Q1 2022 Natural Health Trends Corp Earnings Call

Greetings and welcome to the natural Health trends Corp, first quarter 2022 earnings 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. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Michelle Gladwell with natural Health trends Corp. Thank you you may begin.

Thank you and welcome to natural health trends first quarter 2022 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 performances or achievements could differ materially from those anticipated in such forward looking statements through the result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission.

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

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 nine o'clock a M eastern time.

At this time I'd like to turn the call over to Chris Sean <unk> President of natural health trends.

Thank you Michelle and thanks to everyone for joining us this morning to discuss our first quarter 2022 financial results.

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

Revenue of $11 $5 million decreased 14% compared to $13 $5 million in the first quarter of 2021.

The results were primarily attributable to the increased COVID-19 related restrictions in Hong Kong and China in particular in Shenzhen, which interrupted our supply chain and create a distribution challenges in all 70 days of the quarter were impacted by slower or completely close.

Logistical operations.

We had been in constant contact with our members informing them of their order deliveries.

Despite this very challenging environment, we still managed to ship nearly 23000 orders during the quarter.

As of today, we do see some signs of improvement in the flow of goods.

The year over year comparison.

It's also adversely affected by the fact that in 2021, we held an in person January you fly How're you doing in China.

This year, we were forced to push our planned in person March Mccullough you bet. Two later this year.

Which negatively impacted orders for the quarter.

We generally experienced an uptick in orders in the weeks, leading up to and after our events, which are designed to promote and trained all of our product offerings and showcase our programs and incentives.

While in person events are not possible in the current environment in Hong Kong, China, or Mattel, we continue to conduct virtual activities such as Webinars online training any bids to encourage in engagement.

Deep and product knowledge and home personal development skills.

Our resilience and hard working members have learned to adjust their business practices to make the most of the ever evolving environment.

And we're rolling out programs and promotions designed to engage meters more effectively in business activities ultimately rewarding them what teamwork.

Turning to our markets outside of China.

We're pleased with the sales momentum and development in our Japan, and South East Asian market.

These two markets exceeded their year over year performance by 37% and 67% respectively.

We continue to host virtual events to support our market and to provide product and business training and offer a stage for product launches and promotions.

In fact, just two weekends ago, we held our virtual awaken eat boring for our North America, Japan, Peru, India, Europe and C. I S markets.

That same weekend, we held an in person beauty event in Gothenburg, Sweden.

150 members and prospects, where we launched our skin diligence probiotic amesville product in Europe .

Moving on to our market expansion and diversification efforts during the quarter we were.

Our systems and back office platform to be able to accept the enrollment and transfer of members to Bolivia, and Colombia country codes.

These developments from our Peru visit.

Beginning this month members will begin signing up customers and prospects in the market as we finalized product registration and prepare for the official market Grand opening later this year.

In summary.

Despite the difficult operating environment and challenges outside of our control arm.

Our employees maintained a keen focus on business fundamentals, including providing exceptional member support.

And demonstrating strong financial oversight to maximize value performance for our shareholders.

Well, it's likely that construction and mandatory lockdowns around COVID-19, we will continue to impact our business in the near term.

We are positioned with the best leaders and members in the industry who.

Who are dedicated to our quality products and bring these products to people around the world.

I'd like to thank all of our leaders for their ongoing dedication and commitment to energy global.

I like to also thank all of our loyal members.

Prefer customers employees and stockholders for their continued support of MH global.

With that I'd like to turn the call over to CFO .

Scott Davis to discuss our financial results in greater detail Scott.

Scott.

Thank you Chris total revenue for the first quarter was $11 5 million, a day kind of 14% compared to $13 5 million in the first quarter of 2021.

As Chris mentioned the year over year decline in revenue was primarily due to the rise in COVID-19 related restrictions in Hong Kong, and China that led to supply chain disruptions and prohibited us from holding in person events during the quarter as.

As we continue to navigate through this latest wave of the pandemic, we expect our financial results will continue to be adversely impacted.

Our active member base decreased 3% to 44490 at March 31st from 45760 at December 31st It was down 10% compared to 49420 at March 31st last year.

Turning to our cost and operating expenses.

Gross profit margin was 74, 8% compared to 75, 8% in the first quarter of last year due to the impact of relatively fixed cost on a lower level of net sales as well as a decrease in administrative fee revenue.

Commissions expense as a percent of net sales for the first quarter was 41% compared with 49% in the prior year quarter.

Yeah.

Selling general and administrative expenses for the quarter decreased 4% to $4 3 million from the first quarter a year ago. The decrease in our SG&A from the prior year quarter reflects lower professional and credit card fees.

As a result operating loss for the quarter was 383000 compared to operating income of 220000 in the first quarter of last year.

We recognize the income tax benefit of 168000 for the quarter compared to an income tax provision of 87000 recorded in the first quarter of last year.

Net loss for the first quarter totaled 105000, or one cent per diluted share compared to net income of 153000 or one cent per diluted share in the first quarter of 2021.

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

Total cash and cash equivalents were $79 4 million at March 31 down from $83 8 million at December 31st.

Net cash used in operating activities was $2 3 million in the first quarter compared to net cash provided by operating activities up 414000 in the first quarter of last year.

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

In closing I am pleased with the operational execution that our loyal members and employees have demonstrated because the challenging and ever changing needs of our global business.

As we look ahead, we remain focused on supporting our members and capitalizing on any improvements in the operating environment in the coming months.

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

Thank you ladies and gentlemen, this concludes our conference call. We thank you for your interest and participation you may now disconnect your lines.