Natural Health Trends Reports Third Quarter 2020 Financial Results

About this update from Natural Health Trends Corp.

– Maintained profitability with third quarter earnings per share improving to $0.06 – Achieved positive third quarter sales momentum in markets outside of Hong Kong – Strong balance sheet with ample liquidity – Declared a quarterly cash dividend of $0.20 per share HONG KONG , Nov. 04, 2020 (GLOBE NEWSWIRE) -- Natural Health Trends Corp. (NASDAQ: NHTC), a leading direct-selling and e-commerce company that markets premium quality personal care, wellness and “quality of life” products under the NHT Global brand, today announced its financial results for the third quarter ended September 30, 2020 . Third Quarter 2020 Financial Highlights Revenue of $14.1 million decreased 14% compared to $16.4 million in the second quarter of 2020 and decreased 17% compared to $17.0 million in the third quarter of 2019. Operating income was $668,000 compared to $183,000 in the second quarter of 2020 and a loss of $1.1 million in the third quarter of 2019. Net income was $635,000 , or $0.06 per diluted share, compared to $34,000 , or break-even per diluted share, in the second quarter of 2020 and net loss of $1.2 million , or $0.12 per diluted share, in the third quarter of 2019. The number of Active Members1 decreased 2% to 53,300 at September 30, 2020 compared to 54,370 at June 30, 2020 , and decreased 22% compared to 68,150 at September 30, 2019 . 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. Year-to-Date 2020 Financial Highlights Revenue of $45.5 million decreased 24% compared to $59.8 million in the first nine months of 2019. Operating loss was $597,000 compared to a loss of $3.8 million in the first nine months of 2019. Net income was $96,000 , or $0.01 per diluted share, compared to a net loss of $2.8 million , or $0.25 per diluted share, in the first nine months of 2019. Management Commentary “The challenging macroeconomic conditions inherent in the global economy as a result of the COVID-19 pandemic continued to weigh on our financial performance with third quarter revenue of $14.1 million down 14% compared to the prior quarter,” commented Chris Sharng , President of Natural Health Trends Corp. “Our total third quarter orders were relatively consistent with both the prior quarter and the first quarter of 2020 with our deferred revenue balance increasing by $832,000 from June to September 2020 . Additionally, there were a number of bright spots in certain markets with third quarter order volume exceeding that of the first two quarters of the year and revenue outside of Hong Kong increasing 10% over the prior quarter. When coupled with our proactive cost reduction efforts, we were able to maintain our profitability on reduced sales in the third quarter.” Mr. Sharng concluded, “We have continued to manage the elements of our business that are within our control to preserve our profitability and leader base which we view as critical to our success. Further, we were pleased to remain in a position to return value to our stockholders through our quarterly cash dividend, made possible by our strong balance sheet. I’d like to extend my thanks to all of our leaders, members, preferred customers and shareholders for their ongoing commitment to NHT Global . Through all of the challenges 2020 has presented, we are very grateful to continue supporting our mission of improving health and quality of life through our superior products and global opportunity.” Balance Sheet and Cash Flow Net cash used in operating activities was $1.5 million in the first nine months of 2020, compared to $18.7 million in the first nine months of 2019. Total cash and cash equivalents were $90.8 million at September 30, 2020 , down slightly from $93.2 million at June 30, 2020 . On November 2, 2020 , the Company’s Board of Directors declared a quarterly cash dividend of $0.20 on each share of common stock outstanding. The dividend will be payable on November 27, 2020 to stockholders of record as of November 17, 2020 . Third Quarter 2020 Financial Results Conference Call Management will host a conference call to discuss the third quarter 2020 financial results today, Wednesday, November 4, 2020 at 11:30 a.m. Eastern Time . The conference call details are as follows: Date: Wednesday, November 4, 2020 Time: 11:30 a.m. Eastern Time / 8:30 a.m. Pacific Time Dial-in: 1-877-407-0789 (Domestic)1-201-689-8562 (International) Conference ID: 13711362 Webcast: http://public.viavid.com/index.php?id=141728 For those unable to participate during the live broadcast, a replay of the call will also be available from 2:30 p.m. Eastern Time on November 4, 2020 through 11:59 p.m. Eastern Time on November 18, 2020 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13711362. About Natural Health Trends Corp. Natural Health Trends Corp. (NASDAQ: NHTC) is an international direct-selling and e-commerce company operating through its subsidiaries throughout Asia , the Americas , and Europe . The Company markets premium quality personal care products under the NHT Global brand. Additional information can be found on the Company’s website at www.naturalhealthtrendscorp.com . Forward-Looking Statements Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Forward-looking statements in this press release do not constitute guarantees of future performance. Such forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from those anticipated. Such risks and uncertainties include the risks and uncertainties detailed under the caption “Risk Factors” in Natural Health Trends Corp.’s Annual Report on Form 10-K filed on March 9, 2020 with the Securities and Exchange Commission (SEC), as well as in subsequent reports filed this year with the SEC . The Company assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein. NATURAL HEALTH TRENDS CORP. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30 , 2020 December 31 , 2019 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 90,789 $ 96,035 Inventories 4,259 6,404 Other current assets 4,972 5,936 Total current assets 100,020 108,375 Property and equipment, net 581 735 Operating lease right-of-use assets 4,200 3,135 Restricted cash 517 3,390 Deferred tax asset 1,069 2,039 Other assets 701 823 Total assets $ 107,088 $ 118,497 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 887 $ 680 Accrued commissions 3,046 2,931 Other accrued expenses 1,786 2,387 Deferred revenue 3,477 4,506 Amounts held in eWallets 9,831 12,938 Operating lease liabilities 1,217 1,655 Other current liabilities 1,067 1,205 Total current liabilities 21,311 26,302 Income taxes payable 13,748 15,365 Deferred tax liability 203 202 Operating lease liabilities 3,150 1,564 Total liabilities 38,412 43,433 Stockholders’ equity: Preferred stock — — Common stock 13 13 Additional paid-in capital 86,102 86,102 Retained earnings 9,358 16,117 Accumulated other comprehensive loss (893 ) (1,264 ) Treasury stock, at cost (25,904 ) (25,904 ) Total stockholders’ equity 68,676 75,064 Total liabilities and stockholders’ equity $ 107,088 $ 118,497 NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data) Three Months Ended September 30 , Nine Months Ended September 30 , 2020 2019 2020 2019 Net sales $ 14,124 $ 17,023 $ 45,476 $ 59,779 Cost of sales 3,635 4,371 12,966 15,002 Gross profit 10,489 12,652 32,510 44,777 Operating expenses: Commissions expense 5,620 7,362 19,336 28,258 Selling, general and administrative expenses 4,201 6,354 13,771 20,296 Total operating expenses 9,821 13,716 33,107 48,554 Income (loss) from operations 668 (1,064 ) (597 ) (3,777 ) Other income, net 385 323 603 1,128 Income (loss) before income taxes 1,053 (741 ) 6 (2,649 ) Income tax provision (benefit) 418 502 (90 ) 120 Net income (loss) $ 635 $ (1,243 ) $ 96 $ (2,769 ) Net income (loss) per common share: Basic $ 0.06 $ (0.12 ) $ 0.01 $ (0.25 ) Diluted $ 0.06 $ (0.12 ) $ 0.01 $ (0.25 ) Weighted-average common shares outstanding: Basic 10,678 10,623 10,581 11,010 Diluted 11,424 10,623 11,424 11,010 NATURAL HEALTH TRENDS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended September 30 , 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 96 $ (2,769 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 301 290 Noncash lease expense 1,199 1,336 Deferred income taxes 979 (3 ) Changes in assets and liabilities: Inventories 2,193 4,104 Other current assets 923 (1,674 ) Other assets 120 2 Accounts payable 206 (1,002 ) Accrued commissions 136 (8,683 ) Other accrued expenses (598 ) (1,779 ) Deferred revenue (1,045 ) (3,485 ) Amounts held in eWallets (3,163 ) (1,508 ) Operating lease liabilities (1,120 ) (1,392 ) Income taxes payable (1,617 ) (1,617 ) Other current liabilities (140 ) (235 ) Long-term incentive — (333 ) Net cash used in operating activities (1,530 ) (18,748 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (147 ) (181 ) Net cash used in investing activities (147 ) (181 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of common stock — (9,564 ) Dividends paid (6,855 ) (2,736 ) Net cash used in financing activities (6,855 ) (12,300 ) Effect of exchange rates on cash, cash equivalents and restricted cash 413 (428 ) Net decrease in cash, cash equivalents and restricted cash (8,119 ) (31,657 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 99,425 135,651 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 91,306 $ 103,994 SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: Issuance of treasury stock for employee awards, net $ — $ 8,289 Right-of-use assets obtained in exchange for operating lease liabilities $ 2,724 $ 5,058 CONTACTS: Company Contact: Scott Davidson Senior Vice President and Chief Financial Officer Natural Health Trends Corp. Tel ( Hong Kong ): +852-3107-0800Tel ( U.S. ): 310-541-0888 [email protected] Investor Contact: ADDO Investor RelationsTel: 310-829-5400 [email protected] Source: Natural Health Trends Corp.

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