Natural Health Trends Reports Third Quarter 2019 Financial Results
November 01 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 third quarter ended September 30, 2019.
Third Quarter 2019 Financial
Highlights
- Revenue of $17.0 million decreased 64% compared to $47.0
million in the third quarter of 2018.
- Gross profit was $12.7 million compared to $37.1 million in the
third quarter of 2018. As a percent of total revenue, gross profit
was 74% compared to 79% in the third quarter of 2018.
- Operating loss was $1.1 million compared to operating income of
$7.8 million in the third quarter of 2018.
- Net loss was $1.2 million, or $0.12 per diluted share, compared
to net income of $7.6 million, or $0.67 per diluted share, in the
third quarter of 2018.
- The number of Active Members1 decreased 13% to 68,150 at
September 30, 2019, compared to 78,280 at June 30, 2019, and
decreased 30% compared to 97,160 at September 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 $59.8 million decreased 60% compared to $150.3
million in the first nine months of 2018.
- Gross profit was $44.8 million compared to $119.8 million in
the first nine months of 2018. As a percent of total revenue, gross
profit was 75% compared to 80% in the first nine months of
2018.
- Operating loss was $3.8 million compared to operating income of
$28.0 million in the first nine months of 2018.
- Net loss was $2.8 million, or $0.25 per diluted share, compared
to net income of $25.5 million, or $2.25 per diluted share, in the
first nine months of 2018.
Management Commentary
“The business environment in China continued to present broad
challenges during the third quarter,” commented Chris Sharng,
President of Natural Health Trends Corp. “In addition, protests in
Hong Kong posed new complications. As a result, we suspended
company-sponsored meetings in Hong Kong as current conditions are
not conducive to hosting visitors.”
Mr. Sharng further commented, “Beyond the elements that are not
within our control, we remain pleased with our leaders’ abilities
to adapt our business strategy and to continue performing under
these circumstances. Subsequent to quarter end, we held a
successful event in Macau which was traditionally held during the
third quarter. Our fourth quarter order volume trends are already
improving following this major event which is a promising
development. Lastly, in light of the current business environment,
we are implementing cost reduction measures to focus resources on
our members and markets. We expect to realize an annualized $5.7
million in savings by the first quarter of 2020.
Balance Sheet and Cash Flow
- Net cash used in operating activities was $3.7 million compared
to net cash provided by operating activities of $8.8 million in the
third quarter of 2018. For the first nine months of 2019,
net cash used in operating activities was $18.7 million,
compared to net cash provided by operating activities of $25.3
million in the first nine months of 2018.
- Total cash and cash equivalents were $101.1 million as of
September 30, 2019, down from $132.7 million as of December
31, 2018.
- On October 29, 2019, the Company’s Board of Directors declared
a special cash dividend of $0.40 per share on outstanding common
stock. The dividend will be payable on November 29, 2019 to
stockholders of record as of November 19, 2019.
- During the three months ended September 30, 2019, the Company
purchased a total of 383,127 shares of its common stock for an
aggregate purchase price of $2.9 million, plus transaction costs.
As of September 30, 2019, $22.4 million of the stock
repurchase program remained available for future purchases,
inclusive of related estimated income tax.
Third Quarter 2019 Financial Results Conference
Call
Management will host a conference call to discuss the third
quarter 2019 financial results today, Friday November 1, 2019 at
11:30 a.m. Eastern Time. The conference call details are as
follows:
Date: |
Friday, November 1, 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: |
13695076 |
Webcast: |
http://public.viavid.com/index.php?id=136315 |
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 November 1, 2019 through 11:59 p.m. Eastern Time on
November 15, 2019 by dialing 1-844-512-2921 (domestic) and
1-412-317-6671 (international) and referencing the replay pin
number: 13695076.
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 (SEC), as well as in subsequent reports filed
this year with the SEC. The Company assumes no obligation to
update any forward-looking information contained in this press
release or with respect to the announcements described herein.
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
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED BALANCE
SHEETS(In thousands, except share
data)
|
September 30, 2019 |
|
December 31, 2018 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
101,113 |
|
|
$ |
132,653 |
|
Inventories |
7,999 |
|
|
12,165 |
|
Other current assets |
6,997 |
|
|
5,369 |
|
Total current assets |
116,109 |
|
|
150,187 |
|
Property and equipment, net |
821 |
|
|
934 |
|
Operating lease right-of-use
assets |
3,515 |
|
|
— |
|
Goodwill |
1,764 |
|
|
1,764 |
|
Restricted cash |
2,881 |
|
|
2,998 |
|
Deferred tax asset |
1,210 |
|
|
1,207 |
|
Other assets |
807 |
|
|
831 |
|
Total assets |
$ |
127,107 |
|
|
$ |
157,921 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
627 |
|
|
$ |
1,631 |
|
Accrued commissions |
3,798 |
|
|
12,502 |
|
Other accrued expenses |
3,392 |
|
|
6,121 |
|
Deferred revenue |
3,302 |
|
|
6,795 |
|
Amounts held in eWallets |
13,090 |
|
|
14,611 |
|
Operating lease liabilities |
1,689 |
|
|
— |
|
Other current liabilities |
1,188 |
|
|
1,424 |
|
Total current liabilities |
27,086 |
|
|
43,084 |
|
Income taxes payable |
15,365 |
|
|
16,982 |
|
Deferred tax liability |
186 |
|
|
186 |
|
Long-term incentive |
— |
|
|
7,808 |
|
Operating lease liabilities |
1,903 |
|
|
— |
|
Total liabilities |
44,540 |
|
|
68,060 |
|
Stockholders’ equity: |
|
|
|
Preferred stock |
— |
|
|
— |
|
Common stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,102 |
|
|
86,415 |
|
Retained earnings |
23,567 |
|
|
44,431 |
|
Accumulated other comprehensive loss |
(1,764 |
) |
|
(1,250 |
) |
Treasury stock, at cost |
(25,351 |
) |
|
(39,748 |
) |
Total stockholders’ equity |
82,567 |
|
|
89,861 |
|
Total liabilities and
stockholders’ equity |
$ |
127,107 |
|
|
$ |
157,921 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(In thousands, except per share
data)
|
Three Months EndedSeptember 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
17,023 |
|
|
$ |
47,043 |
|
|
$ |
59,779 |
|
|
$ |
150,320 |
|
Cost of sales |
4,371 |
|
|
9,926 |
|
|
15,002 |
|
|
30,546 |
|
Gross profit |
12,652 |
|
|
37,117 |
|
|
44,777 |
|
|
119,774 |
|
Operating expenses: |
|
|
|
|
|
|
|
Commissions expense |
7,362 |
|
|
22,001 |
|
|
28,258 |
|
|
67,291 |
|
Selling, general and administrative expenses |
6,354 |
|
|
7,269 |
|
|
20,296 |
|
|
24,484 |
|
Total operating expenses |
13,716 |
|
|
29,270 |
|
|
48,554 |
|
|
91,775 |
|
Income (loss) from
operations |
(1,064 |
) |
|
7,847 |
|
|
(3,777 |
) |
|
27,999 |
|
Other income, net |
323 |
|
|
249 |
|
|
1,128 |
|
|
465 |
|
Income (loss) before income
taxes |
(741 |
) |
|
8,096 |
|
|
(2,649 |
) |
|
28,464 |
|
Income tax provision |
502 |
|
|
467 |
|
|
120 |
|
|
2,988 |
|
Net income (loss) |
$ |
(1,243 |
) |
|
$ |
7,629 |
|
|
$ |
(2,769 |
) |
|
$ |
25,476 |
|
Net income (loss) per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.12 |
) |
|
$ |
0.67 |
|
|
$ |
(0.25 |
) |
|
$ |
2.25 |
|
Diluted |
$ |
(0.12 |
) |
|
$ |
0.67 |
|
|
$ |
(0.25 |
) |
|
$ |
2.25 |
|
Weighted-average number of common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
10,623 |
|
|
11,309 |
|
|
11,010 |
|
|
11,298 |
|
Diluted |
10,623 |
|
|
11,322 |
|
|
11,010 |
|
|
11,307 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(In thousands)
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income (loss) |
$ |
(2,769 |
) |
|
$ |
25,476 |
|
Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
Depreciation and amortization |
290 |
|
|
332 |
|
Noncash lease expense |
1,336 |
|
|
— |
|
Deferred income taxes |
(3 |
) |
|
— |
|
Changes in assets and
liabilities: |
|
|
|
Inventories |
4,104 |
|
|
(2,828 |
) |
Other current assets |
(1,674 |
) |
|
2,548 |
|
Other assets |
2 |
|
|
(83 |
) |
Accounts payable |
(1,002 |
) |
|
967 |
|
Accrued commissions |
(8,683 |
) |
|
2,003 |
|
Other accrued expenses |
(1,779 |
) |
|
314 |
|
Deferred revenue |
(3,485 |
) |
|
26 |
|
Amounts held in eWallets |
(1,508 |
) |
|
(930 |
) |
Operating lease liabilities |
(1,392 |
) |
|
— |
|
Income taxes payable |
(1,617 |
) |
|
(2,201 |
) |
Other current liabilities |
(235 |
) |
|
438 |
|
Long-term incentive |
(333 |
) |
|
(800 |
) |
Net cash provided by (used in)
operating activities |
(18,748 |
) |
|
25,262 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of property and equipment |
(181 |
) |
|
(176 |
) |
Net cash used in investing
activities |
(181 |
) |
|
(176 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Repurchase of common stock |
(9,564 |
) |
|
— |
|
Dividends paid |
(2,736 |
) |
|
(27,644 |
) |
Net cash used in financing
activities |
(12,300 |
) |
|
(27,644 |
) |
Effect of exchange rates on cash,
cash equivalents and restricted cash |
(428 |
) |
|
(711 |
) |
Net decrease in cash, cash
equivalents and restricted cash |
(31,657 |
) |
|
(3,269 |
) |
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of period |
135,651 |
|
|
138,478 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of period |
$ |
103,994 |
|
|
$ |
135,209 |
|
SUPPLEMENTAL DISCLOSURES OF OTHER
CASH FLOW INFORMATION: |
|
|
|
Issuance of treasury stock for employee awards, net |
$ |
8,289 |
|
|
$ |
554 |
|
Right-of-use assets obtained in exchange for operating lease
liabilities |
$ |
5,058 |
|
|
$ |
— |
|
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