Market Overview

Natural Health Trends Reports Third Quarter 2017 Financial Results

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  • Positive sales momentum in emerging international markets
  • Maintained strong gross profit and operating income margins 
  • Announced market entry into Malaysia
  • Increased quarterly dividend 9% to $0.12 per share
  • Declared special dividend of $0.15 per share

LOS ANGELES, Nov. 01, 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 September 30, 2017.

Third Quarter 2017 Financial Highlights

• Total revenue decreased 43% to $40.1 million, compared to $70.7 million in the third quarter of 2016.

  • Revenue from the Company's Hong Kong operations, which represented 87% of total revenue, decreased 47% to $35.0 million, compared to $65.9 million in the third quarter of 2016.

  • Revenue outside of Hong Kong increased 6% to $5.1 million, compared to $4.8 million in the third quarter of 2016.

• Operating income decreased 44% to $8.5 million, compared to $15.2 million in the third quarter of 2016. As a percent of total revenue, operating income was 21%, compared to 22% in the third quarter of 2016.

• Net income was $7.3 million, or $0.65 per diluted share, compared to $12.6 million, or $1.12 per diluted share, in the third quarter of 2016.

• The number of Active Members1 decreased 7% to 99,690 at September 30, 2017, compared to 107,290 at June 30, 2017, and decreased 19% compared to 122,900 at September 30, 2016.

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 33% to $151.5 million, compared to $225.4 million in the first nine months of 2016.
     
  • Operating income decreased 22% to $34.4 million, compared to $44.1 million in the first nine months of 2016. As a percent of total revenue, operating income was 23%, compared to 20% in the first nine months of 2016.
     
  • Net income was $28.1 million, or $2.49 per diluted share, compared to $36.0 million, or $3.14 per diluted share, in the first nine months of 2016.

Management Commentary

"While we made progress during the third quarter to revitalize sales growth, certain short-term factors exerted significant adverse effects and masked a quarter that was otherwise indicative of positive developments," commented Chris Sharng, President of Natural Health Trends Corp. "The difficult market conditions we have been experiencing since the third quarter of 2016 were further compounded by the 20th anniversary of Hong Kong's handover in July, as well as China's Communist Party's 19th National Congress in October, which tempered economic activities. These events impacted the operations of our logistics partners and detracted from our leaders' ability to organize meetings, which hindered our progress in comparison to the prior quarter. As we view both occurrences as short-term issues, we are working to revitalize sales in Asia through enhancements to our incentive programs as well as adjustments to our bonus and reward programs in an effort to provide more resources to up-and-coming members."

Mr. Sharng further commented, "Partially offsetting the year-over-year decline in net sales was strength in our emerging international markets including: Peru, Northern Europe, Southeast Asia and Japan. We also received positive responses from our members to our most recent product introductions during the quarter, notably OcuFocus, NaturalGlo and CogniMax. Further, after receiving approval for a direct selling license in Malaysia, on-site and follow-up orders at our Kuala Lumpur event in August were substantially greater than those of the Macau event in March. Despite challenging market conditions, we were able to maintain a healthy gross profit margin of nearly 80% and an operating income margin of over 21% due to strong consumer allegiance to our products and proactive expense management."

Balance Sheet and Cash Flow

  • Net cash used in operating activities was $5.3 million, compared to $16.6 million in net cash provided by operating activities in the third quarter of 2016. For the first nine months of 2017, net cash provided by operating activities was $15.3 million, compared to $36.3 million in the first nine months of 2016.
     
  • On October 30, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.12, which represents a 9% increase over the prior quarter dividend, as well as a special cash dividend of $0.15 per share on outstanding common stock. The dividends will be payable on November 24, 2017 to stockholders of record as of November 14, 2017. 

Third Quarter 2017 Financial Results Conference Call

Management will host a conference call to discuss the third quarter 2017 financial results today, Wednesday, November 1, 2017 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date:   Wednesday, November 1, 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:   13671086
Webcast:   http://public.viavid.com/index.php?id=126351 

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 November 1, 2017 through 11:59 p.m. Eastern Time on November 15, 2017 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13671086.

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) 
       
  September 30, 2017   December 31, 2016
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 126,953     $ 125,921  
Inventories 10,632     11,257  
Other current assets 2,961     4,066  
Total current assets 140,546     141,244  
Property and equipment, net 1,225     1,388  
Goodwill 1,764     1,764  
Restricted cash 3,092     2,963  
Other assets 772     692  
Total assets $ 147,399     $ 148,051  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 1,023     $ 2,145  
Income taxes payable 1,064     663  
Accrued commissions 10,443     13,611  
Other accrued expenses 8,545     14,989  
Deferred revenue 3,568     4,948  
Amounts held in eWallets 16,178     19,165  
Other current liabilities 1,705     1,633  
Total current liabilities 42,526     57,154  
Deferred tax liability 285     268  
Long-term incentive 6,730     8,190  
Total liabilities 49,541     65,612  
Commitments and contingencies      
Stockholders' equity:      
Preferred stock      
Common stock 13     13  
Additional paid-in capital 86,674     86,574  
Retained earnings 52,457     38,548  
Accumulated other comprehensive loss (716 )   (807 )
Treasury stock, at cost (40,570 )   (41,889 )
Total stockholders' equity 97,858     82,439  
Total liabilities and stockholders' equity $ 147,399     $ 148,051  
               


 

NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
         
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
                                 
    (Unaudited)
Net sales   $ 40,132     $ 70,679     $ 151,471     $ 225,416  
Cost of sales     8,183       13,627       29,221       42,966  
Gross profit     31,949       57,052       122,250       182,450  
Operating expenses:                                
Commissions expense
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