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 fourth
quarter of 2019.
Quarter End Results
Fourth quarter net sales for 2019 were $39.4 million, a decrease
of $4.6 million, or 10.5%, as compared to $44.0 million in the
fourth quarter of 2018. Income from operations increased to $2.7
million for the fourth quarter 2019, from a loss of $0.5 million in
the same period in 2018. Net income was $2.1 million, or $0.87 per
diluted share, for the fourth quarter 2019, as compared to a net
loss of $1.6 million, or ($0.66) per diluted share, for the fourth
quarter 2018.
Gross profit as a percentage of sales decreased to 78.9% for the
three months ended December 31, 2019, as compared to 79.5% for the
same period in 2018.
Commissions as a percentage of net sales were 39.9% for the
three months ended December 31, 2019, as compared to 40.2% for the
same period in the prior year. Incentive costs as a percentage of
net sales were 0.9% for the three months ended December 31, 2019,
as compared to 3.4% for the same period in 2018.
For the three months ended December 31, 2019, overall selling
and administrative expenses decreased by $2.5 million to $5.9
million, as compared to $8.5 million for the same period in 2018.
The decrease in selling and administrative expenses consisted
primarily of a $1.4 million decrease in payroll related costs, a
$1.0 million decrease in marketing costs and a $0.1 million
decrease in warehouse costs.
For the three months ended December 31, 2019, other operating
costs decreased by $1.5 million to $5.9 million, as compared to
$7.4 million for the same period in 2018. The decrease in other
operating costs was primarily due to a decrease in legal and
consulting fees as well as travel and entertainment costs
associated with our corporate sponsored events.
The approximate number of new and continuing independent
associate and preferred customer positions held by individuals in
Mannatech’s network and associated with purchases of our packs or
products as of December 31, 2019 and 2018 were approximately
169,000 and 200,000, respectively. Recruiting decreased 9.7% in the
fourth quarter of 2019 as compared to the fourth quarter of 2018.
The number of new independent associate and preferred customer
positions in the company’s network for the fourth quarter of 2019
was 18,462 as compared to 20,447 in 2018.
Year End Results
Overall net sales decreased $15.8 million, or 9.1%, for 2019, as
compared to 2018. During 2019, fluctuations in foreign currency
exchange rates had an overall unfavorable impact on our net sales.
During 2019, our net sales declined 6.1% on a Constant dollar basis
(a Non-GAAP financial measure); while unfavorable foreign exchange
during 2019 caused a decrease of $5.3 million in net sales as
compared to 2018. Net income for 2019 was $3.3 million, or $1.35
per diluted share, as compared to a net loss of $3.9 million, or
($1.53) per diluted share, for 2018.
Gross profit as a percentage of net sales decreased to 80.0% for
2019, as compared to 80.1% for 2018.
Commission expenses decreased for the year ended December 31,
2019, by 10.7%, or $7.4 million to $61.7 million, as compared to
$69.1 million for the same period in 2018. Commissions as a
percentage of net sales were 39.1% for the year ending December 31,
2019 and 39.8% for the same period in the prior year.
Incentive costs decreased for the year ended December 31, 2019
by 40.9%, or $1.8 million, to $2.6 million, as compared to $4.4
million, for the same period in 2018. The costs of incentives, as a
percentage of net sales decreased to 1.6% for the year ended
December 31, 2019, as compared to 2.5% for the same period in
2018.
For the year ended December 31, 2019, overall selling and
administrative expenses decreased by $3.3 million, or 9.8%, to
$30.8 million, as compared to $34.2 million for the same period in
2018. The decrease in selling and administrative expenses consisted
of a $2.1 million decrease in marketing costs, of which $1.1
million was a VAT refund that was originally recorded in marketing
costs, a $0.6 million decrease in distribution costs, a $0.4
million decrease in stock based compensation expense and a $0.2
million decrease in contract labor costs.
For the year ended December 31, 2019, other operating costs
decreased by $6.9 million, or 23.3%, to $22.6 million, as compared
to $29.4 million for the same period in 2018. For the year ended
December 31, 2019, other operating costs, as a percentage of net
sales, were 14.3%, as compared to 17.0% for the same period in
2018. The decrease was due to a $2.2 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 $2.2 million decrease in office expenses due to the
corporate office relocation during 2018, a $1.4 million decrease in
legal and consulting fees, a $0.5 million decrease in bad debt
expense, a $0.4 million decrease in credit card fees and a $0.1
million decrease in charitable contributions.
For the year ended December 31, 2019 our tax provision was $2.4
million and for the comparable period of 2018, our tax provision
was $4.4 million. For both 2019 and 2018, the Company’s provision
was impacted by the mix of earnings across jurisdictions, valuation
allowance recorded on losses in certain jurisdictions, and the
impact of global intangible low-tax income as a result of the Tax
Cuts and Jobs Act (the "Act") passed in 2017.
As of December 31, 2019, our cash and cash equivalents increased
by 13.4%, or $2.9 million, to $24.8 million from $21.8 million as
of December 31, 2018. For the year ended December 31, 2019
operations generated $4.9 million of cash. During the year ended
December 31, 2019, we invested $0.8 million in computer hardware
and software and $0.4 million for leasehold improvements in various
international offices and training centers. During this period, our
financing activities included repayments of $1.2 million to long
term liabilities and finance lease obligations. Finally, we are
proud that we have returned shareholder value with $1.2 million for
dividends to shareholders and repurchases of $0.3 million in common
stock.
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.
We have included a second non-GAAP measure, which reconciles net
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
This release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by use of
phrases or terminology such as “may,” “will,” “should,” "hope,"
“could,” “would,” “expects,” “plans,” “intends,” “anticipates,”
“believes,” “estimates,” “approximates,” “predicts,” “projects,”
“potential,” and “continues” or other similar words or the negative
of such terminology. Similarly, descriptions of Mannatech’s
objectives, strategies, plans, goals or targets contained herein
are also considered forward-looking statements. Mannatech believes
this release should be read in conjunction with all of its filings
with the United States Securities and Exchange Commission and
cautions its readers that these forward-looking statements are
subject to certain events, risks, uncertainties, and other factors.
Some of these factors include, among others, Mannatech’s inability
to attract and retain associates and members, increases in
competition, litigation, regulatory changes, and its planned growth
into new international markets. Although Mannatech believes that
the expectations, statements, and assumptions reflected in these
forward-looking statements are reasonable, it cautions readers to
always consider all of the risk factors and any other cautionary
statements carefully in evaluating each forward-looking statement
in this release, as well as those set forth in its latest Annual
Report on Form 10-K, and other filings filed with the United States
Securities and Exchange Commission, including its current reports
on Form 8-K. All of the forward-looking statements contained herein
speak only as of the date of this release.
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
information)
December 31, 2019
December 31, 2018
ASSETS
Cash and cash equivalents
$
24,762
$
21,845
Restricted cash
943
1,514
Accounts receivable, net of allowance of
$708 and $770 in 2019 and 2018, respectively
955
106
Income tax receivable
220
291
Inventories, net
10,152
12,821
Prepaid expenses and other current
assets
2,239
3,361
Deferred commissions
1,758
2,449
Total current assets
41,029
42,387
Property and equipment, net
5,261
5,860
Construction in progress
865
904
Long-term restricted cash
5,295
7,225
Other assets
9,592
3,894
Deferred tax assets, net
881
1,928
Total assets
$
62,923
$
62,198
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current portion of finance leases
$
87
$
75
Accounts payable
3,526
6,724
Accrued expenses
8,209
5,995
Commissions and incentives payable
9,728
12,189
Taxes payable
2,187
2,655
Current notes payable
739
702
Deferred revenue
4,416
5,274
Total current liabilities
28,892
33,614
Finance leases, excluding current
portion
176
72
Deferred tax liabilities
3
3
Long-term notes payable
363
883
Other long-term liabilities
6,214
2,302
Total liabilities
35,648
36,874
Commitments and contingencies (Note
11)
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 2,381,131
shares outstanding as of December 31, 2019 and 2,742,857 shares
issued and 2,381,149 shares outstanding as of December 31, 2018
—
—
Additional paid-in capital
34,143
33,939
Accumulated deficits
(690
)
(2,782
)
Accumulated other comprehensive income
3,757
4,337
Treasury stock, at average cost, 361,726
shares as of December 31, 2019 and 361,708 shares as of December
31, 2018, respectively
(9,935
)
(10,170
)
Total shareholders’ equity
27,275
25,324
Total liabilities and shareholders’
equity
$
62,923
$
62,198
MANNATECH, INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
information)
For the three months ended
December 31,
For the years ended December
31,
2019
2018
2019
2018
Net sales
$
39,388
$
44,024
$
157,728
$
173,558
Cost of sales
8,297
9,049
31,550
34,476
Gross profit
31,091
34,975
126,178
139,082
Operating expenses:
Commissions and incentives
16,064
19,153
64,254
73,514
Selling and administrative expenses
5,916
8,450
30,824
34,156
Depreciation and amortization
524
543
2,088
2,064
Other operating costs
5,858
7,352
22,579
29,438
Total operating expenses
28,362
35,498
119,745
139,172
Income (loss) from operations
2,729
(523
)
6,433
(90
)
Interest income (expense)
67
76
(16
)
288
Other income (expense), net
(1,235
)
(390
)
(681
)
291
Income (loss) before income
taxes
1,561
(837
)
5,736
489
Income tax (provision) benefit
544
(738
)
(2,447
)
(4,375
)
Net income (loss)
$
2,105
$
(1,575
)
$
3,289
$
(3,886
)
Income (loss) per
common share:
Basic
$
0.88
$
(0.66
)
$
1.38
$
(1.53
)
Diluted
$
0.87
$
(0.66
)
$
1.35
$
(1.53
)
Weighted-average
common shares outstanding:
Basic
2,385
2,381
2,391
2,541
Diluted
2,416
2,381
2,441
2,541
Non-GAAP Financial Measures (Sales, Gross Profit and Income
From Operations in Constant Dollars)
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.
The table below reconciles fourth quarter 2019 constant dollar
sales to GAAP sales.
Sales - Q4 2019
GAAP Measure: Total $
Non-GAAP Measure: Constant
$
Constant $ Change
Americas
$
11.8
$
11.8
$
—
Asia Pacific
24.1
24.8
0.7
EMEA
3.4
3.5
0.1
Total
$
39.3
$
40.1
$
0.8
The table below reconciles fiscal year 2018 and 2019 constant
dollar net sales, gross profit and income from operations to GAAP
net sales, gross profit and income from operations.
2019
2018
Constant $ Change
GAAP Measure: Total $
Non-GAAP Measure: Constant
$
GAAP Measure: Total $
Dollar
Percent
Net sales
157.7
163.0
$
173.6
(10.6
)
(6.1
)%
Product
154.6
159.7
170.2
(10.5
)
(6.2
)%
Pack and associate fees
2.3
2.4
2.5
(0.1
)
(4.0
)%
Other
0.8
0.9
0.9
—
—
%
Gross profit
126.2
130.5
139.1
(8.6
)
(6.2
)%
Income (loss) from operations
6.4
7.7
(0.1
)
7.8
(7,800.0
)%
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 in this release
adjusted net earnings, a performance measure that the Securities
and Exchange Commission defines as a “non-GAAP financial measure.”
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 eliminate certain items that management believes do
not reflect the Company’s operations and underlying operational
performance.
The following is a reconciliation of net loss, presented and
reported in accordance with U.S. generally accepted accounting
principles, to net earnings, as adjusted for certain items:
Three Months Ended
Twelve Months Ended
12/31/2019
12/31/2018
12/31/2019
12/31/2018
Net income (loss), as reported
$
2,105
$
(1,575
)
$
3,289
$
(3,886
)
Expenses related to moving the corporate
headquarters
—
—
—
1,305
Net earnings (loss), as
adjusted
$
2,105
$
(1,575
)
$
3,289
$
(2,581
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200326005140/en/
Donna Giordano Manager, Executive Office Administration
972-471-6512 ir@mannatech.com www.mannatech.com
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