Q2 2024 Natural Health Trends Corp Earnings Call

Greetings and welcome to the natural Health trends Corp, second quarter 2024 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.

Operator: Greetings and welcome to the Natural Health Trends Corp. second quarter 2024 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.

Operator: 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.

Operator: As a reminder, this conference is being recorded.

Operator: As a reminder, this conference is being recorded.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michelle Glidewell, with Natural Health Trends Corp. Thank you, Michelle. You may begin.

Michelle Glidewell: It is not my pleasure to introduce your host, Michelle Glidewell, with Natural Health Trends Corp.

Speaker Change: Now my pleasure to introduce your host Michelle glide Glidewell, what's natural health trends Corp. Thank you Michelle you may begin.

Michelle Glidewell: Thank you, Michelle. You may begin. Thank you, and welcome to Natural Health Trends, Second Quarter of 2024 Earnings Conference Call. During today's call, there may be statements made relating to the future results of the company, but are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Michelle Glidewell: Thank you, and welcome to Natural Health Trends' second quarter 2024 earnings conference call. During today's call, there may be statements made relating to the future results of the company, but these 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.

Speaker Change: Thank you and welcome to natural health trends second quarter 2024 earnings Conference call.

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.

Michelle Glidewell: Actual results, performance, or achievements could differ materially from those anticipated and set 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's selection of the company's corporate website at Natural Health Trends Corp.com.

Michelle Glidewell: Actual results performance or achievements could differ materially from those anticipated in such forward looking statements through the result of certain factors.

Michelle Glidewell: And 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 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 Sharng, President of Natural Health Trends.

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 that natural health trends Corp Dot com.

Michelle Glidewell: Instructions for exercising 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.

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.

Michelle Glidewell: At this time, I'd like to turn the call over to Chris Sharng, President of Natural Health Trends.

Michelle Glidewell: At this time I'd like to turn the call over to Chris Charlotte, President I'm natural health trends.

Chris Sharng: Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our second quarter 2024 financial results. With me today is Scott Davidson, our senior vice president and chief financial officer. Second quarter in their sales of $10.5 million were flat compared to the second quarter of 2023, reflecting stability in our revenue streams, even in challenging market conditions. The downturn in consumer spending continues to be a headwind for our business, and our members face a tougher sales environment. However, we have implemented targeted programs to attract and retain customers, helping to mitigate the impact. Globally, our programs, promotions, and incentives designed to drive engagement, enhance customer loyalty, and support sales performance have been well received by our members.

Chris T. Sharng: Thank you Michelle and thanks to everyone for joining us this morning to discuss our second quarter 2024 financial results.

Chris T. Sharng: Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our second quarter 2024 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Second quarter net sales of $10.5 million were flat compared to the second quarter of 2023, reflecting stability in our revenue streams even in challenging market conditions.

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

Chris T. Sharng: Second quarter net sales of $10 $5 million were flat compared to the second quarter of 2023.

Chris T. Sharng: Selecting stability in our revenue streams.

Chris T. Sharng: Even in challenging market conditions.

Chris T. Sharng: The downturn in consumer spending continues to be a headwind for our business, and our members face a tougher sales environment. However, we have implemented targeted programs to attract and retain customers, helping to mitigate the impact. Globally, our programs, promotions, and incentives designed to drive engagement, enhance customer loyalty, and support sales performance have been well received by our members. In June, we held our first two-day training event since 2021 in Jeju, South Korea, welcoming more than 500 members to take part in business, product, and personal development training.

Chris T. Sharng: The downturn in consumer spending continues to be a headwind for our business and our members face a tougher sales environment.

Chris T. Sharng: However, we have implemented targeted programs to attract and retain customers helping to mitigate the impact.

Speaker Change: Globally, our programs promotions and incentives designed to drive engagement and enhance customer loyalty and support sales performance have been well received by our vendors.

Chris Sharng: In June, we held our first two-day training event since 2021 in Jeju, South Korea, welcoming more than 500 members to take part in business, product, and personal development training. The goal of this event is to prepare new and existing members with the business skills and leadership mindset to find success with NHG Global and our product offerings. Taiwan demonstrated a positive increase in orders of 51% compared to the prior quarter and of 16% year-over-year. The successful implementation of precision health events in this market is starting to take hold as we integrate personal health testing into our activities and provide wellness snapshots to those in attendance.

Chris T. Sharng: In June we held our first two day training events since 2021 in <unk>, South Korea welcoming more than 500 members to take part in business product and personal development and training.

Chris T. Sharng: The goal of this event is to prepare new and existing members with the business skills and leadership mindset to find success with NHG Global and our product offering. Taiwan demonstrated a positive increase in orders of 51% compared to the prior quarter and up 16% year over year.

Chris T. Sharng: The goal of this event is to prepare at new and existing members with the business skills and leadership mindset to find success with NFC global and our product offering.

Chris T. Sharng: Taiwan demonstrated a positive increase in orders up 51% compared to the prior quarter and up 16% year over year.

Chris T. Sharng: The successful implementation of precision health events in this market is starting to take hold as we integrate personal health testing into our activities and provide wellness snapshots to those in attendance. North America orders increased 22% quarter over quarter and 7% compared to Q2 2023. The company continues to engage members and new customers at in-store meetings and events held at our various Healthy Lifestyle Center locations in New Jersey, Los Angeles, and Vancouver.

Chris T. Sharng: The successful implementation of precision health events and this market.

Chris T. Sharng: He is starting to take hold as we integrate personal health testing into our activities and provide wellness snapshots to those in attendance.

Chris Sharng: North America orders increased 22% quarter-over-quarter and 7% compared to Q2 2023. The market continues to engage members and new customers at in-store meetings and events held at our various healthy lifestyle center locations in New Jersey, Los Angeles, and Vancouver. Also, during the quarter, we introduce a Cancun incentive trip qualification, which will continue throughout the second half of the year.

Chris T. Sharng: North America orders increased 22% quarter over quarter, and 7% compared to Q2 2023.

Chris T. Sharng: The market continues to engage members and new customers in store or meetings and events held at our various healthy lifestyle center locations in New Jersey, Los Angeles in Vancouver.

Chris T. Sharng: Also, during the quarter, we introduced a Cancun Incentive Trip Qualification, which will continue throughout the second half of the year. In the coming days, we'll be launching a new category of product in North America, an at-home testing kit called BioEssence Wellness Panel. This test kit measures 17 health biomarkers with a simple blood draw to provide actionable insights into your current health status.

Chris T. Sharng: Also during the quarter, we introduced a Ken Cooley incentive could qualification, which will continue throughout the second half of the year.

Chris Sharng: In the coming days, we'll be launching a new category of product in North America, an at-home testing kit called Bioessence Wellness Panel. This test kit measures 17 health biomarkers with a simple blood draw to reveal actionable insights into your current health status. With a result in hand, customers can now have a data-driven approach to know which of our products might best support their wellness journey.

Chris T. Sharng: In the coming days, we'll be launching a new category of product in North America and at home testing kit called bio assays wellness panel.

Chris T. Sharng: This test kit measure 17 held biomarkers with a simple blood draw.

Chris T. Sharng: To reveal actionable insights into your current health status.

Chris T. Sharng: With their results in hand, customers can now have a data-driven approach to know which of our products might best support their wellness journey. Our Peru and India markets embark on multi-city roadshows during the period. In Peru, the focus of the event was on the newly launched Collagen Supreme product that drew excitement and interest. India's roadshow emphasized product and business sharing for new prospects and customers. We appreciate and recognize the efforts of our committed members, field leaders, and loyal customers.

Chris T. Sharng: Their results in hand customers can now have a data driven approach to know which of our products My best support their wellness journey.

Chris Sharng: Our Peru in India markets embarked on multi-city roadshows during the period. In Peru, the focus of the events was on the newly launched Collagen Supreme product that Julie Simon and Enches. India's Rochelle emphasized product and business sharing for new prospects and customers. We appreciate and recognize the efforts of our committed members, few leaders, and loyal customers. We are encouraged by the enthusiasm of our global members who embrace our initiatives and commit to energy global in our products experiencing tangible results. As we move into the second half of the year, our focus remains on executing strategies that do our business growth and enhance shareholder value.

Chris T. Sharng: Our Peru, and India markets embark on a multi city roadshows during the period.

Chris T. Sharng: In Peru, the focus of the event with.

Chris T. Sharng: The newly launched collagen Supreme product that Julie Simon and interest.

Chris T. Sharng: India will show emphasize product and business sharing for new prospects and customers.

Chris T. Sharng: We appreciate and recognize the efforts of our committed members field leaders and loyal customers.

Chris T. Sharng: We are encouraged by the enthusiasm of our global members who embrace our initiatives and commit to NHE Global and our products, experiencing tangible results. As we move into the second half of the year, our focus remains on executing strategies that drive business growth and enhance shareholder value. With that, I'd like to turn the call over to our CFO, Scott Davidson, to discuss our financial results in greater detail.

Chris T. Sharng: We are encouraged by the enthusiasm of our global members, who embrace our initiatives and commit to and if he global in our products experiencing tangible results.

Chris T. Sharng: As we move into the second half of the year, our focus remains on executing strategies that drive business growth and enhance shareholder value.

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

Chris T. Sharng: With that I'd like to turn the call over to our CFO, Scott Davidson to discuss our financial results in greater detail.

Scott Davidson: Scott? Thank you, Chris. Those are 10.5 million, worth essentially flat when compared to the second quarter last year. Our active member base decreased 2% to 36,110 at June 30th, from 31,620 at March 30th last year, and was down 15% from 36,730 at June 30th last year. Gross profit margin that kinds flat rate to 74.2% from 74.6% in the second quarter last year due primarily to higher cost related to our premium known juice product. Commissions that spent as a percent of total sales for the second quarter was 40.1% compared with 42.9% a year ago. Commissions that spent as a percent of net sales declined due to lower weekly commissions earned outside of our Hong Kong business, as well as a lower supplemental commissions recognized this year.

Chris T. Sharng: Scott.

Timothy Scott Davidson: Thank you Chris.

Timothy Scott Davidson: Chris, those $10.5 million were essentially flat when compared to the second quarter of last year. However, our active member base decreased 2% to 36,110 at June 30th from 31,620 at March 31st and was down 15% from 36,730 at June 30th last year.

Timothy Scott Davidson: So the $10 5 million of worst essentially flat when compared to the second quarter of last year.

Speaker Change: Our active member base decreased 2% to 36110 at June 30th from 31628 at March 31st and was down 15% from 36730 at June 30 of last year.

Timothy Scott Davidson: Gross profit margin declined flatly to 74.2 percent from 74.6 percent in the second quarter of last year due primarily to higher costs related to our premium noni juice product. Commissioned expense as a percent of total sales for the second quarter was 40.1% compared with 42.9% a year ago. Commissions expense as a percent of net sales declined due to lower weekly commissions earned outside of our Hong Kong business, as well as lower supplemental commissions recognized this year.

Timothy Scott Davidson: Gross profit margin declined slightly to 74, 2% from 74, 6% in the second quarter of last year, due primarily to higher costs related to our premium noni juice product.

Timothy Scott Davidson: Commissions expense as a percent of total sales for the second quarter was 41% compared with 42, 9% a year ago.

Timothy Scott Davidson: Commissions expense as a percent of net sales declined due to lower weekly commissions earned outside of our Hong Kong business as well as lower supplemental commissions recognized this year.

Scott Davidson: Telling general and administrative expenses declined flat rate at 3.8 million for the quarter from 4.1 million in the second quarter a year ago.

Timothy Scott Davidson: Selling general and administrative expenses declined slightly to $3 8 million for the quarter from $4 1 million in the second quarter a year ago.

Timothy Scott Davidson: Selling general and administrative expenses declined slightly to $3.8 million for the quarter from $4.1 million in the second quarter a year ago. As a result, operating loss for the quarter was $238,000 compared to $743,000 in the second quarter of last year. And net income for the second quarter totaled $173,000, or $0.02 per deleted share, compared to a net loss of $219,000, or $0.02 per deleted share, in the second quarter of

Timothy Scott Davidson: Okay.

Scott Davidson: As a result, operating loss for the quarter was 238,000 compared to 743,000 in the second quarter last year, and net income for the second quarter total of 173,000 or 2 cents per related share compared to a net loss of 219,000 or 2 cents per related share in the second quarter of 2023.

Timothy Scott Davidson: As a result operating loss for the quarter was 238000 <unk>.

Timothy Scott Davidson: <unk> two 743000 in the second quarter of last year and net income for the second quarter totaled 173000 or two cents per diluted share.

Timothy Scott Davidson: Compared to a net loss of 219000 or two cents per diluted share in the second quarter of 2023.

Scott Davidson: Now I'll turn to our cash flows and mallet sheet. Net cash used in operating activities was 3.6 million in the second quarter compared to 2.6 million in the second quarter last year. Excluding our required annual tax installment payments related to the 2017 US Tax Cuts and Jobs Act, cash flows from operations was positive for the second consecutive quarter and approved 1.3 million over the comparable six month period last year. Total cash, cash equivalent, and marketable securities were 48.7 million at June 30, down from 54.4 million at March 31, due to our required tax installment payment of 4 million and our quarterly dividend payment.

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

Timothy Scott Davidson: Now I'll turn to our cash flows and balance sheet. Net cash used in operating activities was $3.6 million in the second quarter, compared to $2.6 million in the second quarter last year. Excluding our required annual tax installment payments related to the 2017 U.S. Tax Cuts and Jobs Act, cash flows from operations were positive for the second consecutive quarter and improved $1.3 million over the comparable six-month period last year. Total cash, cash equivalents, and marketable securities were $48.7 million at June 30th, down from $54.4 million at March 31st due to our required tax installment payment of $4 million and our quarterly dividend payment.

Timothy Scott Davidson: Net cash used in operating activities was $3 6 million in the second quarter compared to $2 6 million in the second quarter of last year.

Timothy Scott Davidson: <unk> are required annual tax installment payments related to the 2017 U S tax cuts and jobs Act cash flows from operations was positive for the second consecutive quarter and improved 1.3 million over the comparable six month period last year.

Timothy Scott Davidson: Total cash cash equivalence and marketable securities were 48 7 million at June 30th down from $54 4 million at March 31st.

Timothy Scott Davidson: Our required tax installment payment of $4 million.

Timothy Scott Davidson: And our quarterly dividend payment.

Scott Davidson: As returning capital to our stock loaders remains a top priority, and pleased in now that on July 29, our board of directors declared another quarterly cash dividend of 20 cents per share, which will be payable on August 23, due stock loaders are record as of August 13.

Timothy Scott Davidson: As returning capital to our stockholders remains a top priority.

Timothy Scott Davidson: As returning capital to our stockholders remains a top priority, I am pleased to announce that on July 29th, our Board of Directors declared another quarterly cash dividend of $0.20 per share, which will be payable on August 23rd to stockholders of record as of August 13th. In closing, I was fortunate to join our members in Jeju Island last month and witness firsthand their passion and energy for NHG Global, our extensive product offerings, and the promising future that lies ahead with us.

Timothy Scott Davidson: Please to announce that on July 29, our board of directors declared another quarterly cash dividend of <unk> 20 per share, which will be payable on August 23rd to stockholders of record as of August 13th.

Scott Davidson: In closing, I was fortunate to join our members in Jeju Island last month and witness firsthand their passion and energy for NHG Global, our extensive product offerings, and the promising future that lies ahead with us. They're enthusiasm for health, wellness, and the enriching opportunity for personal growth and development is inspiring. It was also great to hear from them that what we have implemented is working and supporting their efforts. With this knowledge and through strong partnership and collaboration, we are committed to continue developing programs, new products, and activities that will help support their success and our overall business growth while maintaining a key eye on effective cost management.

Speaker Change: In closing I was fortunate to join our members and Jed you all that last night and witnessed firsthand the passion and energy for NXT global.

Timothy Scott Davidson: Extensive product offerings and the promising future that lies ahead with that.

Timothy Scott Davidson: Their enthusiasm for health, wellness, and the enriching opportunity for personal growth and development is inspiring. It was also great to hear from them that what we have implemented is working and supporting their efforts. With this knowledge, and through strong partnership and collaboration, we are committed to continuing developing programs, new products, and activities that will help support their success and our overall business growth, while maintaining a keen eye on effective cost management. That concludes our prepared remarks. I would now like to turn the call back over to the operator.

Timothy Scott Davidson: Their enthusiasm for health wellness and enriching opportunity for personal growth and development is inspiring. It was also great to hear from them that what we have implemented is working and supporting their efforts.

Timothy Scott Davidson: With this knowledge and through strong partnership and collaboration we are committed to continue developing programs new product.

Timothy Scott Davidson: And activities that will help support their success and our overall business growth, while maintaining a keen eye on effective cost management.

Scott Davidson: That completes our prepared remarks.

Timothy Scott Davidson: That completes our prepared remarks, I would now like to turn the call back over to the operator.

Operator: I would now like to turn the call back over to the operator.

Operator: This concludes today's conference. You may disconnect your lines.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Yeah.