Natural Health Trends Reports Third Quarter 2023 Financial Results

Rhea-AI Summary

Natural Health Trends Corp. (NASDAQ: NHTC) announced its financial results for the third quarter of 2023. Despite headwinds of a stronger dollar and consumer sentiment, total orders remained flat. Cash flows from operations improved by $1.4 million. The company declared a quarterly cash dividend of $0.20 per share.

Positive

• Cash flows from operations improved by $1.4 million.
• Declared a quarterly cash dividend of $0.20 per share.

Negative

• Total orders taken were roughly flat despite headwinds of a stronger dollar and consumer sentiment.

• Total orders taken were roughly flat despite continued headwinds of a stronger dollar and trepid consumer sentiment
• Cash flows from operations improved $1.4 million
• Declared a quarterly cash dividend of $0.20 per share

HONG KONG, Nov. 01, 2023 (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, 2023.

Third Quarter 2023 Financial Highlights

• Revenue of $10.6 million decreased 9% compared to $11.7 million in the third quarter of 2022. The decrease in revenue was primarily due to the changes in deferred revenue in the two respective quarters. Deferred revenue decreased $603,000 and $1.4 million during the third quarter of 2023 and 2022, respectively, resulting in an $835,000 unfavorable revenue variance.
  
  
• Operating loss was $292,000 compared to $145,000 in the third quarter of 2022.
  
  
• Net income was $172,000, or $0.02 per diluted share, compared to $47,000, or breakeven per diluted share, in the third quarter of 2022.
  
  
• The number of Active Members¹ was down 6% to 34,660 at September 30, 2023 compared to 36,730 at June 30, 2023, and decreased 16% compared to 41,170 at September 30, 2022.

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 2023 Financial Highlights

• Revenue of $33.0 million decreased 10% compared to $36.6 million in the first nine months of 2022. The revenue decrease was primarily due to the changes in deferred revenue in the two respective nine-month periods. Deferred revenue increased $651,000 during the first nine months of 2023, but decreased $3.3 million during the same period last year, resulting in a $3.9 million unfavorable revenue variance.
  
  
• Operating loss was $1.4 million compared to $313,000 in the first nine months of 2022.
  
  
• Net income was $210,000, or $0.02 per diluted share, compared to $125,000, or $0.01 per diluted share, in the first nine months of 2022.

Management Commentary

“Adapting to the current environment in which Chinese consumers are reluctant to spend or invest, we managed to generate orders on pace with those of last year. Orders grew 3% at a constant exchange rate compared to the third quarter of 2022, while year-to-date 2023 orders increased 8% compared to prior year. The reported decrease in revenue was largely due to changes in deferred revenue, partly because orders tended to be received later in the quarter this year. Importantly, our members remained responsive to our programs, demonstrating that our promotions, incentives and high-quality product offerings continue to resonate,” commented Chris Sharng, President of Natural Health Trends Corp.

Mr. Sharng continued, “Noteworthy to highlight are the signs of momentum extending to several of our other markets including Taiwan, Peru, North America and Japan, each of which delivered strong performance during the quarter. We’re hopeful that these signs of growth will continue supported by careful planning and execution to our strategies around digital enhancements, new product launches, geographic diversification and superior member support.”

Balance Sheet and Cash Flow

• Net cash used in operating activities was $4.2 million in the first nine months of 2023 compared to $5.8 million in the first nine months of 2022. Before tax installment payments, the liability of which arises from the 2017 U.S. Tax Cuts and Jobs Act (the “Act Act”), cash used in operating activities was $1.2 million in the first nine months 2023, versus $4.2 million in the comparable period a year ago. Of the total Tax Act liability of $20.2 million, $11.2 million has been paid to date.
  
  
• Total cash and cash equivalents were $58.4 million at September 30, 2023, down from $61.6 million at June 30, 2023.
  
  
• On October 30, 2023, 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 November 24, 2023 to stockholders of record as of November 14, 2023.

Third Quarter 2023 Financial Results Conference Call

Management will host a conference call to discuss the third quarter 2023 financial results today, Wednesday, November 1, 2023 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date:	Wednesday, November 1, 2023
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:	13740859
Webcast:	https://viavid.webcasts.com/starthere.jsp?ei=1631150&tp_key=ea6cd96ef7

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, 2023 through 11:59 p.m. Eastern Time on November 8, 2023 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13740859.

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 3, 2023 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) 

		September 30, 2023				December 31, 2022
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	58,412			$	69,667
Inventories			4,882				4,525
Other current assets			3,675				3,359
Total current assets			66,969				77,551
Property and equipment, net			284				394
Operating lease right-of-use assets			3,549				3,992
Restricted cash			37				79
Deferred tax asset			303				195
Other assets			679				606
Total assets		$	71,821			$	82,817
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	666			$	810
Income taxes payable			4,092				2,972
Accrued commissions			2,589				2,943
Other accrued expenses			1,100				1,181
Deferred revenue			6,248				5,597
Amounts held in eWallets			4,154				4,895
Operating lease liabilities			1,182				1,135
Other current liabilities			747				905
Total current liabilities			20,778				20,438
Income taxes payable			5,054				9,098
Deferred tax liability			140				141
Operating lease liabilities			2,539				2,989
Total liabilities			28,511				32,666
Stockholders’ equity:
Preferred stock			—				—
Common stock			13				13
Additional paid-in capital			84,657				86,102
Accumulated deficit			(15,757	)			(9,056	)
Accumulated other comprehensive loss			(1,267	)			(1,004	)
Treasury stock, at cost			(24,336	)			(25,904	)
Total stockholders’ equity			43,310				50,151
Total liabilities and stockholders’ equity		$	71,821			$	82,817

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Net sales		$	10,615			$	11,716			$	32,987			$	36,622
Cost of sales			2,689				3,098				8,386				9,398
Gross profit			7,926				8,618				24,601				27,224
Operating expenses:
Commissions expense			4,361				4,863				13,861				15,370
Selling, general and administrative expenses			3,857				3,900				12,169				12,167
Total operating expenses			8,218				8,763				26,030				27,537
Loss from operations			(292	)			(145	)			(1,429	)			(313	)
Other income, net			585				187				1,708				472
Income before income taxes			293				42				279				159
Income tax provision (benefit)			121				(5	)			69				34
Net income		$	172			$	47			$	210			$	125
Net income per common share:
Basic		$	0.02			$	0.00			$	0.02			$	0.01
Diluted		$	0.02			$	0.00			$	0.02			$	0.01
Weighted average common shares outstanding:
Basic			11,440				11,423				11,432				11,341
Diluted			11,454				11,423				11,449				11,423

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

		Nine Months Ended September 30,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	210			$	125
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization			130				156
Share-based compensation			123				—
Noncash lease expense			830				889
Deferred income taxes			(117	)			(2	)
Changes in assets and liabilities:
Inventories			(420	)			140
Other current assets			(425	)			1,000
Other assets			(92	)			(44	)
Accounts payable			(141	)			228
Income taxes payable			(2,923	)			(1,382	)
Accrued commissions			(315	)			(1,055	)
Other accrued expenses			(58	)			(540	)
Deferred revenue			674				(3,209	)
Amounts held in eWallets			(725	)			(1,150	)
Operating lease liabilities			(812	)			(950	)
Other current liabilities			(148	)			4
Net cash used in operating activities			(4,209	)			(5,790	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(32	)			(130	)
Net cash used in investing activities			(32	)			(130	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid			(6,911	)			(6,855	)
Net cash used in financing activities			(6,911	)			(6,855	)
Effect of exchange rates on cash, cash equivalents and restricted cash			(145	)			(858	)
Net decrease in cash, cash equivalents and restricted cash			(11,297	)			(13,633	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period			69,746				84,365
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period		$	58,449			$	70,732
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets obtained in exchange for operating lease liabilities		$	115			$	2,218

FAQ

What is the stock symbol for Natural Health Trends Corp.?

The stock symbol for Natural Health Trends Corp. is NHTC.

What were the financial highlights for the third quarter of 2023?

Revenue was $10.6 million, a decrease of 9% compared to the same period last year. Operating loss was $292,000. Net income was $172,000, or $0.02 per diluted share. The number of Active Members decreased by 6%.

What were the year-to-date financial highlights for 2023?

Revenue was $33.0 million, a decrease of 10% compared to the same period last year. Operating loss was $1.4 million. Net income was $210,000, or $0.02 per diluted share.

What did the management say about the financial results?

The management mentioned that despite the challenging environment, orders remained on pace with last year. They highlighted signs of growth in several markets and expressed hope for continued growth supported by strategic initiatives.

What was the cash flow and balance sheet situation?

Net cash used in operating activities was $4.2 million in the first nine months of 2023. Total cash and cash equivalents were $58.4 million at September 30, 2023. The company's Board of Directors declared a quarterly cash dividend of $0.20 per share.

When is the conference call to discuss the financial results?

The conference call will be held on Wednesday, November 1, 2023, at 11:30 a.m. Eastern Time.