Golden Ocean Group Q1 2023 Earnings Call Transcript

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May 3, 2023

There are 4 speakers on the call.

Operator

Greetings, and welcome to the Natural Health Trends Corp's First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. Please note this conference is being recorded. I'll now turn the conference over to Michelle Glidewell with Natural Health Trends. Michelle, you may begin.

Speaker 1

Thank you, and welcome to Natural Health Trends Q1 2023 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 Investors section of the company's corporate website at naturalhealthtrendscorp.com. Instructions can be found for accessing the archived version of the conference call in today's financial results press release, which was issued at approximately 9 o'clock a.

Speaker 1

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

Speaker 2

Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our Q1 2023 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Since the end of 0 COVID policies last December, our Greater China business and leaders are still adjusting and adapting to a fluid and dynamic operating environment. Our experience in the Q1 is that consumers have been slow and gradual to participate in the reopening and they're taking a cautious approach to spending and to meeting new people and gathering in group settings. In spite of this consumer sentiment, we are encouraged that our Hong Kong business showed good progress with revenue increasing 10% year over year.

Speaker 2

Companywide revenue of $11,900,000 increased 3% compared to $11,500,000 in the Q1 of 2022. This marks our 1st year over year increase since the Q3 of 2021 and the second increase since the Q3 of 2018. Despite the overall consumer sentiment, our leaders executed on aggressive plans to resume local small scale in person meetings. During the period, we hosted a Shanghai incentive trip with more than 500 attendees. Feedback from this activity was positive and we are eager to return to a robust calendar of these types of large scale activities to engage with leaders and members in the region.

Speaker 2

Looking ahead to the Q2, we are preparing for the launch of our newest wellness supplement, Medi Boost. This supplement is uniquely formulated to promote healthy glucose levels and provide cardiovascular support. Shifting our attention outside of our Hong Kong and China markets to North America. In February, we officially opened the Los Angeles Area Healthy Lifestyle Center in Golden Heights, California. This location is the 3rd in North America and is designed to support the local team members' business building and training activities, serves as an order pickup location and is a showcase center for all of our products.

Speaker 2

In March, we were pleased to embark on the 1st incentive trip for this market since the beginning of the COVID pandemic, hosting a group of nearly 100 enthusiastic members on our cruise to the Bahamas. In our other local markets, we were excited to connect with members at local in person events and on several incentive trips during the quarter to great destinations such as Grand Canary, Spain, Rajasthan, India, Honolulu, Hawaii and Cartagena, Colombia. In Europe, we held a successful event in Gothenburg, Sweden featuring our top selling premium Noni product and in March we pre launched the previously mentioned Meta Boost product. Response from the field for this upcoming product was tremendous having so through our initial pre launch inventories. Progress continues to be made on our worldwide digital enhancement initiatives.

Speaker 2

As a reminder, this is the long term development project and transitioning away from our legacy platform to a new robust end to end ecosystem will help improve the customer experience of our digital platforms and make doing business with us as seamless as possible. Wrapping up my commentary for the quarter, we are cautiously optimistic about the future. If the current trend of an improving operating environment continues, we are hopeful that our business will benefit from the prospect that people are more willing and comfortable to meet gathering travel, all activities that are important to how we facilitate our business development. And now I will turn the call over to our CFO, Scott Davidson to discuss our financial results in greater detail. Scott?

Speaker 3

Thank you, Chris. Total revenue for the Q1 was $11,900,000 an increase of 3% compared to $11,500,000 in the Q1 of 2022 and our Hong Kong business was able to increase revenue 10%. This increase was partially offset by the impact of the current geopolitical and industry regulatory environments in certain of our other markets. Our active member base declined slightly to 38,330 at March 31 from 38,000 660 at December 31 and was down 14% compared to 44,490 at March 31 last year. Turning to our cost and operating expenses.

Speaker 3

Gross profit margin was 74.5% compared to 74 0.8% in the Q1 last year, which was relatively consistent year over year, excluding the impact of administrative fee revenue. Commissions expense as a percent of net sales for the Q1 was 42.1% compared with 41% in the prior year quarter. Excluding the impact of administrative fee revenue, commissions expense as a percent of net sales increased slightly due to higher commission payouts and more supplemental incentive costs. Selling, general and administrative expenses of $4,200,000 for the quarter decreased slightly from 4,300,000 dollars in the Q1 of last year. The decrease in our SG and A from the prior year quarter reflects lower employee related costs.

Speaker 3

As a result, operating loss for the quarter was $394,000 compared to $383,000 in the Q1 last year. We recognized the income tax provision of $30,000 for the quarter compared to an income tax benefit of $168,000 reported in the Q1 last year. Net income for the Q1 totaled $257,000 or $0.02 per diluted share, compared to net loss of $105,000 or $0.01 per diluted share in the Q1 of 2022. Now I'll turn to our balance sheet and cash flow. Total cash and cash equivalents were $66,600,000 at March 31, down from $69,700,000 at December 31.

Speaker 3

Net cash used in operating activities was $696,000 for the Q1 compared to $2,300,000 in the Q1 of last year. I am pleased to announce that on May 1, our Board of Directors declared a quarterly cash dividend of $0.20 per share, which will be payable on May 26 to stockholders of record as of May 16. In conclusion, having personally spent some time this past quarter with our key leaders in several markets, their enthusiasm to get back to business building activities was expressed, along with their eagerness to travel, so this type of activity remains challenging in many cases. We are hopeful that the moderately improved operating environment continues to trend in the right direction and that our business will benefit accordingly. We wish to thank all of our dedicated members for their commitment to their business activities, to our product offering and to fully embracing our mantra of helping to create wellness creations around the world.

Speaker 3

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

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Golden Ocean Group Q1 2023
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