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Mannatech Reports Second Quarter 2019 Financial Results

FLOWER MOUND, 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 second quarter of 2019.

Second Quarter Results

Second quarter net sales for 2019 were $40.7 million, a decrease of $4.4 million, or 9.8%, as compared to $45.1 million in the second quarter of 2018. For the three months ended June 30, 2019, our net sales declined 5.5% on a constant dollar basis (see Non-GAAP Financial Measures, below), as compared to the same period in 2018.

Net income was $2.0 million, or $0.81 per diluted share, for the second quarter 2019, as compared to a net loss of $0.4 million, or $0.14 per diluted share, for the second quarter 2018, which included approximately $0.2 million in non-recurring costs related to the corporate office move in our loss from operations.

Gross profit as a percentage of sales decreased to 80.1% for the three months ended June 30, 2019, as compared to 82.0% for the same period in 2018 due to increased inventory write-offs.

Commission and incentives as a percentage of net sales was 40.0% for the three months ended June 30, 2019, as compared to 42.8% for the same period in the prior year.

For the three months ended June 30, 2019, overall selling and administrative expenses decreased by $1.2 million to $8.4 million, as compared to $9.6 million for the same period in 2018. The decrease in selling and administrative expenses consisted of a $0.6 million decrease in marketing costs associated with management's decision to conduct Mannafest as a regional event instead of an international event, a $0.4 million decrease in stock-based compensation expense and a $0.3 million decrease in distribution and warehouse costs, which was partially offset by a $0.2 million increase in payroll costs related to an increase in bonus accruals.

Other operating costs, which include professional fees, travel and entertainment, bad debt, credit card processing fees and other miscellaneous operating expenses, decreased by $2.5 million, or 31.6%, for the three months ended June 30, 2019, as compared to the same period in 2018. The decrease in operating costs was primarily due to a $1.1 million decrease in travel and entertainment costs associated with management's decision to conduct Mannafest as a regional event instead of an international event, a $0.7 million decrease in office expenses due to the corporate office relocating during 2018, and a $0.3 million decrease in legal and consulting fees.

The approximate number of new and continuing active independent associates and preferred customers who purchased our packs or products or paid associate fees during the twelve months ended June 30, 2019 and 2018 were approximately 175,000 and 202,000, respectively. Recruitment of new independent associates and preferred customers decreased 5.9% during the three months ended June 30, 2019, as compared to the same period in 2018. The number of new independent associate and preferred customer positions held by individuals in our network for the three months ended June 30, 2019 was approximately 20,084, as compared to 21,353 for the same period in 2018.

Non-GAAP Measures

In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, which reconcile net income (loss), as reported to net earnings, as adjusted. This presentation isolates the effects of some items that vary from period to period without any correlation to core operating performance and eliminates certain items that management believes do not reflect the Company’s operations and underlying operational performance. Please see Schedule A: Reconciliation of Non-GAAP Financial Measures (Net Earnings, as Adjusted).

Safe Harbor statement

Forward-looking statements generally can be identified by the use of phrases or terminologies such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “approximates,” “predicts,” “projects,” “hopes,” “potential,” and “continues” or other similar words or the negative of such terminology.

We caution readers that such forward-looking statements are subject to certain events, risks, uncertainties, and other factors and speak only as of today. We also refer our readers to review our SEC submissions.

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

June 30, 2019
(unaudited)

 

December 31,
2018

Cash and cash equivalents

$

25,023

 

 

$

21,845

 

Restricted cash

1,451

 

 

1,514

 

Accounts receivable, net of allowance of $740 and $770 in 2019 and 2018, respectively

126

 

 

106

 

Income tax receivable

128

 

 

291

 

Inventories, net

13,336

 

 

12,821

 

Prepaid expenses and other current assets

2,663

 

 

3,361

 

Deferred commissions

2,672

 

 

2,449

 

Total current assets

45,399

 

 

42,387

 

Property and equipment, net

5,958

 

 

5,860

 

Construction in progress

657

 

 

904

 

Long-term restricted cash

5,296

 

 

7,225

 

Other assets

8,482

 

 

3,894

 

Long-term deferred tax assets, net

1,475

 

 

1,928

 

Total assets

$

67,267

 

 

$

62,198

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current portion of capital leases

$

104

 

 

$

75

 

Accounts payable

5,961

 

 

6,724

 

Accrued expenses

7,961

 

 

5,995

 

Commissions and incentives payable

10,691

 

 

12,189

 

Taxes payable

2,581

 

 

2,655

 

Current notes payable

834

 

 

702

 

Deferred revenue

5,783

 

 

5,274

 

Total current liabilities

33,915

 

 

33,614

 

Capital leases, excluding current portion

222

 

 

72

 

Long-term deferred tax liabilities

3

 

 

3

 

Long-term notes payable

626

 

 

883

 

Other long-term liabilities

5,256

 

 

2,302

 

Total liabilities

40,022

 

 

36,874

 

 

 

 

 

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, 2,742,857 shares issued and 2,392,847 shares outstanding as of June 30, 2019 and 2,742,857 shares issued and 2,381,149 shares outstanding as of December 31, 2018

 

 

 

Additional paid-in capital

34,026

 

 

33,939

 

Retained earnings (deficit)

(710

)

 

(2,782

)

Accumulated other comprehensive income

3,707

 

 

4,337

 

Treasury stock, at average cost, 350,010 shares as of June 30, 2019 and 361,708 shares as of December 31, 2018

(9,778

)

 

(10,170

)

Total shareholders’ equity

27,245

 

 

25,324

 

Total liabilities and shareholders’ equity

$

67,267

 

 

$

62,198

 

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)

(in thousands, except per share information)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

Net sales

$

40,711

 

 

$

45,137

 

 

$

78,684

 

 

$

86,520

 

Cost of sales

8,115

 

 

8,141

 

 

15,542

 

 

16,390

 

Gross profit

32,596

 

 

36,996

 

 

63,142

 

 

70,130

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Commissions and incentives

16,295

 

 

19,322

 

 

31,494

 

 

36,307

 

Selling and administrative expenses

8,381

 

 

9,615

 

 

15,957

 

 

17,595

 

Depreciation and amortization expense

517

 

 

535

 

 

1,045

 

 

1,046

 

Other operating costs

5,384

 

 

7,873

 

 

11,507

 

 

16,419

 

Total operating expenses

30,577

 

 

37,345

 

 

60,003

 

 

71,367

 

 

 

 

 

 

 

 

 

Income (loss) from operations

2,019

 

 

(349

)

 

3,139

 

 

(1,237

)

Interest income (expense), net

25

 

 

133

 

 

(70

)

 

162

 

Other income (expense), net

980

 

 

476

 

 

984

 

 

764

 

Income (loss) before income taxes

3,024

 

 

260

 

 

4,053

 

 

(311

)

 

 

 

 

 

 

 

 

Income tax (provision) benefit

(1,037

)

 

(644

)

 

(1,378

)

 

(337

)

Net income (loss)

$

1,987

 

 

$

(384

)

 

$

2,675

 

 

$

(648

)

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

Basic

$

0.83

 

 

$

(0.14

)

 

$

1.12

 

 

$

(0.24

)

Diluted

$

0.81

 

 

$

(0.14

)

 

$

1.09

 

 

$

(0.24

)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

2,394

 

 

2,674

 

 

2,395

 

 

2,696

 

Diluted

2,452

 

 

2,674

 

 

2,457

 

 

2,696

 

Schedule A: Reconciliation of Non-GAAP Financial Measures (Net Earnings, as Adjusted)

(Unaudited and unreviewed), (Table provides Dollars in thousands)

In addition to its reported results and guidance calculated in accordance with GAAP, the Company has included adjusted net earnings, a performance measure that the Securities and Exchange Commission defines as a “non-GAAP financial measure,” in this release. Management believes that such non-GAAP financial measures, when read in conjunction with the Company’s reported results, in each case calculated in accordance with GAAP, can provide useful supplemental information for investors because they facilitate a period to period comparative assessment of the Company’s operating performance relative to its performance based on reported results under GAAP, while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminating certain items that management believes do not reflect the Company’s operations and underlying operational performance.

The following is a reconciliation of net income or loss, presented and reported in accordance with GAAP, to net earnings, as adjusted for certain items:

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

Net Income (loss), as reported

$

1,987

 

 

$

(384

)

 

$

2,675

 

 

$

(648

)

Expenses related to moving the corporate headquarters

 

 

214

 

 

 

 

1,305

 

Net earnings (loss), as adjusted

$

1,987

 

 

$

(170

)

 

$

2,675

 

 

$

657

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190807005873/en/