Earnings call transcript: Natural Health Trends posts Q2 2025 net income

Natural Health Trends Corp (NASDAQ:NHTC), with a market capitalization of $52.9 million, reported its financial performance for the second quarter of 2025, revealing a net income of $15,000, which translates to breakeven per diluted share. The company experienced a 6% decline in net sales compared to the previous year, totaling $9.8 million. Despite these challenges, the gross profit margin remained stable at 73.9%, maintaining the company’s impressive margins highlighted by InvestingPro analysis. The stock saw a minor decrease of 1.5% in regular trading, closing at $4.635, with a slight uptick of 0.11% in premarket trading. According to InvestingPro’s Fair Value analysis, the stock appears to be slightly undervalued at current levels.

Key Takeaways

• Net sales decreased by 6% year-over-year, totaling $9.8 million.
• Operating loss widened to $333,000 from $238,000 in the previous year.
• The company launched operations in Colombia, expanding its market presence.
• Cash reserves decreased to $34.2 million from $41.9 million in Q1 2025.

Company Performance

Natural Health Trends faced a challenging quarter with a decline in net sales and an increase in operating losses. The company continues to navigate economic uncertainties in its primary market, Hong Kong, which accounts for 82% of its sales. The launch in Colombia marks a strategic move to diversify its market presence amid these challenges.

Financial Highlights

• Revenue: $9.8 million, down 6% from Q2 2024.
• Gross Profit Margin: 73.9%, consistent with the previous year.
• Operating Loss: $333,000, compared to $238,000 in Q2 2024.
• Net Income: $15,000, breakeven per diluted share.
• Cash and Equivalents: $34.2 million, down from $41.9 million in Q1 2025.

Outlook & Guidance

The company remains focused on operational discipline, emphasizing expense management, margin protection, and supply chain optimization. A quarterly cash dividend of $0.20 per share is announced, payable on August 22, representing an impressive 17.26% yield - one of the highest among its peers according to InvestingPro analysis. Future revenue forecasts for FY2025 and FY2026 stand at $42.96 million, with an EPS forecast of $0.05 for FY2026. For deeper insights into NHTC’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Chris Yarn, President, highlighted the strategic transition to Asian manufacturing partners, aiming to reduce tariff exposure and optimize logistics. CFO Scott Davidson emphasized the company’s focus on executing strategic priorities with discipline despite near-term pressures.

Risks and Challenges

• Economic uncertainty in Hong Kong affecting consumer sentiment.
• Dependence on a single primary market for the majority of sales.
• Potential impacts from transitioning supply chains to Asia.
• Competitive pressures in the health and wellness sector.
• Fluctuations in cash reserves impacting financial flexibility.

Full transcript - Natural Health Trend (NHTC) Q2 2025:

Conference Operator: Greetings. Welcome to Natural Health Trends Corp. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Please note this conference is being recorded.

I will now turn the conference over to Michele Gladwell with Natural Health Trends Corp. Thank you. You may begin.

Michele Gladwell, Corporate Representative, Natural Health Trends Corp: Thank you, and welcome to Natural Health Trends second quarter twenty twenty five 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 for accessing the archived version of the conference call can be found in today’s financial results press release, which was issued at approximately 09:00 a.

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

Conference Operator: Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our second quarter twenty twenty five financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Second quarter net sales were $9,800,000 a 6% decrease compared to the 2024. It was a challenging quarter due to a heightened economic uncertainty because of the evolving trade tensions that continue to weigh heavily on consumer sentiment in our biggest market. Facing an increasingly uncertain global trade environment, we are actively transitioning our US based supply chain to trusted manufacturing partners in Asia closer to our main markets.

We aim to reduce exposure to unpredictable tariffs, streamline logistics by consolidating vendors and transportation lanes and to lower logistic costs. In addition, this move enhances our access to specialized R and D resources and technical support while allowing us to maintain strong quality control standards. We believe this strategic realignment positions us to better serve our customers, mitigate risk, and drive long term value creation. Around the world, we continue to execute our programs, promotions, and incentives designed to drive engagement, enhance customer loyalty, and support sales performance. During the quarter, we celebrated the achievements of top performers from multiple markets with incentive trips to The Maldives and Paris.

We also executed a dynamic slate of in person regional and local engagements, including training sessions, product seminars, leadership development programs, and initiatives focused on driving customer acquisitions and retentions. Earlier this month, we celebrated the official launch of our newest market, Columbia. The grand opening event was well attended and filled with energy, reflecting strong enthusiasm for growth across South America. We are excited to welcome Columbia to our global network and are confident that our proven high impact products will support healthier lifestyles while also offering individuals the opportunity to build meaningful income and a brighter future. As these economic headwinds persist, we’re exercising operational discipline with a continued focus on expense management, protecting margins, inventory control, and as previously mentioned, supply chain recalibration to mitigate tariff uncertainty.

Despite near term pressures, our long term fundamentals remain strong. We’re investing in our brand programs, incentives, product innovation, and digital enhancements to drive recovery and future growth. We’re actively listening and engaging with our field leaders and customers and adjusting tactics to ensure we remain resilient. With that, I’d like to turn the call over to our CFO, Scott Davidson, to discuss our financial results in greater detail. Scott?

Chris Yarn, President, Natural Health Trends Corp: Thank you, Chris. Net sales in the second quarter were $9,800,000 a decline of 6% compared to $10,500,000 in the second quarter a year ago. Our sales in Hong Kong, which made up 82% of our sales during the quarter, declined 5% year over year due to the heightened economic uncertainty that Chris mentioned. Gross profit margin of 73.9% in the second quarter was relatively consistent with the second quarter last year. Commissions expense as a percent of total sales for the second quarter were 40.9% compared with 40.1% a year ago.

Commissions expense increased primarily due to higher weekly commissions earned by our members during the second quarter this year. Selling, general and administrative expenses declined $235,000 to $3,600,000 for the quarter from $3,800,000 in the second quarter a year ago. As a result, operating loss for the quarter was $333,000 compared to $238,000 in the second quarter last year, and net income for the second quarter totaled $15,000 or breakeven per diluted share compared to $173,000 or $02 per diluted share in the 2024. Now, I’ll turn to our cash flows and balance sheet. Net cash used in operating activities was 5,200,000 during the 2025, compared to $3,000,000 during the comparable period a year ago.

Excluding our required annual tax installment payments related to the 2017 U. S. Tax Cuts and Jobs Act, we used $97,000 in cash flows from operations during the current year period, compared with cash generated from operations of $950,000 during the same period a year ago. Total cash, cash equivalents and marketable securities were $34,200,000 at June 30, down from $41,900,000 at March 31 due to our required tax installment payment of $5,100,000 and our quarterly dividend payment. Our tax liability related to the Tax Cuts and Jobs Act is now fully settled.

In regards to our quarterly dividend, I am pleased to announce that on July 28, our Board of Directors declared another cash dividend of $0.20 per share, which will be payable on August 22 to stockholders of record as of August 12. In closing, we remain focused on executing our strategic priorities with discipline. Our ongoing supply chain transition is a key part of the strategy, designed to shield the business from tariff uncertainty, improve cost efficiencies, and enhance our resilience in today’s challenging and unpredictable economic environment. We are confident that the successful execution of these initiatives will position us for continued progress and value creation. On behalf of our leadership team, I want to express our sincere gratitude to our dedicated field leaders, loyal customers, and shareholders for their continued support.

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

Conference Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.

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