Earnings call transcript: Natural Health Trends Q4 2024 shows flat revenue

Natural Health Trends Corp (NASDAQ: NHTC), a $62 million market cap company offering one of the highest dividend yields in its sector at 15.2%, reported its financial results for the fourth quarter of 2024, revealing flat revenue year-over-year and a slight decline in net income. Despite these challenges, the company’s stock price saw a modest increase of 2.47%, closing at $5.40. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value metrics. The company remains optimistic about future opportunities, particularly in Greater China.

Key Takeaways

• Total (EPA:TTEF) Q4 revenue remained flat at $10.8 million year-over-year.
• Net income decreased to $176,000, or $0.02 per diluted share.
• The Greater China market experienced a 7% sales increase.
• The company expanded into the Colombian market and launched new products in Hong Kong.
• Stock price rose by 2.47% following the earnings announcement.

Company Performance

Natural Health Trends maintained stable revenue in Q4 2024, totaling $10.8 million, unchanged from the previous year. The company faced challenges in Taiwan and North America but saw a positive sales trend in Greater China, with a 7% increase. Efforts to expand globally included entering the Colombian market and launching new products in Hong Kong.

Financial Highlights

• Revenue: $10.8 million (flat year-over-year)
• Gross Profit Margin: 74.2% (down from 74.5% in prior year)
• Net Income: $176,000 or $0.02 per diluted share (down from $358,000 or $0.03 in Q4 2023)
• Full Year Cash Flow: $602,000 from operations (improved by $1.8 million from previous year)
• Total Cash and Equivalents: $43.9 million as of December 31, 2024

Outlook & Guidance

The company declared a quarterly cash dividend of $0.20 per share and expressed optimism about 2025, focusing on market recovery in Greater China. The ongoing innovation and support for member success are expected to drive future growth.

Executive Commentary

Chris Scharn, President, emphasized the company’s strategic focus: "We believe these efforts position us for longer-term benefits of safeguarding margins and reinforcing market discipline." CFO Scott Davidson acknowledged the challenges but remained confident: "While consumer sentiment and macroeconomic conditions in Greater China remain challenging, we are confident that we are on the right track."

Risks and Challenges

• Declining active member base, down 5% year-over-year, poses a risk to growth.
• Increased commissions expense, now 41.9% of net sales, could pressure margins.
• Macroeconomic challenges in key markets like Taiwan and North America may impact future performance.
• Market saturation and competitive pressures in the health and wellness sector.
• Potential supply chain disruptions affecting product availability and cost.

Natural Health Trends is navigating a complex market environment with a focus on strategic expansion and product innovation. The company’s efforts to strengthen its presence in Greater China and enter new markets like Colombia are key to its growth strategy moving forward.

Full transcript - Natural Health Trend (NASDAQ:NHTC) Q4 2024:

Conference Operator: Greetings and welcome to the Natural Health Trans Corp.

Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Michelle Gladwell with Natural Health Trends Corp. Thank you.

You may begin. Thank you. And welcome to Natural Health Trends’ fourth quarter and full year twenty twenty four 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 result 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 naturalhealthrenscorp.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 09:00AM Eastern Time. At this time, I’d like to turn the call over to Chris Scharn, President of Natural Health Trends.

Chris Scharn, President, Natural Health Trends Corp: Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our fourth quarter and full year twenty twenty four financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. During the fourth quarter, our performance was steady with overall reported sales remaining essentially flat in comparison to the fourth quarter a year ago. Our primary market Greater China where sluggish consumer sentiment persists achieved a 7% increase in net sales compared to the fourth quarter of twenty twenty three and a 9% increase compared to the preceding third quarter of twenty twenty four, a sign that our programs, trainings, promotions and incentives are resonating with the consumers and field leaders. Overall, our results for the fourth quarter and full year were adversely affected by decreases in Taiwan and North America, where we implemented strategic price adjustments in 2023 and began offering fewer product promotions throughout 2024.

We believe these efforts position us for longer term benefits of safeguarding margins and reinforcing market discipline. In November, we introduced two new products in Hong Kong, a raspberry lemonade flavor version of our Collagen Supreme, as well as a new topical hair serum called Root Revive designed to improve hair strength and density. We follow-up the launch with a six city roadshow in China where our members and consumers learn about these two products, while gaining valuable training and business insights. These two products were also rolled out in Taiwan and North America with other markets preparing for their introductions later this year. In the January, we held our annual Asia Forum in Bangkok with more than four thirty attendees.

This gathering was a springboard for our 2025 programs and initiatives and ensure that our leaders and the field have a clear roadmap for success and vision for the year ahead. In 2024, we officially opened the Columbia market for in country order taking and we’re finalizing arrangements for an official office opening later this month to celebrate, recognize and welcome this new community to the NHE Global family. We are excited these new members are drawn to our opportunity and high quality products and that they share enthusiasm for our global mission of creating wellness traditions. In all of our markets, we continue to regularly hold products and business trainings, personal development sessions and recognition events both in person and online. These initiatives are designed to empower, engage and inform our members while also serving as excellent platforms to spark new recruitment and retail activities and support retention.

In October, leaders and qualifiers from Peru, Mexico and Japan came together for an unforgettable incentive trip to Paris combining efforts across multiple markets to celebrate their achievements. And in December, we hosted our North American qualifiers for our Cancun incentive trip, where half of the qualifiers were first time attendees to one of our travel incentives. These recognition activities are designed to drive goal setting and business growth, motivate and help strengthen relationships among members, leaders and staff to support retention and collaboration. I want to acknowledge the vital contributions of our leaders, members, preferred customers, employees and stockholders. Your dedication plays a key role in strengthening Energy Global and advancing the reach of our outstanding products.

Our business and product offerings provide an opportunity for individuals of all backgrounds whether they are looking to supplement their income or take proactive steps toward improving their health and wellness. With our exceptional products, we’re well positioned to support these aspirations and help individuals achieve their goals in an ever changing world. As we welcome the year the Snake, we extend our heartfelt wishes for health, prosperity and success throughout 2025. Now I’ll pass the call to our CFO, Scott Davidson, who will share a detailed overview of our financial results. Scott?

Scott Davidson, Senior Vice President and Chief Financial Officer, Natural Health Trends Corp: Thank you, Chris. Total fourth quarter revenue of $10,800,000 was roughly unchanged from $10,900,000 in the fourth quarter a year ago. Revenue in our primary market of Greater China during the quarter increased 7% compared to the fourth quarter last year. This improvement was tempered by the performance of other markets, particularly Taiwan and North America. Our active member base was 30,870 at December 31, consistent with September 30 and a 5% decline since the December 2023.

Turning to our cost and operating expenses. Gross profit margin of 74.2% in the fourth quarter declined slightly from 74.5% in the fourth quarter last year, primarily due to higher freight costs. Commissions expense as a percent of net sales for the fourth quarter increased to 41.9% from 41.6% in the prior year quarter due to higher supplemental incentive costs incurred this year. Selling, general and administrative expenses for the quarter were 3,900,000 a slight increase from $3,800,000 a year ago due to the timing of certain professional services. As a result of additional costs incurred during the fourth quarter of this year, operating loss for the quarter was $421,000 compared to $242,000 in the fourth quarter last year.

However, due to interest income and an income tax benefit recognized in the fourth quarter of this year, net income for the fourth quarter was $176,000 or 0.02 per diluted share. In comparison, net income was $358,000 or $0.03 per diluted share in the fourth quarter of twenty twenty three. I’ll now turn to our cash flows and balance sheet. Net cash provided by operating activities was $88,000 during the fourth quarter. For the full year, net cash used in operating activities was $3,400,000 compared to $4,300,000 a year ago.

Excluding our required annual tax installment payment related to the 2017 U. S. Tax Cuts and Jobs Act, we generated $602,000 in cash flows from operations during 2024, which is a $1,800,000 improvement over last year. Total cash, cash equivalents and marketable securities were $43,900,000 at December 31, down from $46,300,000 at September 30 due to our quarterly dividend payment. For the full year 2024, we paid out $9,200,000 in dividends as returning capital to our stockholders remains a priority.

We are pleased to announce that on February 3, our Board of Directors declared a quarterly cash dividend of $0.2 per share, which will be payable on February 28 to stockholders of record as of February 18. In closing, while consumer sentiment and macroeconomic conditions in Greater China remain challenging, we are confident that we are on the right track. After spending time with many of our key leaders and members in Bangkok, I can say with certainty that their commitment and optimism for the future are stronger than ever. We remain fully committed to innovating, growing and enhancing our support to ensure their continued success and we are excited for the opportunities ahead. That completes our prepared remarks.

I will now turn the call back over to the operator.

Conference Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. You may disconnect your

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