Natural Health Trends Reports Third Quarter 2018 Financial Results

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  • Total revenue increased 17% year-over-year to $47.0 million
  • Year-to-date cash flow from operations increased 65% year-over-year to $25.3 million
  • Declared special dividend of $0.18 per share
  • Increased quarterly dividend 7% to $0.16 per share

LOS ANGELES, Oct. 30, 2018 (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 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 Ended
September 30,		   Nine Months Ended
September 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 Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel: 310-541-0888
scott.davidson@nhtglobal.com

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

NHTC Corporate Logo.jpg

Source: Natural Health Trends Corp.

Released October 30, 2018