Natural Health Trends Corp. (NHTC) reported modest revenue growth in the fourth quarter of 2023, despite a challenging macroeconomic environment and subdued consumer sentiment, particularly in China. The company saw a 3% sequential increase in orders compared to the third quarter of 2023, with revenue totaling $10.9 million for the quarter. This marks an increase from $10.6 million in the previous quarter but a decrease from $12.5 million in the same quarter of the previous year. Positive net income for the quarter was attributed to effective cost control and margin protection amid inflation and a stronger dollar. The company also highlighted various in-person events and training activities, which are expected to contribute to future growth.
Key Takeaways
- Natural Health Trends Corp. experienced a 3% sequential increase in orders from Q3 to Q4 2023.
- Q4 revenue reached $10.9 million, up from $10.6 million in Q3 but down from $12.5 million year-over-year.
- Positive net income was achieved through effective margin protection and cost control.
- The company hosted several in-person events to engage with members and promote new products.
- A quarterly cash dividend of $0.20 per share was declared, payable on March 1st.
Company Outlook
- Plans for 2024 include prioritizing training offerings for various consumer types.
- The company is hopeful about expanding its market through ongoing in-person events and training.
Bearish Highlights
- Year-over-year revenue declined by 13% from $12.5 million in Q4 of the previous year.
- The active member base decreased by 6% from the previous quarter and 16% year-over-year.
Bullish Highlights
- Management remains optimistic about the company's future, citing enthusiastic participation in international events.
- Recognition by the Swedish Direct Selling Association for the second consecutive year.
Misses
- Deferred revenue increased during 2023 but decreased significantly last year, leading to an unfavorable variance.
- Net cash used in operating activities for the full year was $4.3 million.
Q&A Highlights
- The earnings call did not include a Q&A session.
Natural Health Trends Corp. is navigating a period of mixed financial performance, with the company's management focusing on strategic events and training to drive future growth. The company's performance in the fourth quarter shows resilience in the face of external economic pressures, and the declaration of a dividend reflects a commitment to returning capital to shareholders. As Natural Health Trends Corp. moves into the new year, it remains to be seen how these strategic initiatives will influence its financial trajectory and member engagement.
InvestingPro Insights
Natural Health Trends Corp. (NHTC) has shown a mix of challenges and strengths in the recent quarter, as reflected in the real-time data and insights from InvestingPro. With a focus on financial health and shareholder returns, here are some key metrics and tips that stand out:
InvestingPro Data indicates that despite a year-over-year revenue decline of approximately 13.71%, the company holds an impressive gross profit margin of 74.4% for the last twelve months as of Q3 2023. This suggests that while revenue streams have faced headwinds, the company has maintained a strong ability to control the cost of goods sold and preserve profitability at the gross level.
Moreover, the company's commitment to shareholder value is evident, with a substantial dividend yield of 12.97% as of the latest available data. This aligns with one of the InvestingPro Tips highlighting that NHTC pays a significant dividend to shareholders, which is particularly attractive for income-focused investors.
Another InvestingPro Tip that resonates with the company's current financial narrative is that NHTC holds more cash than debt on its balance sheet. This is a key indicator of financial stability, especially in uncertain economic times, and suggests that the company has the liquidity to weather potential market fluctuations.
For investors looking for a deeper dive into NHTC's financial metrics and strategic insights, there are additional InvestingPro Tips available. In total, there are 7 more insights that can be accessed, which could be particularly valuable for those considering an investment in Natural Health Trends Corp. To explore these further, visit https://www.investing.com/pro/NHTC.
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Full transcript - Natural Health Trend (NASDAQ:NHTC) Q4 2023:
Operator: Greetings. Welcome to Natural Health Trends Corp. Fourth Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Michelle Glidewell with Natural Health Trends Corp. Thank you. You may begin.
Michelle Glidewell: Thank you and welcome to Natural Health Trends fourth quarter and full year 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 or as a 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 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.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 fourth quarter and full year 2023 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. As indicated in our financial results released earlier today, we managed to achieve a 3% sequential increase in orders compared to the third quarter of 2023 despite continued tepid consumer sentiment in China and an overall challenging macroeconomic environment in this market. Revenue for the quarter totaled $10.9 million compared to $10.6 million last quarter and $12.5 million in the fourth quarter a year ago. We believe the quarter-over-quarter sequential uptick is largely due to the increased frequency and size of our in-person activities during the period, and we plan to sponsor more such events in the coming months to build on our growth and to help improve the effectiveness of our market campaigns. In addition, during the quarter, we generated positive net income partly due to our ability to effectively protect margins and control costs despite lingering inflation and a stronger dollar. In Hong Kong, we held a Fly High event in November with nearly 500 members in attendance. This activity allowed us to offer in-person training and introduce a promising new product, Relaxo Pro, uniquely formulated to help reduce stress and promote calmness. We look forward to hosting more of these activities in the months to come and as it allow us to engage directly with members and build upon the excitement and energy that comes from in-person gatherings. We have just wrapped up our Abu Dhabi trip, bringing 300 Chinese members along for training and team building. This marks our first international travel for this market since the onset of the pandemic. Our participants are enthusiastic to embark on more of these adventures with us soon. Our 2024 plans prioritize and emphasize training offerings for all types of consumers attracted to our business from the product enthusiast to the mid-level builder to the seasoned leader. Through this systematic training that utilizes knowledgeable employees and experts in product and soft skill development, we hope to cultivate new talent and support current hardworking members. Our Taiwan team hosted its first larger-scale activity since the global pandemic. The precision health event is a new wellness seminar where attendees participate in various health screenings. Participants walk away with a deeper understanding of their current state of well-being, along with product knowledge and lifestyle recommendations. As we continue these precision health seminars in the future, we are hopeful this value-add can help further develop and expand the market with an influx of new members and customers. In North America, the fourth quarter was busy with activities at our three healthy lifestyle plus centers in Metuchen, New Jersey; Rowland Heights, California; and Richmond, British Columbia. Early in the quarter, we held a product road show showcasing our top-selling Premium Noni product, and we followed that up with a December Premium Noni manufacturing facility and corporate headquarters tour for a select group of qualifiers. In addition, qualifications just closed for our Machu Picchu incentive scheduled for later this year. In Europe, we executed our incentive trip to Madeira, Spain, hosting a well-deserving group of qualifiers on a five-day trip. We were also honored to be recognized by the Swedish Direct Selling Association for a second year in a row as a top company in the market. We're pleased to conclude the year with a rise in sequential quarterly revenue. As we usher in a new year, I want to express my gratitude to our committed leaders, members, preferred customers, employees and stockholders for their ongoing support of NHT Global and our range of products. We believe that our business presents an incredible opportunity for all agents, professionals and the millions of potential customers worldwide seeking alternative avenues to enhance their personal well-being, whether it's earning some extra income or taking significant strides toward improving overall health and wellness. Our exceptional product offerings are here to support those aspirations. We extend our wishes for good health and success throughout 2024 and look forward to speaking again with an update next quarter. And now I will turn the call over to our CFO, Scott Davidson, to discuss our financial results in greater detail. Scott?
Scott Davidson: Thank you, Chris. Total revenue for the fourth quarter was $10.9 million, an increase of 3% compared to $10.6 million in the third quarter of 2023 and a decrease of 13% compared to $12.5 million in the fourth quarter last year. As Chris mentioned, we were able to increase revenue sequentially despite tepid consumer sentiment in China. For the full year 2023, total revenue was $43.9 million compared to $49.1 million in 2022. The decrease year-over-year was largely accounted for by changes in deferred revenue. Deferred revenue increased $569,000 [ph] during 2023 but decreased $2.9 million last year, resulting in a $3.5 million unfavorable revenue variance. Our active member base declined 6% to 32,410 at December 31st from 34,660 at September 30th and was down 16% from 38,660 at December 31st last year. Turning to our cost and operating expenses. Gross profit margin of 74.5% improved slightly from 73.9% in the fourth quarter of last year due to lower logistics costs. Commissions expense as a percent of net sales for the fourth quarter decreased to 41.6% from 43% in the same quarter last year. Selling, general and administrative expenses for the quarter were $3.8 million, consistent with a year ago. As a result, operating loss for the quarter was $242,000 compared to $292,000 in the third quarter of 2023 and operating income of $43,000 in the fourth quarter last year. We recorded an income tax provision of $108,000 for the quarter compared to $255,000 in the fourth quarter last year. Net income for the fourth quarter totaled $358,000 or $0.03 per diluted share compared to $172,000 or $0.02 per diluted share in the third quarter and $188,000 or $0.02 per diluted share in the fourth quarter of 2022. For the full year, net income totaled $568,000 or $0.05 per diluted share compared to $313,000 or $0.03 per diluted share in 2022. I'll now turn to our balance sheet and cash flow. Total cash and cash equivalents were $56.2 million at December 31st, down from $58.4 million at September 30th. Net cash used by operating activities was $69,000 in the fourth quarter compared to net cash provided by operating activities of $938,000 in the fourth quarter last year. For the full year, net cash used in operating activities was $4.3 million compared to $4.9 million in 2022. Before tax installment payments, the liability of which arises from the 2017 U.S. Tax Cuts and Jobs Act, cash used in operating activities was $1.2 million in 2023 versus $3.2 million a year ago. For the full year 2023, we paid out $9.2 million in dividends. As returning capital to our stockholders remains a priority, I am pleased to announce that on February 5th, our Board of Directors declared a quarterly cash dividend of $0.20 per share, which will be payable on March 1st to stockholders of record as of February 20. We continue to find inspiration in the enthusiasm and dedication demonstrated by our leaders, members and customers towards both our product offerings and the global business opportunity we provide. Having personally spent time with many of our key leaders in Abu Dhabi, their commitment and optimism for the future has never shined brighter. We stand by our promise to continue innovating, growing and strengthening our offerings to support their business. 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 and thank you for your participation.
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