Natural Health Trends Q2 2024 Earnings Call Transcript

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Provided by Quartr
July 31, 2024

There are 4 speakers on the call.

Operator

Greetings, and welcome to the Natural Health Trends Corp. 2nd Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michelle Glidewell with Natural Health Trends Corp.

Operator

Thank you, Michelle. You may begin.

Speaker 1

Thank you, and welcome to Natural Health Trends' Q2 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 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 naturalhealthtranscorp.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 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 Q2 2024 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. 2nd quarter net sales of $10,500,000 were flat compared to the Q2 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.

Speaker 2

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 2 day training event since 20 21 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 NHE 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.

Speaker 2

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, an at home testing kit called Bio Essence Wellness Panel. This test kit measures 17 health biomarkers with a simple blood draw to reveal actionable insights into your current health status.

Speaker 2

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 embarked on multi city road shows 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 brochure 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.

Speaker 2

We are encouraged by the enthusiasm of our global members who embrace our initiatives and commit to NAC 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?

Speaker 3

Thank you, Chris. Sales of $10,500,000 were essentially flat when compared to the Q2 last year. Our active member base decreased 2% to 36,110 at June 30 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 0.2% from 74.6% in the Q2 last year due primarily to higher costs related to our premium nonage juice product. Commissions expense as a percent of total sales for the 2nd quarter was 40.1% compared with 42.9% a year ago.

Speaker 3

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 $3,800,000 for the quarter from $4,100,000 in the 2nd quarter a year ago. As a result, operating loss for the quarter was $238,000 compared to $743,000 in the Q2 last year. And net income for the 2nd quarter totaled 173,000 dollars or $0.02 per diluted share compared to a net loss of $219,000 or $0.02 per diluted share in the Q2 of 2023. Now I'll turn to our cash flows and balance sheet.

Speaker 3

Net cash used in operating activities was $3,600,000 in the 2nd quarter compared to $2,600,000 in the Q2 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 2nd consecutive quarter and improved $1,300,000 over the comparable 6 month period last year. Total cash, cash equivalents and marketable securities were $48,700,000 at June 30, down from $54,400,000 at March 31, due to our required tax installment payment of $4,000,000 and our quarterly dividend payment.

Speaker 3

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 NXT 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.

Speaker 3

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

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Earnings Conference Call
Natural Health Trends Q2 2024
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