Q2 2021 Natural Health Trends Corp Earnings Call

Greetings and welcome to the natural Health trends Corporation second quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note that this conference is being recorded.

I will now turn the conference over to our host Kim Orlando with Adam on Investor Relations. Thank you you may begin.

And welcome to natural health trends second quarter 2021 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 from those anticipated in such forward looking statements grid of ours.

All of certain factors, including those set forth on the company's filings with the Securities and Exchange Commission.

It should also be noted that today's call will be webcast slides, which can be found on the investors section of the company's corporate website for natural health trends Corp Dotcom.

The instructions can be found for accessing the archived version of the conference call in today's financial results Press release, which was issued at approximately 9 a M eastern time.

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

Thank you, Kevin and thanks to everyone for joining us this morning to discuss our second quarter 2021 of the financial results.

With me today is Scott Davidson, our senior Vice President and Chief Financial Officer.

We were pleased.

With our second quarter financial performance, which reflected the sequential growth despite ongoing macroeconomic challenges.

We generated revenue of $16.2 million, an increase of 20 per cent compared to $13.5 million in the first quarter of 2021.

The decrease of 2 per cent compared to $16.4 million in the second quarter of 2020.

Our performance compared to the prior quarter was primarily driven by our first major in person event of the year, which was held in Macau.

Along with multiple other in person fly high training event and road shows which are helping to rejuvenate momentum in our core market.

Partially offsetting the strength was sporadic corona virus outbreaks hampering meeting turned out of low with global supply chain constraints, which have linked the lead times for some of our products.

Compared to the second quarter of 2020.

Revenue decreased 2 per se.

Partially offsetting this decline were improvements in certain of our SR markets with net sales increasing 27 per cent year over year outside of our Hong Kong China market.

The Malaysia, Japan, Korea, Singapore C. I S in North America, India, Taiwan, Peru, and Europe, all experienced improved order volume versus a year ago.

Similar to the prior year period, we're still navigating through the complexities associated with the COVID-19 pandemic in China, and the pockets of outbreaks that continue to occur.

This had led to Scott Kozak measures implemented by the Chinese government to control of the virus, including the require of closure of some.

This is a long way of restrictions on public gatherings and travel over the course of the past year.

Aside from these challenges we reported our fifth consecutive quarter of positive operating income and net income in addition to our third consecutive quarter of positive cash flow generation.

Importantly, despite the modest year over year reduction in revenue.

Our total of second quarter order volume was still up in the mid teens range.

As a reminder of our order volume in the second quarter of 2020 included several of product promotions, which we have since curtailed significantly in an effort to preserve our margins.

As I highlighted earlier.

Strong contributor to our order volume in the second quarter of 2021 was our first major in person event held in Macau in early June.

However, while this experience was intended for 1500 participants.

Clusters of COVID-19 virus outbreaks in nearby cities reduced attendance by more than half.

As such we believe our order volume would have been even stronger had we been able to host the event to a much broader audience as initially planned.

In addition to Macau, we held in April in person fly high training in China, which attracted nearly 700 attendees and was predominantly focused on business training.

In the months of they follow our leaders continues the sponsor and organize the serious of marketing activities, both in person and a lie including product and business training Roadshows.

In regards to new products we.

The launch our ultra B complex supplement in North America in May and in Hong Kong in June.

It's proprietary timed release formula with a high concentration of all 8 b vitamins helped contribute to solid order volume during the quarter.

We also released colostrum chewable tablets in India in June.

Which has been well received we expect this new product will help drive sales momentum at the India market continue its steady recovery in the quarters to come.

In summary, we were pleased with our second quarter financial performance to achieve sequential topline growth.

By ongoing macroeconomic challenges.

Our order volume improved both year over year and quarter over quarter the.

Appointed by our efforts to maintain momentum through in person events.

Product roadshows and exciting new products.

Further our efforts to preserve our margin resulted in continued bottom line profit of bogey for the fifth consecutive quarter.

As larger restrictions pertaining to the COVID-19 pandemic continues to ease we believe this will be of positive development for our business.

I liked the sincerely thank all of our leaders for their ongoing support of and commitment to global.

I also like to thank all of our loyal members preferred customers employees and stockholders for their continued dedication to our company day.

Well and we look forward to reconnecting with you on our third quarter earnings call in November.

With that I'd like to turn the call over to our CFO, Scott Davidson to discuss our financial results in greater detail.

Scott.

Thank you Chris total revenue for the second quarter was $16.2 million, an increase of 20% compared to $13.5 million in the first quarter of 2021, and a decrease of 2% compared to $16 for Mega and the second quarter of 2020.

As Chris highlighted the sequential quarter increase in revenue was primarily due to the ongoing gradual resumption of in person events of member activities.

Clothing fly high training Roadshows and most notably our first major in person event in Macau.

Which contributed to double digit growth in order volume compared to the prior quarter.

While we remain cautiously optimistic the macroeconomic environment and operating conditions will improve we anticipate our financial result may continue to be impacted by the ongoing effects of the pandemic of cities work to cautiously reopen safely amid continuing outbreaks and spikes in COVID-19.

Mrs.

Our active member base decreased 5% to 46860 of June 30th from 49000 for 'twenty at March 31st It was down 14% from 54370 at June 30th of last year.

Turning to our cost in the operating expenses.

Gross profit margin of 75, 7% increase from 78, 6% in the second quarter of last year due to lower logistics cost fewer product promotions and the increase in administrative fee revenue.

Commissions expense as a percentage of total revenue for the second quarter decreased to 42, 9% from 43, 4% on the prior year quarter.

Excluding the increase in administrative fee revenue commissions expense would've been relatively consistent with the prior year period.

Selling general and administrative expenses for the quarter were $4.9 million compared to $4.3 million a year ago.

The increase in our SG&A from the prior year quarter reflects the higher vehicles as we held our first major event since the coronavirus outbreak in June 2021.

As a result operating income for the quarter was 385000 compared to 183000 in the second quarter of last year.

We recorded the income tax provision of 97000 for the quarter compared to 274000 recognized in the second quarter of last year.

Net income for the second quarter totaled 229000, or 2 cents per diluted share compared to 34000 or breakeven per diluted share in the second quarter of 2020.

Now I'll turn to our balance sheet and cash flow.

Total cash and cash equivalents were $88.1 million at June 30 down slightly from $90.2 million at March 31.

Net cash provided by operating activities was 134000 in the second quarter compared to net cash used in operating activities of 28000 in the second quarter of last year.

As return on capital to our stockholders remains a top priority I am pleased to announce that on August 2nd our board of directors declared another quarterly cash dividend of <unk> 20 per share, which will be payable on August 27 to stockholders of record as of August 17.

In conclusion, I am very pleased with our second quarter financial results as we continued to navigate the complex operating environment we.

We delivered solid growth in order volume from both the prior quarter and prior year period and generated positive cash flow from operations for the third consecutive quarter.

Looking ahead, we remain committed to maintaining our strong balance sheet effectively managing working capital and diligently managing expenses to enable us to continue to support our volume members revitalized growth in our business and create value for our stockholders.

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

Thank you.

And with that that concludes today's conference all parties may now disconnect. Thank you and have a great day.

Yeah.