Business Wire | Aug 10, 2020 10:05PM EDT

Mannatech Reports Second Quarter 2020 Financial Results

Aug. 11, 2020

FLOWER MOUND, Texas--(BUSINESS WIRE)--Aug. 11, 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 second quarter of 2020.

Second Quarter End Results

Second quarter net sales for 2020 were $37.6 million, a decrease of $3.1 million, or 7.5%, as compared to $40.7 million in the second quarter of 2019. Income from operations decreased to $1.1 million for the second quarter of 2020, from $2.0 million in the same period in 2019.

Net income was $1.1 million, or $0.47 per diluted share, for the second quarter of 2020, as compared to a net income of $2.0 million, or $0.81 per diluted share, for the second quarter of 2019.

Gross profit as a percentage of sales declined to 76.9% for the three months ended June 30, 2020, as compared to 80.1% for the same period in 2019.

Commission and incentives as a percentage of net sales was 40.7% for the three months ended June 30, 2020, as compared to 40.0% for the same period in the prior year.

For the three months ended June 30, 2020, overall selling and administrative expenses decreased by $1.2 million to $7.2 million, as compared to $8.4 million for the same period in 2019. The decrease in selling and administrative expenses was due to a $0.9 million decrease in payroll costs, a $0.2 million decrease in marketing costs and a $0.1 million decrease in stock-based compensation.

For the three months ended June 30, 2020, other operating costs decreased by $0.6 million, or 10.9%, to $4.8 million, as compared to $5.4 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 and a $0.2 million decrease in office expenses.

For the three months ended June 30, 2020, taxes were a $0.2 million provision, compared to the same period in the prior year, which had a $1.0 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 June 30, 2020 and 2019 were approximately 172,000 and 175,000, respectively. As the novel coronavirus ("COVID-19") continued to spread into our markets, recruiting decreased 5.2% in the second quarter of 2020 as compared to the second quarter of 2019. The number of new independent associate and preferred customer positions in the company's network for the second quarter of 2020 was approximately 19,047 as compared to 20,084 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)

June 30, DecemberASSETS 2020 31, (unaudited) 2019

Cash and cash equivalents $ 20,712 $ 24,762

Restricted cash 943 943

Accounts receivable, net of allowance of $654 and $708 251 955 in 2020 and 2019, respectively

Income tax receivable 1,333 220

Inventories, net 13,319 10,152

Prepaid expenses and other current assets 3,122 2,239

Deferred commissions 1,650 1,758

Total current assets 41,330 41,029

Property and equipment, net 4,456 5,261

Construction in progress 1,131 865

Long-term restricted cash 4,242 5,295

Other assets 11,986 9,592

Long-term deferred tax assets, net 991 881

Total assets $ 64,136 $ 62,923

LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of finance leases $ 84 $ 87

Accounts payable 5,971 3,526

Accrued expenses 8,162 8,209

Commissions and incentives payable 9,981 9,728

Taxes payable 1,609 2,187

Current notes payable 889 739

Deferred revenue 4,801 4,416

Total current liabilities 31,497 28,892

Finance leases, excluding current portion 178 176

Deferred tax liabilities 3 3

Long-term notes payable 92 363

Other long-term liabilities 7,727 6,214

Total liabilities 39,497 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 2,101,240shares outstanding as of June 30, 2020 and 2,742,857 - - shares issued and 2,381,131 shares outstanding as ofDecember 31, 2019

Additional paid-in capital 33,764 34,143

Retained earnings (accumulated deficit) 2,628 (690)

Accumulated other comprehensive income 2,671 3,757

Treasury stock, at average cost, 641,617 shares as ofJune 30, 2020 and 361,726 shares as of December 31, (14,424) (9,935) 2019

Total shareholders' equity 24,639 27,275

Total liabilities and shareholders' equity $ 64,136 $ 62,923

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Net sales $ 37,647 $ 40,711 $ 74,252 $ 78,684

Cost of sales 8,708 8,115 15,716 15,542

Gross profit 28,939 32,596 58,536 63,142

Operating expenses:

Commissions and incentives 15,330 16,295 30,219 31,494

Selling and administrative 7,165 8,381 14,020 15,957 expenses

Depreciation and amortization 537 517 1,057 1,045 expense

Other operating costs 4,797 5,384 10,118 11,507

Total operating expenses 27,829 30,577 55,414 60,003

Income from operations 1,110 2,019 3,122 3,139

Interest income (expense), net 13 25 63 (70)

Other (expense) income, net 166 980 (42) 984

Income before income taxes 1,289 3,024 3,143 4,053

Income tax (provision) benefit (159) (1,037) 775 (1,378)

Net income $ 1,130 $ 1,987 $ 3,918 $ 2,675

Earnings per common share:

Basic $ 0.48 $ 0.83 $ 1.65 $ 1.12

Diluted $ 0.47 $ 0.81 $ 1.62 $ 1.09

Weighted-average common shares outstanding:

Basic 2,370 2,394 2,380 2,395

Diluted 2,388 2,452 2,402 2,457

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

June 30, June 30, Constant $ Change 2020 2019

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

Net Sales $ 37.6 $ 39.1 $ 40.7 $ (1.6) (3.9) %

Product 37.0 38.5 39.9 (1.4) (3.5) %

Pack and associate fees 0.4 0.4 0.6 (0.2) (33.3) %

Other 0.2 0.2 0.2 - - %

Gross profit 28.9 30.0 32.6 (2.6) (8.0) %

Income from operations 1.1 1.3 2.0 (0.7) (35.0) %

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