Q3 2019 Earnings Call

Greetings welcome.

It's a natural health trends Corporation third quarter 2019 earnings conference call. At this time, all participants are not listen only mode.

If anyone should require operators just turn the conference. Please press star zero on your telephone keypad.

Please note. This conference is being recorded I would now like turn the conference over to you host Mr., Andrew Greenberg with.

I don't Investor Relations. Thank you you may begin.

Thank you and welcome to natural health trends third quarter 2019 earnings Conference call.

During today's call there may be statements made relating to the future results of the company that are forward looking statements as defined in the.

Private Securities Litigation Reform Act of 1995.

Actual results performance or achievements could differ materially those anticipated in such forward looking statements surgery adult certain factors, including those set forth in the Companys filings with the securities and exchange.

Changed Commission.

It could also be no did that today's call will be webcast live it can be found on the investor section the company's corporate web site at natural health trends Corp Dot com.

Instructions can be found for accessing the archived version of the conference call.

<unk> financial results press release.

Which was issued at approximately nine am eastern time.

At this time I'd like to turn the call over there Chris chart President of natural health trends.

Thank you Andrew and thanks to everyone for joining us.

With me today, it's Scott Davidson.

Our senior Vice President and Chief Financial Officer.

I'll start by discussing our third quarter results.

And then hand, the call over to Scott to review our financials in greater detail.

Total third quarter revenue of $17 million declined 64% compare to the third quarter 2018.

He asked the business environment in China presented broad challenges for health products companies due to the 100 day campaign and its ongoing aftermath.

In addition.

Protests in Hong Kong poets, new complication during the quarter.

As a result, we had to suspend company sponsored meetings in.

I would call at the current conditions are not conducive to hosting business why mainland China.

Despite a difficult operating environment in China, and Hong Kong, we're pleased with our leader its ability to adapt and perform under these circumstances.

Due to the Hong Kong protest.

We.

Thanks to the timing of our traditional third quarter, Hong Kong event to October and held it in Macau.

We attracted 3000 attendees for a weekend bill what product demonstrations keynote speakers motivation and training.

The new products. We introduced include it in electric Toothbrushes and the new version of our.

Purifier, which will be source in China as part of our efforts to reduce our exposure to the ongoing trade disputes.

Reception to the Mccalley bad about largesse was very positive.

Our fourth quarter order volume trends are improving following this major event.

Hi.

It also paves the way for us and our leaders to play for more activity, including a flight training event in Malaysia into fourth quarter and back to Hong Kong early next year.

Additionally, we are new and improved stereo products during the quarter.

With the re registration process underway in.

All key markets.

This enhanced formula will be supported by an existing product manufacturing partner that can better educated members on the vast benefits behind the product the support Delaware health.

On the heels of this development, we conducted a stay every deal manufacturing Tory in Minneapolis.

In August to showcase the new Formula and provided exclusive product training for members who qualified to attend.

As part of the savvy, new re registration process in Latin America.

We held a multi band in Lima, Peru to promote awareness in January orders.

Further registrations in Peru, <unk> other NFC global products are expected to be completed by the ended the year actually help us to maintain our momentum.

Lastly in light at the current business environment, we are implementing cost reduction measures to focus resources our members end.

Yes.

We expect to realize an annualized 5.7 million dollar savings by the first quarter 2020.

In summary.

While we continue to face broader macro challenges in both China and Hong Kong.

We are cautiously optimistic that are consistent execution.

Well help reinvigorate growth.

The situation stabilizes.

In fact, our board of directors that was straight at your confidence in our business by declaring a special cash dividend of 40 cents a here.

We will also continue to evaluate opportunities for additional share repurchases.

In our remaining authorization for $22.4 million.

We'd like to turn the call over to Scott Davis, our CFO to discuss our third quarter financials in detail Scott.

Thank you Chris total revenue for the third quarter of a 17 million declined 64% compared to 47.

Seven leg in the third quarter of 2018.

The year over year decline was primarily due to the broad challenge as Chris spoke to which are impacting the business environment in China as well as unrest in Hong Kong.

Our active member base decreased 13% to 68000.

At September Thirtyth from 78000 at June Thirtyth and was down 30% from 97000 at September Thirtyth last year.

Turning to our cost in operating expenses.

Gross profit margin of 74.3% declined from 78.9 per se in the third quarter last year, primarily.

As a result of higher logistics cost.

It was further impacted by nonrecurring obsolescence charge of $550000.

Commissions expense as a percent of total revenue of 43.2% decreased from 46.8% in the third quarter last year due to cost saving us on.

I've trips that occurred during the quarter.

Selling general and administrative expenses for the quarter decreased 13% to 6.4 million from 7.3 million a year ago due to the shift or bar second half major back into October compared to August last year.

As a result operating loss for the.

Quarter was 1.1 million compared to operating income of 7.8 megawatt in the third quarter last year.

We recorded income tax provision of 502000 for the quarter compared to 467000 in the third quarter last year.

Net loss for the quarter totaled 1.2 million oral also 12 cents per diluted share.

Compared to net income of 7.6 million were 67 cents per diluted share in the third quarter of 2018.

Net cash used in operating activities was 3.7 million during the quarter.

Compared to net cash provided by operating activities of 8.8 million in the third quarter of two 2018.

Cash and cash equivalents were 101.1 million at September Thirtyth down slightly from 108.1 billion at June Thirtyth.

During the quarter, we repurchased just over 383000 shares of our common stock at an average price at $7 51 says for a total of 2.9 million.

As of September Thirtyth 22.4 million other previously approved stock repurchase program remain available for future purchases.

Lastly on October 29, our board of directors declared a special cash dividend of 40 cents per share on outstanding common stock the.

The dividend will be payable on November 29, just stockholders of record.

As of November 19th.

As always we will continue to evaluate our capital allocation strategy going forward to deliver increased value to our shareholders.

That completes our prepared remarks, I will now I'll turn the call back over to the operator.

Thank you for joining todays call. It has now concluded you.

May now disconnect your lines at this time, we think for your participation and have a wonderful day.