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Mannatech Reports Third Quarter End 2020 Financial Results

FLOWER MOUND, Texas--(BUSINESS WIRE)--Nov. 10, 2020-- 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 third quarter of 2020.

Third Quarter End Results

Third quarter net sales for 2020 were $38.0 million, a decrease of $1.7 million, or 4.3%, as compared to $39.7 million in the third quarter of 2019. Income from operations increased to $1.4 million for the third quarter of 2020, from $0.6 million in the same period in 2019.

Net income was $1.6 million, or $0.76 per diluted share, for the third quarter of 2020, as compared to a net loss of $1.5 million, or $0.62 per diluted share, for the third quarter of 2019.

Gross profit as a percentage of sales declined to 75.4% for the three months ended September 30, 2020, as compared to 80.6% for the same period in 2019.

Commission and incentives as a percentage of net sales was 39.7% for the three months ended September 30, 2020, as compared to 42.1% for the same period in the prior year.

For the three months ended September 30, 2020, overall selling and administrative expenses decreased by $2.3 million to $6.6 million, as compared to $9.0 million for the same period in 2019. The decrease in selling and administrative expenses was due to a $1.8 million decrease in payroll costs, a $0.4 million decrease in marketing costs and a $0.1 million decrease in stock-based compensation.

For the three months ended September 30, 2020, other operating costs decreased by $0.1 million, or 2.9%, to $5.1 million, as compared to $5.2 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, which was offset by a $0.3 million increase in consulting fees.

For the three months ended September 30, 2020, provision for taxes was $22,000, compared to the same period in the prior year, which had a $1.6 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 September 30, 2020 and 2019 were approximately 180,000 and 176,000, respectively. Recruitment increased 13.7% in the third quarter of 2020 as compared to the third quarter of 2019. The number of new independent associate and preferred customer positions in the company’s network for the third quarter of 2020 was approximately 25,388 as compared to 22,321 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

September 30,
2020
(unaudited)

 

December 31,
2019

Cash and cash equivalents

$

21,234

 

 

 

$

24,762

 

 

Restricted cash

943

 

 

 

943

 

 

Accounts receivable, net of allowance of $787 and $708 in 2020 and 2019, respectively

144

 

 

 

955

 

 

Income tax receivable

825

 

 

 

220

 

 

Inventories, net

13,512

 

 

 

10,152

 

 

Prepaid expenses and other current assets

2,516

 

 

 

2,239

 

 

Deferred commissions

1,729

 

 

 

1,758

 

 

Total current assets

40,903

 

 

 

41,029

 

 

Property and equipment, net

4,007

 

 

 

5,261

 

 

Construction in progress

1,411

 

 

 

865

 

 

Long-term restricted cash

4,049

 

 

 

5,295

 

 

Other assets

11,712

 

 

 

9,592

 

 

Long-term deferred tax assets, net

963

 

 

 

881

 

 

Total assets

$

63,045

 

 

 

$

62,923

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current portion of finance leases

$

77

 

 

 

$

87

 

 

Accounts payable

4,763

 

 

 

3,526

 

 

Accrued expenses

7,823

 

 

 

8,209

 

 

Commissions and incentives payable

9,807

 

 

 

9,728

 

 

Taxes payable

1,080

 

 

 

2,187

 

 

Current notes payable

689

 

 

 

739

 

 

Deferred revenue

5,034

 

 

 

4,416

 

 

Total current liabilities

29,273

 

 

 

28,892

 

 

Finance leases, excluding current portion

152

 

 

 

176

 

 

Deferred tax liabilities

3

 

 

 

3

 

 

Long-term notes payable

 

 

 

363

 

 

Other long-term liabilities

7,373

 

 

 

6,214

 

 

Total liabilities

36,801

 

 

 

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 2,089,002 shares outstanding as of September 30, 2020 and 2,742,857 shares issued and 2,381,131 shares outstanding as of December 31, 2019

 

 

 

 

 

Additional paid-in capital

33,765

 

 

 

34,143

 

 

Retained earnings (accumulated deficit)

3,908

 

 

 

(690

)

 

Accumulated other comprehensive income

3,350

 

 

 

3,757

 

 

Treasury stock, at average cost, 653,855 shares as of September 30, 2020 and 361,726 shares as of December 31, 2019

(14,779

)

 

 

(9,935

)

 

Total shareholders’ equity

26,244

 

 

 

27,275

 

 

Total liabilities and shareholders’ equity

$

63,045

 

 

 

$

62,923

 

 

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

 
 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2020

 

2019

 

2020

 

2019

Net sales

$

37,966

 

 

 

$

39,656

 

 

 

$

112,218

 

 

$

118,340

 

 

Cost of sales

9,328

 

 

 

7,711

 

 

 

25,044

 

 

23,253

 

 

Gross profit

28,638

 

 

 

31,945

 

 

 

87,174

 

 

95,087

 

 

Operating expenses:

 

 

 

 

 

 

 

Commissions and incentives

15,089

 

 

 

16,696

 

 

 

45,308

 

 

48,190

 

 

Selling and administrative expenses

6,639

 

 

 

8,951

 

 

 

20,659

 

 

24,908

 

 

Depreciation and amortization expense

468

 

 

 

519

 

 

 

1,525

 

 

1,564

 

 

Other operating costs

5,062

 

 

 

5,214

 

 

 

15,180

 

 

16,721

 

 

Total operating expenses

27,258

 

 

 

31,380

 

 

 

82,672

 

 

91,383

 

 

Income from operations

1,380

 

 

 

565

 

 

 

4,502

 

 

3,704

 

 

Interest income (expense), net

10

 

 

 

(12

)

 

 

73

 

 

(83

)

 

Other income (expense), net

248

 

 

 

(430

)

 

 

206

 

 

554

 

 

Income before income taxes

1,638

 

 

 

123

 

 

 

4,781

 

 

4,175

 

 

Income tax (provision) benefit

(22

)

 

 

(1,613

)

 

 

753

 

 

(2,991

)

 

Net income (loss)

$

1,616

 

 

 

$

(1,490

)

 

 

$

5,534

 

 

$

1,184

 

 

Earnings per common share:

 

 

 

 

 

 

 

Basic

$

0.77

 

 

 

$

(0.62

)

 

 

$

2.42

 

 

$

0.50

 

 

Diluted

$

0.76

 

 

 

$

(0.62

)

 

 

$

2.38

 

 

$

0.47

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

2,098

 

 

 

2,391

 

 

 

2,286

 

 

2,393

 

 

Diluted

2,135

 

 

 

2,391

 

 

 

2,312

 

 

2,450

 

 

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

 

September 30,
2020

 

 

 

September 30,
2019

 


Constant $ Change

 

GAAP
Measure:
Total $

 

Non-GAAP Measure:
Constant $

 

GAAP
Measure:
Total $

 

Dollar

 

Percent

Net Sales

$

38.0

 

 

$

38.2

 

 

$

39.7

 

 

$

(1.5

)

 

(3.8

)%

Product

35.7

 

 

36.0

 

 

38.7

 

 

(2.7

 

(7.0

)%

Pack and associate fees

2.0

 

 

1.9

 

 

0.7

 

 

1.2

 

 

171.4

%

Other

0.3

 

 

0.3

 

 

0.3

 

 

 

 

%

Gross profit

28.6

 

 

28.8

 

 

31.9

 

 

(3.1

)

 

(9.7

)%

Income from operations

1.4

 

 

1.4

 

 

0.6

 

 

0.8

 

 

133.3

%

 

Donna Giordano
Manager, Executive Office Administration
972-471-6512
ir@mannatech.com
www.mannatech.com

Source: Mannatech, Incorporated