FLOWER MOUND, Texas--(BUSINESS WIRE)--Nov. 6, 2018--
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 2018.
Third Quarter Results
Third quarter net sales for 2018 were $43.0 million, an increase of $1.0
million, or 2.4%, as compared to $42.0 million in the third quarter of
2017. For the three-month period ended September 30, 2018, our net sales
increased 2.9% on a constant dollar basis (see Non-GAAP Financial
Measures, below) as compared to the same period in 2017, while
unfavorable foreign exchange caused a $0.2 million decrease in GAAP net
sales as compared to the same period in 2017.
Income from operations was $1.7 million for the third quarter 2018, as
compared to income of $0.7 million in the same period in 2017. Due to
taxes, our net loss was $1.7 million, or $0.69 per diluted share, for
the third quarter 2018, as compared to net income of $1.4 million, or
$0.50 per diluted share, for the third quarter 2017.
For the three months ended September 30, 2018, the Company’s effective
tax rate was 167.8% as compared to (58.5)% for the same period in 2017.
The effective tax rate for the three months ended September 30, 2018
were different from the federal statutory rate due to the mix of
earnings across jurisdictions, valuation allowances recorded on foreign
losses in certain jurisdictions, and the impact of global intangible
low-tax income ("GILTI") as a result of the Tax Cuts and Jobs Act.
For the three months ended September 30, 2018, Mannatech’s operations
outside of the Americas accounted for approximately 69.1% of Mannatech’s
consolidated net sales.
Commission expenses for the three months ended September 30, 2018
decreased by 4.5%, or $0.8 million, to $16.8 million, as compared to
$17.6 million for the same period in 2017. For the three months ended
September 30, 2018, commissions as a percentage of net sales decreased
to 39.1% from 42.0% for the same period in 2017 due to the structure of
the 2017 Associate Compensation Plan, which was implemented on July 1,
2017.
Incentive costs for the three months ended September 30, 2018 increased
by 64.2%, or $0.5 million, to $1.2 million, as compared to $0.7 million
for the same period in 2017 due to new incentives in growth markets. For
the three months ended September 30, 2018, incentives as a percentage of
net sales increased to 2.8% from 1.8% for the same period in 2017.
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 September 30, 2018
and 2017 were approximately 202,000 and 219,000, respectively.
Recruitment of new independent associates and preferred customers
increased 1.6% during the three months ended September 30, 2018 as
compared to the same period in 2017. The number of new independent
associate and preferred customer positions held by individuals in our
network for the three months ended September 30, 2018 was approximately
25,802, as compared to 25,394 for the same period in 2017.
For the three months ended September 30, 2018, selling and
administrative expenses decreased by $0.1 million, or 0.7%, to $8.1
million, as compared to $8.2 million for the same period in 2017. The
decrease in selling and administrative expenses consisted of a $0.2
million decrease in payroll costs in our headquarters, Japan, Australia,
and Europe offices, and a $0.1 million decrease in distribution and
warehouse costs, offset by $0.1 million increase in stock-based
compensation expense and a $0.1 million increase in contract labor costs.
Other operating costs, which include professional fees, travel and
entertainment, bad debt, credit card processing fees, and other
miscellaneous operating expenses, decreased by $0.4 million, or 7.3% for
the three months ended September 30, 2018, as compared to the same
period in 2017. The decrease in operating costs was primarily due to a
$0.8 million decrease in travel and entertainment costs and a $0.1
million decrease in other miscellaneous operating expenses. This was
partially offset by a $0.4 million increase in legal and consulting fees
and a $0.1 million increase in office expenses.
As of September 30, 2018, our cash and cash equivalents decreased by
31.9%, or $12.0 million, to $25.7 million from $37.7 million as of
December 31, 2017.
Cash provided by operating activities was $1.7 million for the nine
months ended September 30, 2018, compared to cash provided by operating
activities of $9.0 million for the same period in 2017. During the nine
months ended September 30, 2018, we purchased inventory, collected cash
from our income tax receivable, used less cash to pay commissions due to
the timing of our commission payments, and managed our accrued expenses
and other liabilities and taxes payable carefully. Our inventory balance
at September 30, 2018 was $12.7 million, compared to $9.4 million at
December 31, 2017. We invested in inventory in order to introduce
Ambrotose Life to our growth markets.
During the nine months ended September 30, 2018, we invested
approximately $0.8 million in back-office software projects,
approximately $0.5 million in leasehold improvements and $0.5 million in
furniture and equipment.
For the nine months ended September 30, 2018, we used $7.4 million to
repurchase common stock pursuant to a tender offer and open market
repurchases, $1.1 million in the repayment of capital lease obligations
and $1.9 million in payments of dividends to shareholders.
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 Tuesday, November 7, 2018 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 9546587.
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 |
|
|
|
September 30,
2018
(unaudited)
|
|
|
December 31,
2017
|
|
Cash and cash equivalents
|
|
|
|
$
|
25,678
|
|
|
|
$
|
37,682
|
|
|
Restricted cash
|
|
|
|
1,514
|
|
|
|
1,514
|
|
|
Accounts receivable, net of allowance of $726 and $582 in 2018 and
2017, respectively
|
|
|
|
124
|
|
|
|
273
|
|
|
Income tax receivable
|
|
|
|
—
|
|
|
|
907
|
|
|
Inventories, net
|
|
|
|
12,711
|
|
|
|
9,385
|
|
|
Prepaid expenses and other current assets
|
|
|
|
3,570
|
|
|
|
2,607
|
|
|
Deferred commissions
|
|
|
|
3,124
|
|
|
|
3,880
|
|
| Total current assets |
|
|
|
46,721 |
|
|
|
56,248 |
|
|
Property and equipment, net
|
|
|
|
6,231
|
|
|
|
3,537
|
|
|
Construction in progress
|
|
|
|
638
|
|
|
|
777
|
|
|
Long-term restricted cash
|
|
|
|
7,268
|
|
|
|
7,565
|
|
|
Other assets
|
|
|
|
3,828
|
|
|
|
3,876
|
|
|
Long-term deferred tax assets, net
|
|
|
|
4,455
|
|
|
|
4,239
|
|
| Total assets |
|
|
|
$ |
69,141 |
|
|
|
$ |
76,242 |
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current portion of capital leases
|
|
|
|
$
|
74
|
|
|
|
$
|
228
|
|
|
Accounts payable
|
|
|
|
6,402
|
|
|
|
6,008
|
|
|
Accrued expenses
|
|
|
|
6,617
|
|
|
|
5,771
|
|
|
Commissions and incentives payable
|
|
|
|
11,489
|
|
|
|
9,658
|
|
|
Taxes payable
|
|
|
|
3,925
|
|
|
|
2,404
|
|
|
Current notes payable
|
|
|
|
802
|
|
|
|
815
|
|
|
Deferred revenue
|
|
|
|
6,960
|
|
|
|
8,561
|
|
| Total current liabilities |
|
|
|
36,269 |
|
|
|
33,445 |
|
|
Capital leases, excluding current portion
|
|
|
|
92
|
|
|
|
144
|
|
|
Long-term deferred tax liabilities
|
|
|
|
1,103
|
|
|
|
1,147
|
|
|
Long-term notes payable
|
|
|
|
1,009
|
|
|
|
—
|
|
|
Other long-term liabilities
|
|
|
|
2,796
|
|
|
|
1,265
|
|
| Total liabilities |
|
|
|
41,269 |
|
|
|
36,001 |
|
|
|
|
|
|
|
|
|
|
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 2,381,244 shares outstanding as of
September 30, 2018 and 2,742,857 shares issued and 2,702,940
shares outstanding as of December 31, 2017
|
|
|
|
—
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
|
|
33,859
|
|
|
|
34,928
|
|
|
Retained earnings (deficit)
|
|
|
|
(3
|
)
|
|
|
4,190
|
|
|
Accumulated other comprehensive income
|
|
|
|
4,227
|
|
|
|
5,984
|
|
|
Treasury stock, at average cost, 361,613 shares as of September 30,
2018 and 39,917 shares as of December 31, 2017
|
|
|
|
(10,211
|
)
|
|
|
(4,861
|
)
|
| Total shareholders’ equity |
|
|
|
27,872 |
|
|
|
40,241 |
|
| Total liabilities and shareholders’ equity |
|
|
|
$ |
69,141 |
|
|
|
$ |
76,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| MANNATECH, INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)
|
|
(in thousands, except per share information)
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
| Net sales |
|
|
|
$ |
43,014 |
|
|
|
$ |
41,997 |
|
|
$ |
129,534 |
|
|
|
$ |
130,324 |
|
Cost of sales
|
|
|
|
9,037
|
|
|
|
8,233
|
|
|
25,426
|
|
|
|
25,781
|
| Gross profit |
|
|
|
33,977 |
|
|
|
33,764 |
|
|
104,108 |
|
|
|
104,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and incentives
|
|
|
|
18,054
|
|
|
|
18,370
|
|
|
54,361
|
|
|
|
54,445
|
|
Selling and administrative expenses
|
|
|
|
8,111
|
|
|
|
8,171
|
|
|
25,706
|
|
|
|
26,803
|
|
Depreciation and amortization expense
|
|
|
|
475
|
|
|
|
424
|
|
|
1,521
|
|
|
|
1,379
|
|
Other operating costs
|
|
|
|
5,667
|
|
|
|
6,115
|
|
|
22,086
|
|
|
|
20,447
|
|
Total operating expenses
|
|
|
|
32,307
|
|
|
|
33,080
|
|
|
103,674
|
|
|
|
103,074
|
| Income from operations |
|
|
|
1,670 |
|
|
|
684 |
|
|
434 |
|
|
|
1,469 |
|
Interest income
|
|
|
|
50
|
|
|
|
10
|
|
|
212
|
|
|
|
58
|
|
Other income (expense), net
|
|
|
|
(83
|
)
|
|
|
177
|
|
|
681
|
|
|
|
209
|
| Income before income taxes |
|
|
|
1,637 |
|
|
|
871 |
|
|
1,327 |
|
|
|
1,736 |
|
Income tax benefit (provision)
|
|
|
|
(3,300
|
)
|
|
|
510
|
|
|
(3,637
|
)
|
|
|
193
|
| Net income (loss) |
|
|
|
$ |
(1,663 |
) |
|
|
$ |
1,381 |
|
|
$ |
(2,310 |
) |
|
|
$ |
1,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$ |
(0.69 |
) |
|
|
$ |
0.51 |
|
|
$ |
(0.89 |
) |
|
|
$ |
0.71 |
|
Diluted
|
|
|
|
$ |
(0.69 |
) |
|
|
$ |
0.50 |
|
|
$ |
(0.89 |
) |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
2,396 |
|
|
|
2,711 |
|
|
2,595 |
|
|
|
2,708 |
|
Diluted
|
|
|
|
2,396 |
|
|
|
2,766 |
|
|
2,595 |
|
|
|
2,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
September 30, 2018 |
|
|
September 30,
2017
|
|
|
Constant $ Change |
|
|
|
|
GAAP
Measure:
Total $
|
|
|
Non-GAAP
Measure:
Constant $
|
|
|
GAAP
Measure:
Total $
|
|
|
Dollar |
|
|
Percent |
|
Net sales
|
|
|
|
$
|
43.0
|
|
|
|
$
|
43.2
|
|
|
|
$
|
42.0
|
|
|
|
$
|
1.2
|
|
|
|
2.9
|
%
|
|
Product
|
|
|
|
42.5
|
|
|
|
42.7
|
|
|
|
40.4
|
|
|
|
2.3
|
|
|
|
5.7
|
%
|
|
Pack sales and associate fees(a) |
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
1.8
|
|
|
|
(1.2
|
)
|
|
|
(66.7
|
)%
|
|
Other
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
|
|
(50.0
|
)%
|
|
Gross profit
|
|
|
|
34.0
|
|
|
|
34.0
|
|
|
|
33.8
|
|
|
|
0.2
|
|
|
|
0.6
|
%
|
|
Income from operations
|
|
|
|
1.7
|
|
|
|
1.6
|
|
|
|
0.7
|
|
|
|
0.9
|
|
|
|
128.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-month period ended
(in millions, except
percentages)
|
|
|
|
September 30, 2018 |
|
|
September 30,
2017
|
|
|
Constant $ Change |
|
|
|
|
GAAP
Measure:
Total $
|
|
|
Non-GAAP
Measure:
Constant $
|
|
|
GAAP
Measure:
Total $
|
|
|
Dollar |
|
|
Percent |
|
Net sales
|
|
|
|
$
|
129.5
|
|
|
|
$
|
127.0
|
|
|
|
$
|
130.3
|
|
|
|
$
|
(3.3
|
)
|
|
|
(2.5
|
)%
|
|
Product
|
|
|
|
128.1
|
|
|
|
125.6
|
|
|
|
117.0
|
|
|
|
8.6
|
|
|
|
7.4
|
%
|
|
Pack sales and associate fees(a) |
|
|
|
1.7
|
|
|
|
1.7
|
|
|
|
13.5
|
|
|
|
(11.8
|
)
|
|
|
(87.4
|
)%
|
|
Other
|
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
|
50.0
|
%
|
|
Gross profit
|
|
|
|
104.1
|
|
|
|
102.0
|
|
|
|
104.5
|
|
|
|
(2.5
|
)
|
|
|
(2.4
|
)%
|
|
Income (loss) from operations
|
|
|
|
0.4
|
|
|
|
(0.2
|
)
|
|
|
1.5
|
|
|
|
(1.7
|
)
|
|
|
(113.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Coincident with the introduction of the 2017 Associate
Compensation Plan, which was implemented on July 1, 2017, the Company
collects associate fees, which each independent associate pays to the
Company annually in order to be entitled to earn commissions, benefits
and incentives for that year. The Company collected associate fees
within the United States, Canada, South Africa, Japan, Australia, New
Zealand, Singapore, Hong Kong, and Taiwan since the implementation of
2017 Associate Compensation Plan. Prior to the change, independent
associates purchased packs that were bundles of products within these
respective geographic markets. Since implementing the 2017 Associate
Compensation Plan, total associate fees represented an immaterial amount
of total sales.
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 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 GAAP, to net earnings, as adjusted for certain items:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net loss, as reported
|
|
|
|
$
|
(1,663
|
)
|
|
|
$
|
1,381
|
|
|
$
|
(2,310
|
)
|
|
|
$
|
1,929
|
|
Expenses related to moving the corporate headquarters
|
|
|
|
—
|
|
|
|
—
|
|
|
1,305
|
|
|
|
—
|
| Net earnings, as adjusted |
|
|
|
$ |
(1,663 |
) |
|
|
$ |
1,381 |
|
|
$ |
(1,005 |
) |
|
|
$ |
1,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
About Mannatech
Mannatech, Incorporated offers a full body wellness experience through
its global network of independent associates and preferred customers.
With more than 20 years of experience and operations in 26 markets,
Mannatech is committed to transforming lives. For more information,
visit Mannatech.com.
Please Note: 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,” “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.
Similarly, descriptions of Mannatech’s objectives, strategies, plans,
goals or targets contained herein are also considered forward-looking
statements. This release should be read in conjunction with all of its
filings with the United States Securities and Exchange Commission and
Mannatech 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 independent 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181106005269/en/
Source: Mannatech, Incorporated
Mannatech, Incorporated
Donna Giordano, 972-471-6512
Manager,
Executive Office Administration
ir@mannatech.com
www.mannatech.com