Q3 2023 Natural Health Trends Corp Earnings Call

Greetings and welcome to natural Health trends Corp, third quarter 2023 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. This conference is being recorded I will now turn the conference over to Michele kills well with natural health trends Corp. Thank you you may begin.

Thank you and welcome to natural health trends third quarter 2023 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.

There is a 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 for accessing the archived version of the conference call can be found 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 President of natural health trends.

Thank you Michelle and thanks to everyone for joining us this morning to discuss our third quarter 2023 financial results.

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

For the quarter, we generated revenue of $10.6 million, a decrease of 9% compared to the third quarter of 2022.

The decrease was largely accounted for by changes in deferred revenue and orders were received later in the quarter. This year.

Our business is adapting to the economic landscape, where Chinese consumers are reluctant to spend or invest and where overall consumer sentiment is tragic.

Yet despite this environment. We are pleased to see that orders taken during the period were roughly flat even with continued headwinds of a stronger U S dollar Q.

Q3, 2023 orders compared to Q3 2022 at a constant exchange rate grew by 3%.

While year to date 2023 orders compared to the same period last year increased 8%.

The fact that our members remain responsive to our programs.

As a positive indicator that the promotions incentives and our high quality product offerings continue to resonate and make an impact.

In China, and Hong Kong are members participated in local gatherings and training events.

Engage and attract customers and to further develop skills, such as improved product knowledge and leadership development.

We look forward to an upcoming you bet in this month and the launch of our newest product relax a pro.

Supplement designed to help reduce stress and Pablo communist.

The product is formulated with clinically proven Asheville, gonda and other relaxation do think ingredients, such as lemon balm and magnesium.

Turning our focus outside of China, and Hong Kong.

Several of our other markets delivered strong third quarter performance is mainly Taiwan, Peru, North America and Japan.

Each of these markets achieved an increase in orders taken at a constant exchange rate compared to prior year.

Growth was primarily driven through the combination of online training and in person event, there with product promotions and incentives qualifications.

Successfully re engaging members in all worldwide activities helps create excitement and momentum around our business model and high impact product offerings.

In Latin America, we are getting closer to launch our business in Colombia in the fourth quarter and will continue to progress the necessary regulatory requirements to walk to operate in Bolivia.

We steadily make progress on our digital enhancement initiatives that we believe will be a key driver for future growth by enhancing member productivity and improving the overall shopping experience with us.

We look forward to where we could rolled out these developments to our members and customers.

I like to thank our loyal members, who remain committed to our products.

And to helping others achieve improved health and wellness through our product lines as well.

Their ability to rise to the challenging economic environment speaks volumes about their perseverance and passion for our mission.

We will continue to focus on careful planning and execution of our strategic key initiatives, including digital improvements.

New product introductions and the delivery of exceptional support.

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

Hi.

Thank you Chris total revenue for the third quarter was $10 6 million, a decrease of 9% compared to $11 7 million in the third.

Third quarter of 2022.

As Chris stated the decrease was largely accounted for by the changes in deferred revenue as orders were received later in the quarter. This year.

Deferred revenue decreased 603000 during the third quarter this year as compared to $1 4 million in the third quarter of last year.

As noted in our 835000 unfavorable revenue variance.

Our active member base decreased 6% to 34660 at September 30th from 36730 at June 30th and was down 16% from 41170 at September 30 of last year.

Turning to our cost and operating expenses.

Gross profit margin of 74, 7% improved slightly from 73 point.

73, 6% in the third quarter of last year due to lower logistics costs.

Commissions expense as a percent of total revenue for the third quarter was 41, 1% compared to 41, 5% in the prior year quarter.

Selling general and administrative expenses for the quarter were $3 9 million flat compared to a year ago.

As a result operating loss for the quarter was 293000 compared to 145000 in the third quarter of last year.

We recorded an income tax provision of 121000 in the for the quarter compared to an income tax benefit of 5000 in the third quarter last year.

Operator: Greetings. Welcome to Natural Health Trends Corp. They're quarter 2023 earnings conference call.

Net income for the third quarter totaled 172000, or two cents per diluted share compared to 47000 or breakeven per diluted share in the third quarter of 2022.

Operator: At this time, all participants are in a listen only mode. If anyone's require operator assistance during the conference, please press store zero on your telephone keypad. Please note this conference is being recorded.

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

Total cash and cash equivalents were $58 4 million at September 30th down from $61 6 million at June 30.

Michelle Glidewell: I will now turn the conference over to Michelle Glidewell with Natural Health Trends Corp. Thank you. You may begin.

Net cash used in operating activities was 869000 in the third quarter compared to $2 3 million in the third quarter of last year.

Michelle Glidewell: Thank you and welcome to Natural Health Trends third quarter 2023 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 assigned in the private security litigation reform act of 1995. Actual results, performance or achievements differ materially from those anticipated and such forward looking statements through the results of certain factors, including those that forth in the company's filing with the securities and exchange commission.

As returning capital to our stockholders remains a top priority and I'm pleased to announce that on October 30th our board of directors declared another quarterly cash dividend of 20 cents per share, which will be payable on November 24 to stockholders of record as of November 14.

We just to be ever changing business environment, we continued to carefully goodbyes and implement programs to improve performance and productivity.

Michelle Glidewell: It should also be noted that today's call will be webcast live and can be found on the investor section of the company's corporate website at NaturalHealth Trends Corp.com. Instructions for accessing the archive version of the conference call can be found in today's financial results press release, which was issued at approximately 9 o'clock a.m. Eastern time.

Our focus remains on returning to a period of growth through execution of our strategies to boost top line revenue and that ultimately deliver shareholder value.

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

Chris Sharng: At this time, I'd like to turn the call over to Chris Sharng, President of Natural Health Trends. Thank you, Michelle. And thanks to everyone for joining us this morning to discuss our third quarter 2023 financial results.

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

Hum.

Chris Sharng: With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. For the quarter, we generated revenue of $10.6 million, a decrease in 9%, compared to the third quarter of 2022. The decrease was largely accounted for by changes in deferred revenue as orders were received later in the quarter this year.

Mhm.

Yeah.

Yeah.

[music].

Okay.

Yeah.

Hum.

Okay.

Chris Sharng: Our business is adapting to the economic landscape where Chinese consumers are reluctant to spend or invest, and where overall consumer sentiment is tripping. Yet, despite this environment, we are pleased to see that orders taken during the period were roughly flat, even with continued headwinds of a stronger US dollar. Q3 2023 orders compared to Q3 2022 at a constant exchange rate grew by 3%. While year to date 2023 orders compared to the same period last year increased 8%.

Yeah.

Hum.

Okay.

[music].

Chris Sharng: The fact that our members remain responsive to our programs is a positive indicator that the promotions, incentives, and our high quality product offerings continue to resonate and make an impact. In China and Hong Kong, our members participated in local gatherings and training events to engage and attract customers and to further develop skills such as improve product knowledge and leadership development. We look forward to an upcoming event in this month and the launch of our newest product, RelaxAppro, a supplement designed to help reduce stress and promote calmness. The product is formulated with clinically proven ashwaganda and other relaxation-ducing ingredients such as lemon balm and magnesium.

Chris Sharng: Turning our focus outside of China and Hong Kong, several of our other markets deliver strong third-quarter performances, mainly Taiwan, Peru, North America, and Japan. Each of these markets achieved an increase in orders taken at a constant exchange rate compared to prior year. Growth was primarily driven through the combination of online trainings and in-person events, fair with product promotions and incentive qualifications.

Chris Sharng: Successfully re-engaging members in all worldwide activities helps create segment and momentum around our business model and high impact product offerings. In Latin America, we are getting closer to launch our business in Colombia in the fourth quarter and will continue to progress the necessary regulatory requirements to operate in Bolivia. We steadily made progress on our digital enhancement initiatives that we believe will be a key driver for future growth by enhancing member productivity and improving the overall shopping experience with us. We look forward to when we can road out these developments to our members and customers.

Chris Sharng: I'd like to thank our loyal members who remain committed to our products and to helping others achieve improved health and wellness to our product lines as well. Their ability to rise to the challenging economic environment speaks volumes about their perseverance and passion for our mission. We will continue to focus on careful planning and execution of our strategic initiatives, including digital improvement, new product introductions and the delivery of exceptional support.

Scott Davidson: 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. [inaudible] for the third quarter total $172,000 or two cents per divided share compared to $47,000 or break even per divided share in the third quarter of 2022.

Scott Davidson: Now I'll turn to our balance sheet and cash flow. Total cash and cash equivalents worth 58.4 million at September 30th, down from 61.6 million at June 30th. Net cash used and operated in use was 860,000 in the third quarter compared to 2.3 million in the third quarter last year.

Scott Davidson: As returning capital to our stock orders remains a top priority, and pleased to announce that on October 30th, our board of directors declared another quarterly cash dividend a 20 cents per share which would be payable on November 24th to stock orders of record as of November 14th. As we adjust to the ever changing business environment, we continue to carefully devise and implement programs to improve performance and productivity. Our focus remains on returning to a period of growth through execution of our strategies to boost top line revenue and that ultimately deliver shareholder value.

Scott Davidson: That completes our prepared remarks.

Operator: I will now turn the call back over to the operator. Thank you.

Operator: This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.