Mannatech Reports Second Quarter 2020 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 2020.

Second Quarter End Results

Second quarter net sales for 2020 were $37.6 million, a decrease of $3.1 million, or 7.5%, as compared to $40.7 million in the second quarter of 2019. Income from operations decreased to $1.1 million for the second quarter of 2020, from $2.0 million in the same period in 2019.

Net income was $1.1 million, or $0.47 per diluted share, for the second quarter of 2020, as compared to a net income of $2.0 million, or $0.81 per diluted share, for the second quarter of 2019.

Gross profit as a percentage of sales declined to 76.9% for the three months ended June 30, 2020, as compared to 80.1% for the same period in 2019.

Commission and incentives as a percentage of net sales was 40.7% for the three months ended June 30, 2020, as compared to 40.0% for the same period in the prior year.

For the three months ended June 30, 2020, overall selling and administrative expenses decreased by $1.2 million to $7.2 million, as compared to $8.4 million for the same period in 2019. The decrease in selling and administrative expenses was due to a $0.9 million decrease in payroll costs, a $0.2 million decrease in marketing costs and a $0.1 million decrease in stock-based compensation.

For the three months ended June 30, 2020, other operating costs decreased by $0.6 million, or 10.9%, to $4.8 million, as compared to $5.4 million for the same period in 2019. The decrease in operating costs was primarily due to a $0.4 million decrease in travel and entertainment and a $0.2 million decrease in office expenses.

For the three months ended June 30, 2020, taxes were a $0.2 million provision, compared to the same period in the prior year, which had a $1.0 million provision.

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 products as of June 30, 2020 and 2019 were approximately 172,000 and 175,000, respectively. As the novel coronavirus (“COVID-19”) continued to spread into our markets, recruiting decreased 5.2% in the second quarter of 2020 as compared to the second quarter of 2019. The number of new independent associate and preferred customer positions in the company’s network for the second quarter of 2020 was approximately 19,047 as compared to 20,084 in 2019.

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.

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, the impact of COVID-19 on Mannatech’s business, Mannatech’s inability to attract and retain associates and preferred customers, 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)

 

ASSETS

June 30, 2020

(unaudited)

 

December 31,

2019

Cash and cash equivalents

$

20,712

 

 

$

24,762

 

Restricted cash

943

 

 

943

 

Accounts receivable, net of allowance of $654 and $708 in 2020 and 2019, respectively

251

 

 

955

 

Income tax receivable

1,333

 

 

220

 

Inventories, net

13,319

 

 

10,152

 

Prepaid expenses and other current assets

3,122

 

 

2,239

 

Deferred commissions

1,650

 

 

1,758

 

Total current assets

41,330

 

 

41,029

 

Property and equipment, net

4,456

 

 

5,261

 

Construction in progress

1,131

 

 

865

 

Long-term restricted cash

4,242

 

 

5,295

 

Other assets

11,986

 

 

9,592

 

Long-term deferred tax assets, net

991

 

 

881

 

Total assets

$

64,136

 

 

$

62,923

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current portion of finance leases

$

84

 

 

$

87

 

Accounts payable

5,971

 

 

3,526

 

Accrued expenses

8,162

 

 

8,209

 

Commissions and incentives payable

9,981

 

 

9,728

 

Taxes payable

1,609

 

 

2,187

 

Current notes payable

889

 

 

739

 

Deferred revenue

4,801

 

 

4,416

 

Total current liabilities

31,497

 

 

28,892

 

Finance leases, excluding current portion

178

 

 

176

 

Deferred tax liabilities

3

 

 

3

 

Long-term notes payable

92

 

 

363

 

Other long-term liabilities

7,727

 

 

6,214

 

Total liabilities

39,497

 

 

35,648

 

 

 

 

 

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 2,101,240 shares outstanding as of June 30, 2020 and 2,742,857 shares issued and 2,381,131 shares outstanding as of December 31, 2019

 

 

 

Additional paid-in capital

33,764

 

 

34,143

 

Retained earnings (accumulated deficit)

2,628

 

 

(690)

 

Accumulated other comprehensive income

2,671

 

 

3,757

 

Treasury stock, at average cost, 641,617 shares as of June 30, 2020 and 361,726 shares as of December 31, 2019

(14,424)

 

 

(9,935)

 

Total shareholders’ equity

24,639

 

 

27,275

 

Total liabilities and shareholders’ equity

$

64,136

 

 

$

62,923

 

 

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Net sales

$

37,647

 

 

$

40,711

 

 

$

74,252

 

 

$

78,684

 

Cost of sales

8,708

 

 

8,115

 

 

15,716

 

 

15,542

 

Gross profit

28,939

 

 

32,596

 

 

58,536

 

 

63,142

 

Operating expenses:

 

 

 

 

 

 

 

Commissions and incentives

15,330

 

 

16,295

 

 

30,219

 

 

31,494

 

Selling and administrative expenses

7,165

 

 

8,381

 

 

14,020

 

 

15,957

 

Depreciation and amortization expense

537

 

 

517

 

 

1,057

 

 

1,045

 

Other operating costs

4,797

 

 

5,384

 

 

10,118

 

 

11,507

 

Total operating expenses

27,829

 

 

30,577

 

 

55,414

 

 

60,003

 

Income from operations

1,110

 

 

2,019

 

 

3,122

 

 

3,139

 

Interest income (expense), net

13

 

 

25

 

 

63

 

 

(70)

 

Other (expense) income, net

166

 

 

980

 

 

(42)

 

 

984

 

Income before income taxes

1,289

 

 

3,024

 

 

3,143

 

 

4,053

 

Income tax (provision) benefit

(159)

 

 

(1,037)

 

 

775

 

 

(1,378)

 

Net income

$

1,130

 

 

$

1,987

 

 

$

3,918

 

 

$

2,675

 

Earnings per common share:

 

 

 

 

 

 

 

Basic

$

0.48

 

 

$

0.83

 

 

$

1.65

 

 

$

1.12

 

Diluted

$

0.47

 

 

$

0.81

 

 

$

1.62

 

 

$

1.09

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

2,370

 

 

2,394

 

 

2,380

 

 

2,395

 

Diluted

2,388

 

 

2,452

 

 

2,402

 

 

2,457

 

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 second quarter 2020 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.

 

June 30,

2020

 

 

 

June 30,

2019

 

Constant $ Change

 

GAAP
Measure:
Total $

 

Non-GAAP

Measure:

Constant $

 

GAAP
Measure:
Total $

 

Dollar

 

Percent

Net Sales

$

37.6

 

 

$

39.1

 

 

$

40.7

 

 

$

(1.6)

 

 

(3.9)

%

Product

37.0

 

 

38.5

 

 

39.9

 

 

(1.4)

 

 

(3.5)

%

Pack and associate fees

0.4

 

 

0.4

 

 

0.6

 

 

(0.2)

 

 

(33.3)

%

Other

0.2

 

 

0.2

 

 

0.2

 

 

 

 

%

Gross profit

28.9

 

 

30.0

 

 

32.6

 

 

(2.6)

 

 

(8.0)

%

Income from operations

1.1

 

 

1.3

 

 

2.0

 

 

(0.7)

 

 

(35.0)

%

 

Contacts

Donna Giordano

Manager, Executive Office Administration

972-471-6512

[email protected]
www.mannatech.com

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