Natural Health Trends Reports Second Quarter 2017 Financial Results

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LOS ANGELES, Aug. 02, 2017 (GLOBE NEWSWIRE) -- 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 quarter ended June 30, 2017.

Second Quarter 2017 Financial Highlights

  • Total revenue decreased 36% to $51.5 million, compared to $80.4 million in the second quarter of 2016.

    • Revenue from the Company’s Hong Kong operations, which represented 89% of total revenue, decreased 38% to $45.7 million, compared to $73.3 million in the second quarter of 2016.

    • Revenue outside of Hong Kong decreased 18% to $5.8 million, compared to $7.1 million in the second quarter of 2016, and was partly mitigated by an increase in Europe of 256% year-over-year.

  • Operating income decreased 14% to $12.9 million, compared to $14.9 million in the second quarter of 2016. As a percent of total revenue, operating income was 25%, compared to 19% in the second quarter of 2016.

  • Net income was $10.3 million, or $0.91 per diluted share, compared to $12.2 million, or $1.07 per diluted share, in the second quarter of 2016.

  • The number of Active Members1 decreased 6% to 107,290 at June 30, 2017, compared to 113,710 at March 31, 2017, and decreased 15% compared to 126,440 at June 30, 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.

Year-to-Date 2017 Financial Highlights

  • Total revenue decreased 28% to $111.3 million, compared to $154.7 million in the first six months of 2016. 

  • Operating income decreased 11% to $25.9 million, compared to $28.9 million in the first six months of 2016. As a percent of total revenue, operating income was 23%, compared to 19% in the first six months of 2016.  

  • Net income was $20.7 million, or $1.84 per diluted share, compared to $23.5 million, or $2.03 per diluted share, in the first six months of 2016.

Management Commentary

“Our revenue for the second quarter declined by 14% from the prior quarter primarily due to the slowdown we have been experiencing in our Asian markets since the third quarter of 2016,” commented Chris Sharng, President of Natural Health Trends Corp. “Further, the second quarter of 2016 presented a challenging year-over-year comparison due to record product orders in anticipation of a significant product price increase effective last June. Partially offsetting the year-over-year decrease in net sales was strength in Europe, our market opening in Peru and a positive response to our most recent product introductions.”

Mr. Sharng further commented, “We are pleased to announce we received preliminary approval for a direct selling license in Malaysia, which correlates perfectly with our summer Ambassador Academy event we have been actively preparing for in Kuala Lumpur. We also recently celebrated our grand opening in Peru and received registration approval for key products, enabling us to generate nearly $500 thousand in product orders during the quarter. In addition, we are working to reinvigorate momentum in Asia by enhancing our incentive programs and adjusting our bonus and reward programs to provide more resources to the most productive and up-and-coming members. While it will take time to restore our Asian markets to growth and to train our leaders to navigate the challenges involved with operating through a slowdown, we believe the measures we have taken to enhance our matching bonus and ease rank advancement will help attract, motivate and retain a strong member base.”

Balance Sheet and Cash Flow

  • Net cash provided by operating activities in the second quarter of 2017 was $6.8 million, compared to $16.6 million in the second quarter of 2016. For the first six months of 2017, net cash provided by operating activities was $20.6 million, compared to $30.4 million in the first six months of 2016.
     
  • On July 31, 2017, the Company's Board of Directors declared a quarterly dividend of $0.11 per share on outstanding common stock, which represents a 10% increase over the prior quarter dividend, as well as a special cash dividend of $0.25 per share on outstanding common stock. The dividends will be payable on August 31, 2017 to stockholders of record as of August 21, 2017. 

Second Quarter 2017 Financial Results Conference Call

Management will host a conference call to discuss the second quarter 2017 financial results today, Wednesday, August 2, 2017 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date: Wednesday, August 2, 2017
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: 13664982
Webcast: http://public.viavid.com/index.php?id=125041

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 2, 2017 through 11:59 p.m. Eastern Time on August 16, 2017 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13664982.

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 10, 2017 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)
 
  June 30, 2017   December 31, 2016
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 136,261     $ 125,921  
Inventories 9,804     11,257  
Other current assets 3,638     4,066  
Total current assets 149,703     141,244  
Property and equipment, net 1,292     1,388  
Goodwill 1,764     1,764  
Restricted cash 3,039     2,963  
Other assets 768     692  
Total assets $ 156,566     $ 148,051  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 2,371     $ 2,145  
Income taxes payable 4,971     663  
Accrued commissions 12,666     13,611  
Other accrued expenses 10,366     14,989  
Deferred revenue 3,994     4,948  
Amounts held in eWallets 18,713     19,165  
Other current liabilities 1,622     1,633  
Total current liabilities 54,703     57,154  
Deferred tax liability 285     268  
Long-term incentive 7,179     8,190  
Total liabilities 62,167     65,612  
Commitments and contingencies      
Stockholders’ equity:      
Preferred stock —     —  
Common stock 13     13  
Additional paid-in capital 86,665     86,574  
Retained earnings 49,198     38,548  
Accumulated other comprehensive loss (907 )   (807 )
Treasury stock, at cost (40,570 )   (41,889 )
Total stockholders’ equity 94,399     82,439  
Total liabilities and stockholders’ equity $ 156,566     $ 148,051  
               


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2017   2016   2017   2016
                               
  (Unaudited)
Net sales $ 51,465     $ 80,391     $ 111,339     $ 154,737  
Cost of sales 9,793     15,059     21,038     29,339  
Gross profit 41,672     65,332     90,301     125,398  
Operating expenses:              
Commissions expense 22,075     37,883     48,040     72,969  
Selling, general and administrative expenses 6,590     12,431     16,126     23,335  
Depreciation and amortization 140     91     276     180  
Total operating expenses 28,805     50,405     64,442     96,484  
Income from operations 12,867     14,927     25,859     28,914  
Other income (expense), net 80     16     236     (8 )
Income before income taxes 12,947     14,943     26,095     28,906  
Income tax provision 2,644     2,742     5,367     5,425  
Net income $ 10,303     $ 12,201     $ 20,728     $ 23,481  
Net income per common share:              
Basic $ 0.92     $ 1.08     $ 1.84     $ 2.03  
Diluted $ 0.91     $ 1.07     $ 1.84     $ 2.03  
Weighted-average number of common shares outstanding:              
Basic 11,243     11,333     11,236     11,553  
Diluted 11,274     11,359     11,264     11,579  
Cash dividends declared per common share $ 0.45     $ 0.06     $ 0.89     $ 0.11  
                               


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  Six Months Ended June 30,
  2017   2016
               
  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 20,728     $ 23,481  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 276     180  
Stock-based compensation 17     84  
Cumulative translation adjustment realized in net income (258 )   132  
Changes in assets and liabilities:      
Inventories 1,388     (1,865 )
Other current assets 489     (612 )
Other assets (58 )   2  
Accounts payable 226     665  
Income taxes payable 4,304     487  
Accrued commissions (915 )   (989 )
Other accrued expenses (3,229 )   2,597  
Deferred revenue (939 )   4,816  
Amounts held in eWallets (327 )   1,759  
Other current liabilities (24 )   203  
Long-term incentive (1,049 )   (506 )
Net cash provided by operating activities 20,629     30,434  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment (170 )   (524 )
Net cash used in investing activities (170 )   (524 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Repurchase of common stock —     (23,704 )
Dividends paid (10,078 )   (1,262 )
Net cash used in financing activities (10,078 )   (24,966 )
Effect of exchange rates on cash and cash equivalents (41 )   (209 )
Net increase in cash and cash equivalents 10,340     4,735  
CASH AND CASH EQUIVALENTS, beginning of period 125,921     104,914  
CASH AND CASH EQUIVALENTS, end of period $ 136,261     $ 109,649  
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:      
Issuance of treasury stock for employee awards, net 1,393     1,741  

 

CONTACTS:

Company Contact:
Scott Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel: 310-541-0888
scott.davidson@nhtglobal.com

Investors:
ADDO Investor Relations
Tel: 310-829-5400
investor.relations@nhtglobal.com

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Source: Natural Health Trends Corp.

Released August 2, 2017