Business Wire | Nov 10, 2020 07:00AM EST

Mannatech Reports Third Quarter End 2020 Financial Results

Nov. 10, 2020

FLOWER MOUND, Texas--(BUSINESS WIRE)--Nov. 10, 2020--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 2020.

Third Quarter End Results

Third quarter net sales for 2020 were $38.0 million, a decrease of $1.7 million, or 4.3%, as compared to $39.7 million in the third quarter of 2019. Income from operations increased to $1.4 million for the third quarter of 2020, from $0.6 million in the same period in 2019.

Net income was $1.6 million, or $0.76 per diluted share, for the third quarter of 2020, as compared to a net loss of $1.5 million, or $0.62 per diluted share, for the third quarter of 2019.

Gross profit as a percentage of sales declined to 75.4% for the three months ended September 30, 2020, as compared to 80.6% for the same period in 2019.

Commission and incentives as a percentage of net sales was 39.7% for the three months ended September 30, 2020, as compared to 42.1% for the same period in the prior year.

For the three months ended September 30, 2020, overall selling and administrative expenses decreased by $2.3 million to $6.6 million, as compared to $9.0 million for the same period in 2019. The decrease in selling and administrative expenses was due to a $1.8 million decrease in payroll costs, a $0.4 million decrease in marketing costs and a $0.1 million decrease in stock-based compensation.

For the three months ended September 30, 2020, other operating costs decreased by $0.1 million, or 2.9%, to $5.1 million, as compared to $5.2 million for the same period in 2019. The decrease in operating costs was primarily due to a $0.4 million decrease in travel and entertainment, which was offset by a $0.3 million increase in consulting fees.

For the three months ended September 30, 2020, provision for taxes was $22,000, compared to the same period in the prior year, which had a $1.6 million provision.

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 products as of September 30, 2020 and 2019 were approximately 180,000 and 176,000, respectively. Recruitment increased 13.7% in the third quarter of 2020 as compared to the third quarter of 2019. The number of new independent associate and preferred customer positions in the company's network for the third quarter of 2020 was approximately 25,388 as compared to 22,321 in 2019.

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.

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, the impact of COVID-19 on Mannatech's business, 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.

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)

SeptemberASSETS 30, December 31, 2020 2019 (unaudited)

Cash and cash equivalents $ 21,234 $ 24,762

Restricted cash 943 943

Accounts receivable, net of allowance of $787 and 144 955 $708 in 2020 and 2019, respectively

Income tax receivable 825 220

Inventories, net 13,512 10,152

Prepaid expenses and other current assets 2,516 2,239

Deferred commissions 1,729 1,758

Total current assets 40,903 41,029

Property and equipment, net 4,007 5,261

Construction in progress 1,411 865

Long-term restricted cash 4,049 5,295

Other assets 11,712 9,592

Long-term deferred tax assets, net 963 881

Total assets $ 63,045 $ 62,923

LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of finance leases $ 77 $ 87

Accounts payable 4,763 3,526

Accrued expenses 7,823 8,209

Commissions and incentives payable 9,807 9,728

Taxes payable 1,080 2,187

Current notes payable 689 739

Deferred revenue 5,034 4,416

Total current liabilities 29,273 28,892

Finance leases, excluding current portion 152 176

Deferred tax liabilities 3 3

Long-term notes payable - 363

Other long-term liabilities 7,373 6,214

Total liabilities 36,801 35,648



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 sharesauthorized, 2,742,857 shares issued and 2,089,002shares outstanding as of September 30, 2020 and - - 2,742,857 shares issued and 2,381,131 sharesoutstanding as of December 31, 2019

Additional paid-in capital 33,765 34,143

Retained earnings (accumulated deficit) 3,908 (690 )

Accumulated other comprehensive income 3,350 3,757

Treasury stock, at average cost, 653,855 shares asof September 30, 2020 and 361,726 shares as of (14,779 ) (9,935 ) December 31, 2019

Total shareholders' equity 26,244 27,275

Total liabilities and shareholders' equity $ 63,045 $ 62,923

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Net sales

$

37,966

$

39,656

$

112,218

$

118,340

Cost of sales

9,328

7,711

25,044

23,253

Gross profit

28,638

31,945

87,174

95,087

Operating expenses:

Commissions and incentives

15,089

16,696

45,308

48,190

Selling and administrative expenses

6,639

8,951

20,659

24,908

Depreciation and amortization expense

468

519

1,525

1,564

Other operating costs

5,062

5,214

15,180

16,721

Total operating expenses

27,258

31,380

82,672

91,383

Income from operations

1,380

565

4,502

3,704

Interest income (expense), net

10

(12

)

73

(83

)

Other income (expense), net

248

(430

)

206

554

Income before income taxes

1,638

123

4,781

4,175

Income tax (provision) benefit

(22

)

(1,613

)

753

(2,991

)

Net income (loss)

$

1,616

$

(1,490

)

$

5,534

$

1,184

Earnings per common share:

Basic

$

0.77

$

(0.62

)

$

2.42

$

0.50

Diluted

$

0.76

$

(0.62

)

$

2.38

$

0.47

Weighted-average common shares outstanding:

Basic

2,098

2,391

2,286

2,393

Diluted

2,135

2,391

2,312

2,450

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 third quarter 2020 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net sales $ 37,966 $ 39,656 $ 112,218 $ 118,340

Cost of sales 9,328 7,711 25,044 23,253

Gross profit 28,638 31,945 87,174 95,087

Operating expenses:

Commissions and 15,089 16,696 45,308 48,190 incentives

Selling andadministrative 6,639 8,951 20,659 24,908 expenses

Depreciation and 468 519 1,525 1,564 amortization expense

Other operating costs 5,062 5,214 15,180 16,721

Total operating 27,258 31,380 82,672 91,383 expenses

Income from 1,380 565 4,502 3,704 operations

Interest income 10 (12 ) 73 (83 ) (expense), net

Other income 248 (430 ) 206 554 (expense), net

Income before income 1,638 123 4,781 4,175 taxes

Income tax (22 ) (1,613 ) 753 (2,991 ) (provision) benefit

Net income (loss) $ 1,616 $ (1,490 ) $ 5,534 $ 1,184

Earnings per common share:

Basic $ 0.77 $ (0.62 ) $ 2.42 $ 0.50

Diluted $ 0.76 $ (0.62 ) $ 2.38 $ 0.47

Weighted-averagecommon shares outstanding:

Basic 2,098 2,391 2,286 2,393

Diluted 2,135 2,391 2,312 2,450

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 third quarter 2020 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.

September September 30, 30, Constant $ Change 2020 2019

GAAP Non-GAAP GAAP Measure: Measure: Measure: Dollar Percent Total $ Constant $ Total $

Net Sales $ 38.0 $ 38.2 $ 39.7 $ (1.5 ) (3.8 ) %

Product 35.7 36.0 38.7 (2.7 ) (7.0 ) %

Pack and 2.0 1.9 0.7 1.2 171.4 %associate fees

Other 0.3 0.3 0.3 - - %

Gross profit 28.6 28.8 31.9 (3.1 ) (9.7 ) %

Income from 1.4 1.4 0.6 0.8 133.3 %operations

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CONTACT: Donna Giordano Manager, Executive Office Administration 972-471-6512 ir@mannatech.com www.mannatech.com