Natural Health Trends Q2 2024 Earnings Report

Natural Health Trends EPS Results

• Actual EPS: $0.02
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Natural Health Trends Revenue Results

• Actual Revenue: $10.48 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Natural Health Trends Announcement Details

• Quarter: Q2 2024
• Date: 7/31/2024
• Time: N/A
• Conference Call Date: Wednesday, July 31, 2024
• Conference Call Time: 11:30AM ET

Natural Health Trends (NASDAQ:NHTC) is a U.S.-based holding company that develops, markets and distributes a range of plant-based health supplements, nutritional products and personal care items. The company’s product portfolio spans weight management, skin care, men’s health, nutritional supplements and wellness solutions designed to support overall health and beauty. Natural Health Trends focuses on delivering scientifically formulated products through modern e-commerce channels and direct selling platforms.

Through its principal subsidiaries in the People’s Republic of China—including Shanghai NHTC Health Products Co., Ltd. and NutriVision Pharma Co., Ltd.—Natural Health Trends operates an integrated digital sales model. The company leverages proprietary online storefronts, mobile applications and a network of independent distributors to reach consumers in urban and rural regions. Its direct selling approach combines social media marketing with virtual training events to engage end users and strengthen brand loyalty.

Founded in 2002 and headquartered in Irvine, California, Natural Health Trends has made the Chinese market its primary focus, where it generates the majority of its revenues. Over time, the company has expanded its research and development capabilities, established quality-control laboratories and forged strategic partnerships with packaging and logistics providers. This infrastructure supports its goal of delivering safe, compliant and high-purity products to a growing base of health-conscious consumers.

Natural Health Trends is led by President and Chief Executive Officer Winston Tan, whose background in international e-commerce and health sciences has guided the company’s digital growth strategy. Under his leadership, the management team continues to refine the company’s online distribution channels, enhance customer service platforms and explore product innovation opportunities within the global wellness market.

Natural Health Trends Q2 2024 Earnings Call Transcript

Key Takeaways

• 2Q net sales of $10.5M were flat year-over-year, reflecting revenue stability despite downturn in consumer spending
• Active member base declined 2% quarter-over-quarter and 15% year-over-year to 36,110, indicating softer engagement
• Orders in Taiwan surged 51% sequentially and 16% year-over-year, driven by Precision Health events integrating personal health testing
• North America orders rose 22% quarter-over-quarter and 7% year-over-year, supported by in-store events and the upcoming launch of the Bio Essence Wellness Panel
• Operating loss narrowed to $238k from $743k a year ago, delivering net income of $173k compared to a prior-year loss and reflecting improved cost management

Presentation

[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. 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, Michele. You may begin.

[Michelle Glidewell, Head of Investor Relations at Natural Health Trends Corp]

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 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 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 9:00 A.M. Eastern Time.

[Michelle Glidewell, Head of Investor Relations at Natural Health Trends Corp]

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

[Chris Sharng, President at Natural Health Trends Corp]

Thank you, Michele, 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. 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 Sharng, President at Natural Health Trends Corp]

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 NHT Global and our product offerings. Taiwan demonstrated a positive increase in orders, up 51% compared to the prior quarter and up 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. North America orders increased 22% quarter-over-quarter and 7% compared to Q2 2023.

[Chris Sharng, President at Natural Health Trends Corp]

The market continues to engage members and new customers at in-store meetings and events held at our various Healthy Lifestyle Centers in New Jersey, Los Angeles, and Vancouver. 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 BioSense Wellness Panel. This test kit measures 17 health biomarkers with a simple blood draw to reveal actionable insights into your current health status. With your 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 road shows during the period.

[Chris Sharng, President at Natural Health Trends Corp]

In Peru, the focus of the events 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. We are encouraged by the enthusiasm of our global members, who embrace our initiatives and commit to NHT 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. Scott?

[Scott Davidson, SVP and CFO at Natural Health Trends Corp]

Thank you, Chris. Sales of $10.5 million were essentially flat when compared to the second quarter of last year. 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. Gross profit margin declined slightly to 74.2% from 74.6% in the second quarter last year, due primarily to higher costs related to our Premium Noni Juice product. Commissions and expense as a percent of total sales for the second quarter was 40.1%, compared with 42.9% a year ago.

[Scott Davidson, SVP and CFO at Natural Health Trends Corp]

Commissions and expense as a % 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. 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 last year, and net income for the second quarter totaled $173,000, or $0.02 per diluted share, compared to a net loss of $219,000, or $0.02 per diluted share in the second quarter of 2023. Now I'll turn to our cash flows and balance sheet.

[Scott Davidson, SVP and CFO at Natural Health Trends Corp]

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 was 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.

[Scott Davidson, SVP and CFO at Natural Health Trends Corp]

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 NHT Global, our extensive product offerings, and the promising future that lies ahead with us. 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.

[Scott Davidson, SVP and CFO at Natural Health Trends Corp]

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 keen eye on effective cost management. That completes our prepared remarks. I would now like to turn the call back over to the operator.

Participants

Executives

• Chris Sharng, President
• Michelle Glidewell, Head of Investor Relations
• Scott Davidson, SVP and CFO