Natural Health Trends Reports Third Quarter 2020 Financial Results

– Maintained profitability with third quarter earnings per share improving to $0.06
– Achieved positive third quarter sales momentum in markets outside of Hong Kong
– Strong balance sheet with ample liquidity
– Declared a quarterly cash dividend of $0.20 per share

HONG KONG, Nov. 04, 2020 (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 third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights

  • Revenue of $14.1 million decreased 14% compared to $16.4 million in the second quarter of 2020 and decreased 17% compared to $17.0 million in the third quarter of 2019.

  • Operating income was $668,000 compared to $183,000 in the second quarter of 2020 and a loss of $1.1 million in the third quarter of 2019.

  • Net income was $635,000, or $0.06 per diluted share, compared to $34,000, or break-even per diluted share, in the second quarter of 2020 and net loss of $1.2 million, or $0.12 per diluted share, in the third quarter of 2019.

  • The number of Active Members1 decreased 2% to 53,300 at September 30, 2020 compared to 54,370 at June 30, 2020, and decreased 22% compared to 68,150 at September 30, 2019.
 1Natural 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 2020 Financial Highlights

  • Revenue of $45.5 million decreased 24% compared to $59.8 million in the first nine months of 2019.

  • Operating loss was $597,000 compared to a loss of $3.8 million in the first nine months of 2019.

  • Net income was $96,000, or $0.01 per diluted share, compared to a net loss of $2.8 million, or $0.25 per diluted share, in the first nine months of 2019.

Management Commentary

“The challenging macroeconomic conditions inherent in the global economy as a result of the COVID-19 pandemic continued to weigh on our financial performance with third quarter revenue of $14.1 million down 14% compared to the prior quarter,” commented Chris Sharng, President of Natural Health Trends Corp. “Our total third quarter orders were relatively consistent with both the prior quarter and the first quarter of 2020 with our deferred revenue balance increasing by $832,000 from June to September 2020.  Additionally, there were a number of bright spots in certain markets with third quarter order volume exceeding that of the first two quarters of the year and revenue outside of Hong Kong increasing 10% over the prior quarter. When coupled with our proactive cost reduction efforts, we were able to maintain our profitability on reduced sales in the third quarter.”

Mr. Sharng concluded, “We have continued to manage the elements of our business that are within our control to preserve our profitability and leader base which we view as critical to our success. Further, we were pleased to remain in a position to return value to our stockholders through our quarterly cash dividend, made possible by our strong balance sheet. I’d like to extend my thanks to all of our leaders, members, preferred customers and shareholders for their ongoing commitment to NHT Global. Through all of the challenges 2020 has presented, we are very grateful to continue supporting our mission of improving health and quality of life through our superior products and global opportunity.”

Balance Sheet and Cash Flow

  • Net cash used in operating activities was $1.5 million in the first nine months of 2020, compared to $18.7 million in the first nine months of 2019.
  • Total cash and cash equivalents were $90.8 million at September 30, 2020, down slightly from $93.2 million at June 30, 2020.
  • On November 2, 2020, 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 27, 2020 to stockholders of record as of November 17, 2020.

Third Quarter 2020 Financial Results Conference Call

Management will host a conference call to discuss the third quarter 2020 financial results today, Wednesday, November 4, 2020 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date:Wednesday, November 4, 2020
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:13711362
Webcast:http://public.viavid.com/index.php?id=141728 

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 4, 2020 through 11:59 p.m. Eastern Time on November 18, 2020 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13711362.

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 9, 2020 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.


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) 

  September 30,
2020
  December 31,
2019
 
  (Unaudited)     
ASSETS        
Current assets:        
Cash and cash equivalents $90,789  $96,035 
Inventories  4,259   6,404 
Other current assets  4,972   5,936 
Total current assets  100,020   108,375 
Property and equipment, net  581   735 
Operating lease right-of-use assets  4,200   3,135 
Restricted cash  517   3,390 
Deferred tax asset  1,069   2,039 
Other assets  701   823 
Total assets $107,088  $118,497 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $887  $680 
Accrued commissions  3,046   2,931 
Other accrued expenses  1,786   2,387 
Deferred revenue  3,477   4,506 
Amounts held in eWallets  9,831   12,938 
Operating lease liabilities  1,217   1,655 
Other current liabilities  1,067   1,205 
Total current liabilities  21,311   26,302 
Income taxes payable  13,748   15,365 
Deferred tax liability  203   202 
Operating lease liabilities  3,150   1,564 
Total liabilities  38,412   43,433 
Stockholders’ equity:        
Preferred stock      
Common stock  13   13 
Additional paid-in capital  86,102   86,102 
Retained earnings  9,358   16,117 
Accumulated other comprehensive loss  (893)  (1,264)
Treasury stock, at cost  (25,904)  (25,904)
Total stockholders’ equity  68,676   75,064 
Total liabilities and stockholders’ equity $107,088  $118,497 



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,
 
  2020  2019  2020  2019 
Net sales $14,124  $17,023  $45,476  $59,779 
Cost of sales  3,635   4,371   12,966   15,002 
Gross profit  10,489   12,652   32,510   44,777 
Operating expenses:                
Commissions expense  5,620   7,362   19,336   28,258 
Selling, general and administrative expenses  4,201   6,354   13,771   20,296 
Total operating expenses  9,821   13,716   33,107   48,554 
Income (loss) from operations  668   (1,064)  (597)  (3,777)
Other income, net  385   323   603   1,128 
Income (loss) before income taxes  1,053   (741)  6   (2,649)
Income tax provision (benefit)  418   502   (90)  120 
Net income (loss) $635  $(1,243) $96  $(2,769)
Net income (loss) per common share:                
Basic $0.06  $(0.12) $0.01  $(0.25)
Diluted $0.06  $(0.12) $0.01  $(0.25)
Weighted-average common shares outstanding:                
Basic  10,678   10,623   10,581   11,010 
Diluted  11,424   10,623   11,424   11,010 



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

  Nine Months Ended September 30, 
  2020  2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss) $96  $(2,769)
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Depreciation and amortization  301   290 
Noncash lease expense  1,199   1,336 
Deferred income taxes  979   (3)
Changes in assets and liabilities:        
Inventories  2,193   4,104 
Other current assets  923   (1,674)
Other assets  120   2 
Accounts payable  206   (1,002)
Accrued commissions  136   (8,683)
Other accrued expenses  (598)  (1,779)
Deferred revenue  (1,045)  (3,485)
Amounts held in eWallets  (3,163)  (1,508)
Operating lease liabilities  (1,120)  (1,392)
Income taxes payable  (1,617)  (1,617)
Other current liabilities  (140)  (235)
Long-term incentive     (333)
Net cash used in operating activities  (1,530)  (18,748)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment  (147)  (181)
Net cash used in investing activities  (147)  (181)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Repurchase of common stock     (9,564)
Dividends paid  (6,855)  (2,736)
Net cash used in financing activities  (6,855)  (12,300)
Effect of exchange rates on cash, cash equivalents and restricted cash  413   (428)
Net decrease in cash, cash equivalents and restricted cash  (8,119)  (31,657)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period  99,425   135,651 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $91,306  $103,994 
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:        
Issuance of treasury stock for employee awards, net $  $8,289 
Right-of-use assets obtained in exchange for operating lease liabilities $2,724  $5,058 


CONTACTS:

Company 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
scott.davidson@nhtglobal.com

Investor Contact:
ADDO Investor Relations
Tel: 310-829-5400
investor.relations@nhtglobal.com

 

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