Natural Health Trends Reports Second Quarter 2019 Financial Results

Date : 08/07/2019 @ 1:00PM
Source : GlobeNewswire Inc.
Stock : Natural Health Trends Corporation (NHTC)
Quote : 5.62  -0.08 (-1.40%) @ 1:00AM

Natural Health Trends Reports Second Quarter 2019 Financial Results

Natural Health Trends (NASDAQ:NHTC)
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6 Months : From Jun 2019 to Dec 2019

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 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 
Inventories10,343  12,165 
Other current assets6,127  5,369 
Total current assets124,576  150,187 
Property and equipment, net887  934 
Operating lease right-of-use assets3,796   
Goodwill1,764  1,764 
Restricted cash3,000  2,998 
Deferred tax asset1,210  1,207 
Other assets858  831 
Total assets$136,091  $157,921 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$675  $1,631 
Accrued commissions7,051  12,502 
Other accrued expenses3,676  6,121 
Deferred revenue3,390  6,795 
Amounts held in eWallets13,879  14,611 
Operating lease liabilities1,741   
Other current liabilities1,116  1,424 
Total current liabilities31,528  43,084 
Income taxes payable15,365  16,982 
Deferred tax liability187  186 
Long-term incentive7,531  7,808 
Operating lease liabilities2,128   
Total liabilities56,739  68,060 
Stockholders’ equity:   
Preferred stock   
Common stock13  13 
Additional paid-in capital86,249  86,415 
Retained earnings40,169  44,431 
Accumulated other comprehensive loss(1,192) (1,250)
Treasury stock, at cost(45,887) (39,748)
Total stockholders’ equity79,352  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 sales5,407  10,399  10,631  20,620 
Gross profit18,021  40,511  32,125  82,657 
Operating expenses:       
Commissions expense11,398  22,310  20,896  45,290 
Selling, general and administrative expenses6,627  8,093  13,942  17,215 
Total operating expenses18,025  30,403  34,838  62,505 
Income (loss) from operations(4) 10,108  (2,713) 20,152 
Other income, net373  53  805  216 
Income (loss) before income taxes369  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:       
Basic11,082  11,298  11,207  11,292 
Diluted11,082  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 amortization189  235 
Noncash lease expense914   
Deferred income taxes(3)  
Changes in assets and liabilities:   
Inventories1,881  (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 cash73  (381)
Net decrease in cash, cash equivalents and restricted cash(24,545) (7,097)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period135,651  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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