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
fourth quarter and full year ended December 31, 2018.
Fourth Quarter 2018 Financial
Highlights
- Total revenue of $41.6 million decreased 10% compared to $46.1
million in the fourth quarter of 2017, and decreased 12% compared
to $47.0 million in the third quarter of 2018.
- Revenue from the Company’s Hong Kong operations, which
represented 86% of total revenue, was $35.8 million, a decrease of
10% compared to $39.6 million in the fourth quarter of 2017.
- Revenue outside of Hong Kong of $5.8 million decreased 10%
compared to $6.5 million in the fourth quarter of 2017.
- Gross profit was $32.8 million compared to $36.7 million in the
fourth quarter of 2017, and $37.1 million in the third quarter of
2018. As a percent of total revenue, gross profit was 79% compared
to 80% in the fourth quarter of 2017 and 79% in the third quarter
of 2018.
- Operating income was $5.7 million compared to $8.7 million in
the fourth quarter of 2017, and $7.8 million in the third quarter
of 2018. As a percent of total revenue, operating income was 14%
compared to 19% in the fourth quarter of 2017 and 17% in the third
quarter of 2018.
- Net income was $5.6 million, or $0.49 per diluted share,
compared to a net loss of $4.5 million, or $0.40 per diluted share,
in the fourth quarter of 2017, and net income of $7.6 million, or
$0.67 per diluted share, in the third quarter of 2018. Net loss for
the fourth quarter of 2017 included a one-time net charge of $12.5
million, or $1.11 per diluted share, as a result of the Tax Cuts
and Jobs Act of 2017 (the “Tax Act”). The one-time net charge was
due to the repatriation tax on the deemed repatriation of foreign
income and the re-measurement of net deferred tax assets. Excluding
the impact of the Tax Act, Non-GAAP earnings per diluted share were
$0.71 in the fourth quarter of 2017. Non-GAAP earnings per diluted
share is defined below and is reconciled to earnings per diluted
share in the table entitled “Reconciliation from earnings per
diluted share to Non-GAAP earnings per diluted share.”
- The number of Active Members1 increased 1% to 97,840 at
December 31, 2018, compared to 97,160 at September 30,
2018, and increased 2% compared to 95,670 at December 31,
2017.
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.
Full Year 2018 Financial Highlights
- Total revenue of $191.9 million decreased 3% compared to $197.6
million in 2017.
- Gross profit was $152.5 million compared to $158.9 million in
2017. As a percent of total revenue, gross profit was 80%,
consistent with 2017.
- Operating income was $33.7 million compared to $43.1 million in
2017. As a percent of total revenue, operating income was 18%
compared to 22% in 2017.
- Net income was $31.0 million, or $2.74 per diluted share,
compared to net income of $23.6 million, or $2.09 per diluted
share, in 2017. Excluding the impact of the Tax Act, Non-GAAP
earnings per diluted share were $3.20 in 2017.
Management Commentary
“While 2018 was a challenging year, I’m very pleased with the
ability of our company and members to navigate the difficult
macroeconomic environment,” commented Chris Sharng, President of
Natural Health Trends Corp. “This unpredictable and challenging
operating climate, driven by increased global trade tensions,
China’s slowing economy and a weaker currency resulted in a decline
in revenue. Notably, the Chinese Yuan’s depreciation of 10% against
the Hong Kong dollar since February essentially made our products
more expensive for our Chinese consumers in 2018. Without the
impact of the Yuan devaluation, revenue for the full year of 2018
would have been flat with 2017.”
Mr. Sharng further commented, “While we experienced attractive
growth in many global markets and are encouraged by the continuing
positive sentiment from our leaders, given the global macroeconomic
backdrop and the increased regulatory and media scrutiny in China,
we are cautious regarding our performance in 2019 due to the
potential impact on our operations from the global trade
environment, exchange rate fluctuations, adverse local publicity
and the Chinese government’s 100-day campaign. As a result of this
campaign and consistent with our past strategies and those of
peers, we voluntarily decided in January to temporarily
suspend our member activities while proactively cooperating with
all relevant government agencies to ensure we continue to conduct
our business in compliance with all applicable laws in China. While
I am confident this is the best approach to position our Company to
successfully operate in the long-term, this suspension of member
activities may have a material adverse effect on our business in
the near-term. Despite these elements that are beyond our control,
we remain focused on geographical expansion opportunities and
leader education to further our progress.”
Corporate Development
The Company has relocated its corporate headquarters from Los
Angeles, California to Hong Kong. The strategic decision was made
to align with and further expand the Company’s presence in Asia,
where the majority of its business is conducted, improve
operational efficiency, and provide greater access between leaders,
members and the Company.
Balance Sheet and Cash Flow
- Net cash provided by operating activities was $4.4 million,
compared to $11.3 million in the fourth quarter of 2017. For the
full year of 2018, net cash provided by operating activities was
$29.7 million, compared to $26.6 million in 2017.
- Total cash and cash equivalents were $132.7 million at the end
of the fourth quarter of 2018, up from $132.2 million as of the
third quarter of 2018, and down slightly from $135.3 million as of
the fourth quarter 2017.
- On January 27, 2019, the Company’s Board of Directors
declared a quarterly cash dividend of $0.16, as well as a special
cash dividend of $0.08 per share on outstanding common stock. The
dividends will be payable on March 15, 2019 to stockholders of
record as of March 5, 2019.
- As of December 31, 2018, $32.0 million of the stock repurchase
program previously approved on July 28, 2015 and increased on
January 13, 2016 remained available for future purchases, inclusive
of related estimated income tax.
The Company expects to issue its 2018 audited financial results
in March with its Annual Report on Form 10-K to be filed with the
Securities and Exchange Commission. The financial results are
preliminary and the accompanying financial statements have not been
audited or have not yet been reviewed by the Company’s independent
accountants. Significant updates and revisions may be required
before the release of the Company’s 2018 audited financial
results.
Use of Non-GAAP Financial Measure
The Company included in this release a non-GAAP financial
measure, “Non-GAAP earnings per diluted share,” which is derived by
excluding the one-time net charge resulting from the Tax Act from
the most directly comparable GAAP financial measure of “earnings
per diluted share” for both the quarter and year ended December 31,
2017.
Management’s exclusion of the one-time net charge in calculating
Non-GAAP earnings per diluted share is intended to facilitate a
more useful period-to-period comparison of the Company’s financial
results and to provide additional information about the incremental
impact of the Tax Act, namely the repatriation tax on the deemed
repatriation of foreign income and the re-measurement of net
deferred tax assets to which the Company was subject in the fourth
quarter and year ended December 31, 2017. This non-GAAP
financial measure is supplemental and should not be considered in
isolation or as a substitute for the corresponding financial
measure prepared in accordance with GAAP.
The Company’s financial statements provided with this release
include a reconciliation of Non-GAAP earnings per diluted share to
earnings per diluted share.
Fourth Quarter and Full Year 2018 Financial Results
Conference Call
Management will host a conference call to discuss the fourth
quarter and full year 2018 financial results today, Thursday,
February 21, 2019 at 4:30 p.m. Eastern Time. The conference call
details are as follows:
|
|
Date: |
Thursday, February 21,
2019 |
Time: |
4:30 p.m. Eastern Time /
1:30 p.m. Pacific Time |
Dial-in: |
1-877-407-0789
(Domestic)1-201-689-8562 (International) |
Conference
ID: |
13687705 |
Webcast: |
http://public.viavid.com/index.php?id=133312 |
|
|
For those unable to participate during the live broadcast, a
replay of the call will also be available from 7:30 p.m. Eastern
Time on February 21, 2019 through 11:59 p.m. Eastern Time on March
7, 2019 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671
(international) and referencing the replay pin number:
13687705.
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 March 27, 2018 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)
|
December 31, 2018 |
|
December 31, 2017 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
132,653 |
|
|
$ |
135,311 |
|
Inventories |
12,165 |
|
|
8,398 |
|
Other
current assets |
5,369 |
|
|
7,534 |
|
Total current
assets |
150,187 |
|
|
151,243 |
|
Property and equipment,
net |
934 |
|
|
1,149 |
|
Goodwill |
1,764 |
|
|
1,764 |
|
Restricted cash |
2,998 |
|
|
3,167 |
|
Deferred tax asset |
1,207 |
|
|
1,435 |
|
Other assets |
831 |
|
|
796 |
|
Total assets |
$ |
157,921 |
|
|
$ |
159,554 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
1,631 |
|
|
$ |
1,751 |
|
Income
taxes payable |
287 |
|
|
309 |
|
Accrued
commissions |
12,502 |
|
|
11,170 |
|
Other
accrued expenses |
6,121 |
|
|
7,605 |
|
Deferred
revenue |
6,795 |
|
|
4,455 |
|
Amounts
held in eWallets |
14,611 |
|
|
15,152 |
|
Other
current liabilities |
1,137 |
|
|
1,479 |
|
Total current
liabilities |
43,084 |
|
|
41,921 |
|
Income taxes
payable |
16,982 |
|
|
19,052 |
|
Deferred tax
liability |
186 |
|
|
56 |
|
Long-term
incentive |
7,808 |
|
|
7,904 |
|
Total liabilities |
68,060 |
|
|
68,933 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,415 |
|
|
86,683 |
|
Retained
earnings |
44,431 |
|
|
44,908 |
|
Accumulated other comprehensive loss |
(1,250 |
) |
|
(413 |
) |
Treasury
stock, at cost |
(39,748 |
) |
|
(40,570 |
) |
Total stockholders’
equity |
89,861 |
|
|
90,621 |
|
Total liabilities and
stockholders’ equity |
$ |
157,921 |
|
|
$ |
159,554 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)
|
Three Months EndedDecember 31, |
|
Year EndedDecember 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Net sales |
$ |
41,590 |
|
|
$ |
46,092 |
|
|
$ |
191,910 |
|
|
$ |
197,563 |
|
Cost of sales |
8,821 |
|
|
9,424 |
|
|
39,367 |
|
|
38,645 |
|
Gross profit |
32,769 |
|
|
36,668 |
|
|
152,543 |
|
|
158,918 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Commissions expense |
20,211 |
|
|
19,796 |
|
|
87,502 |
|
|
83,638 |
|
Selling,
general and administrative expenses |
6,825 |
|
|
8,186 |
|
|
31,309 |
|
|
32,221 |
|
Total operating
expenses |
27,036 |
|
|
27,982 |
|
|
118,811 |
|
|
115,859 |
|
Income from
operations |
5,733 |
|
|
8,686 |
|
|
33,732 |
|
|
43,059 |
|
Other income, net |
324 |
|
|
143 |
|
|
789 |
|
|
367 |
|
Income before income
taxes |
6,057 |
|
|
8,829 |
|
|
34,521 |
|
|
43,426 |
|
Income tax
provision |
498 |
|
|
13,317 |
|
|
3,486 |
|
|
19,848 |
|
Net income (loss) |
$ |
5,559 |
|
|
$ |
(4,488 |
) |
|
$ |
31,035 |
|
|
$ |
23,578 |
|
Net income (loss) per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.49 |
|
|
$ |
(0.40 |
) |
|
$ |
2.75 |
|
|
$ |
2.10 |
|
Diluted |
$ |
0.49 |
|
|
$ |
(0.40 |
) |
|
$ |
2.74 |
|
|
$ |
2.09 |
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
11,321 |
|
|
11,272 |
|
|
11,304 |
|
|
11,251 |
|
Diluted |
11,329 |
|
|
11,272 |
|
|
11,318 |
|
|
11,267 |
|
Cash dividends declared
per common share |
$ |
0.34 |
|
|
$ |
0.27 |
|
|
$ |
2.77 |
|
|
$ |
1.52 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands)
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
(Unaudited) |
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
31,035 |
|
|
$ |
23,578 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
424 |
|
|
536 |
|
Stock-based compensation |
— |
|
|
35 |
|
Cumulative translation adjustment realized in net income |
— |
|
|
(258 |
) |
Deferred
income taxes |
358 |
|
|
(1,644 |
) |
Changes in assets and
liabilities: |
|
|
|
Inventories |
(3,879 |
) |
|
2,843 |
|
Other
current assets |
2,065 |
|
|
(3,399 |
) |
Other
assets |
(55 |
) |
|
(61 |
) |
Accounts
payable |
(116 |
) |
|
(392 |
) |
Income
taxes payable |
(2,077 |
) |
|
18,676 |
|
Accrued
commissions |
1,410 |
|
|
(2,417 |
) |
Other
accrued expenses |
(883 |
) |
|
(6,033 |
) |
Deferred
revenue |
2,359 |
|
|
(481 |
) |
Amounts
held in eWallets |
(509 |
) |
|
(3,875 |
) |
Other
current liabilities |
(326 |
) |
|
(179 |
) |
Long-term
incentive |
(96 |
) |
|
(324 |
) |
Net cash provided by
operating activities |
29,710 |
|
|
26,605 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases
of property and equipment |
(214 |
) |
|
(278 |
) |
Net cash used in
investing activities |
(214 |
) |
|
(278 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Dividends
paid |
(31,512 |
) |
|
(17,218 |
) |
Net cash used in
financing activities |
(31,512 |
) |
|
(17,218 |
) |
Effect of exchange
rates on cash, cash equivalents and restricted cash |
(811 |
) |
|
485 |
|
Net (decrease) increase
in cash, cash equivalents and restricted cash |
(2,827 |
) |
|
9,594 |
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, beginning of period |
138,478 |
|
|
128,884 |
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, end of period |
$ |
135,651 |
|
|
$ |
138,478 |
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF OTHER CASH FLOW INFORMATION: |
|
|
|
Issuance
of treasury stock for employee awards, net |
$ |
554 |
|
|
$ |
1,393 |
|
NATURAL HEALTH TRENDS
CORP.RECONCILIATION FROM EARNINGS PER DILUTED
SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE
|
Three Months EndedDecember 31, 2017 |
|
Year EndedDecember 31, 2017 |
|
(Unaudited) |
Net income (loss) per
diluted share |
$ |
(0.40 |
) |
|
$ |
2.09 |
|
Exclude
Tax Act one-time net charge per share |
1.11 |
|
|
1.11 |
|
Non-GAAP earnings per
diluted share |
$ |
0.71 |
|
|
$ |
3.20 |
|
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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