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Natural Health Trends Reports Second Quarter 2018 Financial Results

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  • Maintained strong gross profit and operating income margins
  • Declared special dividend of $0.25 per share
  • Increased quarterly dividend 7% to $0.15 per share

LOS ANGELES, Aug. 01, 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 second quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights

  • Total revenue of $50.9 million decreased 1% compared to $51.5 million in the second quarter of 2017, and decreased 3% compared to $52.4 million in the first quarter of 2018.
    • Revenue from the Company's Hong Kong operations, which represented 88% of total revenue, was $44.6 million, a decrease of 2% compared to $45.7 million in the second quarter of 2017.
    • Revenue outside of Hong Kong of $6.3 million increased 9% compared to $5.8 million in the second quarter of 2017.
  • Gross profit was $40.5 million compared to $41.7 million in the second quarter of 2017, and $42.1 million in the first quarter of 2018. As a percent of total revenue, gross profit was 80% compared to 81% in the second quarter of 2017 and 80% in the first quarter of 2018.
  • Operating income was $10.1 million compared to $12.9 million in the second quarter of 2017, and $10.0 million in the first quarter of 2018. As a percent of total revenue, operating income was 20% compared to 25% in the second quarter of 2017 and 19% in the first quarter of 2018.
  • Net income was $9.0 million, or $0.80 per diluted share, compared to net income of $10.3 million, or $0.91 per diluted share, in the second quarter of 2017, and $8.8 million, or $0.78 per diluted share, in the first quarter of 2018.
  • The number of Active Members1 decreased 2% to 93,000 at June 30, 2018, compared to 95,040 at March 31, 2018, and decreased 13% compared to 107,290 at June 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 $103.3 million decreased 7% compared to $111.3 million in the first six months of 2017.
  • Gross profit was $82.7 million compared to $90.3 million in the first six months of 2017. As a percent of total revenue, gross profit was 80% compared to 81% in the first six months of 2018.
  • Operating income was $20.2 million compared to $25.9 million in the first six months of 2017.  As a percent of total revenue, operating income was 20% compared to 23% in the first six months of 2017.
  • Net income was $17.8 million, or $1.58 per diluted share, compared to net income of $20.7 million, or $1.84 per diluted share, in the first six months of 2017.

Management Commentary

"Our second quarter performance reflected a continuation of the momentum we established in the fourth quarter of 2017," commented Chris Sharng, President of Natural Health Trends. "The 3% sequential decline in quarterly revenue can be attributed to the timing of our promotional activities. Major incentive trips, such as those to Australia and Seattle, took our members out of the markets in the second quarter. However, the associated qualification periods concluded in prior quarters."

Balance Sheet and Cash Flow

  • Net cash provided by operating activities was $5.3 million, compared to $6.8 million in the second quarter of 2017. For the first six months of 2018, net cash provided by operating activities was $16.5 million, compared to $20.6 million in the first six months of 2017.
  • On July 18, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.15, which represents a 7% 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 24, 2018 to stockholders of record as of August 14, 2018.

Second Quarter 2018 Financial Results Conference Call

Management will host a conference call to discuss the second quarter 2018 financial results today, Wednesday, August 1, 2018 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date: Wednesday, August 1, 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: 13681507
Webcast: http://public.viavid.com/index.php?id=130459

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 1, 2018 through 11:59 p.m. Eastern Time on August 15, 2018 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13681507.

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)

  June 30, 2018   December 31, 2017
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 128,270     $ 135,311  
Inventories 10,358     8,398  
Other current assets 5,550     7,534  
Total current assets 144,178     151,243  
Property and equipment, net 1,025     1,149  
Goodwill 1,764     1,764  
Restricted cash 3,111     3,167  
Deferred tax asset 1,435     1,435  
Other assets 854     796  
Total assets $ 152,367     $ 159,554  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 2,995     $ 1,751  
Income taxes payable 257     309  
Accrued commissions 10,399     11,170  
Other accrued expenses 8,157     7,605  
Deferred revenue 3,831     4,455  
Amounts held in eWallets 14,902     15,152  
Other current liabilities 1,446     1,479  
Total current liabilities 41,987     41,921  
Income taxes payable 17,395     19,052  
Deferred tax liability 75     56  
Long-term incentive 7,342     7,904  
Total liabilities 66,799     68,933  
Commitments and contingencies      
Stockholders' equity:      
Preferred stock      
Common stock 13     13  
Additional paid-in capital 86,415     86,683  
Retained earnings 39,662     44,908  
Accumulated other comprehensive loss (774 )   (413 )
Treasury stock, at cost (39,748 )   (40,570 )
Total stockholders' equity 85,568     90,621  
Total liabilities and stockholders' equity $ 152,367     $ 159,554  


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
  (Unaudited)
Net sales $ 50,910     $ 51,465     $ 103,277     $ 111,339  
Cost of sales 10,399     9,793     20,620     21,038  
Gross profit 40,511     41,672     82,657     90,301  
Operating expenses:              
Commissions expense 22,310     22,075     45,290     48,040  
Selling, general and administrative expenses 8,093     6,730     17,215     16,402  
Total operating expenses 30,403     28,805     62,505     64,442  
Income from operations 10,108     12,867     20,152     25,859  
Other income, net 53     80     216     236  
Income before income taxes 10,161     12,947     20,368     26,095  
Income tax provision 1,138     2,644     2,521     5,367  
Net income $ 9,023     $ 10,303     $ 17,847     $ 20,728  
Net income per common share:              
Basic $ 0.80     $ 0.92     $ 1.58     $ 1.84  
Diluted $ 0.80     $ 0.91     $ 1.58     $ 1.84  
Weighted-average number of common shares outstanding:              
Basic 11,298     11,243     11,292     11,236  
Diluted 11,305     11,274     11,297     11,264  
Cash dividends declared per common share $ 1.90     $ 0.45     $ 2.03     $ 0.89  


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

  Six Months Ended June 30,
  2018   2017
  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 17,847     $ 20,728  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 235     276  
Stock-based compensation     17  
Cumulative translation adjustment realized in net income     (258 )
Changes in assets and liabilities:      
Inventories (2,057 )   1,388  
Other current assets 1,955     489  
Other assets (73 )   (58 )
Accounts payable 1,246     226  
Income taxes payable (1,705 )   4,304  
Accrued commissions (707 )   (915 )
Other accrued expenses 1,119     (3,229 )
Deferred revenue (592 )   (939 )
Amounts held in eWallets (192 )   (327 )
Other current liabilities (24 )   (24 )
Long-term incentive (562 )   (1,049 )
Net cash provided by operating activities 16,490     20,629  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment (113 )   (170 )
Net cash used in investing activities (113 )   (170 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Dividends paid (23,093 )   (10,078 )
Net cash used in financing activities (23,093 )   (10,078 )
Effect of exchange rates on cash, cash equivalents and restricted cash (381 )   (41 )
Net (decrease) increase in cash, cash equivalents and restricted cash (7,097 )   10,340  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 138,478     128,884  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 131,381     $ 139,224  
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

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