• | First sequential quarter increase in net sales since the second quarter of 2016 |
• | Positive annual sales momentum in Southeast Asia, Europe and Japan |
• | Maintained strong annual gross profit and operating income margins |
• | Increased quarterly dividend 8% to $0.13 per share |
• | Total revenue of $46.1 million decreased 26% compared to $62.3 million in the fourth quarter of 2016, and increased 15% compared to $40.1 million in the third quarter of 2017. |
◦ | Revenue from the Company’s Hong Kong operations, which represented 86% of total revenue, was $39.6 million, a decrease of 29% compared to $56.1 million in the fourth quarter of 2016, and an increase of 13% compared to $35.0 million in the third quarter of 2017. |
◦ | Revenue outside of Hong Kong of $6.5 million increased 4% compared to $6.2 million in the fourth quarter of 2016, and increased 27% compared to $5.1 million in the third quarter of 2017. |
• | Operating income of $8.7 million decreased 57% compared to $20.0 million in the fourth quarter of 2016, and increased 2% compared to $8.5 million in the third quarter of 2017. |
• | Income tax provision of $13.3 million included a one-time net charge of $12.5 million, or an impact of $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 is due to the repatriation tax on the deemed repatriation of foreign income and the re-measurement of net deferred tax assets. |
• | Net loss was $4.5 million, or $0.40 per diluted share, compared to net income of $19.0 million, or $1.70 per diluted share, in the fourth quarter of 2016, and net income of $7.3 million, or $0.65 per diluted share, in the third quarter of 2017. Excluding the estimated 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 decreased 4% to 95,670 at December 31, 2017, compared to 99,690 at September 30, 2017, and decreased 20% compared to 118,960 at December 31, 2016. |
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. |
• | Total revenue of $197.6 million decreased 31% compared to $287.7 million in 2016. |
• | Operating income of $43.1 million decreased 33% compared to $64.1 million in 2016. As a percent of total revenue, operating income was 22%, consistent with 2016. |
• | Net income was $23.6 million, or $2.09 per diluted share, compared to $55.1 million, or $4.83 per diluted share, in 2016. Excluding the estimated impact of the Tax Act, Non-GAAP earnings per diluted share were $3.20 for the full year of 2017. |
• | Net cash provided by operating activities was $11.3 million, compared to $16.9 million in the fourth quarter of 2016. For the full year of 2017, net cash provided by operating activities was $26.6 million, compared to $53.2 million in 2016. |
• | On February 6, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.13, which represents an 8% increase over the prior quarter dividend. The dividend will be payable on March 9, 2018 to stockholders of record as of February 27, 2018. |
Date: | Wednesday, February 14, 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: | 13675025 |
Webcast: | http://public.viavid.com/index.php?id=127769 |
December 31, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 135,311 | $ | 125,921 | |||
Inventories | 8,398 | 11,257 | |||||
Other current assets | 7,534 | 4,066 | |||||
Total current assets | 151,243 | 141,244 | |||||
Property and equipment, net | 1,149 | 1,388 | |||||
Goodwill | 1,764 | 1,764 | |||||
Restricted cash | 3,167 | 2,963 | |||||
Deferred tax asset | 1,435 | — | |||||
Other assets | 796 | 692 | |||||
Total assets | $ | 159,554 | $ | 148,051 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,751 | $ | 2,145 | |||
Income taxes payable | 309 | 663 | |||||
Accrued commissions | 11,170 | 13,611 | |||||
Other accrued expenses | 7,605 | 14,989 | |||||
Deferred revenue | 4,455 | 4,948 | |||||
Amounts held in eWallets | 15,152 | 19,165 | |||||
Other current liabilities | 1,479 | 1,633 | |||||
Total current liabilities | 41,921 | 57,154 | |||||
Income taxes payable | 19,052 | — | |||||
Deferred tax liability | 56 | 268 | |||||
Long-term incentive | 7,904 | 8,190 | |||||
Total liabilities | 68,933 | 65,612 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 13 | 13 | |||||
Additional paid-in capital | 86,683 | 86,574 | |||||
Retained earnings | 44,908 | 38,548 | |||||
Accumulated other comprehensive loss | (413 | ) | (807 | ) | |||
Treasury stock, at cost | (40,570 | ) | (41,889 | ) | |||
Total stockholders’ equity | 90,621 | 82,439 | |||||
Total liabilities and stockholders’ equity | $ | 159,554 | $ | 148,051 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Net sales | $ | 46,092 | $ | 62,312 | $ | 197,563 | $ | 287,728 | |||||||
Cost of sales | 9,424 | 11,937 | 38,645 | 54,903 | |||||||||||
Gross profit | 36,668 | 50,375 | 158,918 | 232,825 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions expense | 19,796 | 21,503 | 83,638 | 125,050 | |||||||||||
Selling, general and administrative expenses | 8,064 | 8,740 | 31,685 | 43,245 | |||||||||||
Depreciation and amortization | 122 | 118 | 536 | 394 | |||||||||||
Total operating expenses | 27,982 | 30,361 | 115,859 | 168,689 | |||||||||||
Income from operations | 8,686 | 20,014 | 43,059 | 64,136 | |||||||||||
Other income (expense), net | 143 | (99 | ) | 367 | (59 | ) | |||||||||
Income before income taxes | 8,829 | 19,915 | 43,426 | 64,077 | |||||||||||
Income tax provision | 13,317 | 867 | 19,848 | 8,991 | |||||||||||
Net income (loss) | $ | (4,488 | ) | $ | 19,048 | $ | 23,578 | $ | 55,086 | ||||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | (0.40 | ) | $ | 1.70 | $ | 2.10 | $ | 4.84 | ||||||
Diluted | $ | (0.40 | ) | $ | 1.70 | $ | 2.09 | $ | 4.83 | ||||||
Weighted-average number of common shares outstanding: | |||||||||||||||
Basic | 11,272 | 11,219 | 11,251 | 11,382 | |||||||||||
Diluted | 11,272 | 11,234 | 11,267 | 11,407 | |||||||||||
Cash dividends declared per common share | $ | 0.27 | $ | 0.43 | $ | 1.52 | $ | 0.61 |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
(Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 23,578 | $ | 55,086 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 536 | 394 | |||||
Stock-based compensation | 35 | 104 | |||||
Cumulative translation adjustment realized in net income | (258 | ) | 132 | ||||
Deferred income taxes | (1,644 | ) | 217 | ||||
Changes in assets and liabilities: | |||||||
Inventories | 2,843 | (851 | ) | ||||
Other current assets | (3,399 | ) | (1,681 | ) | |||
Other assets | (61 | ) | (90 | ) | |||
Accounts payable | (392 | ) | (714 | ) | |||
Income taxes payable | 18,676 | 303 | |||||
Accrued commissions | (2,417 | ) | (6,031 | ) | |||
Other accrued expenses | (6,033 | ) | 51 | ||||
Deferred revenue | (481 | ) | 947 | ||||
Amounts held in eWallets | (3,875 | ) | 2,752 | ||||
Other current liabilities | (179 | ) | 135 | ||||
Long-term incentive | (324 | ) | 2,420 | ||||
Net cash provided by operating activities | 26,605 | 53,174 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (278 | ) | (905 | ) | |||
Net cash used in investing activities | (278 | ) | (905 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repurchase of common stock | — | (23,704 | ) | ||||
Dividends paid | (17,218 | ) | (6,891 | ) | |||
Net cash used in financing activities | (17,218 | ) | (30,595 | ) | |||
Effect of exchange rates on cash and cash equivalents | 281 | (667 | ) | ||||
Net increase in cash and cash equivalents | 9,390 | 21,007 | |||||
CASH AND CASH EQUIVALENTS, beginning of period | 125,921 | 104,914 | |||||
CASH AND CASH EQUIVALENTS, end of period | $ | 135,311 | $ | 125,921 | |||
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | |||||||
Cash paid for income taxes, net of refunds | $ | 6,772 | $ | 8,791 | |||
Issuance of treasury stock for employee awards, net | 1,393 | 1,741 |
Three Months Ended December 31, 2017 | Year Ended December 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 |