Natural Health Trends Corp. (NHTC) reported a stable second quarter in 2024, with net sales holding steady at $10.5 million, mirroring the figures from the same quarter in the previous year. This stability comes despite a challenging market environment marked by a downturn in consumer spending.
The company has managed to mitigate the impact of these headwinds through targeted programs aimed at attracting and retaining customers. Additionally, the company announced a quarterly cash dividend of $0.20 per share, underlining its commitment to returning capital to shareholders.
Key Takeaways
- Net sales for Q2 2024 remained flat at $10.5 million compared to Q2 2023.
- Active member base decreased by 2% quarter-over-quarter and 15% year-over-year.
- Gross profit margin saw a slight decline to 74.2% due to higher costs associated with the Premium Noni Juice product.
- Operating loss improved to $238,000 in Q2 2024 from $743,000 in Q2 2023.
- Net income for the quarter was $173,000 or $0.02 per diluted share.
- Quarterly cash dividend announced at $0.20 per share, payable on August 23.
Company Outlook
- Focus remains on executing strategies that drive business growth and enhance shareholder value.
- Introduction of new product categories, such as the Bio Essence wellness panel in North America.
- Continued emphasis on targeted programs, promotions, and incentives to support sales and member engagement.
Bearish Highlights
- Downturn in consumer spending continues to pose challenges for the business.
- The active member base has shown a decline both quarter-over-quarter and year-over-year.
Bullish Highlights
- Positive increase in orders from Taiwan, up 51% from the previous quarter and 16% year-over-year.
- North America orders increased by 22% quarter-over-quarter and 7% compared to Q2 2023.
- Successful implementation of precision health events and personal health testing integration.
Misses
- Net cash used in operating activities increased to $3.6 million in Q2 2024 from $2.6 million in Q2 2023.
Q&A Highlights
- The call did not include a Q&A session.
Natural Health Trends Corp. has demonstrated resilience in the face of a challenging global market by maintaining its revenue and implementing effective customer engagement strategies. The company's decision to hold a training event in South Korea and the introduction of new product lines, such as the Bio Essence wellness panel, are indicative of its proactive approach to market dynamics. Despite a slight decline in gross profit margin and an active member base, the improvement in operating loss and a net income turnaround from the previous year's loss are positive signs. The company's commitment to shareholder value is further evidenced by the announcement of a consistent quarterly dividend. Moving forward, Natural Health Trends Corp. aims to continue its focus on growth and cost management to support its business and its members' success.
InvestingPro Insights
Natural Health Trends Corp. (NHTC) presents a mixed financial picture according to recent InvestingPro Data. Despite a challenging market, the company holds a significant gross profit margin of 74.3% for the last twelve months as of Q1 2024, which aligns with the slight decline reported in the article. This margin is impressive and indicates strong pricing power or cost control measures, which are crucial in maintaining profitability amid market downturns.
The company's P/E Ratio, at 165.68, and Adjusted P/E Ratio, at 168.61 for the same period, suggest that investors are willing to pay a premium for NHTC's earnings. This could be reflective of the company's ability to maintain stable sales and the high shareholder yield, which is an InvestingPro Tip highlighting the company's commitment to returning value to shareholders. The generous dividend yield of 11.02% as of mid-2024 further underlines this point and may be attractive to income-focused investors.
Another InvestingPro Tip points out that NHTC is trading near its 52-week high, with the price at 98.65% of this peak. This performance is supported by a one-year price total return of 44.48% as of mid-2024, showcasing investor confidence and a potentially bullish outlook for the stock.
For readers interested in deeper analysis and additional insights, InvestingPro offers a total of 8 InvestingPro Tips on NHTC, which can be explored further for a comprehensive understanding of the company's financial health and investment potential.
Full transcript - Natural Health Trend (NASDAQ:NHTC) Q2 2024:
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. [Operator Instructions]. 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: 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. At this time, I'd like to turn the call over to Chris Sharng, President of 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 net sales of $10.5 million were flat compared to the second quarter of 2023, reflecting stability in our revenue stream, 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. In June, we held our first two-day training events 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 offering. 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. 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 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 and at-home testing kit called Bio Essence wellness panel. This test kit measures 17 health biomarkers with a simple blood draw to review actionable insights into your current health status. With the 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 multicity roadshows during the period. 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, few 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: Thank you, Chris. So the $10.5 million were essentially flat when compared to the second quarter last year. Our active member base decreased 2% to 36,110 at June 30 from 31,620 at March 31 and was down 15% from 36,730 at June 30 last year. 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. Commissions 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. 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. 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 30, down from $54.4 million at March 31, due to our required tax installment payment of $4 million and our quarterly dividend payment. As returning capital to our stockholders remains a top priority, I am pleased to announce that on July 29, our Board of Directors declared another quarterly cash dividend of $0.20 per share, which will be payable on August 23 to stockholders of record as of August 13. In closing, I was fortunate to join our members in Jeju Island last month and witnessed 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. 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.
End of Q&A: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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