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 third quarter of 2017.
Third Quarter Results
Third quarter net sales for 2017 were $42.0 million, a decrease
of $6.1 million, or 12.8% as compared to $48.1 million in the third
quarter of 2016. Income from operations was $0.7 million for the
third quarter 2017, as compared to $0.5 million in the same period
in 2016. Net income was $1.4 million, or $0.50 per diluted share,
for the third quarter 2017, as compared to $1.3 million, or $0.46
per diluted share, for the third quarter 2016.
For the three months ended September 30, 2017, our net sales
declined 12.5% on a constant dollar basis (see Non-GAAP Financial
Measures, below). Excluding the effects due to the translation of
foreign currencies into U.S. dollars, net sales would have declined
$6.0 million for the three months ended September 30, 2017.
As of September 30, 2017, our cash and cash equivalents
increased by 23.3%, or $6.7 million, to $35.4 million from $28.7
million as of December 31, 2016. Our inventory balance at
September 30, 2017 was $10.6 million, compared to $12.0
million at December 31, 2016.
On July 1, 2017, we revised our Associate Compensation Plan (the
"2017 Compensation Plan"), which was designed to stimulate business
growth and development for our active business building associates
and to maximize the buying experience for our preferred customers.
In doing so, we hope to better utilize commission dollars to
stimulate growth. The 2017 Compensation Plan provides revised
income streams, new leadership levels and titles, and modified
various volume requirements for our associates. In addition, the
2017 Compensation Plan re-designated members as preferred customers
and modified their pricing structure.
In connection with the 2017 Compensation Plan, pack sales have
been replaced with associate fees, which provide associates the
right to earn commissions, benefits and incentives. Pack sales
historically had an average value of $197 during fiscal year 2017
before we implemented the 2017 Compensation Plan and now average
approximately $50 annually. Specifically, within the Americas,
during the three months ended September 30, 2017, pack sales
decreased by $0.5 million, from $0.8 million to $0.3 million, as
compared to the same period in 2016.
For the three months ended September 30, 2017, Mannatech’s
operations outside of the Americas accounted for approximately
66.4% of Mannatech’s consolidated net sales.
Third quarter 2017 Asia/Pacific net sales decreased by $1.1
million, or 4.3%, to $24.4 million, as compared to $25.5 million
for the same period in 2016. This decrease was primarily due to a
4.7% decrease in revenue per active independent associate and
preferred customer, which was partially offset by a 0.4% increase
in the number of active independent associates and preferred
customers. During the three months ended September 30, 2017, the
number of product orders in Asia/Pacific decreased by 4,000, from
117,000 to 113,000, as compared to the same period in 2016. During
the three months ended September 30, 2017, pack sale revenue in
Asia/Pacific decreased by $4.2 million, from $5.6 million to $1.4
million, as compared to the same period in 2016.
For the three months ended September 30, 2017, net sales in the
Americas decreased by $4.9 million, or 25.8%, to $14.1 million, as
compared to $19.0 million for the same period in 2016. This
decrease was primarily due to a 21.0% decrease in revenue per
active independent associate and preferred customer and a 6.1%
decline in the number of active independent associates and
preferred customers. During the three months ended September 30,
2017, the number of product orders in the Americas decreased by
9,000, from 97,000 to 88,000, as compared to the same period in
2016. During the three months ended September 30, 2017, pack sale
revenue in the Americas decreased by $0.5 million, from $0.8
million to $0.3 million, as compared to the same period in
2016.
For the three months ended September 30, 2017, EMEA net sales
decreased by $0.1 million, or 2.8%, to $3.5 million, as compared to
$3.6 million for the same period in 2016. This decrease was due to
a 13.5% decline in revenue per active independent associate and
preferred customer, which was partially offset by a 9.3% increase
in the number of active independent associates and preferred
customers. During the three months ended September 30, 2017, the
number of product orders in EMEA increased by 3,000, from 33,000 to
36,000, as compared to the same period in 2016. During the three
months ended September 30, 2017, pack sale revenue in EMEA
decreased by $0.4 million, from $0.5 million to $0.1 million, as
compared to the same period in 2016.
The number of new and continuing active independent associates
and preferred customers who purchased our packs or products during
the twelve months ended September 30, 2017 and 2016 were
approximately 219,000 and 221,000, respectively. Recruitment of new
independent associates and preferred customers increased 1.6%
during the three months ended September 30, 2017 as compared to the
same period in 2016. The number of new independent associate and
preferred customer positions held by individuals in our network for
the three months ended September 30, 2017 was approximately 25,400,
as compared to 25,000 for the same period in 2016.
Commission expenses for the three months ended September 30,
2017 decreased by 7.9%, or $1.5 million, to $17.6 million, as
compared to $19.1 million for the same period in 2016. For the
three months ended September 30, 2017, commissions as a percentage
of net sales increased to 42.0% from 39.8% for the same period in
2016 as a result of the Company revising its 2017 Compensation
Plan.
Incentive costs for the three months ended September 30, 2017
decreased by 12.5%, or $0.1 million, to $0.7 million, as compared
to $0.8 million for the same period in 2016. For the three months
ended September 30, 2017, incentives as a percentage of net sales
remained the same at 1.7% compared to the same period in 2016.
For the three months ended September 30, 2017, selling and
administrative expenses decreased by $1.7 million, or 17.3%, to
$8.2 million, as compared to $9.9 million for the same period in
2016. This decrease consisted of a $0.8 million decrease in payroll
costs because we had a greater number of employees in the prior
comparative period and a $0.4 million severance charge, a $0.8
million decrease in marketing related costs 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 September 30, 2017 decreased to 19.5% from 20.5%
for the same period in 2016.
For the three months ended September 30, 2017, other operating
costs decreased by $1.4 million, or 18.8%, to $6.1 million, as
compared to $7.5 million for the same period in 2016. For the three
months ended September 30, 2017, other operating costs as a
percentage of net sales decreased to 14.6% from 15.6% for the same
period in 2016. The decrease was due to a $0.7 million decrease in
legal and consulting costs and a $0.1 million decrease in each of
the following expense categories: office expenses, credit card
fees, travel and entertainment costs, and research and development
costs. In addition, the decrease was further caused by a $0.4
million impairment of internally developed software during the
third quarter of 2016. These decreases were partially offset by
$0.1 million increases in both professional fees and bad debt
expense.
Our accounts payable balance at September 30, 2017
increased to $6.1 million, compared to $5.2 million at
December 31, 2016, primarily due to an increase in event
costs. At September 30, 2017, our commissions and incentives
payable increased to $10.8 million from $8.8 million at
December 31, 2016, due to timing of our commission payments
and the implementation of the 2017 Compensation Plan. During the
third 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, November 8, 2017 at
9 a.m. CST, 10 a.m. EST. 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 5199567.
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)
September 30,
2017
December 31, ASSETS (unaudited) 2016
Cash and cash equivalents $ 35,373 $ 28,687 Restricted cash 1,514
1,510 Accounts receivable, net of allowance of $566 and $463 in
2017 and 2016, respectively 394 298 Income tax receivable 2,759
1,587 Inventories, net 10,625 11,961 Prepaid expenses and other
current assets, net 2,919 3,483 Deferred commissions 3,796
3,229
Total current assets
57,380 50,755 Property and equipment, net 3,068 3,611
Construction in progress 1,430 1,012 Long-term restricted cash
6,768 6,429 Other assets 3,623 4,013 Long-term deferred tax assets,
net 6,261 5,368
Total assets
$ 78,530 $ 71,188
LIABILITIES AND SHAREHOLDERS’ EQUITY Current portion of
capital leases $ 300 $ 357 Accounts payable 6,050 5,223 Accrued
expenses 5,600 5,605 Commissions and incentives payable 10,786
8,799 Taxes payable 2,839 1,040 Current notes payable 787 801
Deferred revenue 8,768 8,156
Total
current liabilities 35,130 29,981 Capital leases,
excluding current portion 162 261 Long-term deferred tax
liabilities 31 29 Long-term notes payable 144 567 Other long-term
liabilities 1,385 1,465
Total
liabilities 36,852 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, 2,748,408 shares issued and 2,708,491
shares outstanding as of September 30, 2017 and 2,758,275 shares
issued and 2,688,790 shares outstanding as of December 31, 2016
— — Additional paid-in capital 34,963 38,190 Retained earnings
8,014 7,331 Accumulated other comprehensive income 3,562 1,834
Treasury stock, at average cost, 39,917 shares as of September 30,
2017 and 69,485 shares as of December 31, 2016, respectively
(4,861 ) (8,470 )
Total shareholders’ equity
41,678 38,885 Total
liabilities and shareholders’ equity $ 78,530
$ 71,188 MANNATECH,
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS –
(UNAUDITED)
(in thousands, except per share
information)
Three Months Ended Nine
Months Ended September 30, September 30,
2017 2016 2017
2016 Net sales $ 41,997 $
48,146 $ 130,324 $ 137,664 Cost
of sales 8,233 9,736 25,781
28,225
Gross profit 33,764 38,410
104,543 109,439 Operating expenses:
Commissions and incentives 18,370 19,985 54,445 56,019 Selling and
administrative expenses 8,171 9,877 26,803 28,199 Depreciation and
amortization expense 424 507 1,379 1,427 Other operating costs
6,115 7,534 20,447 22,863
Total operating expenses 33,080 37,903 103,074 108,508
Income from operations 684 507 1,469
931 Interest income (expense), net 10 (16 ) 58 (5 ) Other
income (expense), net 177 232 209
(471 )
Income before income taxes 871
723 1,736 455 Income tax benefit
510 562 193 90
Net income
$ 1,381 $ 1,285 $
1,929 $ 545 Earnings per
common share: Basic
$ 0.51 $ 0.47
$ 0.71 $ 0.20 Diluted
$ 0.50 $ 0.46 $
0.69 $ 0.19 Weighted-average
common shares outstanding: Basic
2,711
2,706 2,708 2,703
Diluted
2,766 2,818
2,773 2,812
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
September 30,
(in millions, except percentages)
September 30, 2017 2016 Constant $ Change
GAAP Non-GAAP GAAP
Measure: Measure: Measure: Total $
Constant $ Total $ Dollar Percent Net
sales $ 42.0 $ 42.1 $ 48.1 $ (6.0 ) (12.5 )% Product 39.1 39.2 39.8
(0.6 ) (1.5 )% Pack and associate fees(a) 1.8 1.8 6.9 (5.1 ) (73.9
)% Other 1.1 1.1 1.4 (0.3 ) (21.4 )% Gross profit 33.8 33.9 38.4
(4.5 ) (11.7 )% Income from operations 0.7 0.7 0.5 0.2 40.0 %
Nine-month period ended
September 30,
(in millions, except percentages)
September 30, 2017 2016 Constant $ Change
GAAP Non-GAAP GAAP Measure:
Measure: Measure: Total $ Constant $
Total $ Dollar Percent Net sales $ 130.3 $
128.9 $ 137.7 $ (8.8 ) (6.4 )%
Product
113.2 112.0 113.6 (1.6 ) (1.4 )% Pack and associate fees(a) 13.5
13.3 20.2 (6.9 ) (34.2 )% Other 3.6 3.6 3.9 (0.3 ) (7.7 )% Gross
profit 104.5 103.5 109.4 (5.9 ) (5.4 )% Income from operations 1.5
1.0 0.9 0.1 11.1 %
(a)Coincident with the introduction of the 2017 Compensation
Plan, which was implemented on July 1, 2017, the Company collects
associate fees, which relate to providing the associates with the
right to earn commissions, benefits and incentives for an annual
period. The Company collected associate fees within the United
States, Canada, South Africa and Japan during the three months
ended September 30, 2017. Prior to the change, associates purchased
packs that were bundles of products within these respective
geographic markets. Total associate fees since implementing the
2017 Compensation Plan represented an immaterial amount of total
sales.
About Mannatech
Mannatech, Incorporated offers a full body wellness experience
through its global network of independent associates and preferred
customers. 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,”,"hopes",“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
preferred customers, 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/20171107005452/en/
Mannatech, IncorporatedDonna Giordano, 972-471-6512Manager,
Executive Office Administrationir@mannatech.comwww.mannatech.com
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