Nature's Sunshine Reports Third Quarter 2020 Results
Nature’s Sunshine Products (Nasdaq: NATR) announced a record net sales of $100.3 million for the third quarter of 2020, marking a 13% increase from the previous year. GAAP net income rose significantly to $7.2 million or $0.34 per diluted share. Adjusted EBITDA also increased by 13% to $9.4 million.
The growth was fueled by robust consumer demand, new product launches, and easing COVID-19 restrictions in key markets, particularly in U.S. and China. The company aims to further enhance customer engagement and support distributors as part of its business transformation initiatives.
- Net sales increased by 13% to $100.3 million.
- GAAP net income rose to $7.2 million, a significant increase from $1.4 million.
- Adjusted EBITDA climbed 13% to $9.4 million.
- Successful product launches contributing to strong consumer demand.
- Gross margin decreased to 72.9% from 74.3% due to market mix changes and material costs.
- Selling, general and administrative expenses rose to $33.3 million from $31.2 million.
- Net Sales Increase
LEHI, Utah, Nov. 09, 2020 (GLOBE NEWSWIRE) -- Nature’s Sunshine Products, Inc. (Nasdaq: NATR) (Nature’s Sunshine), a leading natural health and wellness company of high-quality herbal and nutritional products, reported financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights vs. Same Year-Ago Quarter
- Net sales increased
13% to$100.3 million compared to$88.5 million . - GAAP net income increased significantly to
$7.2 million , or$0.34 per diluted share, compared to$1.4 million , or$0.07 per diluted share. - Adjusted net income per diluted share was
$0.34 , compared to an adjusted net income per share of$0.08 . - Adjusted EBITDA increased
13% to$9.4 million compared to$8.3 million .
Management Commentary
“Strong consumer demand and new product launches accelerated our momentum in the U.S. and China, while COVID-19-related restrictions eased in Korea and Latin American markets, allowing us to more fully deploy our revamped field fundamentals,” said Terrence Moorehead, CEO of Nature’s Sunshine. “This combination resulted in the highest consolidated net sales quarter in our history, which flowed through to a more than four-fold increase in net income. The progress we have made with our transformation initiatives is only the beginning to unlocking the true potential of Nature's Sunshine's platform, and we believe we are taking the right steps to continue this momentum into the future."
“During the third quarter, we officially launched our new business model and made further progress deploying our five global growth strategies. Our brand and business model relaunch aim is to respond to our customers’ needs and provide new opportunities for our consultants, health practitioners, and retailers to drive long-term, sustainable growth. We will continue to strengthen the transformation initiatives we have put in place and support our distributors as they make this transition along with us. We will also work to improve customer retention and engagement through additional investments in direct-to-consumer events and expanded customization offerings. Although we remain in a volatile operating environment, the progress we have made has established a strong operational and financial foundation for the remainder of 2020 and into 2021.”
Third Quarter 2020 Financial Results
Net Sales by Operating Segment (Amounts in Thousands) | ||||||||||||||||||
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Percent Change | Impact of Currency Exchange | Percent Change Excluding Impact of Currency | ||||||||||||||
Asia | $ | 38,099 | $ | 33,717 | 13.0 | % | $ | 184 | 12.5 | % | ||||||||
Europe | 18,006 | 14,640 | 23.0 | 236 | 21.4 | |||||||||||||
North America | 37,557 | 34,161 | 9.9 | (22 | ) | 10.0 | ||||||||||||
Latin America and Other | 6,588 | 6,006 | 9.7 | (258 | ) | 14.0 | ||||||||||||
$ | 100,250 | $ | 88,524 | 13.2 | % | $ | 140 | 13.1 | % |
Net sales in the third quarter increased
Gross margin in the third quarter was
Volume incentives as a percentage of net sales increased 50 basis points to
Selling, general and administrative expenses in the third quarter were
Operating income in the third quarter of 2020 increased
Other income, net, in the third quarter of 2020 increased to
GAAP net income attributable to common shareholders increased significantly to
Adjusted net income attributable to common shareholders increased significantly to
Adjusted EBITDA increased
Balance Sheet and Cash Flow
Net cash provided by operating activities improved to
Conference Call
The Company will hold a conference call today at 5:00 p.m. Eastern time to discuss its third quarter 2020 results.
Date: Monday, November 9, 2020
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Toll-free dial-in number: 1-800-263-0877
International dial-in number: 1-646-828-8143
Conference ID: 9071895
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.
The conference call will be broadcast live and available for replay here and via the Events section of the Nature’s Sunshine website here.
A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through November 23, 2020.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9071895
About Nature’s Sunshine Products
Nature’s Sunshine Products (Nasdaq: NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products in more than 40 countries. Nature’s Sunshine manufactures most of its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on the market today. Additional information about the company can be obtained at its website, www.naturessunshine.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements regarding the Company’s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to the Company’s objectives, plans, strategies and financial results. All statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including the following:
- adverse impacts of the global COVID-19 pandemic;
- laws and regulations regarding direct selling may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets;
- extensive government regulations to which the Company's products, business practices and manufacturing activities are subject;
- legal challenges to the Company's direct selling program or to the classification of its independent consultants;
- impact of anti-bribery laws, including the U.S. Foreign Corrupt Practices Act;
- the Company’s ability to attract and retain independent consultants;
- the loss of one or more key independent consultants who have a significant sales network;
- the Company’s joint venture for operations in China with Fosun Industrial Co., Ltd.;
- registration of products for sale in foreign markets, or difficulty or increased cost of importing products into foreign markets;
- cybersecurity threats and exposure to data loss;
- the storage, processing, and use of data, some of which contain personal information, are subject to complex and evolving privacy and data protection laws and regulations;
- reliance on information technology infrastructure;
- the effect of fluctuating foreign exchange rates;
- liabilities and obligations arising from improper activity by the Company’s independent consultants;
- failure of the Company’s independent consultants to comply with advertising laws;
- changes to the Company’s independent consultants compensation plans;
- geopolitical issues and conflicts;
- negative consequences resulting from difficult economic conditions, including the availability of liquidity or the willingness of the Company’s customers to purchase products;
- risks associated with the manufacturing of the Company's products;
- uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto;
- changes in tax laws, treaties or regulations, or their interpretation;
- actions on trade relations by the U.S. and foreign governments;
- product liability claims;
- the sufficiency of trademarks and other intellectual property rights; and
- our cannabidiol (CBD) product line is subject to varying, rapidly changing laws, regulations, and rules.
These and other risks and uncertainties that could cause actual results to differ from predicted results are more fully detailed under the caption “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports filed on Form 10-Q.
All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this press release. Except as is required by law, the Company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this press release.
Non-GAAP Financial Measures
We have included information which has not been prepared in accordance with generally accepted accounting principles (GAAP), such as information concerning non-GAAP net income, Adjusted EBITDA and net sales excluding the impact of foreign currency exchange fluctuations.
We utilize the non-GAAP measures of non-GAAP net income and Adjusted EBITDA in the evaluation of our operations and believe that these measures are useful indicators of our ability to fund our business. These non-GAAP financial measures should not be considered as an alternative to, or more meaningful than, U.S. GAAP net income (loss) as an indicator of our operating performance.
Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of Nature’s Sunshine Products’ performance in relation to other companies. We have included a reconciliation of Net Income to Adjusted EBITDA, the most comparable GAAP measure. We have also included a reconciliation of GAAP net income to Non-GAAP net income and Non-GAAP Adjusted EPS, in the attached financial tables.
Net sales in local currency removes, from net sales in U.S. dollars, the impact of changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries. This is accomplished by translating the current period net sales into U.S. dollars using the same foreign currency exchange rates that were used to translate the net sales for the previous comparable period.
We believe presenting the impact of foreign currency fluctuations is useful to investors because it allows a more meaningful comparison of net sales of our foreign operations from period to period. Net sales excluding the impact of foreign currency fluctuations should not be considered in isolation or as an alternative to net sales in U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.
Investor Relations:
Gateway Investor Relations
Cody Slach
1-949-574-3860
NATR@gatewayir.com
NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share information)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Net sales | $ | 100,250 | $ | 88,524 | $ | 283,462 | $ | 270,520 | |||||||||||
Cost of sales | 27,175 | 22,784 | 74,873 | 70,078 | |||||||||||||||
Gross profit | 73,075 | 65,740 | 208,589 | 200,442 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Volume incentives | 34,310 | 29,862 | 96,493 | 92,177 | |||||||||||||||
Selling, general and administrative | 33,294 | 31,177 | 92,863 | 96,048 | |||||||||||||||
Operating income | 5,471 | 4,701 | 19,233 | 12,217 | |||||||||||||||
Other income (loss), net | 671 | (1,243 | ) | (230 | ) | (985 | ) | ||||||||||||
Income before provision for income taxes | 6,142 | 3,458 | 19,003 | 11,232 | |||||||||||||||
Provision (benefit) for income taxes | (1,027 | ) | 2,107 | 2,695 | 5,523 | ||||||||||||||
Net income | 7,169 | 1,351 | 16,308 | 5,709 | |||||||||||||||
Net income (loss) attributable to noncontrolling interests | 414 | 34 | 837 | (54 | ) | ||||||||||||||
Net income attributable to common shareholders | $ | 6,755 | $ | 1,317 | $ | 15,471 | $ | 5,763 | |||||||||||
Basic and diluted net income per common share: | |||||||||||||||||||
Basic earnings per share attributable to common shareholders | $ | 0.35 | $ | 0.07 | $ | 0.79 | $ | 0.30 | |||||||||||
Diluted earnings per share attributable to common shareholders | $ | 0.34 | $ | 0.07 | $ | 0.78 | $ | 0.29 | |||||||||||
Weighted average basic common shares outstanding | 19,533 | 19,313 | 19,493 | 19,291 | |||||||||||||||
Weighted average diluted common shares outstanding | 19,859 | 19,662 | 19,820 | 19,618 |
NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
September 30, 2020 | December 31, 2019 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 82,260 | $ | 53,629 | |||||
Accounts receivable, net of allowance for doubtful accounts of | 8,977 | 7,319 | |||||||
Inventories | 47,846 | 46,666 | |||||||
Prepaid expenses and other | 5,894 | 5,091 | |||||||
Total current assets | 144,977 | 112,705 | |||||||
Property, plant and equipment, net | 56,164 | 59,512 | |||||||
Operating lease right-of-use assets | 20,632 | 23,951 | |||||||
Investment securities - trading | 1,017 | 1,150 | |||||||
Intangible assets, net | 269 | 567 | |||||||
Deferred income tax assets | 4,087 | 4,899 | |||||||
Other assets | 10,274 | 10,284 | |||||||
Total assets | $ | 237,420 | $ | 213,068 | |||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 5,909 | $ | 4,406 | |||||
Accrued volume incentives and service fees | 17,531 | 18,893 | |||||||
Accrued liabilities | 30,816 | 25,531 | |||||||
Deferred revenue | 1,580 | 1,266 | |||||||
Related party notes payable | 1,303 | 1,518 | |||||||
Income taxes payable | 345 | 1,392 | |||||||
Current portion of operating lease liabilities | 4,957 | 4,941 | |||||||
Current portion of note payable | 3,310 | — | |||||||
Total current liabilities | 65,751 | 57,947 | |||||||
Liability related to unrecognized tax benefits | 82 | 1,499 | |||||||
Long-term portion of operating lease liabilities | 16,981 | 20,213 | |||||||
Long-term note payable | 2,064 | — | |||||||
Deferred compensation payable | 1,017 | 1,150 | |||||||
Deferred income tax liabilities | 2,053 | 1,655 | |||||||
Other liabilities | 1,235 | 1,168 | |||||||
Total liabilities | 89,183 | 83,632 | |||||||
Shareholders’ equity: | |||||||||
Common stock, no par value, 50,000 shares authorized, 19,592 and 19,410 shares issued and outstanding, respectively | 137,776 | 135,741 | |||||||
Retained earnings | 20,164 | 4,693 | |||||||
Noncontrolling interest | 1,064 | 227 | |||||||
Accumulated other comprehensive loss | (10,767 | ) | (11,225 | ) | |||||
Total shareholders’ equity | 148,237 | 129,436 | |||||||
Total liabilities and shareholders’ equity | $ | 237,420 | $ | 213,068 |
NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended September 30, | |||||||||
2020 | 2019 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net income | $ | 16,308 | $ | 5,709 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||
Provision for doubtful accounts | 116 | 4 | |||||||
Depreciation and amortization | 7,834 | 7,533 | |||||||
Non-cash lease expense | 2,398 | 3,989 | |||||||
Share-based compensation expense | 2,141 | 1,529 | |||||||
Loss on sale of property, plant and equipment | 7 | 17 | |||||||
Deferred income taxes | 1,210 | 474 | |||||||
Purchase of trading investment securities | (47 | ) | (69 | ) | |||||
Proceeds from sale of trading investment securities | 221 | 392 | |||||||
Realized and unrealized gains on investments | (41 | ) | (181 | ) | |||||
Foreign exchange losses | 354 | 597 | |||||||
Loss on write-off of cumulative translation adjustment | — | 595 | |||||||
Changes in assets and liabilities: | |||||||||
Accounts receivable | (1,692 | ) | 152 | ||||||
Inventories | (1,361 | ) | (4,074 | ) | |||||
Prepaid expenses and other current assets | (798 | ) | 1,065 | ||||||
Other assets | (30 | ) | 469 | ||||||
Accounts payable | 1,102 | (1,073 | ) | ||||||
Accrued volume incentives and service fees | (1,370 | ) | (1,096 | ) | |||||
Accrued liabilities | 5,106 | (5,277 | ) | ||||||
Deferred revenue | 295 | 127 | |||||||
Lease liabilities | (2,276 | ) | (3,619 | ) | |||||
Income taxes payable | (1,078 | ) | (880 | ) | |||||
Liability related to unrecognized tax benefits | (1,417 | ) | (729 | ) | |||||
Deferred compensation payable | (133 | ) | (142 | ) | |||||
Net cash provided by operating activities | 26,849 | 5,512 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Purchases of property, plant and equipment | (3,487 | ) | (4,474 | ) | |||||
Net cash used in investing activities | (3,487 | ) | (4,474 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Principal payments of revolving credit facility | — | (547 | ) | ||||||
Proceeds from revolving credit facility | — | 547 | |||||||
Proceeds from note payable | 5,374 | — | |||||||
Principal payments of related party borrowing | (243 | ) | — | ||||||
Proceeds from the exercise of stock awards | 192 | 60 | |||||||
Tax benefit from stock awards | (298 | ) | (193 | ) | |||||
Net cash provided by (used in) financing activities | 5,025 | (133 | ) | ||||||
Effect of exchange rates on cash and cash equivalents | 244 | (1,013 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 28,631 | (108 | ) | ||||||
Cash and cash equivalents at the beginning of the period | 53,629 | 50,638 | |||||||
Cash and cash equivalents at the end of the period | $ | 82,260 | $ | 50,530 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||
Cash paid for income taxes, net of refunds | $ | 3,293 | $ | 5,212 | |||||
Cash paid for interest | 24 | 63 |
NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net income | $ | 7,169 | $ | 1,351 | $ | 16,308 | $ | 5,709 | |||||||||
Adjustments: | |||||||||||||||||
Depreciation and amortization | 2,764 | 2,546 | 7,834 | 7,533 | |||||||||||||
Share-based compensation expense | 1,011 | 678 | 2,141 | 1,529 | |||||||||||||
Other (income) loss, net* | (671 | ) | 1,243 | 230 | 985 | ||||||||||||
Provision (benefit) for income taxes | (1,027 | ) | 2,107 | 2,695 | 5,523 | ||||||||||||
Other adjustments (1) | 132 | 410 | (503 | ) | 2,364 | ||||||||||||
Adjusted EBITDA | $ | 9,378 | $ | 8,335 | $ | 28,705 | $ | 23,643 | |||||||||
(1) Other adjustments | |||||||||||||||||
Restructuring and other unusual expenses | $ | 132 | $ | 410 | $ | 132 | $ | 2,364 | |||||||||
VAT refund | — | — | (635 | ) | — | ||||||||||||
Total adjustments | $ | 132 | $ | 410 | $ | (503 | ) | $ | 2,364 |
* Other (income) loss, net is primarily comprised of foreign exchange (gains) losses, interest income, and interest expense.
NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP NET INCOME and NON-GAAP ADJUSTED EPS
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Net income | $ | 7,169 | $ | 1,351 | $ | 16,308 | $ | 5,709 | |||||||||||
Adjustments: | |||||||||||||||||||
Restructuring and other unusual expenses | 132 | 410 | 132 | 2,364 | |||||||||||||||
VAT refund | — | — | (635 | ) | — | ||||||||||||||
Tax impact of adjustments | (33 | ) | (124 | ) | (33 | ) | (867 | ) | |||||||||||
Total adjustments | 58 | 286 | (536 | ) | 1,497 | ||||||||||||||
Non-GAAP net income | $ | 7,268 | $ | 1,637 | $ | 15,772 | $ | 7,206 | |||||||||||
Reported income attributable to common shareholders | $ | 6,755 | $ | 1,317 | $ | 15,471 | $ | 5,763 | |||||||||||
Total adjustments | 99 | 286 | (536 | ) | 1,497 | ||||||||||||||
Non-GAAP net income attributable to common shareholders | $ | 6,854 | $ | 1,603 | $ | 14,935 | $ | 7,260 | |||||||||||
Basic income per share, as reported | $ | 0.35 | $ | 0.07 | $ | 0.79 | $ | 0.30 | |||||||||||
Total adjustments, net of tax | 0.01 | 0.01 | (0.03 | ) | 0.08 | ||||||||||||||
Basic income per share, as adjusted | $ | 0.36 | $ | 0.08 | $ | 0.76 | $ | 0.38 | |||||||||||
Diluted income per share, as reported | $ | 0.34 | $ | 0.07 | $ | 0.78 | $ | 0.29 | |||||||||||
Total adjustments, net of tax | — | 0.01 | (0.03 | ) | 0.08 | ||||||||||||||
Diluted income per share, as adjusted | $ | 0.34 | $ | 0.08 | $ | 0.75 | $ | 0.37 |
FAQ
What were Nature's Sunshine Products' net sales for Q3 2020?
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