Q4 2022 Natural Health Trends Corp Earnings Call

Greetings and welcome to the natural Health trends Corp, fourth quarter 2022 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.

Now I'll turn the conference over to your host Michelle Gladwell, you may begin.

Thank you and welcome to natural health trends fourth quarter and full year 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 performance or achievements to differ materially from those interest payments and 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 Dot com.

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 am eastern time.

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

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

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

So a lot has happened has changed since early December .

Most of the fourth quarter was still under some form of Kobe restrictions, but much of the urban Chinese population.

In this difficult operating environment, our revenue of $12 $5 million, representing a 7% increase compared to our third quarters $11 $7 million.

During the quarter, we also generated positive operating and net income as well as cash from operations due to our ability to protect margin.

By diligently controlling costs and exercising discipline in marketing and product mix.

In Hong Kong, we continue to see traction around the structure online training system officially rolled out earlier in the year.

This coordinated corporate and beat her training approach, coupled with smaller local and regional in person gatherings kept our members 18 engaged and connected.

No we did switch away from the general public policy.

We look forward to the coming year.

We have a school calendar of activity planned.

Complete with in person product and business training.

Team building activities in international incentive travel.

The first of which is our upcoming Super me incentive trip to Shanghai in early March.

Our members have communicated their excitement to travel and can be again in larger recognition training and motivation building you bet.

And we look forward to seeing them again in these settings.

The commitment our members have demonstrated to our product offering into our business. Despite the challenging environment is evidence of the hilli.

To overcome adversity and for that we are thankful.

Oh, sorry.

In North America in Taiwan, we successfully launch collagen Supreme.

Neat formulation to help support healthier looking skin hair and nails.

With join and connected tissue support.

But each market collagen Supreme itself contributed meaningfully to the quarterly performance.

We're currently working on registration in European market introduction in the coming quarter.

Later this month.

We will hold the official Grand opening for a healthy lifestyle center plus store client in Northern California.

Third North American Thule branded locations designed to be a product pickup center as well as a comprehensive training and prospecting Daniel somebody members in Southern California, Andy Yeung.

Also in North America.

We ended up the quarter marks the close of our Caribbean cruise qualification period.

We're pleased to share that will be a company over 70 qualifiers I mean, AP seven night cruise in March.

This marks the first incentive trip, our North American team, we'll embark on that.

Start of the pandemic and we look forward to celebrating with them.

Our international markets were active during the fourth quarter with a whole series of events Roadshows and training both in person and online.

In Peru, we hosted a three city tour at the launch our 'twenty slate probiotic weight management product.

Attracted more than 550 independent.

Meanwhile, in October our European market.

Educational wellness event in Gothenburg, Sweden, featuring one if the market's favorite product standards.

In fact, many of our markets, including Taiwan, North America, and Peru experienced sequential quarterly growth leading into 2023.

Worldwide digital enhancements, we announced and initiated last quarter are well underway.

We are making progress the world is implementation.

These initiatives are designed to improve new member and customer acquisition.

Onboarding and retention and to enhance the overall shopping experience, but those interested in our product.

As previously shared we believe this focus will be a key driver of future growth.

Productivity in support of shareholder value.

We're pleased to end the year with an increase in sequential revenue and we're hopeful to carry this positive momentum into 2023 now that three years, a strict zero COVID-19 protocols.

Government restrictions and Lockdowns are mostly behind us.

We also look forward to when we can return to in person meetings any bed that are important to our operations.

As we begin the new year I like to thank our dedicated leader members preferred customers employees and stockholders.

Continuous support NFC global in our product line.

We believe our business provides a tremendous opportunity for consumers our boys.

She knows and many of the prospects around the world.

Looking for alternative means to improve their personal outlook.

Whether that be through earning a little extra or taking meaningful steps to improve their overall health and wellness with the use of our great product offering.

With that we wish everyone health and success in 2023 and look forward to speaking with you again next quarter.

And now I will turn the call over to our CFO , Scott Davidson to discuss our financial results in greater detail Scott.

Scott.

Thank you correct total revenue for the fourth quarter was $12 5 million.

Create a 7% compared to $11 7 million in the third quarter of 2022.

And a decrease of 22% compared to $16 1 million in the fourth quarter of 2021.

As Chris mentioned, we were able to increase revenue sequentially. Despite most of the quarter still under some form the COVID-19 restrictions for much of the urban Chinese population.

For the full year of 2022.

Revenue was $49 1 million compared to $60 million in 2021.

Our active member base declined slightly to 38660 at December 31st from 41170 at September 30, and was down 12% from 45076 at December 31st of last year.

Turning to our cost and operating expenses.

Gross profit margin of 73, 9% in the fourth quarter decreased slightly from 74, 2% in the fourth quarter of last year.

Commissions expense as a percent of net sales for the fourth quarter decreased to 43% from 44, 1% in the prior year quarter.

Excluding the impact of administrative fee revenue Commission expense as a percent of net sales were flat compared with the fourth quarter of last year.

Selling general and administrative expenses for the quarter were $3 8 million compared to $4 4 million a year ago.

The decrease in SG&A from the prior year quarter reflects lower professional and credit card.

We returned to positive operating income for the quarter.

Which totaled 43000 compared to operating loss of about 145000 in the third quarter and operating income by 487000 in the fourth quarter of 2021.

For the full year of 2022, our operating loss was 270000 compared to operating income of $1 6 million in 2021.

We recorded an income tax provision of 255000 for the quarter compared to 286000 recognized in the fourth quarter of last year.

Net income for the fourth quarter totaled 188000 or two cents per diluted share.

Compared with 47000 or breakeven per diluted share in the third quarter, and 232000 or two cents per diluted share in the fourth quarter of 2021.

For the full year net income totaled 313000 or three cents per diluted share.

<unk> to $1 1 million or nine cents per diluted share in 2021.

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

Total cash and cash equivalents were $69 7 million at December 31st down from $70 7 million at September 30th.

Total cash and cash equivalents decreased by $14 2 million from $83 8 million at December 31st last year, primarily due to dividends paid in 2022 and cash used in operating activities during the year.

Net cash provided by operating activities was 938000 in the fourth quarter compared to $1 6 million in the fourth quarter of last year.

For the full year net cash used in operating activities was $4 9 million compared to net cash provided by operating activities of $1 million in 2021.

For the full year of 2022, we paid out $9 1 million in dividends.

As returning capital to our stockholders remains a priority I am pleased to announce that on February six.

Our board of directors declared a quarterly cash dividend of <unk> 20 per share, which will be payable on march 3rd to stockholders of record as of February 21st.

In conclusion I am very pleased we were able to close out the year by increasing revenue sequentially compared to the third quarter as well as generating positive operating income net income and cash flow from operations for the quarter.

As we cautiously emerged from the ongoing COVID-19 restricting environment, we've been operating under for the past three years.

We're committed to revitalizing companywide growth and supporting the fundamentals of our business to deliver value to our members.

We are hopeful that with the ending of the zero carbon policy. Our members can now more in person meetings, while we support more man and incentive trip.

We wish to thank all of our hardworking members, who have endured the past year and demonstrated strong commitment to our product and our business.

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

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

[music].

Okay.

Yeah.

[music] okay.