Natural Health Trends Reports Second Quarter 2024 Financial Results

Rhea-AI Summary

Natural Health Trends Corp. (NASDAQ: NHTC) reported its Q2 2024 financial results. Key highlights include:

- Revenue remained flat at $10.5 million compared to Q2 2023
- Operating loss improved to $238,000 from $743,000 in Q2 2023
- Net income of $173,000 ($0.02 per diluted share) vs. net loss of $219,000 in Q2 2023
- Active Members decreased 15% year-over-year to 31,110

For the first half of 2024:
- Revenue decreased 4% to $21.4 million
- Net income improved to $361,000 ($0.03 per diluted share)
- Cash, cash equivalents, and marketable securities totaled $48.7 million

The company declared a quarterly cash dividend of $0.20 per share.

Positive

• Revenue remained stable at $10.5 million in Q2 2024 compared to Q2 2023
• Operating loss improved from $743,000 in Q2 2023 to $238,000 in Q2 2024
• Net income of $173,000 in Q2 2024 compared to a net loss in Q2 2023
• Cash provided by operating activities before tax installments was $950,000 in H1 2024
• Declared a quarterly cash dividend of $0.20 per share

Negative

• Active Members decreased 15% year-over-year to 31,110
• Revenue for H1 2024 decreased 4% to $21.4 million compared to H1 2023
• Total cash, cash equivalents and marketable securities decreased to $48.7 million from $54.4 million in Q1 2024

Insights

Financial Analyst

Natural Health Trends Corp.'s Q2 2024 results present a mixed picture with some positive developments amidst ongoing challenges. The flat revenue of $10.5 million year-over-year is a notable improvement from the declining trend, particularly with the first year-over-year increase in Hong Kong sales since Q1 2023. This suggests that the company's strategic initiatives are gaining traction in a key market.

The reduction in operating loss from $743,000 to $238,000 is significant, indicating improved operational efficiency. The shift to a net income of $173,000 ($0.02 per diluted share) from a net loss in Q2 2023 is encouraging, albeit modest. However, the 15% year-over-year decrease in Active Members to 31,110 is concerning, pointing to ongoing challenges in member retention and acquisition.

The company's focus on cost management is evident in the improved cash flow metrics. Before Tax Act installments, cash provided by operating activities was $950,000 in H1 2024, a substantial improvement from the $307,000 cash used in H1 2023. This demonstrates the company's ability to generate positive cash flow despite revenue challenges.

The maintained quarterly dividend of $0.20 per share, while positive for shareholders, should be monitored closely given the company's financial position. With $48.7 million in cash and equivalents, down from $54.4 million in Q1, careful balance sheet management will be crucial.

Overall, while Natural Health Trends shows signs of stabilization and improved efficiency, sustained revenue growth and member acquisition remain key challenges for long-term viability in the competitive direct-selling market.

Market Research Analyst

Natural Health Trends' Q2 2024 results reflect the complex dynamics of the direct-selling industry, particularly in the Asia-Pacific region. The company's flat revenue performance, while not ideal, suggests a potential stabilization after periods of decline. This could indicate that their market strategies are beginning to resonate in a challenging environment.

The increase in Hong Kong sales is particularly noteworthy, as it's the first year-over-year growth since Q1 2023. Hong Kong often serves as a bellwether for broader Asian market trends in the direct-selling industry. This uptick might signal a gradual recovery in consumer confidence and spending patterns in the region.

However, the 15% year-over-year decline in Active Members is a red flag. In the direct-selling model, member base is a important leading indicator of future revenue potential. This decline suggests ongoing challenges in member recruitment and retention, possibly due to competitive pressures or changing consumer preferences.

The company's emphasis on "comprehensive training" and "brand building initiatives" indicates a recognition of the need to adapt to evolving market conditions. These strategies are common in the industry as companies seek to differentiate themselves and provide more value to their members and customers.

Looking ahead, Natural Health Trends will need to focus on reversing the trend of declining Active Members while maintaining its operational efficiencies. The direct-selling landscape continues to face disruption from e-commerce and changing consumer behaviors, necessitating continuous innovation and adaptation to remain competitive.

	–	Total net sales were flat compared to the second quarter of 2023; first year-over-year increase in Hong Kong net sales since the first quarter of 2023
	–	Cash flows from operations before 2017 Tax Act installment were positive for second consecutive quarter
	–	Declared a quarterly cash dividend of $0.20 per share

HONG KONG, July 31, 2024 (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, 2024.

Second Quarter 2024 Financial Highlights

• Revenue of $10.5 million is unchanged compared to the second quarter of 2023. 
• Operating loss improved to $238,000 compared to $743,000 in the second quarter of 2023.
• Net income was $173,000, or $0.02 per diluted share, compared to net loss of $219,000, or $0.02 per diluted share, in the second quarter of 2023.
• The number of Active Members¹ was down 2% to 31,110 at June 30, 2024 compared to 31,620 at March 31, 2024, and decreased 15% compared to 36,730 at June 30, 2023.

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 2024 Financial Highlights

• Revenue of $21.4 million decreased 4% compared to $22.4 million in the first six months of 2023. 
• Operating loss was $603,000 compared to $1.1 million in the first six months of 2023.
• Net income was $361,000, or $0.03 per diluted share, compared to $38,000, or breakeven per diluted share, in the first six months of 2023.

Management Commentary

“Our results indicate that the programs, promotions and incentives we’ve implemented this year have been effective and are performing as expected, maintaining engagement and driving customer satisfaction. We recognize that we’re still operating in a challenging environment, but believe we’re on the right track supporting our business and field leaders so they can find success. Our strong financial statements reflect positively on our ability to navigate the harder than expected business landscape by efficiently managing costs,” commented Chris Sharng, President of Natural Health Trends Corp.

Mr. Sharng continued, “In the second half of the year we will continue to execute our strategic plans with an emphasis on comprehensive training, collaborative coordination between our staff, field leaders and members, and implementation of brand building initiatives to take advantage of market opportunities.”

Balance Sheet and Cash Flow

• Net cash used in operating activities was $3.0 million in the first six months of 2024 compared to $3.3 million in the first six months of 2023. Before tax installment payments, the liability of which arises from the 2017 U.S. Tax Cuts and Jobs Act (the “Tax Act”), cash provided by operating activities was $950,000 in the first six months 2024, versus cash used in operating activities of $307,000 in the comparable period a year ago. Of the total Tax Act liability of $20.2 million, $15.1 million has been paid to date.
• Total cash, cash equivalents and marketable securities were $48.7 million at June 30, 2024, down from $54.4 million at March 31, 2024.
• On July 29, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 on each share of common stock outstanding. The dividend will be payable on August 23, 2024 to stockholders of record as of August 13, 2024.

Second Quarter 2024 Financial Results Conference Call

Management will host a conference call to discuss the second quarter 2024 financial results today, Wednesday, July 31, 2024 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date:	Wednesday, July 31, 2024
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:	13746911
Webcast:	https://viavid.webcasts.com/starthere.jsp?ei=1673848&tp_key=7f60fa0c81

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 July 31, 2024 through 11:59 p.m. Eastern Time on August 7, 2024 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13746911.

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 February 28, 2024 with the Securities and Exchange Commission (SEC), as well as in subsequent reports filed this year with the SEC. The Company assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

CONTACT:

Scott Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel (Hong Kong): +852-3107-0800
Tel (U.S.): 310-541-0888
investor.relations@nhtglobal.com

 

NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
		June 30, 2024				December 31, 2023
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	15,577			$	56,178
Marketable securities			33,087				—
Inventories			4,250				4,293
Other current assets			3,984				3,758
Total current assets			56,898				64,229
Property and equipment, net			225				266
Operating lease right-of-use assets			3,031				3,319
Restricted cash			36				39
Deferred tax asset			345				369
Other assets			956				869
Total assets		$	61,491			$	69,091
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	653			$	990
Income taxes payable			4,953				3,716
Accrued commissions			2,150				2,067
Other accrued expenses			1,300				1,170
Deferred revenue			7,587				6,166
Amounts held in eWallets			3,603				3,945
Operating lease liabilities			1,210				1,146
Other current liabilities			673				784
Total current liabilities			22,129				19,984
Income taxes payable			—				5,054
Deferred tax liability			135				135
Operating lease liabilities			1,977				2,318
Total liabilities			24,241				27,491
Stockholders’ equity:
Preferred stock			—				—
Common stock			13				13
Additional paid-in capital			84,770				84,695
Accumulated deficit			(21,948	)			(17,703	)
Accumulated other comprehensive loss			(1,249	)			(1,069	)
Treasury stock, at cost			(24,336	)			(24,336	)
Total stockholders’ equity			37,250				41,600
Total liabilities and stockholders’ equity		$	61,491			$	69,091

NATURAL HEALTH TRENDS CORP.  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Net sales		$	10,475			$	10,511			$	21,426			$	22,372
Cost of sales			2,699				2,666				5,611				5,697
Gross profit			7,776				7,845				15,815				16,675
Operating expenses:
Commissions expense			4,203				4,508				8,689				9,500
Selling, general and administrative expenses			3,811				4,080				7,729				8,312
Total operating expenses			8,014				8,588				16,418				17,812
Loss from operations			(238	)			(743	)			(603	)			(1,137	)
Other income, net			519				442				1,082				1,123
Income (loss) before income taxes			281				(301	)			479				(14	)
Income tax provision (benefit)			108				(82	)			118				(52	)
Net income (loss)		$	173			$	(219	)		$	361			$	38
Net income (loss) per common share:
Basic		$	0.02			$	(0.02	)		$	0.03			$	0.00
Diluted		$	0.02			$	(0.02	)		$	0.03			$	0.00
Weighted average common shares outstanding:
Basic			11,464				11,432				11,460				11,428
Diluted			11,483				11,432				11,481				11,439

NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
		Six Months Ended June 30,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	361			$	38
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization			69				91
Net accretion of marketable securities			(215	)			—
Share-based compensation			75				85
Noncash lease expense			545				564
Deferred income taxes			16				(82	)
Changes in assets and liabilities:
Inventories			6				(228	)
Other current assets			(294	)			(362	)
Other assets			(101	)			(52	)
Accounts payable			(335	)			(82	)
Income taxes payable			(3,817	)			(3,076	)
Accrued commissions			106				(374	)
Other accrued expenses			136				68
Deferred revenue			1,432				1,270
Amounts held in eWallets			(339	)			(541	)
Operating lease liabilities			(560	)			(595	)
Other current liabilities			(104	)			(64	)
Net cash used in operating activities			(3,019	)			(3,340	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(30	)			(14	)
Purchases of marketable securities			(36,164	)			—
Proceeds from maturities of marketable securities			3,307				—
Net cash used in investing activities			(32,887	)			(14	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid			(4,606	)			(4,608	)
Net cash used in financing activities			(4,606	)			(4,608	)
Effect of exchange rates on cash, cash equivalents and restricted cash			(92	)			(179	)
Net decrease in cash, cash equivalents and restricted cash			(40,604	)			(8,141	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period			56,217				69,746
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period		$	15,613			$	61,605
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease liabilities		$	196			$	(125	)

FAQ

What was Natural Health Trends Corp's (NHTC) revenue in Q2 2024?

Natural Health Trends Corp's revenue in Q2 2024 was $10.5 million, unchanged compared to Q2 2023.

How did NHTC's net income change in Q2 2024 compared to Q2 2023?

NHTC reported a net income of $173,000 ($0.02 per diluted share) in Q2 2024, compared to a net loss of $219,000 in Q2 2023.

What was the change in NHTC's Active Members as of June 30, 2024?

NHTC's Active Members decreased by 15% to 31,110 as of June 30, 2024, compared to 36,730 on June 30, 2023.

What dividend did Natural Health Trends Corp (NHTC) declare for Q2 2024?

NHTC declared a quarterly cash dividend of $0.20 per share, payable on August 23, 2024, to stockholders of record as of August 13, 2024.