Business Wire | Mar 19, 2021 07:00AM EDT

Mannatech Reports Fourth Quarter 2020 Financial Results

Mar. 19, 2021

FLOWER MOUND, Texas--(BUSINESS WIRE)--Mar. 19, 2021--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 fourth quarter of 2020.

Quarter End Results

Fourth quarter net sales for 2020 were $39.2 million, a decrease of $0.2 million, or 0.5%, as compared to $39.4 million in the fourth quarter of 2019. During the fourth quarter, our net sales declined 2.5% on a Constant dollar basis (a Non-GAAP financial measure); favorable foreign exchange during the fourth quarter caused an increase of $0.8 million in net sales as compared to the fourth quarter of 2019. Net income was $0.7 million, or $0.34 per diluted share, for the fourth quarter 2020, as compared to net income of $2.1 million, or $0.87 per diluted share, for the fourth quarter 2019.

Gross profit as a percentage of net sales decreased to 73.3% for the three months ended December 31, 2020, as compared to 78.9% for the same period in 2019.

Commissions as a percentage of net sales were 39.0% for the three months ended December 31, 2020, as compared to 39.9% for the same period in the prior year. Incentive costs as a percentage of net sales were 2.0% for the three months ended December 31, 2020, as compared to 0.9% for the same period in 2019.

For the three months ended December 31, 2020, overall selling and administrative expenses increased by $1.3 million to $7.2 million, as compared to $5.9 million for the same period in 2019. The increase in selling and administrative expenses consisted primarily of a $0.8 million increase in marketing costs, a $0.7 million increase in payroll related costs, which was partially offset by a $0.2 million decrease in contract labor costs.

For the three months ended December 31, 2020, other operating costs decreased by $0.8 million to $5.0 million, as compared to $5.9 million for the same period in 2019. The decrease in other operating costs was primarily due to a $0.4 million decrease in travel and entertainment costs associated with our corporate sponsored events, a $0.2 million decrease in legal and consulting fees, and a $0.2 million decrease in other operating expenses and sales tax adjustments.

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 our packs or products as of December 31, 2020 and 2019 were approximately 183,000 and 169,000, respectively. Recruiting increased 6.6% in the fourth quarter of 2020 as compared to the fourth quarter of 2019. The number of new independent associate and preferred customer positions in the company's network for the fourth quarter of 2020 was 19,675 as compared to 18,462 in 2019.

Year End Results

Overall net sales decreased $6.3 million, or 4.0%, for 2020, as compared to 2019. During 2020, fluctuations in foreign currency exchange rates had an overall unfavorable impact on our net sales. During 2020, our net sales declined 2.7% on a Constant dollar basis (a Non-GAAP financial measure); while unfavorable foreign exchange during 2020 caused a decrease of $2.1 million in net sales as compared to 2019. Net income for 2020 was $6.3 million, or $2.77 per diluted share, as compared to net income of $3.3 million, or $1.35 per diluted share, for 2019.

Gross profit as a percentage of net sales decreased to 76.5% for 2020, as compared to 80.0% for 2019.

Commission expenses decreased for the year ended December 31, 2020, by 4.9%, or $3 million to $58.7 million, as compared to $61.7 million for the same period in 2019. Commissions as a percentage of net sales were 38.8% for the year ending December 31, 2020 and 39.1% for the same period in the prior year.

Incentive costs increased for the year ended December 31, 2020 by 3.8%, or $0.1 million, to $2.7 million, as compared to $2.6 million, for the same period in 2019. The costs of incentives, as a percentage of net sales increased to 1.8% for the year ended December 31, 2020, as compared to 1.6% for the same period in 2019.

For the year ended December 31, 2020, overall selling and administrative expenses decreased by $3.0 million, or 9.7%, to $27.8 million, as compared to $30.8 million for the same period in 2019. The decrease in selling and administrative expenses consisted of a $2.5 million decrease in payroll costs, a $0.3 million decrease in stock-based compensation and a $0.2 million decrease in contract labor costs.

For the year ended December 31, 2020, other operating costs decreased by $2.4 million, or 10.4%, to $20.2 million, as compared to $22.6 million for the same period in 2019. For the year ended December 31, 2020, other operating costs, as a percentage of net sales, were 13.4%, as compared to 14.3% for the same period in 2019. The decrease was due to a $1.2 million decrease in travel and entertainment costs, a $0.6 million decrease in office expenses, a $0.3 million decrease in legal and consulting fees, and a $0.3 million decrease in credit card fees, sales tax adjustments and other operating costs.

For the year ended December 31, 2020, our tax benefit was $0.5 million and for the comparable period of 2019, our tax provision was $2.5 million. For 2020, the Company had a significant decrease due to the carryback of U.S. net operating losses as allowed by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), enacted on March 27, 2020. For 2019, the Company's provision was impacted by the mix of earnings across jurisdictions, valuation allowance recorded on certain losses.

As of December 31, 2020, our cash and cash equivalents decreased by 10.5%, or $2.6 million, to $22.2 million from $24.8 million as of December 31, 2019. For the year ended December 31, 2020 operations generated $6.0 million of cash. During the year ended December 31, 2020, we invested $0.9 million in computer hardware and software. During this period, our financing activities included repayments of $0.6 million to other long term liabilities and finance lease obligations. Finally, we are proud that we have returned shareholder value with $3.4 million for dividends to shareholders and repurchases of $5.9 million in common stock.

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 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.

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)

December 31, December 31, 2020 2019

ASSETS

Cash and cash equivalents $ 22,207 $ 24,762

Restricted cash 944 943

Accounts receivable, net of allowance of $817 and 186 955 $708 in 2020 and 2019, respectively

Income tax receivable 1,008 220

Inventories, net 12,827 10,152

Prepaid expenses and other current assets 2,962 2,239

Deferred commissions 2,343 1,758

Total current assets 42,477 41,029

Property and equipment, net 4,494 5,261

Construction in progress 864 865

Long-term restricted cash 4,346 5,295

Other assets 11,977 9,592

Deferred tax assets, net 1,178 881

Total assets $ 65,336 $ 62,923

LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of finance leases $ 76 $ 87

Accounts payable 4,797 3,526

Accrued expenses 8,691 8,209

Commissions and incentives payable 10,998 9,728

Taxes payable 1,400 2,187

Current notes payable 553 739

Deferred revenue 5,472 4,416

Total current liabilities 31,987 28,892

Finance leases, excluding current portion 129 176

Deferred tax liabilities 3 3

Long-term notes payable - 363

Other long-term liabilities 7,245 6,214

Total liabilities 39,364 35,648

Commitments and contingencies (Note 11)

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 2,071,081shares outstanding as of December 31, 2020 and - - 2,742,857 shares issued and 2,381,131 sharesoutstanding as of December 31, 2019

Additional paid-in capital 33,795 34,143

Retained Earnings (accumulated deficit) 2,213 (690 )

Accumulated other comprehensive income 5,150 3,757

Treasury stock, at average cost, 671,776 shares asof December 31, 2020 and 361,726 shares as of (15,186 ) (9,935 ) December 31, 2019, respectively

Total shareholders' equity 25,972 27,275

Total liabilities and shareholders' equity $ 65,336 $ 62,923

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

For the three months ended December 31,

For the years ended December 31,

2020

2019

2020

2019

Net sales

$

39,189

$

39,388

$

151,407

$

157,728

Cost of sales

10,461

8,297

35,505

31,550

Gross profit

28,728

31,091

115,902

126,178

Operating expenses:

Commissions and incentives

16,041

16,064

61,349

64,254

Selling and administrative expenses

7,186

5,916

27,845

30,824

Depreciation and amortization

465

524

1,990

2,088

Other operating costs

5,047

5,858

20,227

22,579

Total operating expenses

28,739

28,362

111,411

119,745

Income (loss) from operations

(11

)

2,729

4,491

6,433

Interest income (expense)

10

67

83

(16

)

Other income (expense), net

945

(1,235

)

1,151

(681

)

Income before income taxes

944

1,561

5,725

5,736

Income tax (provision) benefit

(217

)

544

536

(2,447

)

Net income

$

727

$

2,105

$

6,261

$

3,289

Income per common share:

Basic

$

0.35

$

0.88

$

2.80

$

1.38

Diluted

$

0.34

$

0.87

$

2.77

$

1.35

Weighted-average common shares outstanding:

Basic

2,085

2,385

2,235

2,391

Diluted

2,121

2,415

2,264

2,441

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 fourth quarter 2020 constant dollar sales to GAAP sales.

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

For the three months For the years ended ended December 31, December 31,

2020 2019 2020 2019

Net sales $ 39,189 $ 39,388 $ 151,407 $ 157,728

Cost of sales 10,461 8,297 35,505 31,550

Gross profit 28,728 31,091 115,902 126,178

Operating expenses:

Commissions and 16,041 16,064 61,349 64,254 incentives

Selling andadministrative 7,186 5,916 27,845 30,824 expenses

Depreciation and 465 524 1,990 2,088 amortization

Other operating costs 5,047 5,858 20,227 22,579

Total operating 28,739 28,362 111,411 119,745 expenses

Income (loss) from (11 ) 2,729 4,491 6,433 operations

Interest income 10 67 83 (16 ) (expense)

Other income 945 (1,235 ) 1,151 (681 ) (expense), net

Income before income 944 1,561 5,725 5,736 taxes

Income tax (217 ) 544 536 (2,447 ) (provision) benefit

Net income $ 727 $ 2,105 $ 6,261 $ 3,289

Income per common share:

Basic $ 0.35 $ 0.88 $ 2.80 $ 1.38

Diluted $ 0.34 $ 0.87 $ 2.77 $ 1.35

Weighted-averagecommon shares outstanding:

Basic 2,085 2,385 2,235 2,391

Diluted 2,121 2,415 2,264 2,441

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 fourth quarter 2020 constant dollar sales to GAAP sales.

Sales - Q4 2020

GAAP Non-GAAP Constant $ Measure: Measure: Change Total $ Constant $

Americas $ 10.8 $ 10.9 $ 0.1

Asia Pacific $ 24.2 $ 23.2 (1.0 )

EMEA $ 4.2 $ 4.3 0.1

Total $ 39.2 $ 38.4 $ (0.8 )

The table below reconciles fiscal year 2019 and 2020 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.

2020 2019 Constant Dollar Change

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

Net sales 151.4 153.5 $ 157.7 (4.2 ) (2.7 ) %

Product 146.2 148.2 154.6 (6.4 ) (4.1 ) %

Pack and associate fees 4.2 4.2 2.3 1.9 82.6 %

Other 1.0 1.1 0.8 0.3 37.5 %

Gross profit 115.9 117.3 126.2 (8.9 ) (7.1 ) %

Income (loss) from 4.5 4.8 6.4 (1.6 ) (25.0 ) %operations

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