Q4 2023 Natural Health Trends Corp Earnings Call

Greetings and welcome to National Health trends Corp, fourth quarter 'twenty twenty-three 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.

Operator: Greetings. Welcome to National Health Trends Corp.'s fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: 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 Michelle Glidewell with Natural Health Trends Corp. Thank you. You may begin.

I will now turn the conference over to Michelle Glidewell with Nacho Natural health trends Corp. Thank you you may begin.

Michelle Glidewell: Thank you, and welcome to Natural Health Trends' fourth quarter and full year 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 as a result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission.

Thank you and welcome to natural health trends fourth quarter and full year 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 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.

Chris Scharn: 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 naturalhealthtrendscorp.com. 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 9 a.m. Eastern Time. At this time, I'd like to turn the call over to Chris Scharn, 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 2023 financial results. With me today is Scott Davison, our Senior Vice President and Chief Financial Officer. As indicated in our financial results released earlier today, we managed to achieve a 3% sequential increase in orders compared to the third quarter of 2023.

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 would like to turn the call over to Chris yarn 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 2023 financial results.

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

As indicated in our financial results released earlier today.

We managed to achieve a 3% sequential increase in orders compared to the third quarter of 2023.

Chris Scharn: Despite continued tepid consumer sentiment in China and an overall challenging macroeconomic environment in this market, revenue for the quarter totaled $10.9 million compared to $10.6 million last quarter and $12.5 million in the fourth quarter a year ago. We believe the quarter over quarter sequential uptick is largely due to the increased frequency and size of our in-person activities during the period, and we plan to sponsor more such events in the coming months to build on our growth and to help improve the effectiveness of our market campaigns. In addition, during the quarter, we generated positive net income partly due to our ability to effectively protect margins and control costs. Despite lingering inflation and the stronger dollar, in Hong Kong, we held a Fly High event in November with nearly 500 members in attendance. This activity allows us to offer in-person training and introduce a promising new product, RelaxoPro, uniquely formulated to help reduce stress and promote calmness.

Despite continued tepid consumer sentiment in China, and an overall challenging macroeconomic environment in this market.

Revenue for the quarter totaled $10 $9 million compared to $10 $6 million last quarter.

$12 $5 million in the fourth quarter a year ago.

We believe the quarter over quarter sequential uptake is largely due to the increased frequency and size of our in person activities during the period and.

We place it sponsored more such events in the coming months, the bill all of our growth and to help improve the effectiveness of our market campaign.

In addition, during the quarter, we generated positive net income partly due to our ability to effectively protect margin and control costs, despite lingering inflation and the stronger dollar.

In Hong Kong, we held at fly high event in November.

With nearly 500 members in attendance.

These activities allow us to offer in person training and introduce a promising new product electrical.

Uniquely formulated to help reduce stress and promote Congress.

Chris Scharn: We look forward to hosting more of these activities in the months to come as it allows us to engage directly with members and build upon the excitement and energy that comes from in-person gatherings. We have just wrapped up our Abu Dhabi trip, bringing 300 Chinese members along for training and team building. This marks our first international trip for this market since the onset of the pandemic.

We look forward to hosting more of these activities in the months to come and allow us to engage directly with members and build upon the excitement and energy that comes from in person gatherings.

We have just wrapped up our Abu Dhabi trip, bringing 300 Chinese members of law for training and team building.

This marked our first international travel, but this market since the outset other pandemic.

Our participants are enthusiastic to embark on more of these adventures with us too.

Chris Scharn: Our participants are enthusiastic to embark on more of these adventures with us soon. Our 2024 plans prioritize and emphasize training and offerings for all types of consumers attracted to our business, from the Twilight Enthusiasts to the mid-level builder to the season leader. Through systematic training that utilizes knowledgeable employees and experts in product and soft skill development, we hope to cultivate new talents and support current hard-working members. Our Taiwan team hosted its first larger-scale activity since the global pandemic. The Precision Health Event is a new wellness seminar where attendees participate in various health screenings.

Our 2024 players prioritize and emphasize training.

Offerings for all types of consumers attracted to our business.

From the product enthusiasm.

At the mid level builder.

The seasoned leader.

Through this systematic training that utilizes knowledgeable employees and expert in product in South Korea with development, we hope to cultivate new talents and support caring and hardworking members.

Our Taiwan team hosted its first larger scale activities as the global pandemic.

The precision health event is a new wellness seminar.

Where attendees participate in various health screening.

Chris Scharn: Participants walk away with a deeper understanding of their current state of well-being, along with product knowledge and lifestyle recommendations. As we continue these Precision Health seminars in the future, we are hopeful this value add can help further develop and expand the market with an influx of new members and customers. In North America, the fourth quarter was busy with activities at our three healthy lifestyle plus centers in Matoochin, New Jersey; Roland Heights, California; and Richmond, British Columbia.

Participants walk away with a deeper understanding of their current state of wellbeing, along with product knowledge and lifestyle recommendations.

As we continue these precision health seminars in the future. We are hopeful this value add can help further develop and expand the market with an influx of new members and customers.

In North America in the fourth quarter was busy with activities at our three healthy lifestyle plus centers.

But Tuesday, New Jersey, Golan Heights, California, and Richmond, British Columbia.

Early in the quarter, we held the product road show showcasing our top selling premium noni product and we followed that up with a December premium noni manufacturing facility and corporate headquarter tour for a select group of qualifiers.

Chris Scharn: Early in the quarter, we held a product roadshow showcasing our top-selling premium Noni product, and we followed that up with a December premium Noni manufacturing facility and corporate headquarters tour for a select group of qualifiers. In addition, qualifications just closed for our Machu Picchu incentive schedule for later this year. In Europe, we executed our incentive trip to Madeira, Spain, hosting a well-deserving group of qualifiers on a five

In addition qualification just close for our Machu Picchu instead of scheduled for later this year.

In Europe, we executed our incentive trip to Modiolus, Spain hosting are well deserving group of qualifiers of a five day trip.

Chris Scharn: We are also honored to be recognized by the Swedish Direct Selling Association for a second year in a row as a top company in the market. We're pleased to conclude the year with a rise in sequential quarterly revenue. As we enter a new year, I want to express my gratitude to our committed leaders, members, preferred customers, employees, and stockholders for their ongoing support of NHG Global and our range of products. We believe that our business presents an incredible opportunity for all ages, professionals, and the millions of potential customers worldwide seeking alternative avenues to enhance their personal well-being, whether it's earning some extra income or taking significant strides toward improving overall health and wellness. Our exceptional product offerings are here to support those aspirations.

We were also honored to be recognized by the Swedish direct selling association for a second year in a row as a top company in the market.

We're pleased to conclude a year with a rise in sequential quarterly revenue.

And who else are in a new year I want to express my gratitude to our committed leaders.

Members prefer customers employees and stockholders.

With your ongoing support of energy global in our range of products.

We believe that our business presents an incredible opportunity for all ages professionals and the millions of potential customers worldwide seeking alternative avenues to enhance their personal well being.

Whether he is earning some extra income we're taking significant strides towards improving overall health and wellness are.

Our exceptional product offerings are here to support those aspirations.

We extend our wishes for good health and success throughout 2024 and look forward to speaking again with an update next quarter.

Chris Scharn: We extend our wishes for good health and success throughout 2024 and look forward to speaking again with an update next quarter. And now, I would turn the call over to our CFO, Scott Davidson, to discuss our financial results in greater detail. Scott. Thank you, Chris.

And now I would turn the call over to our CFO, Scott Davis and to discuss our financial results in greater detail.

Scott.

Thank you Chris total revenue for the fourth quarter was $10 9 million, an increase of 3% compared to $10 6 million in the third quarter.

Scott Davidson: Total revenue for the fourth quarter was $10.9 million, an increase of 3% compared to $10.6 million in the third quarter of 2023 and a decrease of 13% compared to $12.5 million in the fourth quarter of 2020. As Chris mentioned, we were able to increase revenue sequentially despite the debit consumer sentiment in China. For the full year of 2023, total revenue was $43.9 million, compared to $49.1 million in 2022. The decreased year-over-year was largely accounted for by changes in deferred revenue. Deferred revenue increased $559,000 during 2023 but decreased $2.9 million, resulting in a $3.5 million unfavorable revenue. Our active member base declined 6% to 32,410 at December 31st from 34,660 at September 30th and was down 16% from 38,660 at December 31st last year.

2023, and a decrease of 13% compared to $12 5 million in the fourth quarter of last year.

As Chris mentioned, we were able to increase revenue sequentially, Despite tepid computer consumer sentiment in China.

For the full year of 2023 total revenue was $43 9 million compared to $49 1 billion in 2022.

Increase year over year was largely accounted for by changes in deferred revenue.

Deferred revenue increased 569000 during 2023, but decreased 2.9 billion last year.

Hoping at a $3 5 million unfavorable revenue.

Our active member base declined 6% to 32000 and 410 at December 31st from 34660 at September 30th and was down 16% from 38660 at December 31 last year.

Turning to our cost and operating expenses.

Scott Davidson: Turning to our Cost and Operating Expense. Gross profit margin at 74.5% and pre-slot rate from 73.9% in the fourth quarter of last year due to lower logistics. Commissioned expense as a percent of net sales for the fourth quarter decreased at 41.6% from 43% in the same quarter.

Gross profit margin of 74, 5% improved slightly from 73, 9% in the fourth quarter of last year due to lower logistics costs.

Commissions expense as a percent of net sales for the fourth quarter decreased to 41, 6% from 43% in the same quarter last year.

Selling general and administrative expenses for the quarter were $3 8 million.

Scott Davidson: Selling general and administrative expenses for the quarter were $3.8 million, consistent with the year. As a result, the operating loss for the quarter was $242,000, compared to $292,000 in the third quarter of 2023 and operating income of $43,000 in the fourth quarter of 2020. We recorded an income tax provision of $108,000 for the quarter, compared to $255,000 in the fourth quarter last year.

Consistent with a year ago.

As a result operating loss for the quarter was 242000 compared to 292000 in the third quarter of 2023 and operating income of 43000 in the fourth quarter of last year.

We recorded an income tax provision of 108000 for the quarter compared to 255000 in the fourth quarter of last year.

Net income for the fourth quarter totaled 358000, or three cents per diluted share compared to 172000 or two cents per diluted share in the third quarter and 188000 or two cents per diluted share in the fourth quarter of 2022.

Scott Davidson: Net income for the fourth quarter totaled $358,000, or $0.03 per diluted share, compared to $172,000 or $0.02 per diluted share in the third quarter and $188,000 or $0.02 per diluted share in the fourth quarter of 2022. For the full year, net income totaled $568,000, or $0.05 per deloaded share, compared to $313,000 or $0.03 per deloaded share in 2022. I'll now turn to our balance sheet and cash flow. Total cash and cash equivalents were $56.2 million at December 31st, down from $58.4 million at September 30th. Net cash used by operating activities was $69,000 in the fourth quarter compared to net cash provided by operating activities of $938,000 in the fourth quarter last year. For the full year, net cash used in operating activities was $4.3 million compared to $4.9 million in 2022. Before tax installment payments, the liability of which arises from the 2017 U.S. tax cuts on jobs. Cash use and operating activities will be $1.2 million in 2023 versus $3.2 million a year.

For the full year net income totaled 568000 or five cents per diluted share compared to 313000 or three cents per diluted share in 2022.

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

Total cash and cash equivalents were $56 2 million at December 31 down from $58 4 million at September 30th.

Net cash used by operating activities was 69000 in the fourth quarter compared to net cash provided by operating activities of 938000 in the fourth quarter last year.

For the full year net cash used in operating activities was $4 3 million compared to $4 9 million in 2022.

Before tax installment payments the liability of which arises from the 2017 U S tax cuts and jobs Act.

Cash used in operating activities was one point 10 million in 2023 versus $3 2 million a year ago.

Scott Davidson: For the full year of 2023, we paid out $9.2 million. As returning capital to our stockholders remains a priority, I am pleased to announce that on February 5th, our Board of Directors declared a quarterly cash dividend of $0.20 per share, which will be payable on March 1st to stockholders for record as of February 5th. We continue to find inspiration in the enthusiasm and dedication demonstrated by our leaders, members, and customers towards both our product offerings and the global business opportunities we provide. Having personally spent time with many of our key leaders in Abu Dhabi, their commitment and optimism for the future have never shone brighter.

For the full year of 2023, we paid out $9 2 million in dividends.

Returning capital to our stockholders remains a priority I am pleased to announce that on February 5th.

Our board of directors declared a quarterly cash dividend of <unk> 20 per share which.

Which will be payable on March 1st to stockholders of record as of February 20th.

We continue to find inspiration and that usually has them and dedication demonstrated by our leaders.

Members and customers towards both our product offerings and the global business opportunity we provide.

Personally spent time with many of our key leaders in Abu Dhabi their commitment and optimism for the future has never shined brighter.

Operator: We stand by our promise to continue innovating, growing, and strengthening our offerings to support their business. That completes our preparation. I will now turn the call back over to the office. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

We standby our promise to continue innovating and growing and strengthening our offering to support their business.

That completes our prepared remarks.

I will now turn the call back over to the operator.

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

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