• Positive sales momentum in emerging international markets
  • Maintained strong gross profit and operating income margins 
  • Announced market entry into Malaysia
  • Increased quarterly dividend 9% to $0.12 per share
  • Declared special dividend of $0.15 per share

LOS ANGELES, Nov. 01, 2017 (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, 2017.

Third Quarter 2017 Financial Highlights

• Total revenue decreased 43% to $40.1 million, compared to $70.7 million in the third quarter of 2016.

  • Revenue from the Company’s Hong Kong operations, which represented 87% of total revenue, decreased 47% to $35.0 million, compared to $65.9 million in the third quarter of 2016.

  • Revenue outside of Hong Kong increased 6% to $5.1 million, compared to $4.8 million in the third quarter of 2016.

• Operating income decreased 44% to $8.5 million, compared to $15.2 million in the third quarter of 2016. As a percent of total revenue, operating income was 21%, compared to 22% in the third quarter of 2016.

• Net income was $7.3 million, or $0.65 per diluted share, compared to $12.6 million, or $1.12 per diluted share, in the third quarter of 2016.

• The number of Active Members1 decreased 7% to 99,690 at September 30, 2017, compared to 107,290 at June 30, 2017, and decreased 19% compared to 122,900 at September 30, 2016.

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 2017 Financial Highlights

  • Total revenue decreased 33% to $151.5 million, compared to $225.4 million in the first nine months of 2016.
     
  • Operating income decreased 22% to $34.4 million, compared to $44.1 million in the first nine months of 2016. As a percent of total revenue, operating income was 23%, compared to 20% in the first nine months of 2016.
     
  • Net income was $28.1 million, or $2.49 per diluted share, compared to $36.0 million, or $3.14 per diluted share, in the first nine months of 2016.

Management Commentary

“While we made progress during the third quarter to revitalize sales growth, certain short-term factors exerted significant adverse effects and masked a quarter that was otherwise indicative of positive developments,” commented Chris Sharng, President of Natural Health Trends Corp. “The difficult market conditions we have been experiencing since the third quarter of 2016 were further compounded by the 20th anniversary of Hong Kong’s handover in July, as well as China’s Communist Party’s 19th National Congress in October, which tempered economic activities. These events impacted the operations of our logistics partners and detracted from our leaders’ ability to organize meetings, which hindered our progress in comparison to the prior quarter. As we view both occurrences as short-term issues, we are working to revitalize sales in Asia through enhancements to our incentive programs as well as adjustments to our bonus and reward programs in an effort to provide more resources to up-and-coming members.”

Mr. Sharng further commented, “Partially offsetting the year-over-year decline in net sales was strength in our emerging international markets including: Peru, Northern Europe, Southeast Asia and Japan. We also received positive responses from our members to our most recent product introductions during the quarter, notably OcuFocus, NaturalGlo and CogniMax. Further, after receiving approval for a direct selling license in Malaysia, on-site and follow-up orders at our Kuala Lumpur event in August were substantially greater than those of the Macau event in March. Despite challenging market conditions, we were able to maintain a healthy gross profit margin of nearly 80% and an operating income margin of over 21% due to strong consumer allegiance to our products and proactive expense management.”

Balance Sheet and Cash Flow

  • Net cash used in operating activities was $5.3 million, compared to $16.6 million in net cash provided by operating activities in the third quarter of 2016. For the first nine months of 2017, net cash provided by operating activities was $15.3 million, compared to $36.3 million in the first nine months of 2016.
     
  • On October 30, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.12, which represents a 9% increase over the prior quarter dividend, as well as a special cash dividend of $0.15 per share on outstanding common stock. The dividends will be payable on November 24, 2017 to stockholders of record as of November 14, 2017. 

Third Quarter 2017 Financial Results Conference Call

Management will host a conference call to discuss the third quarter 2017 financial results today, Wednesday, November 1, 2017 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date: Wednesday, November 1, 2017
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: 13671086
Webcast: http://public.viavid.com/index.php?id=126351 

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, 2017 through 11:59 p.m. Eastern Time on November 15, 2017 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13671086.

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 10, 2017 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) 
    
 September 30, 2017 December 31, 2016
 (Unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$126,953  $125,921 
Inventories10,632  11,257 
Other current assets2,961  4,066 
Total current assets140,546  141,244 
Property and equipment, net1,225  1,388 
Goodwill1,764  1,764 
Restricted cash3,092  2,963 
Other assets772  692 
Total assets$147,399  $148,051 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$1,023  $2,145 
Income taxes payable1,064  663 
Accrued commissions10,443  13,611 
Other accrued expenses8,545  14,989 
Deferred revenue3,568  4,948 
Amounts held in eWallets16,178  19,165 
Other current liabilities1,705  1,633 
Total current liabilities42,526  57,154 
Deferred tax liability285  268 
Long-term incentive6,730  8,190 
Total liabilities49,541  65,612 
Commitments and contingencies   
Stockholders’ equity:   
Preferred stock   
Common stock13  13 
Additional paid-in capital86,674  86,574 
Retained earnings52,457  38,548 
Accumulated other comprehensive loss(716) (807)
Treasury stock, at cost(40,570) (41,889)
Total stockholders’ equity97,858  82,439 
Total liabilities and stockholders’ equity$147,399  $148,051 
        


 

NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
     
  Three Months Ended
September 30,
 Nine Months Ended
September 30,
  2017 2016 2017 2016
                 
  (Unaudited)
Net sales $40,132  $70,679  $151,471  $225,416 
Cost of sales  8,183   13,627   29,221   42,966 
Gross profit  31,949   57,052   122,250   182,450 
Operating expenses:                
Commissions expense  15,802   30,578   63,842   103,547 
Selling, general and administrative expenses  7,495   11,170   23,621   34,505 
Depreciation and amortization  138   96   414   276 
Total operating expenses  23,435   41,844   87,877   138,328 
Income from operations  8,514   15,208   34,373   44,122 
Other (expense) income, net  (12)  48   224   40 
Income before income taxes  8,502   15,256   34,597   44,162 
Income tax provision  1,164   2,699   6,531   8,124 
Net income $7,338  $12,557  $28,066  $36,038 
Net income per common share:                
Basic $0.65  $1.12  $2.50  $3.15 
Diluted $0.65  $1.12  $2.49  $3.14 
Weighted-average number of common shares outstanding:                
Basic  11,258   11,209   11,244   11,437 
Diluted  11,276   11,232   11,269   11,463 
Cash dividends declared per common share $0.36  $0.07  $1.25  $0.18 
 


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
        
 Nine Months Ended September 30,
 2017 2016
        
 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:       
Net income$28,066  $36,038 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization414  276 
Stock-based compensation26  94 
Cumulative translation adjustment realized in net income(258) 132 
Changes in assets and liabilities:   
Inventories590  (4,382)
Other current assets1,164  (1,244)
Other assets(61) (91)
Accounts payable(1,121) 252 
Income taxes payable392  278 
Accrued commissions(3,143) (1,045)
Other accrued expenses(5,064) 3,459 
Deferred revenue(1,364) 222 
Amounts held in eWallets(2,856) 3,098 
Other current liabilities51  26 
Long-term incentive(1,498) (825)
Net cash provided by operating activities15,338  36,288 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property and equipment(238) (679)
Net cash used in investing activities(238) (679)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Repurchase of common stock  (23,704)
Dividends paid(14,157) (2,049)
Net cash used in financing activities(14,157) (25,753)
Effect of exchange rates on cash and cash equivalents89  (270)
Net increase in cash and cash equivalents1,032  9,586 
CASH AND CASH EQUIVALENTS, beginning of period125,921  104,914 
CASH AND CASH EQUIVALENTS, end of period$126,953  $114,500 
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:   
Cash paid for income taxes, net of refunds$5,690  $7,994 
Issuance of treasury stock for employee awards, net1,393  1,741 

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