COPPELL, Texas–(BUSINESS WIRE)–Mannatech, Incorporated (NASDAQ: MTEX), a global health and wellness company committed to transforming lives to make a better world, today announced financial results for its first quarter of 2017.
First Quarter Results
First quarter net sales for 2017 were $40.6 million, a decrease of $0.1 million, or 0.2% as compared to $40.7 million in the first quarter of 2016. Income (loss) from operations was $(2.0) million for the first quarter 2017, as compared to $0.5 million in the same period in 2016. Net income (loss) was $(1.2) million, or $(0.46) per diluted share, for the first quarter 2016, as compared to $0.6 million, or $0.21 per diluted share, for the first quarter 2016.
For the three months ended March 31, 2017, Mannatech’s operations outside of the Americas accounted for approximately 61.8% of Mannatech’s consolidated net sales.
First quarter 2017 Asia/Pacific net sales increased by $0.5 million, or 2.3%, to $21.9 million, as compared to $21.4 million for the same period in 2016. This increase was primarily due to a 7.9% increase in the number of active independent associates and members partially offset by a 5.1% decrease in revenue per active independent associate and member. During the three months ended March 31, 2017, the loyalty program increased sales by $0.3 million, as compared to the same period in 2016. Foreign currency exchange had the effect of increasing revenue by $0.7 million for the three months ended March 31, 2017, as compared to the same period in 2016. The currency impact is primarily due to the strengthening of the Korean Won, Australian Dollar, Japanese Yen, Taiwanese Dollar, New Zealand Dollar, and Hong Kong Dollar partially offset by the weakening of the Singapore Dollar and Chinese Yuan (Renminbi).
First quarter 2017 net sales for Europe, the Middle East and Africa (EMEA) decreased by $0.1 million, or 3%, to $3.2 million, as compared to $3.3 million for the same period in 2016. This decrease was primarily due to a 0.2% decrease in the number of active independent associates and members as well as a 2.9% decrease in revenue per active independent associate and member. During the three months ended March 31, 2017, the loyalty program in EMEA increased net sales by $0.1 million. Foreign currency exchange had the effect of increasing revenue by $0.3 million when the three-month period ending March 31, 2017 is compared to the same period in 2016. The currency impact is primarily due to the strengthening of the South Africa Rand partially offset by the weakening of the British Pound.
For the three months ended March 31, 2017, net sales in the Americas decreased by $0.5 million, or 3.1%, to $15.5 million, as compared to $16.0 million for the same period in 2016. This decrease was primarily due to a 7.7% decline in the number of active independent associates and members partially offset by a 4.9% increase in revenue per active independent associate and member.
For the three-month period ended March 31, 2017, our net sales declined 2.5% on a Constant dollar basis (see Non-GAAP Financial Measures, below) as compared to the same period in 2016, while favorable foreign exchange caused a $0.9 million increase in GAAP net sales as compared to the same period in 2016.
Commission expenses for the three months ended March 31, 2017 increased by 8.6%, or $1.3 million, to $16.5 million, as compared to $15.2 million for the same period in 2016. For the three months ended March 31, 2017, commissions as a percentage of net sales increased to 40.6% from 37.4% for the same period in 2016 due to the commission expense on the pre-launch in certain Asia/Pacific markets of new products available after our annual convention held in April 2017.
Incentive costs for the three months ended March 31, 2017 increased by 50.0%, or $0.2 million, to $0.6 million, as compared to $0.4 million for the same period in 2016 due to new incentives in growth markets. For the three months ended March 31, 2017, incentives as a percentage of net sales increased to 1.4% from 0.9% for the same period in 2016.
The approximate number of new and continuing active independent associates and members who purchased our packs or products during the twelve months ended March 31, 2017 and 2016 were approximately 220,000 and 218,000, respectively. Recruitment of new independent associates and members decreased 3.8% during the three months ended March 31, 2017 as compared to the same period in 2016. The number of new independent associate and member positions held by individuals in our network for the three months ended March 31, 2017 was approximately 22,900, as compared to 23,800 for the same period in 2016.
For the three months ended March 31, 2017, selling and administrative expenses increased by $0.5 million, or 6.3%, to $8.6 million, as compared to $8.1 million for the same period in 2016. The increase in selling and administrative expenses consisted of a $0.3 million increase in marketing related costs and a $0.3 million increase in payroll costs in our headquarters, Korea, Hong Kong, and Colombia offices, offset by $0.1 million decrease in stock based compensation expense.
Other operating costs, which include professional fees, travel and entertainment, bad debt, credit card processing fees, and other miscellaneous operating expenses, increased by $0.1 million, or 1.3% for the three months ended March 31, 2017, as compared to the same period in 2016. Included in this cost is a $0.5 million legal settlement. Partially offsetting increases in legal costs are decreases in travel and entertainment.
As of March 31, 2017, our cash and cash equivalents increased by 2.4%, or $0.7 million, to $29.4 million from $28.7 million as of December 31, 2016. Our inventory balance at March 31, 2017 was $13.4 million, compared to $12.0 million at December 31, 2016. During the quarter, we purchased inventory in advance of introducing new products at MannaFestSM event in April and as part of the introduction of TruHealth to new markets, including inventory purchased for China. Our accounts payable balance at March 31, 2017 increased to $5.9 million, compared to $5.2 million at December 31, 2016, due to the purchase of inventory. At March 31, 2017, our commissions and incentives payable increased to $9.1 million from $8.8 million at December 31, 2016, due to timing of our commission payments. During the first quarter of 2017, we paid dividends of $0.3 million.
Non-GAAP Measures
In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, including a presentation of constant dollar measures. We disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from Operations.
We believe that these non-GAAP financial measures provide useful information to investors because they are an indicator of the strength and performance of ongoing business operations. The constant currency figures are financial measures used by management to provide investors an additional perspective on trends. Although we believe the non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an exclusive alternative to accompanying GAAP financial measures. Please see the accompanying table entitled “Non-GAAP Financial Measures” for a reconciliation of these non-GAAP financial measures.
Conference Call
Mannatech will host a conference call to discuss the quarter’s results with investors on Wednesday, May 10, 2017 at 9 a.m. CDT, 10 a.m. EDT. The live call will be webcast and can be accessed on Mannatech’s website at http://ir.mannatech.com.
For those unable to listen to the live broadcast, a replay will be available shortly after the call. The toll-free replay number is (855) 859-2056 (International (404) 537-3406); the Conference ID to access the call is 14269069.
Individuals interested in Mannatech’s products or in exploring its business opportunity can learn more at Mannatech.com.
| MANNATECH, INCORPORATED AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
|
(in thousands, except share and per share amounts) |
||||||||
| ASSETS |
March 31, 2017 |
December 31, 2016 | ||||||
| Cash and cash equivalents | $ | 29,447 | $ | 28,687 | ||||
| Restricted cash | 1,511 | 1,510 | ||||||
| Accounts receivable, net of allowance of $486 and $463 in 2017 and 2016, respectively | 178 | 298 | ||||||
| Income tax receivable | 163 | 1,587 | ||||||
| Inventories, net | 13,416 | 11,961 | ||||||
| Prepaid expenses and other current assets | 3,625 | 3,483 | ||||||
| Deferred commissions | 3,214 | 3,229 | ||||||
| Total current assets | 51,554 | 50,755 | ||||||
| Property and equipment, net | 3,631 | 3,611 | ||||||
| Construction in progress | 1,050 | 1,012 | ||||||
| Long-term restricted cash | 6,936 | 6,429 | ||||||
| Other assets | 3,914 | 4,013 | ||||||
| Long-term deferred tax assets, net | 5,603 | 5,368 | ||||||
| Total assets | $ | 72,688 | $ | 71,188 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current portion of capital leases | $ | 367 | $ | 357 | ||||
| Accounts payable | 5,912 | 5,223 | ||||||
| Accrued expenses | 4,991 | 5,605 | ||||||
| Commissions and incentives payable | 9,116 | 8,799 | ||||||
| Taxes payable | 711 | 1,040 | ||||||
| Current notes payable | 999 | 801 | ||||||
| Deferred revenue | 8,355 | 8,156 | ||||||
| Total current liabilities | 30,451 | 29,981 | ||||||
| Capital leases, excluding current portion | 276 | 261 | ||||||
| Long-term deferred tax liabilities | 30 | 29 | ||||||
| Long-term notes payable | 427 | 567 | ||||||
| Other long-term liabilities | 1,448 | 1,465 | ||||||
| Total liabilities | 32,632 | 32,303 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||
| Common stock, $0.0001 par value, 99,000,000 shares authorized, 2,758,275 shares issued and 2,710,858 shares outstanding as of March 31, 2017 and 2,758,275 shares issued and 2,688,790 shares outstanding as of December 31, 2016 | — | — | ||||||
| Additional paid-in capital | 35,873 | 38,190 | ||||||
| Retained earnings | 5,747 | 7,331 | ||||||
| Accumulated other comprehensive income | 4,213 | 1,834 | ||||||
| Treasury stock, at average cost, 47,417 shares as of March 31, 2017 and 69,485 shares as of December 31, 2016, respectively | (5,777 | ) | (8,470 | ) | ||||
| Total shareholders’ equity | 40,056 | 38,885 | ||||||
| Total liabilities and shareholders’ equity | $ | 72,688 | $ | 71,188 | ||||
| MANNATECH, INCORPORATED AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED) | ||||||||
|
(in thousands, except per share information) |
||||||||
| Three Months Ended March 31, |
||||||||
| 2017 | 2016 | |||||||
| Net sales | $ | 40,641 | $ | 40,708 | ||||
| Cost of sales | 8,762 | 8,389 | ||||||
| Gross profit | 31,879 | 32,319 | ||||||
| Operating expenses: | ||||||||
| Commissions and incentives | 17,081 | 15,618 | ||||||
| Selling and administrative expenses | 8,654 | 8,142 | ||||||
| Depreciation and amortization expense | 502 | 443 | ||||||
| Other operating costs | 7,676 | 7,580 | ||||||
| Total operating expenses | 33,913 | 31,783 | ||||||
| Income (loss) from operations | (2,034 | ) | 536 | |||||
| Interest income (expense) | 29 | (13 | ) | |||||
| Other income, net | 41 | 334 | ||||||
| Income (loss) before income taxes | (1,964 | ) | 857 | |||||
| Income tax provision (benefit) | (717 | ) | 266 | |||||
| Net income (loss) | $ | (1,247 | ) | $ | 591 | |||
| Earnings (loss) per common share: | ||||||||
| Basic | $ | (0.46 | ) | $ | 0.22 | |||
| Diluted | $ | (0.46 | ) | $ | 0.21 | |||
| Weighted-average common shares outstanding: | ||||||||
| Basic | 2,701 | 2,696 | ||||||
| Diluted | 2,701 | 2,780 | ||||||
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from Operations. We refer to these adjusted financial measures as constant dollar items, which are non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year results at a constant exchange rate, which is the prior year’s rate. Currency impact is determined as the difference between actual growth rates and constant currency growth rates.
| Three-month period ended
(in millions, except percentages) |
March 31, 2017 | March 31, 2016 | Constant $ Change | |||||||||||||||
|
GAAP |
Non-GAAP |
GAAP |
Dollar | Percent | ||||||||||||||
| Net Sales | $ | 40.6 | $ | 39.7 | $ | 40.7 | $ | (1.0 | ) | (2.5 | )% | |||||||
| Product | 33.8 | 33.1 | 33.7 | (0.6 | ) | (1.8 | )% | |||||||||||
| Pack | 5.7 | 5.5 | 5.8 | (0.3 | ) | (5.2 | )% | |||||||||||
| Other | 1.1 | 1.1 | 1.2 | (0.1 | ) | (8.3 | )% | |||||||||||
| Gross Profit | 31.9 | 31.2 | 32.3 | (1.1 | ) | (3.4 | )% | |||||||||||
| Income (Loss) from Operations | (2.0 | ) | (2.3 | ) | 0.6 | (2.9 | ) | (483.3 | )% | |||||||||
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