Q1 2024 Natural Health Trends Corp Earnings Call

Are in a listen-knowing mode. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michelle Clydewell. Please go ahead.

Thank you and welcome to Natural Health Trends first quarter 2024 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 results 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 investor section of the company's corporate website at natural health trendscourt.com.

Ladies and gentlemen, good morning, and welcome to the natural Health trends Corp, first quarter 'twenty 'twenty four earnings conference calls.

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 o'clock a.m. Eastern Times. At this time, I'd like to turn the call over to Chris Sharne, President of Natural Health Trends.

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 the telephone keypad.

Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our first quarter, 2024, financial results. With me today is Scott Davidson, our senior vice president and chief financial officer.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Michelle Glidewell Chief.

Michelle Glidewell: Please go ahead.

Michelle Glidewell: Thank you and welcome to natural health trends first quarter 'twenty 'twenty four earnings conference call.

Our financial performance for the quarter reflects a $1 million rise in defer revenue, resulting in a decrease in recognized revenue compared to the same period last year.

Michelle Glidewell: 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.

We expect gradual recognition of this defer revenue in the coming months as we fulfill orders to our value customers.

Michelle Glidewell: Actual results performance or achievements could differ materially from those anticipated in such forward looking statements.

It's noteworthy that this quarter we achieve sequential increase in orders taken during the first quarter over the preceding fourth quarter for the first time in six years.

Michelle Glidewell: So as a result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission.

Michelle Glidewell: 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.

Additionally, we achieve positive cash flow from operations, highlight the robustness of our business model and the resilience of our balance sheet.

Michelle Glidewell: 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.

While we approached the Year of the Dragon with guarded optimism, these results underscore the effectiveness of our current strategies.

Michelle Glidewell: At this time I'd like to turn the call over to Christian Arnell, President of natural health trends.

We continue to emphasize innovation, customer satisfaction, leadership development, and operational efficiency as we navigate our forward progress.

Christian Arnell: Thank you Michelle and thanks to everyone for joining us this morning to discuss our first quarter 2024 financial results.

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

We believe that our core programs and initiatives started to show some positive fact in the first quarter.

Christian Arnell: Our financial performance for the quarter reflects a $1 million rise in deferred revenue, resulting in a decrease in recognized revenue compared to the same period last year.

Members have thus far responded favorably to our year-long Achiever bonus program, which provides them additional opportunities for cash rewards and qualification to attend future travel incentives.

Christian Arnell: We expect gradual recognition of this deferred revenue in the coming months as we fulfill orders to our valued customers.

In addition, the effectiveness of our corporate-driven Train the Trainer program focused on building loyal product consumers and leaders of the future has been well received and attended.

Timothy Scott Davidson: Its noteworthy that this quarter, we achieved sequential increase in orders taken during the first quarter over the preceding fourth quarter for the first time in six years. Additionally, we achieved positive cash flow from operations highlight the robustness of our business model and the resilience.

In early March, we hosted 120 attendees in Shaman, and we look forward to the upcoming session plan for the second quarter.

Timothy Scott Davidson: Although our balance sheet.

Timothy Scott Davidson: Well, we approach the year of the Dragon with guarded optimism. These results underscore the effectiveness of our current strategies.

We also resume product roachos holding our first post-COVID, 6-City tour, targeting one of our recently launched products, Meta Boost.

Timothy Scott Davidson: We continue to emphasize innovation.

These activities allow us to connect with more than 600 participants, eager to learn more and share their experiences with this blood sugar support product.

Timothy Scott Davidson: Customer satisfaction.

Timothy Scott Davidson: Leadership development and operational efficiency as we navigate our forward progress.

Timothy Scott Davidson: We believe that our core programs and initiatives started to show some positive effect in the first quarter.

In late March, we embark on an incentive trip to Jiangxi province.

Timothy Scott Davidson: Members have thus far responded favorably to our year long achiever bonus program, which provides additional opportunities for cash rewards and qualification to attend future travel incentives.

bringing close to 300 attendees together for team building and outdoor charity walk activities under our One Heart, One World Charity Program, supporting primary schools in rural China.

Timothy Scott Davidson: In addition, the effectiveness of our corporate given train the trainer program focus on building loyalty product consumers and leaders of the future has been well received and attended.

Beyond Hong Kong and China, India achieved year-over-year triple-digit growth.

spurred by the launch of our stem renewing product in that market, along with a robust calendar of multi-city road shows, online events, and group meetings to promote product adoption and new member activity.

Timothy Scott Davidson: In early March we hosted 120 attendees in Sherman and we look forward to the upcoming session planned for the second quarter.

In Q1, our global markets held corporate-led online and in-person events and encourage smaller group team gatherings designed to share the business opportunity and our products with new prospects and customers.

Timothy Scott Davidson: We also resumed product roadshows coding our first post Covid six city tour targeting one of our recently launched products.

Timothy Scott Davidson: Boost these.

Timothy Scott Davidson: These activities allow us to connect with more than 600 participants eager to learn more and share their experiences with this blood sugar support product.

We anticipate these activities to continue into Q2 as the markets stay engaged and step-fast on their efforts to expand the business and reach new consumers.

Timothy Scott Davidson: In late March we embarked on an incentive trip to Jiangsu province, bringing closed at 300 attendees together for team building and Al Dor charity work activities under our one heart one World Charity program supporting primary schools in rural China.

To wrap up my comments, we remain confident in the underlying strength of our business.

As we approach the future with cautious optimism,

Our commitment to delivering exceptional products and maintaining strong customer relationships positions us well for growth and shareholder value creation in the long term.

Timothy Scott Davidson: Yeah, Hong Kong and China.

Timothy Scott Davidson: India achieved year over year triple digit growth.

Timothy Scott Davidson: Spurred by the launch of our standard product in that market, along with a robust calendar of <unk>.

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

Timothy Scott Davidson: <unk> City Road shows online event and group meetings to promote product adoption and new member activity.

Scott? Thank you, Chris. Total revenue for the first quarter was 11 million, a decrease of 8% compared to 11.9 million in the first quarter of 2023.

Timothy Scott Davidson: In Q1, our global markets held corporate led online and in person events and encourage smaller group team gatherings designed to share the business opportunity and our products.

As Chris mentioned, the decrease was entirely due to the changes in deferred revenue between the two periods.

Deferred revenue increased $1 million in the first quarter this year and remained flat in the comparable period last year.

Timothy Scott Davidson: New prospects and customers. We anticipate these activities to continue into Q2 as the market stay engaged and steadfast on their efforts to expand the business and reach new consumers.

Our active member base declined slot late to 31,620 at March 31st from 32,410 at December 31st and was down 18% compared to 38,330 at March 31st last year.

Timothy Scott Davidson: To wrap up my comments, we remain confident in the underlying strength of our business.

Turning to our cost and operating expenses.

Timothy Scott Davidson: As we approach the future with cautious optimism.

Gross profit margin declined slightly to 73.4% from 74.5% in the first quarter last year due primarily to an increase in product cost.

Timothy Scott Davidson: Our commitment to delivering exceptional products and maintaining strong customer relationships.

Timothy Scott Davidson: Positions us well for growth and shareholder value creation in the long term.

Commission's expense as a percent of net sales for the first quarter was 41 percent compared with 42.1 percent in the prior year quarter.

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

Excluding the impact of administrative fee revenue, commissions it spends as a percent of net sales decreased slightly due to lower commissions earned outside of our Hong Kong business.

Timothy Scott Davidson: Scott.

Timothy Scott Davidson: Chris total revenue for the first quarter was 11 million a decrease of 8% compared to $11 9 million in the first quarter of 2023.

Selling general and administrative expenses decreased the 3.9 million for the quarter from 4.2 million in the first quarter a year ago.

Timothy Scott Davidson: As Chris mentioned, the decrease was entirely due to the changes in deferred revenue between the two periods.

The decrease in our SGNA from the prior year quarter reflects reduced employee-related costs and professional fees.

Timothy Scott Davidson: Deferred revenue increased $1 million in the first quarter. This year and remained flat in the comparable period last year.

As a result, operating loss for the quarter was 365,000 compared to 394,000 in the first quarter last year.

Timothy Scott Davidson: Our active member base declined slightly to 31620 at March 31 from 32000 and Fortune at December 31, and was down 18% compared to 38330 at March 31 last year.

Net income for the first quarter totaled 188,000 or two cents per deleted share.

compared to net income of 257,000 or two cents per delivery share in the first quarter of 2023.

Timothy Scott Davidson: Turning to our costs and operating expenses.

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

Timothy Scott Davidson: Gross profit margin declined slightly to 73, 4% from 74, 5% in the first quarter of last year due primarily to an increase in product cost.

Total cash, cash equivalents, and marketable securities were $54.4 million at March 31st, down from $56.2 million at December 31st.

Timothy Scott Davidson: Commissions expense as a percent of net sales for the first quarter was 41% compared with 42, 1% in the prior year quarter.

Net cash provided by operations was $549,000 for the first quarter compared with net cash used in operations of $696,000 in the first quarter last year.

Timothy Scott Davidson: Excluding the impact of administrative fee revenue commissions expense as a percent of net sales decreased slightly due to lower commissions earned outside of our Hong Kong business.

I am pleased to announce that on April 29th, our board of directors declared a quarterly cash dividend of 20 cents per share, which will be payable on May 24 to stockholders of record as on May 14th.

Timothy Scott Davidson: Selling general and administrative expenses decreased to $3 9 million for the quarter from $4 2 million in the first quarter a year ago.

In summary, we continue to be impressed, inspired, and encouraged by the resiliency and dedication of our key leaders, loyal product consumers, and hardworking teams around the world.

Timothy Scott Davidson: The decrease in our SG&A from the prior year quarter reflects reduced employee related costs and professional fees.

Timothy Scott Davidson: As a result operating loss for the quarter was 365000 compared to 394000 in the first quarter of last year.

We remain guardedly optimistic about the gradually improving operating landscape and its potential impact on our business. We are seeing some encouraging signs pointing in the right direction.

Timothy Scott Davidson: Net income for the first quarter totaled 188000, or <unk> <unk> per diluted share.

Timothy Scott Davidson: Compared to net income of 257000 or <unk> <unk> per diluted share in the first quarter of 2023 now.

We are committed to maintaining a focus on prudent financial management and improving operational efficiencies in the months ahead.

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

Speaker Change: Total cash cash equivalence and marketable securities were $54 4 million at March 31.

We extend our appreciation to all of our devoted members for the unwavering dedication to their business pursuits, our incredible product offering, and for embracing our mission of fostering wellness traditions around the world.

Speaker Change: Down from $56 2 million at December 31.

Speaker Change: Net cash provided by operations was 549000 for the first quarter compared with net cash used in operations of 696000 in the first quarter last year.

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

Speaker Change: I am pleased to announce that on April 29, our board of directors declared a quarterly cash dividend of <unk> 20 per share, which will be payable on may 24 to stockholders of record as of May 2014.

Thank you.

Ladies and Chairman, this concludes the conference of Natural Health Transcorps. Thank you for your participation. You may now disconnect your lines.

Speaker Change: In summary, we continue to be impressed and inspired and encouraged by the resiliency and dedication of our accumulators.

Speaker Change: All product consumers and hard working teams around the world.

Speaker Change: We remain guardedly optimistic about the gradually improving operating landscape landscape and its potential impact on our business.

Speaker Change: We are seeing some encouraging signs pointing in the right direction we.

Speaker Change: We are committed to maintaining a focus on prudent financial management and improving operational efficiencies in the months ahead.

Speaker Change: We extend our appreciation to all of our devoted members.

Speaker Change: The unwavering dedication to their business pursuits, our incredible product offering and for embracing our mission of fostering wellness traditions around the world.

Speaker Change: That completes our prepared remarks.

Speaker Change: I'll now turn it back over to the operator.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, this concludes the conference of natural Health trends Corp.

Speaker Change: Thank you for your participation you may now disconnect your lines.

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