FLOWER MOUND, Texas--(BUSINESS WIRE)--Mar. 11, 2019--
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 2018.
Quarter End Results
Fourth quarter net sales for 2018 were $44.0 million, a decrease of $2.3
million, or 5.0%, as compared to $46.3 million in the fourth quarter of
2017. Income (loss) from operations decreased to ($0.5) million for the
fourth quarter 2018, from $1.1 million in the same period in 2017. Net
(loss) was ($1.6) million, or ($0.66) per diluted share, for the fourth
quarter 2018, as compared to ($3.7) million, or ($1.37) per diluted
share, for the fourth quarter 2017.
Gross profit as a percentage of sales improved to 79.5% for the three
months ended December 31, 2018, as compared to 78.7% for the same period
in 2017.
Commissions as a percentage of net sales were 40.2% for the three months
ended December 31, 2018, as compared to 40.6% for the same period in the
prior year. Incentive costs as a percentage of net sales were 3.4% for
the three months ended December 31, 2018, as compared to 2.8% for the
same period in 2017.
For the three months ended December 31, 2018, overall selling and
administrative expenses decreased by $0.2 million to $8.5 million, as
compared to $8.7 million for the same period in 2017. The decrease in
selling and administrative expenses consisted primarily of a $0.1
million decrease in payroll related costs and marketing costs and a $0.1
million decrease in warehouse costs.
For the three months ended December 31, 2018, other operating costs
increased by $1.2 million to $7.4 million, as compared to $6.2 million
for the same period in 2017. The increase in other operating costs was
primarily due to an increase 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, 2018 and 2017 were approximately 200,000 and 215,000,
respectively. Recruiting decreased 2.4% in the fourth quarter of 2018 as
compared to the fourth quarter of 2017. The number of new independent
associate and preferred customer positions in the company’s network for
the fourth quarter of 2018 was approximately 20,000 as compared to
21,000 in 2017.
Year End Results
Overall net sales decreased $3.1 million, or 1.8%, for 2018, as compared
to 2017. During 2018, fluctuations in foreign currency exchange rates
had an overall favorable impact on our net sales. During 2018, our net
sales declined 2.7% on a Constant dollar basis (a Non-GAAP financial
measure); while favorable foreign exchange during 2018 caused an
increase of $1.7 million in net sales as compared to 2017. Net loss for
2018 was ($3.9) million, or ($1.53) per diluted share, as compared to
($1.8) million, or ($0.66) per diluted share, for 2017.
Gross profit as a percentage of net sales improved to 80.1% for 2018, as
compared to 79.8% for 2017.
Commission expenses decreased for the year ended December 31, 2018, by
3.1%, or $2.2 million to $69.1 million, as compared to $71.3 million for
the same period in 2017. Commissions as a percentage of net sales were
39.8% for the year ending December 31, 2018 and 40.4% for the same
period in the prior year due to transition costs as we transitioned from
our legacy Associate Compensation Plan to the launch of our new
Associate Compensation Plan on July 1, 2017.
Incentive costs increased for the year ended December 31, 2018 by 37.5%,
or $1.2 million, to $4.4 million, as compared to $3.2 million, for the
same period in 2017. The costs of incentives, as a percentage of net
sales increased to 2.5% for the year ended December 31, 2018, as
compared to 1.8% for the same period in 2017.
For the year ended December 31, 2018, overall selling and administrative
expenses decreased by $1.3 million, or 3.7%, to $34.2 million, as
compared to $35.5 million for the same period in 2017. The decrease in
selling and administrative expenses consisted of a $1.8 million decrease
in payroll related costs as we had a greater number of employees in the
prior comparative period, and a $0.2 million decrease in marketing
costs. These decreases were partially offset by a $0.6 million increase
in stock based compensation expense and a $0.1 million increase in
contract labor costs.
For the year ended December 31, 2018, other operating costs increased by
$2.8 million, or 10.6%, to $29.4 million, as compared to $26.6 million
for the same period in 2017. For the year ended December 31, 2018, other
operating costs, as a percentage of net sales, were 17.0%, as compared
to 15.1% for the same period in 2017. The increase was due to a $1.5
million increase in office expenses, largely attributed to the $1.3
million non-recurring cost of moving to a new corporate headquarters, a
$0.7 million increase in travel and entertainment costs associated with
corporate sponsored events, a $0.5 million increase in legal and
consulting fees, a $0.2 million increase in bad debt expense, a $0.1
million increase in accounting and auditing fees, offset by a $0.1
million decrease in credit card fees and a $0.1 million decrease in auto
and equipment leases.
For the year ended December 31, 2018 our tax provision was $4.4 million
and for the comparable period of 2017, our tax provision was $4.3
million. For 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 last
year. For 2017, the Company had a significant increase in its rate due
to the impact of the Act. Items impacting the 2017 provision included
the rate differences in foreign jurisdictions, utilization of foreign
tax credits against the transition tax, and certain tax reserve items
removed due to expiration of applicable statute of limitations. Items
increasing the provision included the transition tax, return to
provision and prior year adjustments, and change in valuation allowance.
As of December 31, 2018, our cash and cash equivalents decreased by
34.6%, or $16.2 million, to $30.6 million from $46.8 million as of
December 31, 2017. On declining revenues and profits, cash provided by
operating activities decreased by $10.5 million for the year ended
December 31, 2018 as compared to the same period in 2017. During the
year ended December 31, 2018, we invested $2.2 million in computer
hardware and software, $1.9 million for leasehold improvements and $0.5
million in office furniture and equipment as we moved our corporate
headquarters to a new building. During this period, our financing
activities included repayments of $1.5 million for capital lease
obligations. Finally, we are proud that we have returned shareholder
value with $1.4 million for dividends to shareholders and repurchases of
$0.2 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).
Conference Call
Mannatech will host a conference call to discuss the quarter’s results
with investors on Tuesday, March 12, 2019 at 9 a.m. CT, 10 a.m. ET. The
live call was 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 8539789.
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, 2018 |
|
December 31, 2017 |
| ASSETS |
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,845
|
|
|
$
|
37,682
|
|
|
Restricted cash
|
|
1,514
|
|
|
1,514
|
|
|
Accounts receivable, net of allowance of $770 and $582 in 2018 and
2017, respectively
|
|
106
|
|
|
273
|
|
|
Income tax receivable
|
|
291
|
|
|
907
|
|
|
Inventories, net
|
|
12,821
|
|
|
9,385
|
|
|
Prepaid expenses and other current assets
|
|
3,361
|
|
|
2,607
|
|
|
Deferred commissions
|
|
2,449
|
|
|
3,880
|
|
| Total current assets |
|
42,387 |
|
|
56,248 |
|
|
Property and equipment, net
|
|
5,860
|
|
|
3,537
|
|
|
Construction in progress
|
|
904
|
|
|
777
|
|
|
Long-term restricted cash
|
|
7,225
|
|
|
7,565
|
|
|
Other assets
|
|
3,894
|
|
|
3,876
|
|
|
Deferred tax assets, net
|
|
1,928
|
|
|
4,239
|
|
| Total assets |
|
$ |
62,198 |
|
|
$ |
76,242 |
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current portion of capital leases
|
|
$
|
75
|
|
|
$
|
228
|
|
|
Accounts payable
|
|
6,724
|
|
|
6,008
|
|
|
Accrued expenses
|
|
5,995
|
|
|
5,771
|
|
|
Commissions and incentives payable
|
|
12,189
|
|
|
9,658
|
|
|
Taxes payable
|
|
2,655
|
|
|
2,404
|
|
|
Current notes payable
|
|
702
|
|
|
815
|
|
|
Deferred revenue
|
|
5,274
|
|
|
8,561
|
|
| Total current liabilities |
|
33,614 |
|
|
33,445 |
|
|
Capital leases, excluding current portion
|
|
72
|
|
|
144
|
|
|
Deferred tax liabilities
|
|
3
|
|
|
1,147
|
|
|
Long-term notes payable
|
|
883
|
|
|
—
|
|
|
Other long-term liabilities
|
|
2,302
|
|
|
1,265
|
|
| Total liabilities |
|
36,874 |
|
|
36,001 |
|
|
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 2,381,149 shares outstanding as of
December 31, 2018 and 2,742,857 shares issued and 2,702,940 shares
outstanding as of December 31, 2017
|
|
—
|
|
|
—
|
|
|
Additional paid-in capital
|
|
33,939
|
|
|
34,928
|
|
|
Retained earnings (deficit)
|
|
(2,782
|
)
|
|
4,190
|
|
|
Accumulated other comprehensive income
|
|
4,337
|
|
|
5,984
|
|
|
Treasury stock, at average cost, 361,708 shares as of December 31,
2018 and 39,917 shares as of December 31, 2017, respectively
|
|
(10,170
|
)
|
|
(4,861
|
)
|
| Total shareholders’ equity |
|
25,324 |
|
|
40,241 |
|
| Total liabilities and shareholders’ equity |
|
$ |
62,198 |
|
|
$ |
76,242 |
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
| Net sales |
|
$ |
44,024 |
|
|
$ |
46,372 |
|
|
$ |
173,558 |
|
|
$ |
176,696 |
|
|
Cost of sales
|
|
9,049
|
|
|
9,886
|
|
|
34,476
|
|
|
35,667
|
|
| Gross profit |
|
34,975 |
|
|
36,486 |
|
|
139,082 |
|
|
141,029 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Commissions and incentives
|
|
19,153
|
|
|
20,105
|
|
|
73,514
|
|
|
74,550
|
|
|
Selling and administrative expenses
|
|
8,450
|
|
|
8,667
|
|
|
34,156
|
|
|
35,470
|
|
|
Depreciation and amortization
|
|
543
|
|
|
485
|
|
|
2,064
|
|
|
1,864
|
|
|
Other operating costs
|
|
7,352
|
|
|
6,179
|
|
|
29,438
|
|
|
26,626
|
|
|
Total operating expenses
|
|
35,498
|
|
|
35,436
|
|
|
139,172
|
|
|
138,510
|
|
| Income (loss) from operations |
|
(523 |
) |
|
1,050 |
|
|
(90 |
) |
|
2,519 |
|
|
Interest income
|
|
76
|
|
|
216
|
|
|
288
|
|
|
274
|
|
|
Other expense (income), net
|
|
(390
|
)
|
|
(542
|
)
|
|
291
|
|
|
(333
|
)
|
| Income before income taxes |
|
(837 |
) |
|
724 |
|
|
489 |
|
|
2,460 |
|
|
Income tax provision
|
|
(738
|
)
|
|
(4,440
|
)
|
|
(4,375
|
)
|
|
(4,247
|
)
|
| Net loss |
|
$ |
(1,575 |
) |
|
$ |
(3,716 |
) |
|
$ |
(3,886 |
) |
|
$ |
(1,787 |
) |
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.66
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.53
|
)
|
|
$
|
(0.66
|
)
|
|
Diluted
|
|
$
|
(0.66
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.53
|
)
|
|
$
|
(0.66
|
)
|
|
Weighted-average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
2,381
|
|
|
2,707
|
|
|
2,541
|
|
|
2,708
|
|
|
Diluted
|
|
2,381
|
|
|
2,707
|
|
|
2,541
|
|
|
2,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2018 constant dollar sales to
GAAP sales.
|
|
Sales - Q4 2018
|
|
|
GAAP
Measure:
Total $ |
|
Non-GAAP
Measure:
Constant $
|
|
Constant $
Change
|
|
Americas
|
|
$
|
14.4
|
|
|
$
|
14.5
|
|
|
$
|
0.1
|
|
Asia Pacific
|
|
26.4
|
|
|
26.7
|
|
|
0.3
|
|
EMEA
|
|
3.2
|
|
|
3.4
|
|
|
0.2
|
|
Total
|
|
$ |
44.0 |
|
|
$ |
44.6 |
|
|
$ |
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
The table below reconciles fiscal year 2017 and 2018 constant dollar net
sales, gross profit and income from operations to GAAP net sales, gross
profit and income from operations.
|
|
2018 |
|
2017 |
|
Constant $ Change
|
|
|
GAAP
Measure:
Total $ |
|
Non-GAAP
Measure:
Constant $
|
|
GAAP
Measure:
Total $ |
|
Dollar |
|
Percent |
|
Net sales
|
|
173.6
|
|
|
171.9
|
|
|
$
|
176.7
|
|
|
(4.8
|
)
|
|
(2.7
|
)%
|
|
Product
|
|
170.2
|
|
|
168.6
|
|
|
157.9
|
|
|
10.7
|
|
|
6.8
|
%
|
|
Pack and associate fees(a) |
|
2.5
|
|
|
2.4
|
|
|
14.2
|
|
|
(11.8
|
)
|
|
(83.1
|
)%
|
|
Other
|
|
0.9
|
|
|
0.9
|
|
|
4.6
|
|
|
(3.7
|
)
|
|
(80.4
|
)%
|
|
Gross profit
|
|
139.1
|
|
|
137.7
|
|
|
141.0
|
|
|
(3.3
|
)
|
|
(2.3
|
)%
|
|
Income (loss) from operations
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
0.7
|
|
|
(3.0
|
)
|
|
(120.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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, Taiwan, Austria, the Czech Republic, Denmark,
Estonia, Finland, Germany, the Republic of Ireland, the Netherlands,
Norway, Spain, Sweden and the United Kingdom during the year ended
December 31, 2018. Prior to the change, 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 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 |
|
|
12/31/2018
|
|
12/31/2017
|
|
12/31/2018
|
|
12/31/2017
|
|
Net loss, as reported
|
|
$
|
(1,575
|
)
|
|
$
|
(3,716
|
)
|
|
$
|
(3,886
|
)
|
|
$
|
(1,787
|
)
|
|
Expenses related to moving the corporate headquarters
|
|
—
|
|
|
266
|
|
|
1,305
|
|
|
266
|
|
|
Legal settlements
|
|
—
|
|
|
200
|
|
|
—
|
|
|
700
|
|
|
Provisional tax impact(a) |
|
—
|
|
|
3,381
|
|
|
—
|
|
|
3,381
|
|
| Net earnings, as adjusted |
|
$ |
(1,575 |
) |
|
$ |
(3,716 |
) |
|
$ |
(2,581 |
) |
|
$ |
(1,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a) Relates to the estimated income tax effect of the Tax Cuts
and Jobs Act on the Company’s Consolidated Financial Statements as of
December 31, 2017 as discussed in Note 7, Income Taxes, to the
Consolidated Financial Statements included in the annual report on form
10-K for the year ended December 31, 2017.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190311005392/en/
Source: Mannatech, Incorporated
Donna Giordano
Manager, Executive Office Administration
972-471-6512
ir@mannatech.com
www.mannatech.com