restricted cash |
3,000 |
|
|
2,998 |
|
| Deferred tax asset |
1,210 |
|
|
1,207 |
|
| Other assets |
858 |
|
|
831 |
|
| Total assets |
$ |
136,091 |
|
|
$ |
157,921 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
675 |
|
|
$ |
1,631 |
|
|
Accrued commissions |
7,051 |
|
|
12,502 |
|
|
Other accrued expenses |
3,676 |
|
|
6,121 |
|
|
Deferred revenue |
3,390 |
|
|
6,795 |
|
|
Amounts held in eWallets |
13,879 |
|
|
14,611 |
|
|
Operating lease liabilities |
1,741 |
|
|
— |
|
|
Other current liabilities |
1,116 |
|
|
1,424 |
|
| Total current liabilities |
31,528 |
|
|
43,084 |
|
| Income taxes payable |
15,365 |
|
|
16,982 |
|
| Deferred tax liability |
187 |
|
|
186 |
|
| Long-term incentive |
7,531 |
|
|
7,808 |
|
| Operating lease liabilities |
2,128 |
|
|
— |
|
| Total liabilities |
56,739 |
|
|
68,060 |
|
| Stockholders’ equity: |
|
|
|
|
Preferred stock |
— |
|
|
— |
|
|
Common stock |
13 |
|
|
13 |
|
|
Additional paid-in capital |
86,249 |
|
|
86,415 |
|
|
Retained earnings |
40,169 |
|
|
44,431 |
|
|
Accumulated other comprehensive loss |
(1,192 |
) |
|
(1,250 |
) |
|
Treasury stock, at cost |
(45,887 |
) |
|
(39,748 |
) |
| Total stockholders’ equity |
79,352 |
|
|
89,861 |
|
| Total liabilities and
stockholders’ equity |
$ |
136,091 |
|
|
$ |
157,921 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(In thousands, except per share
data)
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Net sales |
$ |
23,428 |
|
|
$ |
50,910 |
|
|
$ |
42,756 |
|
|
$ |
103,277 |
|
| Cost of sales |
5,407 |
|
|
10,399 |
|
|
10,631 |
|
|
20,620 |
|
| Gross profit |
18,021 |
|
|
40,511 |
|
|
32,125 |
|
|
82,657 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
Commissions expense |
11,398 |
|
|
22,310 |
|
|
20,896 |
|
|
45,290 |
|
|
Selling, general and administrative expenses |
6,627 |
|
|
8,093 |
|
|
13,942 |
|
|
17,215 |
|
| Total operating expenses |
18,025 |
|
|
30,403 |
|
|
34,838 |
|
|
62,505 |
|
| Income (loss) from
operations |
(4 |
) |
|
10,108 |
|
|
(2,713 |
) |
|
20,152 |
|
| Other income, net |
373 |
|
|
53 |
|
|
805 |
|
|
216 |
|
| Income (loss) before income
taxes |
369 |
|
|
10,161 |
|
|
(1,908 |
) |
|
20,368 |
|
| Income tax provision
(benefit) |
(28 |
) |
|
1,138 |
|
|
(382 |
) |
|
2,521 |
|
| Net income (loss) |
$ |
397 |
|
|
$ |
9,023 |
|
|
$ |
(1,526 |
) |
|
$ |
17,847 |
|
| Net income (loss) per common
share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.04 |
|
|
$ |
0.80 |
|
|
$ |
(0.14 |
) |
|
$ |
1.58 |
|
|
Diluted |
$ |
0.04 |
|
|
$ |
0.80 |
|
|
$ |
(0.14 |
) |
|
$ |
1.58 |
|
| Weighted-average number of common
shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
11,082 |
|
|
11,298 |
|
|
11,207 |
|
|
11,292 |
|
|
Diluted |
11,082 |
|
|
11,305 |
|
|
11,207 |
|
|
11,297 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(In thousands)
| |
Six Months Ended June 30, |
| |
2019 |
|
2018 |
| CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
| Net income (loss) |
$ |
(1,526 |
) |
|
$ |
17,847 |
|
| Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
|
Depreciation and amortization |
189 |
|
|
235 |
|
|
Noncash lease expense |
914 |
|
|
— |
|
|
Deferred income taxes |
(3 |
) |
|
— |
|
| Changes in assets and
liabilities: |
|
|
|
|
Inventories |
1,881 |
|
|
(2,057 |
) |
|
Other current assets |
(752 |
) |
|
1,955 |
|
|
Other assets |
(35 |
) |
|
(73 |
) |
|
Accounts payable |
(956 |
) |
|
1,246 |
|
|
Accrued commissions |
(5,475 |
) |
|
(707 |
) |
|
Other accrued expenses |
(1,946 |
) |
|
1,119 |
|
|
Deferred revenue |
(3,409 |
) |
|
(592 |
) |
|
Amounts held in eWallets |
(765 |
) |
|
(192 |
) |
|
Operating lease liabilities |
(964 |
) |
|
— |
|
|
Income taxes payable |
(1,617 |
) |
|
(1,657 |
) |
|
Other current liabilities |
(318 |
) |
|
(72 |
) |
|
Long-term incentive |
(277 |
) |
|
(562 |
) |
| Net cash provided by (used in)
operating activities |
(15,059 |
) |
|
16,490 |
|
| CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
Purchases of property and equipment |
(141 |
) |
|
(113 |
) |
| Net cash used in investing
activities |
(141 |
) |
|
(113 |
) |
| CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
Repurchase of common stock |
(6,682 |
) |
|
— |
|
|
Dividends paid |
(2,736 |
) |
|
(23,093 |
) |
| Net cash used in financing
activities |
(9,418 |
) |
|
(23,093 |
) |
| Effect of exchange rates on cash,
cash equivalents and restricted cash |
73 |
|
|
(381 |
) |
| Net decrease in cash, cash
equivalents and restricted cash |
(24,545 |
) |
|
(7,097 |
) |
| CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of period |
135,651 |
|
|
138,478 |
|
| CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of period |
$ |
111,106 |
|
|
$ |
131,381 |
|
| SUPPLEMENTAL DISCLOSURES OF OTHER
CASH FLOW INFORMATION: |
|
|
|
|
Issuance of treasury stock for employee awards, net |
$ |
377 |
|
|
$ |
554 |
|
|
Right-of-use assets obtained in exchange for operating lease
liabilities |
$ |
4,697 |
|
|
$ |
— |
|
CONTACTS:
Company Contact:Scott DavidsonSenior Vice
President and Chief Financial OfficerNatural Health Trends Corp.Tel
(Hong Kong): +852-3107-0800Tel (U.S.):
310-541-0888scott.davidson@nhtglobal.com
Investor Contact:ADDO Investor RelationsTel:
310-829-5400investor.relations@nhtglobal.com
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