UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 13, 2024
(Exact Name of Registrant as Specified in its Charter)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities Registered Pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On August 13, 2024 , Mannatech, Incorporated issued a press release announcing financial and operating results for the third quarter ended June 30, 2024. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Exhibit Number | Description | ||||
99.1* | Press Release, dated August 13, 2024, titled Mannatech Reports Financial Results for Second Quarter 2024 | ||||
*Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
August 13, 2024
| MANNATECH, INCORPORATED | |||||
| By: | /s/ Landen Fredrick | ||||
| Landen Fredrick | |||||
| Chief Executive Officer and Interim Chief Financial Officer | |||||
Mannatech Reports Financial Results for Second Quarter 2024
(Flower Mound, Texas) August 13, 2024 - Mannatech, Incorporated (NASDAQ: MTEX), ("Mannatech" or "Company"), global health and wellness company committed to transforming lives to make a better world, today announced financial results for its second quarter of 2024.
Second Quarter Highlights
•Net sales for the quarter ended June 30, 2024 were $27.7 million, as compared to $32.6 million for the same period in 2023, a decrease of $4.9 million, or 14.9%. On a Constant dollar basis (see Non-GAAP Measures, below) our net sales decreased $4.2 million, or 12.9%, and unfavorable foreign exchange caused a $0.7 million decrease in GAAP net sales as compared to the same period in 2023. The decline in revenues was principally due to supply chain constraints, items on back order, and some weakening of economic conditions in Asia.
•Gross profit as a percentage of net sales decreased to 77.1% for three months ended June 30, 2024, as compared to 78.5% for the same period in 2023, some of the increase in costs were related to increased freight costs related to back ordered items and running some sales promotions on products thereby reducing our margin.
•Commission expenses for the three months ended June 30, 2024 decreased by 12.5%, or $1.6 million, to $11.1 million, as compared to $12.7 million for the same period in 2023. Commissions are earned from sales. Commission expenses in dollar terms decreased during the three months ended June 30, 2024 primarily due to a decline in our sales. For the three months ended June 30, 2024, commissions as a percentage of net sales increased to 40.0% from 38.9% for the same period in 2023. The increase in commissions was due partially to running promotions on our products.
•For the three months ended June 30, 2024, selling and administrative expenses decreased by $2.2 million, or 17.0%, to $10.9 million, as compared to $13.1 million for the same period in 2023. The decrease in selling and administrative expenses was the result of a $0.9 million reduction in payroll costs, a $0.7 million decrease in legal and consulting fees, a $0.3 million decrease in travel and entertainment costs, a $0.2 million decrease in marketing costs and a $0.1 million decrease in office expenses. Selling and administrative expenses, as a percentage of net sales, for the three months ended June 30, 2024 decreased to 39.1% from 40.1% for the same period in 2023.
•Loss from operations was $1.1 million for the three months ended June 30, 2024 as compared to $1.0 million in the same period last year. On a Constant dollar basis (see Non-GAAP Measures, below), the loss from operations was unfavorably affected by $0.1 million due to foreign exchange. Weaker than expected economic conditions in the Asian markets led to reduced recruiting and lower sales per Associate during the quarter, which caused a reduction to net sales of $3.4 million. Supply chain challenges in the Americas drove a $1.1 million decrease in net sales in the Americas during the quarter.
•Due to the strengthening of the U.S. Dollar and dissolution of an entity, foreign exchange gains were $1.1 million the three months ended June 30, 2024. This included a one-time gain of $0.2 million during the quarter ended June 30, 2024 attributable to the liquidation of the Company’s entity in Sweden.
•Income tax expense was $0.5 million for the three months ended June 30, 2024 as compared to $0.3 million in the same period last year.
•Net loss was $0.6 million for the three months ended June 30, 2024, or $0.33 per diluted share, as compared to $1.1 million, or $0.59 per diluted share for the three months ended June 30, 2023.
•As of June 30, 2024, the company's cash and cash equivalents increased 18.9%, or $1.5 million, to $9.2 million from $7.7 million as of December 31, 2023. Cash used in operations was $0.8 million for the six months ended June 30, 2023 compared to $1.3 million for the same period in 2023. Acquisition of property and equipment decreased for the six months ended June 30, 2024, to $0.1 million compared to $0.4 million for the same period in 2023. Financing activities provided $3.1 million of cash during the quarter ended June 30, 2024. This increase consisted of $3.6 million in gross loan proceeds and use of $0.5 million for the repayment of finance lease obligations and other long-term liabilities. For the six months ended June 30, 2023, $1.3 million was used related to payments for dividends of $0.7 million, repurchase of common stock of $0.1 million and $0.4 million for the repayment of lease obligations and other long-term liabilities. Additionally, foreign exchange effects reduced cash position $0.8 million in the six months ended June 30, 2024, compared to $1.5 million in the same period in 2023.
•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 its packs or products as of June 30, 2024 and 2023 remained constant at approximately 142,000 as our Associate attrition rate decreased by 21%. Recruiting new associates and preferred customers decreased 13.6% in the second quarter of 2024 as compared to the second quarter of 2023.
Landen Fredrick, President and CEO, stated, “We are a multinational company and therefore we are subject to fluctuations in the value of the U.S. Dollar versus other currencies in the countries we operate. Although we recorded a second quarter loss in 2024, we recorded an overall gain in the first six months of 2024. The gain was, in part, a result of a second quarter $1.1 million foreign exchange gain, reflected in “Other Income” in our Statement of Operations. This gain in the second quarter, coupled with our $0.9 million foreign exchange gain in the first quarter of 2024 contributed to the net income for the six months ended 2024 of $0.6 million.”
Mr. Fredrick continued, “Demand remained weak in the second quarter across our world-wide operations but was most pronounced in our Asia/Pacific region where economic conditions have not improved.”
Mr. Fredrick concluded, “We see continued economic challenges for the remainder of 2024, however, we remain committed to increasing our revenues through increasing the number of our sales associates and preferred customers while maintaining disciplined cost controls.”
Non-GAAP Financial 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. The company discloses 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.
The company believes 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 with an additional perspective on trends. Although management believes the non-GAAP financial measures enhance investors’ understanding of their 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, Mannatech’s inability to attract and retain associates and members, 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.
^ Mannatech operates in China under a cross-border e-commerce platform that is separate from its network marketing model.
Individuals interested in Mannatech's products or in exploring its business opportunity can learn more at Mannatech.com.
Contact Information:
Erin K. Barta
General Counsel and Corporate Secretary
214-724-3378
ir@mannatech.com
www.mannatech.com
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
| ASSETS | June 30, 2024 (unaudited) | December 31, 2023 | |||||||||
| Cash and cash equivalents | $ | 9,196 | $ | 7,731 | |||||||
| Restricted cash | 938 | 938 | |||||||||
| Accounts receivable, net of allowance of $1,364 and $1,278 | 99 | 91 | |||||||||
| Income tax receivable | 416 | 465 | |||||||||
| Inventories, net | 13,155 | 14,535 | |||||||||
| Prepaid expenses and other current assets | 2,214 | 1,774 | |||||||||
| Deferred commissions | 1,910 | 2,130 | |||||||||
| Total current assets | 27,928 | 27,664 | |||||||||
| Property and equipment, net | 3,303 | 4,147 | |||||||||
| Operating lease right-of-use assets | 2,807 | 3,315 | |||||||||
| Other assets | 3,511 | 3,751 | |||||||||
| Deferred tax assets, net | 1,690 | 1,611 | |||||||||
| Long-term restricted cash | 676 | 718 | |||||||||
| Total assets | $ | 39,915 | $ | 41,206 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Commissions and incentives payable | $ | 8,011 | $ | 8,175 | |||||||
| Accrued expenses | 5,965 | 6,779 | |||||||||
| Deferred revenue | 4,152 | 4,786 | |||||||||
| Accounts payable | 3,454 | 4,010 | |||||||||
| Taxes payable | 1,743 | 1,521 | |||||||||
| Current notes payable | 369 | 240 | |||||||||
| Current portion of finance lease liabilities | 267 | 269 | |||||||||
| Total current liabilities | 23,961 | 25,780 | |||||||||
| Long-term notes payable | 3,600 | — | |||||||||
| Operating lease liabilities, excluding current portion | 1,975 | 2,582 | |||||||||
| Other long-term liabilities | 1,360 | 1,404 | |||||||||
| Finance lease liabilities, excluding current portion | 820 | 956 | |||||||||
| Total liabilities | 31,716 | 30,722 | |||||||||
| 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 1,884,814 shares outstanding as of June 30, 2024 and 2,742,857 shares issued and 1,860,154 shares outstanding as of December 31, 2023 | — | — | |||||||||
| Additional paid-in capital | 32,982 | 33,309 | |||||||||
| Accumulated deficit | (745) | (1,301) | |||||||||
| Accumulated other comprehensive loss | (4,102) | (1,015) | |||||||||
Treasury stock, at average cost, 858,043 shares as of June 30, 2024 and 882,703 shares as of December 31, 2023 | (19,936) | (20,509) | |||||||||
| Total shareholders’ equity | 8,199 | 10,484 | |||||||||
| Total liabilities and shareholders’ equity | $ | 39,915 | $ | 41,206 | |||||||
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net sales | $ | 27,740 | $ | 32,594 | $ | 57,133 | $ | 66,708 | |||||||||||||||
| Cost of sales | 6,363 | 7,004 | 12,658 | 14,417 | |||||||||||||||||||
| Gross profit | 21,377 | 25,590 | 44,475 | 52,291 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Commissions and incentives | 11,660 | 13,465 | 23,345 | 27,022 | |||||||||||||||||||
| Selling and administrative expenses | 10,860 | 13,079 | 21,452 | 25,510 | |||||||||||||||||||
| Total operating expenses | 22,520 | 26,544 | 44,797 | 52,532 | |||||||||||||||||||
| Loss from operations | (1,143) | (954) | (322) | (241) | |||||||||||||||||||
| Interest (expense) income, net | (105) | (10) | (87) | 14 | |||||||||||||||||||
| Other income, net | 1,120 | 150 | 1,990 | 483 | |||||||||||||||||||
| (Loss) income before income taxes | (128) | (814) | 1,581 | 256 | |||||||||||||||||||
| Income tax provision | (496) | (291) | (1,025) | (757) | |||||||||||||||||||
| Net (loss) income | $ | (624) | $ | (1,105) | $ | 556 | $ | (501) | |||||||||||||||
| (Loss) income per common share: | |||||||||||||||||||||||
| Basic | $ | (0.33) | $ | (0.59) | $ | 0.30 | $ | (0.27) | |||||||||||||||
| Diluted | $ | (0.33) | $ | (0.59) | $ | 0.30 | $ | (0.27) | |||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | 1,885 | 1,870 | 1,885 | 1,871 | |||||||||||||||||||
| Diluted | 1,885 | 1,870 | 1,885 | 1,871 | |||||||||||||||||||
Net sales by region for the three and six months ended June 30, 2024 and 2023 were as follows (in millions, except percentages):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| Region | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Americas | $ | 9.5 | 34.3 | % | $ | 10.6 | 32.5 | % | $ | 19.7 | 34.5 | % | $ | 21.1 | 31.6 | % | |||||||||||||||||||||||||||||||
| Asia/Pacific | 15.9 | 57.4 | % | 19.3 | 59.2 | % | 33.0 | 57.8 | % | 40.4 | 60.6 | % | |||||||||||||||||||||||||||||||||||
| EMEA | 2.3 | 8.3 | % | 2.7 | 8.3 | % | 4.4 | 7.7 | % | 5.2 | 7.8 | % | |||||||||||||||||||||||||||||||||||
| Total sales | $ | 27.7 | 100.0 | % | $ | 32.6 | 100.0 | % | $ | 57.1 | 100.0 | % | $ | 66.7 | 100.0 | % | |||||||||||||||||||||||||||||||
Non-GAAP Financial Measures (Sales, Gross Profit and Income from Operations in Constant Dollars)
To supplement its financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Mannatech discloses 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. It refers to these adjusted financial measures as Constant dollar items, which are non-GAAP financial measures. The company believes these measures provide investors with an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, it calculates 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 the actual GAAP results and the recalculated results for the current year at the Constant dollar rates.
The tables below reconcile second quarter 2024 and year-to-date Constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations. (in millions, except percentages):
| Three-month period ended | June 30, 2024 | June 30, 2023 | Constant $ Change | |||||||||||||||||||||||
| GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | GAAP Measure: Total $ | Dollar | Percent | |||||||||||||||||||||
| Net sales | $ | 27.7 | $ | 0.7 | $ | 28.4 | $ | 32.6 | $ | (4.2) | (12.9) | % | ||||||||||||||
| Gross profit | 21.4 | 0.5 | 21.9 | 25.6 | (3.7) | (14.5) | % | |||||||||||||||||||
| Loss from operations | (1.1) | 0.1 | (1.0) | (1.0) | — | — | % | |||||||||||||||||||
| Six-month period ended | June 30, 2024 | June 30, 2023 | Constant $ Change | |||||||||||||||||||||||
| GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | GAAP Measure: Total $ | Dollar | Percent | |||||||||||||||||||||
| Net sales | $ | 57.1 | $ | 1.5 | $ | 58.6 | $ | 66.7 | $ | (8.1) | (12.1) | % | ||||||||||||||
| Gross profit | 44.5 | 1.2 | 45.7 | 52.3 | (6.6) | (12.6) | % | |||||||||||||||||||
| (Loss) income from operations | (0.3) | $ | 0.4 | 0.1 | (0.2) | 0.3 | (150.0) | % | ||||||||||||||||||