COPPELL, Texas--(BUSINESS WIRE)--Nov. 7, 2017--
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 2017.
Third Quarter Results
Third quarter net sales for 2017 were $42.0 million, a decrease of $6.1
million, or 12.8% as compared to $48.1 million in the third quarter of
2016. Income from operations was $0.7 million for the third quarter
2017, as compared to $0.5 million in the same period in 2016. Net income
was $1.4 million, or $0.50 per diluted share, for the third quarter
2017, as compared to $1.3 million, or $0.46 per diluted share, for the
third quarter 2016.
For the three months ended September 30, 2017, our net sales declined
12.5% on a constant dollar basis (see Non-GAAP Financial Measures,
below). Excluding the effects due to the translation of foreign
currencies into U.S. dollars, net sales would have declined $6.0 million
for the three months ended September 30, 2017.
As of September 30, 2017, our cash and cash equivalents increased by
23.3%, or $6.7 million, to $35.4 million from $28.7 million as of
December 31, 2016. Our inventory balance at September 30, 2017 was $10.6
million, compared to $12.0 million at December 31, 2016.
On July 1, 2017, we revised our Associate Compensation Plan (the "2017
Compensation Plan"), which was designed to stimulate business growth and
development for our active business building associates and to maximize
the buying experience for our preferred customers. In doing so, we hope
to better utilize commission dollars to stimulate growth. The 2017
Compensation Plan provides revised income streams, new leadership levels
and titles, and modified various volume requirements for our associates.
In addition, the 2017 Compensation Plan re-designated members as
preferred customers and modified their pricing structure.
In connection with the 2017 Compensation Plan, pack sales have been
replaced with associate fees, which provide associates the right to earn
commissions, benefits and incentives. Pack sales historically had an
average value of $197 during fiscal year 2017 before we implemented the
2017 Compensation Plan and now average approximately $50 annually.
Specifically, within the Americas, during the three months ended
September 30, 2017, pack sales decreased by $0.5 million, from $0.8
million to $0.3 million, as compared to the same period in 2016.
For the three months ended September 30, 2017, Mannatech’s operations
outside of the Americas accounted for approximately 66.4% of Mannatech’s
consolidated net sales.
Third quarter 2017 Asia/Pacific net sales decreased by $1.1 million, or
4.3%, to $24.4 million, as compared to $25.5 million for the same period
in 2016. This decrease was primarily due to a 4.7% decrease in revenue
per active independent associate and preferred customer, which was
partially offset by a 0.4% increase in the number of active independent
associates and preferred customers. During the three months ended
September 30, 2017, the number of product orders in Asia/Pacific
decreased by 4,000, from 117,000 to 113,000, as compared to the same
period in 2016. During the three months ended September 30, 2017, pack
sale revenue in Asia/Pacific decreased by $4.2 million, from $5.6
million to $1.4 million, as compared to the same period in 2016.
For the three months ended September 30, 2017, net sales in the Americas
decreased by $4.9 million, or 25.8%, to $14.1 million, as compared to
$19.0 million for the same period in 2016. This decrease was primarily
due to a 21.0% decrease in revenue per active independent associate and
preferred customer and a 6.1% decline in the number of active
independent associates and preferred customers. During the three months
ended September 30, 2017, the number of product orders in the Americas
decreased by 9,000, from 97,000 to 88,000, as compared to the same
period in 2016. During the three months ended September 30, 2017, pack
sale revenue in the Americas decreased by $0.5 million, from $0.8
million to $0.3 million, as compared to the same period in 2016.
For the three months ended September 30, 2017, EMEA net sales decreased
by $0.1 million, or 2.8%, to $3.5 million, as compared to $3.6 million
for the same period in 2016. This decrease was due to a 13.5% decline in
revenue per active independent associate and preferred customer, which
was partially offset by a 9.3% increase in the number of active
independent associates and preferred customers. During the three months
ended September 30, 2017, the number of product orders in EMEA increased
by 3,000, from 33,000 to 36,000, as compared to the same period in 2016.
During the three months ended September 30, 2017, pack sale revenue in
EMEA decreased by $0.4 million, from $0.5 million to $0.1 million, as
compared to the same period in 2016.
The number of new and continuing active independent associates and
preferred customers who purchased our packs or products during the
twelve months ended September 30, 2017 and 2016 were approximately
219,000 and 221,000, respectively. Recruitment of new independent
associates and preferred customers increased 1.6% during the three
months ended September 30, 2017 as compared to the same period in 2016.
The number of new independent associate and preferred customer positions
held by individuals in our network for the three months ended September
30, 2017 was approximately 25,400, as compared to 25,000 for the same
period in 2016.
Commission expenses for the three months ended September 30, 2017
decreased by 7.9%, or $1.5 million, to $17.6 million, as compared to
$19.1 million for the same period in 2016. For the three months ended
September 30, 2017, commissions as a percentage of net sales increased
to 42.0% from 39.8% for the same period in 2016 as a result of the
Company revising its 2017 Compensation Plan.
Incentive costs for the three months ended September 30, 2017 decreased
by 12.5%, or $0.1 million, to $0.7 million, as compared to $0.8 million
for the same period in 2016. For the three months ended September 30,
2017, incentives as a percentage of net sales remained the same at 1.7%
compared to the same period in 2016.
For the three months ended September 30, 2017, selling and
administrative expenses decreased by $1.7 million, or 17.3%, to $8.2
million, as compared to $9.9 million for the same period in 2016. This
decrease consisted of a $0.8 million decrease in payroll costs because
we had a greater number of employees in the prior comparative period and
a $0.4 million severance charge, a $0.8 million decrease in marketing
related costs and a $0.1 million decrease in stock based compensation
expense. Selling and administrative expenses, as a percentage of net
sales, for the three months ended September 30, 2017 decreased to 19.5%
from 20.5% for the same period in 2016.
For the three months ended September 30, 2017, other operating costs
decreased by $1.4 million, or 18.8%, to $6.1 million, as compared to
$7.5 million for the same period in 2016. For the three months ended
September 30, 2017, other operating costs as a percentage of net sales
decreased to 14.6% from 15.6% for the same period in 2016. The decrease
was due to a $0.7 million decrease in legal and consulting costs and a
$0.1 million decrease in each of the following expense categories:
office expenses, credit card fees, travel and entertainment costs, and
research and development costs. In addition, the decrease was further
caused by a $0.4 million impairment of internally developed software
during the third quarter of 2016. These decreases were partially offset
by $0.1 million increases in both professional fees and bad debt expense.
Our accounts payable balance at September 30, 2017 increased to $6.1
million, compared to $5.2 million at December 31, 2016, primarily due to
an increase in event costs. At September 30, 2017, our commissions and
incentives payable increased to $10.8 million from $8.8 million at
December 31, 2016, due to timing of our commission payments and the
implementation of the 2017 Compensation Plan. During the third quarter
of 2017, we paid dividends of $0.3 million and repurchased approximately
$0.1 million of our 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.
Conference Call
Mannatech will host a conference call to discuss the quarter’s results
with investors on Wednesday, November 8, 2017 at 9 a.m. CST, 10 a.m.
EST. 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 5199567.
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)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2017
|
|
|
December 31, |
| ASSETS |
|
|
(unaudited) |
|
|
2016 |
|
Cash and cash equivalents
|
|
|
$
|
35,373
|
|
|
|
$
|
28,687
|
|
|
Restricted cash
|
|
|
|
1,514
|
|
|
|
|
1,510
|
|
|
Accounts receivable, net of allowance of $566 and $463 in 2017 and
2016, respectively
|
|
|
|
394
|
|
|
|
|
298
|
|
|
Income tax receivable
|
|
|
|
2,759
|
|
|
|
|
1,587
|
|
|
Inventories, net
|
|
|
|
10,625
|
|
|
|
|
11,961
|
|
|
Prepaid expenses and other current assets, net
|
|
|
|
2,919
|
|
|
|
|
3,483
|
|
|
Deferred commissions
|
|
|
|
3,796
|
|
|
|
|
3,229
|
|
| Total current assets |
|
|
|
57,380 |
|
|
|
|
50,755 |
|
|
Property and equipment, net
|
|
|
|
3,068
|
|
|
|
|
3,611
|
|
|
Construction in progress
|
|
|
|
1,430
|
|
|
|
|
1,012
|
|
|
Long-term restricted cash
|
|
|
|
6,768
|
|
|
|
|
6,429
|
|
|
Other assets
|
|
|
|
3,623
|
|
|
|
|
4,013
|
|
|
Long-term deferred tax assets, net
|
|
|
|
6,261
|
|
|
|
|
5,368
|
|
| Total assets |
|
|
$ |
78,530 |
|
|
|
$ |
71,188 |
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current portion of capital leases
|
|
|
$
|
300
|
|
|
|
$
|
357
|
|
|
Accounts payable
|
|
|
|
6,050
|
|
|
|
|
5,223
|
|
|
Accrued expenses
|
|
|
|
5,600
|
|
|
|
|
5,605
|
|
|
Commissions and incentives payable
|
|
|
|
10,786
|
|
|
|
|
8,799
|
|
|
Taxes payable
|
|
|
|
2,839
|
|
|
|
|
1,040
|
|
|
Current notes payable
|
|
|
|
787
|
|
|
|
|
801
|
|
|
Deferred revenue
|
|
|
|
8,768
|
|
|
|
|
8,156
|
|
| Total current liabilities |
|
|
|
35,130 |
|
|
|
|
29,981 |
|
|
Capital leases, excluding current portion
|
|
|
|
162
|
|
|
|
|
261
|
|
|
Long-term deferred tax liabilities
|
|
|
|
31
|
|
|
|
|
29
|
|
|
Long-term notes payable
|
|
|
|
144
|
|
|
|
|
567
|
|
|
Other long-term liabilities
|
|
|
|
1,385
|
|
|
|
|
1,465
|
|
| Total liabilities |
|
|
|
36,852 |
|
|
|
|
32,303 |
|
|
|
|
|
|
|
|
|
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,
2,748,408 shares issued and 2,708,491 shares outstanding as of
September 30, 2017 and 2,758,275 shares issued and 2,688,790
shares outstanding as of December 31, 2016
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
|
|
34,963
|
|
|
|
|
38,190
|
|
|
Retained earnings
|
|
|
|
8,014
|
|
|
|
|
7,331
|
|
|
Accumulated other comprehensive income
|
|
|
|
3,562
|
|
|
|
|
1,834
|
|
|
Treasury stock, at average cost, 39,917 shares as of September 30,
2017 and 69,485 shares as of December 31, 2016, respectively
|
|
|
|
(4,861
|
)
|
|
|
|
(8,470
|
)
|
| Total shareholders’ equity |
|
|
|
41,678 |
|
|
|
|
38,885 |
|
| Total liabilities and shareholders’ equity |
|
|
$ |
78,530 |
|
|
|
$ |
71,188 |
|
|
|
|
|
|
|
|
|
|
| MANNATECH, INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)
|
|
(in thousands, except per share information)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
| Net sales |
|
|
$ |
41,997 |
|
|
$ |
48,146 |
|
|
|
$ |
130,324 |
|
|
$ |
137,664 |
|
|
Cost of sales
|
|
|
|
8,233
|
|
|
|
9,736
|
|
|
|
|
25,781
|
|
|
|
28,225
|
|
| Gross profit |
|
|
|
33,764 |
|
|
|
38,410 |
|
|
|
|
104,543 |
|
|
|
109,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and incentives
|
|
|
|
18,370
|
|
|
|
19,985
|
|
|
|
|
54,445
|
|
|
|
56,019
|
|
|
Selling and administrative expenses
|
|
|
|
8,171
|
|
|
|
9,877
|
|
|
|
|
26,803
|
|
|
|
28,199
|
|
|
Depreciation and amortization expense
|
|
|
|
424
|
|
|
|
507
|
|
|
|
|
1,379
|
|
|
|
1,427
|
|
|
Other operating costs
|
|
|
|
6,115
|
|
|
|
7,534
|
|
|
|
|
20,447
|
|
|
|
22,863
|
|
|
Total operating expenses
|
|
|
|
33,080
|
|
|
|
37,903
|
|
|
|
|
103,074
|
|
|
|
108,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from operations |
|
|
|
684 |
|
|
|
507 |
|
|
|
|
1,469 |
|
|
|
931 |
|
|
Interest income (expense), net
|
|
|
|
10
|
|
|
|
(16
|
)
|
|
|
|
58
|
|
|
|
(5
|
)
|
|
Other income (expense), net
|
|
|
|
177
|
|
|
|
232
|
|
|
|
|
209
|
|
|
|
(471
|
)
|
| Income before income taxes |
|
|
|
871 |
|
|
|
723 |
|
|
|
|
1,736 |
|
|
|
455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
|
510
|
|
|
|
562
|
|
|
|
|
193
|
|
|
|
90
|
|
| Net income |
|
|
$ |
1,381 |
|
|
$ |
1,285 |
|
|
|
$ |
1,929 |
|
|
$ |
545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ |
0.51 |
|
|
$ |
0.47 |
|
|
|
$ |
0.71 |
|
|
$ |
0.20 |
|
|
Diluted
|
|
|
$ |
0.50 |
|
|
$ |
0.46 |
|
|
|
$ |
0.69 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
2,711 |
|
|
|
2,706 |
|
|
|
|
2,708 |
|
|
|
2,703 |
|
|
Diluted
|
|
|
|
2,766 |
|
|
|
2,818 |
|
|
|
|
2,773 |
|
|
|
2,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
September 30, |
|
|
|
|
(in millions, except percentages)
|
|
|
September 30, 2017 |
|
|
2016 |
|
|
Constant $ Change |
|
|
|
GAAP |
|
|
Non-GAAP |
|
|
GAAP |
|
|
|
|
|
|
|
|
|
Measure: |
|
|
Measure: |
|
|
Measure: |
|
|
|
|
|
|
|
|
|
Total $ |
|
|
Constant $ |
|
|
Total $ |
|
|
Dollar |
|
|
Percent |
|
Net sales
|
|
|
$
|
42.0
|
|
|
$
|
42.1
|
|
|
$
|
48.1
|
|
|
$
|
(6.0
|
)
|
|
|
(12.5
|
)%
|
|
Product
|
|
|
|
39.1
|
|
|
|
39.2
|
|
|
|
39.8
|
|
|
|
(0.6
|
)
|
|
|
(1.5
|
)%
|
|
Pack and associate fees(a) |
|
|
|
1.8
|
|
|
|
1.8
|
|
|
|
6.9
|
|
|
|
(5.1
|
)
|
|
|
(73.9
|
)%
|
|
Other
|
|
|
|
1.1
|
|
|
|
1.1
|
|
|
|
1.4
|
|
|
|
(0.3
|
)
|
|
|
(21.4
|
)%
|
|
Gross profit
|
|
|
|
33.8
|
|
|
|
33.9
|
|
|
|
38.4
|
|
|
|
(4.5
|
)
|
|
|
(11.7
|
)%
|
|
Income from operations
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
0.5
|
|
|
|
0.2
|
|
|
|
40.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-month period ended
|
|
|
|
|
|
September 30, |
|
|
|
|
(in millions, except percentages)
|
|
|
September 30, 2017 |
|
|
2016 |
|
|
Constant $ Change |
|
|
|
GAAP |
|
|
Non-GAAP |
|
|
GAAP |
|
|
|
|
|
|
|
|
|
Measure: |
|
|
Measure: |
|
|
Measure: |
|
|
|
|
|
|
|
|
|
Total $ |
|
|
Constant $ |
|
|
Total $ |
|
|
Dollar |
|
|
Percent |
|
Net sales
|
|
|
$
|
130.3
|
|
|
$
|
128.9
|
|
|
$
|
137.7
|
|
|
$
|
(8.8
|
)
|
|
|
(6.4
|
)%
|
|
Product
|
|
|
|
113.2
|
|
|
|
112.0
|
|
|
|
113.6
|
|
|
|
(1.6
|
)
|
|
|
(1.4
|
)%
|
|
Pack and associate fees(a) |
|
|
|
13.5
|
|
|
|
13.3
|
|
|
|
20.2
|
|
|
|
(6.9
|
)
|
|
|
(34.2
|
)%
|
|
Other
|
|
|
|
3.6
|
|
|
|
3.6
|
|
|
|
3.9
|
|
|
|
(0.3
|
)
|
|
|
(7.7
|
)%
|
|
Gross profit
|
|
|
|
104.5
|
|
|
|
103.5
|
|
|
|
109.4
|
|
|
|
(5.9
|
)
|
|
|
(5.4
|
)%
|
|
Income from operations
|
|
|
|
1.5
|
|
|
|
1.0
|
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Coincident with the introduction of the 2017 Compensation
Plan, which was implemented on July 1, 2017, the Company collects
associate fees, which relate to providing the associates with the right
to earn commissions, benefits and incentives for an annual period. The
Company collected associate fees within the United States, Canada, South
Africa and Japan during the three months ended September 30, 2017. Prior
to the change, associates purchased packs that were bundles of products
within these respective geographic markets. Total associate fees since
implementing the 2017 Compensation Plan represented an immaterial amount
of total sales.
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 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: http://www.businesswire.com/news/home/20171107005452/en/
Source: Mannatech, Incorporated
Mannatech, Incorporated
Donna Giordano, 972-471-6512
Manager,
Executive Office Administration
ir@mannatech.com
www.mannatech.com