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Nature's Sunshine Products, CEO, Gregory L. Probert

Nature’s Sunshine Products Q3 Net Sales, Up 4.5% To $89.3 Million

Nature’s Sunshine Products, Inc. (NASDAQ:NATR), a leading natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products, recently reported its financial results for the third quarter ended September 30, 2017.

“We are pleased to report improved third quarter sales performance, returning to both year-over-year and sequential growth led by a recovery at Synergy Worldwide and strong growth in China,” commented Gregory L. Probert, Chairman and Chief Executive Officer.

“The disruptions that impacted sales earlier in the year have moderated with enhanced distributor engagement in Korea and improvements in the performance in North America. We will continue to focus on regaining sales growth in these two markets while driving continued growth in China as we expand our direct selling efforts. The growth at Synergy Worldwide was led by strength in Japan and our NSP business in Russia, Central and Eastern Europe contributed another quarter of growth.”

Mr. Probert continued, “After a period of significant investments, both in China and the ERP system implemented earlier this year, we are now focused on leveraging our China investments to build a long-term profitable and growing business in this promising market. Additionally, we have made significant progress migrating to the new ERP system after a period of disruptions and still have opportunities for improvement. Accordingly, we are continuing our efforts to ensure improved conversion of sales growth into profit enhancements that will drive shareholder value.”

Third Quarter 2017 Financial Highlights

Net sales of $89.3 million increased 4.5 percent, compared to $85.4 million in the third quarter of 2016. On a local currency basis, net sales increased 4.3 percent as compared to the third quarter of 2016. China and New Markets net sales increased approximately 44.5 percent, compared to the same period in 2016.

Synergy WorldWide net sales increased approximately 10.0 percent compared to the same period in 2016 (or 10.7 percent in local currencies). NSP Russia, Central and Eastern Europe net sales increased approximately 11.0 percent compared to the same period in 2016. NSP Americas net sales decreased approximately 4.5 percent compared to the same period in 2016 (or 5.2 percent in local currencies). Net sales were impacted by $0.2 million of favorable foreign currency exchange rate fluctuations.

The Company began the initial implementation of its Oracle ERP system on April 2, 2017, for the Company’s NSP Americas segment as well other corporate operations. The implementation of Oracle ERP negatively impacted net sales and profitability during the second and third quarters of 2017, primarily by causing wait times for calls into the Company’s call center to be longer than usual and by causing difficulties within the Company’s on-line product ordering system.

The Company is addressing these issues and other issues relating to the implementation of the Oracle ERP system. The Company anticipates that the implementation of the Oracle ERP system may continue to negatively impact net sales and profitability going forward.

  • In the second quarter of 2016, the Company began making pre-opening product sales through Hong Kong while awaiting its direct selling license in China.
  • During the second quarter of 2017, the Company received its direct selling license in China, which allows the Company to expand its business scope in China to include direct selling activities.
  • Net income attributable to common shareholders was $2.4 million, or $0.13 per diluted common share, compared to net income of $4.2 million attributable to common shareholders, or $0.22 per diluted common share, in the third quarter of 2016.
  • The Company’s net loss in China attributable to common shareholders was approximately $0.03 per share.
  • Adjusted EBITDA was $4.7 million, compared to $7.1 million in the third quarter of 2016. Adjusted EBITDA, which is a non-GAAP financial measure, is defined here as net income from continuing operations before income taxes, depreciation, amortization, share-based compensation expense and other income/loss.

First Nine Months of 2017 Financial Highlights

  • Net sales of $253.7 million decreased 1.3 percent, compared to $257.2 million in 2016. On a local currency basis, net sales decreased 1.5 percent as compared to 2016. China and New Markets net sales increased approximately 37.2 percent compared to the same period in 2016. NSP Russia, Central and Eastern Europe net sales increased approximately 12.4 percent compared to the same period in 2016. NSP Americas net sales decreased approximately 5.9 percent compared to the same period in 2016 (or 6.0 percent in local currencies). Synergy WorldWide net sales decreased approximately 2.2 percent compared to the same period in 2016 (or 2.4 percent in local currencies). A modest overall weakening of the U.S. dollar versus local currencies resulted in an approximate 0.2 percent or $0.4 million increase of its net sales during the period.
  • Net income attributable to common shareholders was $4.4 million, or $0.23 per diluted common share, compared to $8.8 million, or $0.46 per diluted common share, in 2016.
  • The Company’s net loss in China attributable to common shareholders was approximately $0.15 per share.
  • Adjusted EBITDA was $12.2 million compared to $17.4 million in 2016.

(1) Active Distributors and customers include Nature’s Sunshine Products’ independent Distributors and customers who have purchased products directly from the Company for resale and/or personal consumption during the previous three months ended as of the date indicated.  Total Managers, Distributors and Customers, which include those who have made a purchase in the last twelve months, was 498,000 as of September 30, 2017.

In China, the Company does not sell its products through Managers and Distributors, but rather through independent service providers who are compensated for marketing, sales support, and other services.

Cash Flow and Balance Sheet Highlights

  • Net cash provided by operating activities was $8.0 million for the nine months ended September 30, 2017, as compared to $5.1 million for the nine months ended September 30, 2016.
     
  • Total assets on September 30, 2017 were $222.2 million, compared to $205.6 million on December 31, 2016.

About Nature’s Sunshine Products

Nature’s Sunshine Products (NASDAQ:NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products through a global direct sales force of approximately 498,000 independent Managers, Distributors and Customers in more than 40 countries.  Nature’s Sunshine manufactures most of its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on the market today. The Company has four reportable business segments that are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP’s officers and their responsibilities (NSP Americas; NSP Russia, Central and Eastern Europe; Synergy WorldWide; and China and New Markets). The Company also supports health and wellness for children around the world through its partnership with the Sunshine Heroes Foundation.  Additional information about the Company can be obtained at its website, www.naturessunshine.com.

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