October 27, 2015 | ||
Date of Report (Date of earliest event reported) | ||
NATURAL HEALTH TRENDS CORP. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 001-36849 | 59-2705336 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274 | ||
(Address of principal executive offices, including zip code) | ||
(310) 541-0888 | ||
(Registrant’s telephone number, including area code) |
(d) | Exhibits. |
NATURAL HEALTH TRENDS CORP. | ||
By: | /s/ Timothy S. Davidson | |
Timothy S. Davidson | ||
Senior Vice President and Chief Financial Officer |
• | Record quarterly revenue increased 154% year-over-year to $80.8 million |
• | Record quarterly net income of $14.5 million or $1.18 per diluted share |
• | Increased dividend by 25% to $0.05 per share |
• | Repurchased $5.0 million of common stock during the quarter |
• | Total revenue increased 154% to $80.8 million, compared to $31.8 million in the third quarter of 2014. |
◦ | Revenue from the Company’s Hong Kong operations, which represents 94% of total revenue, increased 168% to $75.9 million, compared to $28.3 million in the third quarter of 2014. |
◦ | Revenue outside of Hong Kong increased 38% to $4.9 million, compared to $3.5 million in the third quarter of 2014. |
• | Operating income increased 171% to $14.8 million, compared to $5.5 million in the third quarter of 2014. |
• | Net income available to common stockholders was $14.5 million, or $1.18 per diluted share, compared to $5.4 million, or $0.42 per diluted share, in the third quarter of 2014. |
• | The number of Active Members1 increased 24% to 94,700 at September 30, 2015, compared to 76,400 at June 30, 2015. |
1 | Natural Health Trends defines Active Members as those that have placed at least one product order with the Company during the preceding twelve month period. |
• | Total revenue increased 114% to $191.2 million, compared to $89.2 million in the first nine months of 2014. |
• | Operating income increased 130% to $34.0 million, compared to $14.8 million in the first nine months of 2014. |
• | Net income available to common stockholders was $33.5 million, or $2.70 per diluted share, compared to $14.6 million, or $1.16 per diluted share, in the first nine months of 2014. |
• | At September 30, 2015, cash and cash equivalents totaled $94.6 million, compared to $74.4 million at June 30, 2015. |
• | Net cash provided by operating activities in the third quarter of 2015 was $25.7 million, compared to $8.1 million in the third quarter of 2014. For the first nine months of 2015, net cash provided by operating activities was $65.2 million, compared to $20.9 million in the first nine months of 2014. |
• | On October 21, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share on outstanding common stock, a 25% increase over the prior quarter dividend, which will be payable on November 20, 2015 to stockholders of record as of November 10, 2015. |
• | During the three months ended September 30, 2015, the Company repurchased a total of $5.0 million of its common stock under its existing $15.0 million stock repurchase program, which remains available for repurchase through December 2016. The Company expects to continue executing against the $15.0 million stock repurchase program and anticipates it will repurchase an additional $5.0 million under this program soon. Since November 2014, the Company has repurchased 800,618 shares of common stock at a cost of $15.6 million. |
Date: | Tuesday, October 27, 2015 |
Time: | 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time |
Dial-in: | 1-877-407-0789 (Domestic) 1-201-689-8562 (International) |
Conference ID: | 13621699 |
Webcast: | http://public.viavid.com/index.php?id=116470 |
September 30, 2015 | December 31, 2014 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 94,565 | $ | 44,816 | |||
Accounts receivable | 305 | 107 | |||||
Inventories, net | 6,613 | 3,760 | |||||
Other current assets | 1,706 | 930 | |||||
Total current assets | 103,189 | 49,613 | |||||
Property and equipment, net | 917 | 476 | |||||
Goodwill | 1,764 | 1,764 | |||||
Restricted cash | 3,231 | 315 | |||||
Other assets | 610 | 372 | |||||
Total assets | $ | 109,711 | $ | 52,540 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,371 | $ | 2,232 | |||
Income taxes payable | 458 | 268 | |||||
Accrued commissions | 20,643 | 8,853 | |||||
Other accrued expenses | 14,426 | 6,743 | |||||
Deferred revenue | 4,515 | 2,687 | |||||
Deferred tax liability | 65 | 65 | |||||
Amounts held in eWallets | 13,419 | 2,064 | |||||
Other current liabilities | 1,590 | 1,513 | |||||
Total current liabilities | 59,487 | 24,425 | |||||
Long-term incentive | 1,436 | 1,665 | |||||
Total liabilities | 60,923 | 26,090 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 13 | 13 | |||||
Additional paid-in capital | 85,940 | 85,750 | |||||
Accumulated deficit | (22,617 | ) | (54,799 | ) | |||
Accumulated other comprehensive income | 17 | 62 | |||||
Treasury stock, at cost | (14,565 | ) | (4,576 | ) | |||
Total stockholders’ equity | 48,788 | 26,450 | |||||
Total liabilities and stockholders’ equity | $ | 109,711 | $ | 52,540 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 80,779 | $ | 31,833 | $ | 191,204 | $ | 89,184 | |||||||
Cost of sales | 16,001 | 6,756 | 39,025 | 19,517 | |||||||||||
Gross profit | 64,778 | 25,077 | 152,179 | 69,667 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions expense | 40,036 | 14,509 | 93,443 | 40,390 | |||||||||||
Selling, general and administrative expenses | 9,867 | 5,076 | 24,571 | 14,454 | |||||||||||
Depreciation and amortization | 72 | 28 | 181 | 72 | |||||||||||
Total operating expenses | 49,975 | 19,613 | 118,195 | 54,916 | |||||||||||
Income from operations | 14,803 | 5,464 | 33,984 | 14,751 | |||||||||||
Other expense, net | (135 | ) | (31 | ) | (112 | ) | (39 | ) | |||||||
Income before income taxes | 14,668 | 5,433 | 33,872 | 14,712 | |||||||||||
Income tax provision | 137 | 46 | 330 | 144 | |||||||||||
Net income | 14,531 | 5,387 | 33,542 | 14,568 | |||||||||||
Preferred stock dividends | — | (2 | ) | — | (9 | ) | |||||||||
Net income available to common stockholders | $ | 14,531 | $ | 5,385 | $ | 33,542 | $ | 14,559 | |||||||
Income per common share: | |||||||||||||||
Basic | $ | 1.19 | $ | 0.43 | $ | 2.71 | $ | 1.22 | |||||||
Diluted | $ | 1.18 | $ | 0.42 | $ | 2.70 | $ | 1.16 | |||||||
Weighted-average number of common shares outstanding: | |||||||||||||||
Basic | 12,239 | 12,455 | 12,364 | 11,883 | |||||||||||
Diluted | 12,284 | 12,774 | 12,439 | 12,424 | |||||||||||
Cash dividends declared per share: | |||||||||||||||
Common | $ | 0.040 | $ | 0.010 | $ | 0.090 | $ | 0.020 | |||||||
Series A preferred stock | $ | — | $ | 0.027 | $ | — | $ | 0.862 |
Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 33,542 | $ | 14,568 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 181 | 72 | |||||
Stock-based compensation | 56 | 42 | |||||
Cumulative translation adjustment realized in net income | (82 | ) | — | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (217 | ) | 25 | ||||
Inventories, net | (2,904 | ) | (2,547 | ) | |||
Other current assets | (736 | ) | (205 | ) | |||
Other assets | (264 | ) | (16 | ) | |||
Accounts payable | 2,140 | 1,359 | |||||
Income taxes payable | 190 | 140 | |||||
Accrued commissions | 11,832 | 3,218 | |||||
Other accrued expenses | 8,397 | 3,479 | |||||
Deferred revenue | 1,844 | 346 | |||||
Amounts held in eWallets | 11,354 | — | |||||
Other current liabilities | 93 | 442 | |||||
Long-term incentive | (229 | ) | — | ||||
Net cash provided by operating activities | 65,197 | 20,923 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment, net | (645 | ) | (199 | ) | |||
Increase in restricted cash | (3,028 | ) | — | ||||
Net cash used in investing activities | (3,673 | ) | (199 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from exercise of warrants | 309 | 4,948 | |||||
Repurchase of common stock | (11,079 | ) | (97 | ) | |||
Dividends paid | (1,111 | ) | (348 | ) | |||
Net cash (used in) provided by financing activities | (11,881 | ) | 4,503 | ||||
Effect of exchange rates on cash and cash equivalents | 106 | (29 | ) | ||||
Net increase in cash and cash equivalents | 49,749 | 25,198 | |||||
CASH AND CASH EQUIVALENTS, beginning of period | 44,816 | 14,550 | |||||
CASH AND CASH EQUIVALENTS, end of period | $ | 94,565 | $ | 39,748 | |||
NON-CASH FINANCING ACTIVITY: | |||||||
Conversion of preferred stock | $ | — | $ | 56 | |||
Issuance of treasury stock | 666 | — |