Natural Health Trends Sales Down 13% To $70.7 Million

 

Natural Health Trends Corp., a leading direct-selling and e-commerce company that markets premium quality personal care, wellness and quality of life products under the NHT Global brand, today announced its financial results for the quarter ended September 30, 2016.

Third Quarter2016 Financial Highlights 

• Total revenue decreased 13% to $70.7 million, compared to $80.8 million in the third quarter of 2015.
• Revenue from the Company's Hong Kong operations, which represented 93% of total revenue, decreased 13% to $65.9 million, compared to $75.9 million in the third quarter of 2015.
• Revenue outside of Hong Kong decreased 2% to $4.8 million, compared to $4.9 million in the third quarter of 2015.
• Operating income increased 3% to $15.2 million, compared to $14.8 million in the third quarter of 2015.
• An additional income tax provision of $2.6 million was recognized in the third quarter of 2016 for the expected partial repatriation of overseas profits, resulting in an overall effective tax rate of 18%.
• Net income was $12.6 million, or $1.12 per diluted share, compared to $14.5 million, or $1.18 per diluted share, in the third quarter of 2015.
• The number of Active Members¹ decreased 3% to 122,900 at September 30, 2016, compared to 126,440 at June 30, 2016, and increased 30% compared to 94,700 at September 30, 2015. 

Year-to-Date 2016 Financial Highlights

• Total revenue increased 18% to $225.4 million, compared to $191.2 million in the first nine months of 2015. 
• Operating income increased 30% to $44.1 million, compared to $34.0 million in the first nine months of 2015.
• An additional income tax provision of $7.3 million was recognized in the first nine months of 2016 for the expected partial repatriation of overseas profits, resulting in an overall effective tax rate of 18%.
• Net income was $36.0 million, or $3.14 per diluted share, compared to $33.5 million, or $2.70 per diluted share, in the first nine months of 2015.

Management Commentary

We had a challenging third quarter characterized by various adverse factors contributing to a 13% year-over-year decline in our total revenue, commented Chris Sharng, President of Natural Health Trends Corp. In addition to a tough year-over-year comparison in the third quarter of 2015 due to a highly successful promotion we ran last year during an otherwise seasonally slower quarter, we encountered currency depreciation of the Chinese yuan by 6% against the Hong Kong dollar.

This effectively increases the price of our products for our members residing in mainland China. That said, we believe the G20 Summit, which was hosted in Hangzhou, one of our top performing markets, was the significant driver behind the quarter's decline in revenue. To prepare for the high profile event, the Chinese government implemented special measures such as temporarily relocating city residents, emptying entire districts, blocking urban traffic and shutting down businesses from July through early September. As a result, our local members' abilities to organize any activity in the Hangzhou metropolitan area were hampered.

Mr. Sharng further commented, Despite these factors, we were pleased to have increased our revenues for the first nine months of 2016 by 18% over last year as well as achieve record operating profit for the quarter of $15.2 million, up 3% over last year.  To reinvigorate growth in our affected markets, we have developed a strategic plan which includes leader training and motivation, expansion by both geography and product, and technological advancements to support enhanced member communication and productivity. We are working hard to build sustainable, long-term growth and we will strive to get there through execution on our strategic initiatives while simultaneously returning excess cash to our valued stockholders.

Balance Sheet and Cash Flow

• Net cash provided by operating activities in the third quarter of 2016 was $5.9 million, compared to $25.7 million in the third quarter of 2015. For the first nine months of 2016, net cash provided by operating activities was $36.3 million, compared to $65.2 million in the first nine months of 2015.
• On October 23, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.08 per share on outstanding common stock, which represents a 14% increase over the prior quarter dividend, and a special cash dividend of $0.35 per share on outstanding common stock. The dividends will be payable on November 25, 2016 to stockholders of record as of November 15, 2016.
• During the nine months ended September 30, 2016, the Company repurchased $23.7 million of its common stock under its existing $70.0 million stock repurchase program. At September 30, 2016, approximately $32.0 million remained available for repurchases, inclusive of related estimated income tax.

About Natural Health Trends Corp.

Natural Health Trends Corp. is an international direct-selling and e-commerce company operating through its subsidiaries throughout Asia, North America, and Europe.  The Company markets premium quality personal care products under the NHT Global brand.  Additional information can be found on the Company's website at www.naturalhealthtrendscorp.com.