Natural Health Trends Reports Third Quarter 2018 Financial Results
October 30 2018 - 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, 2018.
Third Quarter 2018 Financial
Highlights
- Total revenue of $47.0 million increased 17% compared to $40.1
million in the third quarter of 2017, and decreased 8% compared to
$50.9 million in the second quarter of 2018.
- Revenue from the Company’s Hong Kong operations, which
represented 88% of total revenue, was $41.4 million, an increase of
18% compared to $35.0 million in the third quarter of 2017.
- Revenue outside of Hong Kong of $5.6 million increased 10%
compared to $5.1 million in the third quarter of 2017.
- Gross profit was $37.1 million compared to $31.9 million in the
third quarter of 2017, and $40.5 million in the second quarter of
2018. As a percent of total revenue, gross profit was 79% compared
to 80% in the third quarter of 2017 and 80% in the second quarter
of 2018.
- Operating income was $7.8 million compared to $8.5 million in
the third quarter of 2017, and $10.1 million in the second quarter
of 2018. As a percent of total revenue, operating income was 17%
compared to 21% in the third quarter of 2017 and 20% in the second
quarter of 2018.
- Net income was $7.6 million, or $0.67 per diluted share,
compared to net income of $7.3 million, or $0.65 per diluted share,
in the third quarter of 2017, and $9.0 million, or $0.80 per
diluted share, in the second quarter of 2018.
- The number of Active Members1 increased 4% to 97,160 at
September 30, 2018, compared to 93,000 at June 30, 2018,
and decreased 3% compared to 99,690 at September 30,
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.
Year-to-Date 2018 Financial Highlights
- Total revenue of $150.3 million decreased 1% compared to $151.5
million in the first nine months of 2017.
- Gross profit was $119.8 million compared to $122.3 million in
the first nine months of 2017. As a percent of total revenue, gross
profit was 80% compared to 81% in the first nine months of
2018.
- Operating income was $28.0 million compared to $34.4 million in
the first nine months of 2017. As a percent of total revenue,
operating income was 19% compared to 23% in the first nine months
of 2017.
- Net income was $25.5 million, or $2.25 per diluted share,
compared to net income of $28.1 million, or $2.49 per diluted
share, in the first nine months of 2017.
Management Commentary
“Despite a generally difficult trading environment, our
performance in the third quarter was driven by the momentum we
created since the beginning of the year,” commented Chris Sharng,
President of Natural Health Trends. “So far in 2018, both a rapidly
depreciating Chinese yuan, down 10% since February, and the
seasonality associated with the summer months, contributed to an 8%
decline in our revenue from the second quarter to the third quarter
this year. Without the adverse effect of the yuan devaluation, our
third quarter revenue would have been flat with the second quarter.
While we have no control over these conditions, I believe we have
been doing a good job navigating in an increasingly difficult and
unpredictable setting.”
Balance Sheet and Cash Flow
- Net cash provided by operating activities was $8.8 million,
compared to $5.3 million in net cash used in operating activities
in the third quarter of 2017. For the first nine months of 2018,
net cash provided by operating activities was $25.3 million,
compared to $15.3 million in the first nine months of 2017.
- On October 21, 2018, the Company’s Board of Directors
declared a quarterly cash dividend of $0.16, which represents a 7%
increase over the prior quarter dividend, as well as a special cash
dividend of $0.18 per share on outstanding common stock. The
dividends will be payable on November 23, 2018 to stockholders
of record as of November 13, 2018.
Third Quarter 2018 Financial Results Conference
Call
Management will host a conference call to discuss the third
quarter 2018 financial results today, Tuesday, October 30, 2018 at
11:30 a.m. Eastern Time. The conference call details are as
follows:
Date: |
Tuesday, October 30, 2018 |
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: |
13683905 |
Webcast: |
http://public.viavid.com/index.php?id=131653 |
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 October 30, 2018 through 11:59 p.m. Eastern Time on
November 13, 2018 by dialing 1-844-512-2921 (domestic) and
1-412-317-6671 (international) and referencing the replay pin
number: 13683905.
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) |
|
|
September 30, 2018 |
|
December 31, 2017 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
132,206 |
|
|
$ |
135,311 |
|
Inventories |
11,119 |
|
|
8,398 |
|
Other current assets |
4,918 |
|
|
7,534 |
|
Total current assets |
148,243 |
|
|
151,243 |
|
Property and equipment, net |
988 |
|
|
1,149 |
|
Goodwill |
1,764 |
|
|
1,764 |
|
Restricted cash |
3,003 |
|
|
3,167 |
|
Deferred tax asset |
1,435 |
|
|
1,435 |
|
Other assets |
859 |
|
|
796 |
|
Total assets |
$ |
156,292 |
|
|
$ |
159,554 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
2,715 |
|
|
$ |
1,751 |
|
Income taxes payable |
168 |
|
|
309 |
|
Accrued commissions |
13,125 |
|
|
11,170 |
|
Other accrued expenses |
7,341 |
|
|
7,605 |
|
Deferred revenue |
4,462 |
|
|
4,455 |
|
Amounts held in eWallets |
14,196 |
|
|
15,152 |
|
Other current liabilities |
1,906 |
|
|
1,479 |
|
Total current liabilities |
43,913 |
|
|
41,921 |
|
Income taxes payable |
16,982 |
|
|
19,052 |
|
Deferred tax liability |
75 |
|
|
56 |
|
Long-term incentive |
7,104 |
|
|
7,904 |
|
Total liabilities |
68,074 |
|
|
68,933 |
|
Commitments and contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock |
— |
|
|
— |
|
Common stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,415 |
|
|
86,683 |
|
Retained earnings |
42,740 |
|
|
44,908 |
|
Accumulated other comprehensive loss |
(1,202 |
) |
|
(413 |
) |
Treasury stock, at cost |
(39,748 |
) |
|
(40,570 |
) |
Total stockholders’ equity |
88,218 |
|
|
90,621 |
|
Total liabilities and stockholders’ equity |
$ |
156,292 |
|
|
$ |
159,554 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data) |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(Unaudited) |
Net sales |
$ |
47,043 |
|
|
$ |
40,132 |
|
|
$ |
150,320 |
|
|
$ |
151,471 |
|
Cost of sales |
9,926 |
|
|
8,183 |
|
|
30,546 |
|
|
29,221 |
|
Gross profit |
37,117 |
|
|
31,949 |
|
|
119,774 |
|
|
122,250 |
|
Operating expenses: |
|
|
|
|
|
|
|
Commissions expense |
22,001 |
|
|
15,802 |
|
|
67,291 |
|
|
63,842 |
|
Selling, general and administrative expenses |
7,269 |
|
|
7,633 |
|
|
24,484 |
|
|
24,035 |
|
Total operating expenses |
29,270 |
|
|
23,435 |
|
|
91,775 |
|
|
87,877 |
|
Income from operations |
7,847 |
|
|
8,514 |
|
|
27,999 |
|
|
34,373 |
|
Other income (expense), net |
249 |
|
|
(12 |
) |
|
465 |
|
|
224 |
|
Income before income taxes |
8,096 |
|
|
8,502 |
|
|
28,464 |
|
|
34,597 |
|
Income tax provision |
467 |
|
|
1,164 |
|
|
2,988 |
|
|
6,531 |
|
Net income |
$ |
7,629 |
|
|
$ |
7,338 |
|
|
$ |
25,476 |
|
|
$ |
28,066 |
|
Net income per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.67 |
|
|
$ |
0.65 |
|
|
$ |
2.25 |
|
|
$ |
2.50 |
|
Diluted |
$ |
0.67 |
|
|
$ |
0.65 |
|
|
$ |
2.25 |
|
|
$ |
2.49 |
|
Weighted-average number of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
11,309 |
|
|
11,258 |
|
|
11,298 |
|
|
11,244 |
|
Diluted |
11,322 |
|
|
11,276 |
|
|
11,307 |
|
|
11,269 |
|
Cash dividends declared per common share |
$ |
0.40 |
|
|
$ |
0.36 |
|
|
$ |
2.43 |
|
|
$ |
1.25 |
|
NATURAL HEALTH TRENDS
CORP.CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands) |
|
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
|
|
|
|
(Unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
25,476 |
|
|
$ |
28,066 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
332 |
|
|
414 |
|
Stock-based compensation |
— |
|
|
26 |
|
Cumulative translation adjustment realized in net
income |
— |
|
|
(258 |
) |
Changes in assets and liabilities: |
|
|
|
Inventories |
(2,828 |
) |
|
590 |
|
Other current assets |
2,548 |
|
|
1,164 |
|
Other assets |
(83 |
) |
|
(61 |
) |
Accounts payable |
967 |
|
|
(1,121 |
) |
Income taxes payable |
(2,201 |
) |
|
392 |
|
Accrued commissions |
2,003 |
|
|
(3,143 |
) |
Other accrued expenses |
314 |
|
|
(5,064 |
) |
Deferred revenue |
26 |
|
|
(1,364 |
) |
Amounts held in eWallets |
(930 |
) |
|
(2,856 |
) |
Other current liabilities |
438 |
|
|
51 |
|
Long-term incentive |
(800 |
) |
|
(1,498 |
) |
Net cash provided by operating activities |
25,262 |
|
|
15,338 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Purchases of property and equipment |
(176 |
) |
|
(238 |
) |
Net cash used in investing activities |
(176 |
) |
|
(238 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Dividends paid |
(27,644 |
) |
|
(14,157 |
) |
Net cash used in financing activities |
(27,644 |
) |
|
(14,157 |
) |
Effect of exchange rates on cash, cash equivalents and restricted
cash |
(711 |
) |
|
218 |
|
Net (decrease) increase in cash, cash equivalents and restricted
cash |
(3,269 |
) |
|
1,161 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of
period |
138,478 |
|
|
128,884 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
$ |
135,209 |
|
|
$ |
130,045 |
|
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: |
|
|
|
Issuance of treasury stock for employee awards,
net |
554 |
|
|
1,393 |
|
|
|
|
|
|
|
CONTACTS:
Company Contact:Scott DavidsonSenior Vice
President and Chief Financial OfficerNatural Health Trends
Corp.Tel: 310-541-0888scott.davidson@nhtglobal.com
Investor Contact:ADDO Investor RelationsTel:
310-829-5400investor.relations@nhtglobal.com
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