Q4 2024 Natural Health Trends Corp Earnings Call

Greetings and welcome to the natural Health trends Corp, fourth quarter 2024 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call for conference. Please press Star zero on your telephone keypad. It is now.

Operator: Greetings and welcome to the Natural Health Trends Corp fourth quarter 2024 earnings. At this time, all participants are on a listening A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone.

Operator: It is now my pleasure to introduce.

Speaker Change: My pleasure to introduce your host Michelle Gladwell with natural health trends Corp. Thank you you may begin.

Michelle Glidewell: Michelle Glidewell with Natural Health. Thank you. Thank you, and welcome to Natural Health Trends fourth quarter and full year 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 can 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 within 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 naturalhealthtrendscorp.com.

Speaker Change: Thank you and welcome to natural health trends fourth quarter and full year 'twenty 'twenty four earnings conference call.

Speaker Change: 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.

Speaker Change: 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 within the Securities and Exchange Commission.

Speaker Change: 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 9 o'clock a.m. Eastern Time.

Speaker Change: 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 am Eastern time at this time I'd like to turn the call over to Chris Stark President of natural health trends.

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 fourth quarter and full year 2024 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. During the fourth quarter, our performance was steady, with overall reported sales remaining essentially flat in comparison to the fourth quarter a year ago. Our primary market, Greater China, where sluggish consumer sentiment persists, achieved a 7% increase in net sales compared to the fourth quarter of 2023 and a 9% increase compared to the preceding third quarter of 2024, a sign that our programs, trainings, promotions, and incentives are resonating with the consumers and field leaders.

Chris Stark: Thank you Michelle and thanks to everyone for joining us this morning to discuss our fourth quarter and full year 2024 financial results.

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

Speaker Change: During the fourth quarter, our performance was steady with overall reported sales remaining essentially flat in comparison to the fourth quarter a year ago.

Speaker Change: Our primary market greater China were sluggish consumer sentiment persists achieve a 7% increase in net sales compared to the fourth quarter of 2023, and a 9% increase compared to the preceding third quarter of 2024.

Speaker Change: Sign that our programs trainings promotions and incentives.

Speaker Change: Canadian where the consumers in few years.

Speaker Change: Overall, our results for the fourth quarter and full year were adversely affected by decreases in Taiwan in North America, where we implemented strategic price adjustments in 2023 and began offering fewer product promotions throughout 2024.

Overall, our results for the fourth quarter and full year were adversely affected by decreases in Taiwan and North America, where we implemented strategic price adjustments in 2023 and began offering fewer product promotions throughout 2024. We believe these efforts position us for longer-term benefits of safeguarding margins and reinforcing market discipline. In November, we introduced two new products in Hong Kong, a raspberry lemonade flavor version of our Collagen Supreme, as well as a new topical hair serum called Root Revive, designed to improve hair strength and density. We follow up the launch with a six-city roadshow in China where our members and consumers learn about these two products while gaining valuable training and business insight.

Speaker Change: We believe these efforts position us for longer term benefits of safeguarding margins and reinforcing market discipline.

Speaker Change: In November we introduced two new products in Hong Kong.

Speaker Change: Westbury eliminated flavor version of our college and Supreme as well as our new topical here serum called route revive designed to improve here strength in density.

Speaker Change: We follow up the launch with a six city road show in China, where our members and consumers learn about these two products, while gaining valuable training and business insights.

These two products were also rolled out in Taiwan and North America, with other markets preparing for their introductions later this year.

Speaker Change: These two products were also wrote out in Taiwan in North America with other markets preparing for their introductions later this year.

Speaker Change: In the first week of January we held our annual Asia Forum in Bangkok with more than 430 attendees.

In the first week of January, we held our annual Asia Forum in Bangkok with more than 430 attendees. This gathering was a springboard for our 2025 programs and initiatives and ensures that our leaders and the field have a clear roadmap for success and vision for the year ahead. In 2024, we officially opened the Columbia Market for in-country order taking, and we're finalizing arrangements for an official office opening later this month to celebrate, recognize, and welcome this new community to the NHE Global family. We are excited these new members are drawn to our opportunity and high quality products and that they share enthusiasm for our global mission of creating wellness traditions.

Speaker Change: This gathering was a springboard for our 2025 programs and initiatives and ensure that our leaders in the field have a clear roadmap for success and vision for the year ahead.

Speaker Change: In 2024, we officially opened the Colombia market for it in country order, taking and we're finalizing arrangements for an official office opening later this month to celebrate recognize and welcome this new community and then she'd gobo family.

Speaker Change: We are excited these new members are drawn to our opportunity and high quality products and that they share enthusiasm for our global mission of creating wellness traditions.

Speaker Change: In all of our markets, we continue to regularly hold product and business training personal development sessions and recognition events both in person and online. These.

In all of our markets, we continue to regularly hold products and business trainings, personal development sessions, and recognition events, both in person and online. These initiatives are designed to empower, engage, and inform our members, while also serving as excellent platforms to spark new recruitment and retail activities and support retention. In October, leaders and qualifiers from Peru, Mexico, and Japan came together for an unforgettable incentive trip to Paris, combining efforts across multiple markets to celebrate their achievement. In December, we hosted our North American qualifiers for our Cancun incentive trip, where half of the qualifiers were first-time attendees to one of our traveling incentives.

Speaker Change: These initiatives are designed to empower engage and inform our members while also serving as excellent platforms to spark new recruitment and retail activities and support retention.

Speaker Change: In October leaders in qualifiers, if I'm, Peru, Mexico, and Japan came together for an Oh forget about incentive trip to Paris, combining efforts across multiple markets to celebrate their achievements.

Speaker Change: And in December we hosted our North American qualifiers for Cancun incentive trip, where half of the qualifiers were first time attendees to one of our travel incentive.

Speaker Change: These recognition activities are designed to drive go setting and business growth motivate and help strengthen relationships among members leaders and staff to support retention and collaboration.

These recognition activities are designed to drive goal-setting and business growth, motivate and help strengthen relationships among members, leaders, and staff to support retention and collaboration. I want to acknowledge the vital contributions of our leaders, members, preferred customers, employees and stockholders. Your dedication plays a key role in strengthening Energy Global and advancing the reach of our outstanding products. Our business and product offerings provide an opportunity for individuals of all backgrounds, whether they are looking to supplement their income or take proactive steps toward improving their health and wellness. With our exceptional products, we're well-positioned to support these aspirations and help individuals achieve their goals in an ever-changing world.

Speaker Change: I want to acknowledge the vital contributions of our leaders members preferred customers employees and stockholders.

Speaker Change: Your dedication plays a key role in strengthening and is your global.

Speaker Change: Advancing the reach of our outstanding products.

Speaker Change: Our business and product offerings provide an opportunity for individuals of all backgrounds, whether they're looking to supplement their income would take proactive steps to improving their health and wellness.

Speaker Change: With our exceptional products, we're well positioned to support these aspirations and help individuals achieve their goals in an ever changing world.

Speaker Change: And so we welcomed a year the snake, we extend our heartfelt wishes for health prosperity and success throughout 2025.

As we welcome the Year of the Snake, we extend our heartfelt wishes for health, prosperity, and success throughout 2025.

Speaker Change: Now I'll pass the call to our CFO, Scott Davidson, who will share a detailed overview of our financial results.

Scott Davidson: Now I'll pass the call to our CFO, Scott Davidson, who will share a detailed overview of our financial results. Scott? Thank you, Chris. Total fourth quarter revenue of $10.8 million was roughly unchanged from $10.9 million in the fourth quarter a year ago. Revenue in our primary market of Greater Chano during the quarter increased 7% compared to the fourth quarter last year. This improvement was tempered by the performance of other markets, particularly Taiwan and North America. Our active member base was 30,870 at December 31st, consistent with September 30th, and a 5% decline since the end of December 2023.

Speaker Change: Scott.

Scott Davidson: Thank you Chris total fourth quarter revenue of $10 8 million was roughly unchanged from $10 9 million in the fourth quarter a year ago.

Scott Davidson: Revenue in our primary market of greater China during the quarter increased 7% compared to the fourth quarter of last year.

Scott Davidson: This improvement was tempered by the performance of other markets, particularly Taiwan in North America.

Scott Davidson: Our active member base was 30870 at December 31st consistent with September 30th and a 5% decline since the end of December 2023.

Turning to our cost and operating expenses. Gross profit margin of 74.2% in the fourth quarter declined slightly from 74.5% in the fourth quarter last year, primarily due to higher freight costs. Commissions spent as a percent of net sales for the fourth quarter increased to 41.9 percent from 41.6 percent in the prior quarter due to higher supplemental incentive costs incurred this year. Selling general and administrative expenses for the quarter were $3.9 million, a slight increase from $3.8 million a year ago due to the timing of certain professional services. As a result of additional costs incurred during the fourth quarter this year, operating loss for the quarter was $421,000 compared to $242,000 in the fourth quarter last year.

Scott Davidson: Turning to our cost and operating expenses.

Scott Davidson: Gross profit margin of 74, 2% in the fourth quarter declined slightly from 74, 5% in the fourth quarter of last year, primarily due to higher freight costs.

Scott Davidson: Commissions expense as a percent of net sales for the fourth quarter increased to 41, 9% from 41, 6% in the prior year quarter due to higher supplemental incentive costs incurred this year.

Scott Davidson: Selling general and administrative expenses for the quarter were $3 9 million.

Scott Davidson: <unk> increased from $3 8 million a year ago due to the timing of certain professional services.

Scott Davidson: As a result of additional costs incurred during the fourth quarter of this year.

Scott Davidson: Operating loss for the quarter was 421000 compared to 242000 in the fourth quarter of last year.

Scott Davidson: However, due to interest income and an income tax benefit recognized in the fourth quarter of this year.

However, due to interest income and an income tax benefit recognized in the fourth quarter this year, net income for the fourth quarter was $176,000, or $0.02 per diluted share. In comparison, net income was $358,000 or $0.03 per diluted share in the fourth quarter of 2023.

Scott Davidson: Net income for the fourth quarter was 176000 or two cents per diluted share.

In comparison net income was 358000 or three cents per diluted share in the fourth quarter of 2023.

Scott Davidson: I'll now turn to our cash flows and balance sheet.

I'll now turn to our cash flows and balance. Net cash provided by operating activities was $88,000 during the fourth quarter. For the full year, net cash used in operating activities was $3.4 million, compared to $4.3 million a year ago. Excluding our required annual tax installment payment related to the 2017 U.S. Tax Cuts and Jobs Act, we generated $602,000 in cash flow from operations during 2024. which is a $1.8 million improvement over last year. Total cash, cash equivalents, and marketable securities were $43.9 million at December 31st. down from $46.3 million on September 30th due to our quarterly dividend payment.

Scott Davidson: Net cash provided by operating activities was 88000 during the fourth quarter.

Scott Davidson: For the full year net cash used in operating activities was $3 4 million compared to $4 3 million a year ago.

Scott Davidson: Excluding our required annual tax installment payment related to the 2017 U S tax cuts and jobs that we generated 602000 and cash flows from operations during 2024.

Scott Davidson: Which is a $1.8 million improvement over last year.

Scott Davidson: Total cash cash equivalents in marketable securities were $43 9 million at December 31st.

Scott Davidson: Down from $46 3 million at September 30th due to our quarterly dividend payment.

Scott Davidson: For the full year of 2024.

for the full year 2024. We paid out $9.2 million in dividends. As returning capital to our stockholders remains a priority.

Scott Davidson: We paid out $9 2 million in dividends.

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

Scott Davidson: We were pleased to announce that on February 3rd our board of directors declared a quarterly cash dividend of 20 cents per share, which will be payable on February 28 to stockholders of record as of February 18th.

Scott Davidson: We are pleased to announce that on February 3rd, our Board of Directors declared a quarterly cash dividend of 20 cents per share, which will be payable on February 28th to stockholders or record as of February 18th. In closing, while consumer sentiment and macroeconomic conditions in Greater China remain challenging, we are confident that we are on the right track. After spending time with many of our key leaders and members in Bangkok, I can say with certainty that their commitment and optimism for the future are stronger than ever. We remain fully committed to innovating, growing, and enhancing our support to ensure their continued success.

Scott Davidson: In closing, while consumer sentiment and macroeconomic conditions in greater China remained challenging we are confident that we're on the right track.

Speaker Change: After spending time with many of our key leaders and members in Bangkok, I can say with certainty that their commitment and optimism for the future are stronger than ever.

Speaker Change: We remain fully committed to innovating and growing and enhancing our support to ensure their continued success.

and we are excited for the opportunities ahead.

Speaker Change: And we are excited for the opportunities ahead.

Scott Davidson: That completes our prepared remarks.

Speaker Change: That completes our prepared remarks.

Speaker Change: I will now turn the call back over to the operator.

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

Speaker Change: Thank you ladies and gentlemen, this does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Operator: Ladies and gentlemen, this does conclude today's conference and you may disconnect your line.

Speaker Change: Yeah.

[music].

Speaker Change: Yeah.

Speaker Change: [music].