Business Wire | May 11, 2021 06:00AM EDT

Mannatech Reports First Quarter End 2021 Financial Results

May 11, 2021

FLOWER MOUND, Texas--(BUSINESS WIRE)--May 11, 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 first quarter of 2021.

First Quarter End Results

First quarter net sales for 2021 were $38.3 million, an increase of $1.7 million, or 4.7%, as compared to $36.6 million in the first quarter of 2020. Income from operations increased to $2.8 million for the first quarter of 2021, from $2.0 million in the same period in 2020.

Net income was $2.2 million, or $1.04 per diluted share, for the first quarter of 2021, as compared to net income of $2.8 million, or $1.15 per diluted share, for the first quarter of 2020.

Gross profit as a percentage of sales increased to 81.2% for the three months ended March 31, 2021, as compared to 80.9% for the same period in 2020.

Commission and incentives as a percentage of net sales remained constant at 40.7% for each of the three months ended March 31, 2021 and 2020.

For the three months ended March 31, 2021, overall selling and administrative expenses increased by $0.2 million to $7.1 million, as compared to $6.9 million for the same period in 2020. The increase in selling and administrative expenses was due to a $0.3 million increase in payroll costs, a $0.1 million increase in marketing costs, which was partially offset by a $0.1 million decrease in stock-based compensation and a $0.1 million decrease in contract labor costs.

For the three months ended March 31, 2021, other operating costs decreased by $0.2 million, or 4.4%, to $5.1 million, as compared to $5.3 million for the same period in 2020. The decrease in operating costs was primarily due to a $0.3 million decrease in travel and entertainment and a $0.1 million decrease in office expenses, which was partially offset by a $0.2 million increase in consulting fees.

For the three months ended March 31, 2021, provision for taxes was $0.3 million, or an effective rate of 13.3%. For the three months ended March 31, 2020, taxes were a $0.9 million benefit. The effective tax rate for the three months ended March 31, 2021 was different from the federal statutory rate due primarily to the mix of earnings across jurisdictions and the associated valuation allowance recorded on losses in certain jurisdictions.The effective tax rate for the three months ended March 31, 2020 was different from the federal statutory rate due primarily to the $1.2 million benefit recorded in connection with the carryback of U.S. net operating losses as allowed by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), enacted March 27, 2020.

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 March 31, 2021 and 2020 were approximately 187,000 and 166,000, respectively. Recruitment increased 4.6% in the first quarter of 2021 as compared to the first quarter of 2020. The number of new independent associate and preferred customer positions in the company's network for the first quarter of 2021 was approximately 19,538 as compared to 18,687 in 2020.

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, the availability and effectiveness of vaccines on a widespread basis, the impact of any mutations of the COVID-19 virus, 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)

March 31, December 31,ASSETS 2021 2020 (unaudited)

Cash and cash equivalents $ 23,576 $ 22,207

Restricted cash 944 944

Accounts receivable, net of allowance of $872 and 225 186 $817 in 2021 and 2020, respectively

Income tax receivable 536 1,008

Inventories, net 13,625 12,827

Prepaid expenses and other current assets 3,645 2,962

Deferred commissions 2,220 2,343

Total current assets 44,771 42,477

Property and equipment, net 3,949 4,494

Construction in progress 976 864

Long-term restricted cash 3,126 4,346

Other assets 10,866 11,977

Long-term deferred tax assets, net 1,053 1,178

Total assets $ 64,741 $ 65,336

LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of finance leases $ 89 $ 76

Accounts payable 4,836 4,797

Accrued expenses 7,369 8,691

Commissions and incentives payable 11,804 10,998

Taxes payable 1,251 1,400

Current notes payable 755 553

Deferred revenue 5,788 5,472

Total current liabilities 31,892 31,987

Finance leases, excluding current portion 111 129

Deferred tax liabilities 3 3

Long-term notes payable - -

Other long-term liabilities 6,392 7,245

Total liabilities 38,398 39,364



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 2,063,280shares outstanding as of March 31, 2021 and - - 2,742,857 shares issued and 2,071,081 sharesoutstanding as of December 31, 2020

Additional paid-in capital 33,757 33,795

Retained earnings 4,074 2,213

Accumulated other comprehensive income 3,794 5,150

Treasury stock, at average cost, 679,577 shares asof March 31, 2021 and 671,776 shares as of December (15,282 ) (15,186 ) 31, 2020

Total shareholders' equity 26,343 25,972

Total liabilities and shareholders' equity $ 64,741 $ 65,336

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

Three Months Ended March 31,

2021

2020

Net sales

$

38,319

$

36,605

Cost of sales

7,222

7,008

Gross profit

31,097

29,597

Operating expenses:

Commissions and incentives

15,598

14,889

Selling and administrative expenses

7,111

6,855

Depreciation and amortization expense

510

520

Other operating costs

5,089

5,322

Total operating expenses

28,308

27,586

Income from operations

2,789

2,011

Interest income, net

22

50

Other expense, net

(282

)

(208

)

Income before income taxes

2,529

1,853

Income tax (provision) benefit

(335

)

934

Net income

$

2,194

$

2,787

Earnings per common share:

Basic

$

1.06

$

1.17

Diluted

$

1.04

$

1.15

Weighted-average common shares outstanding:

Basic

2,071

2,391

Diluted

2,116

2,415

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 first quarter 2021 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 March 31,

2021 2020

Net sales $ 38,319 $ 36,605

Cost of sales 7,222 7,008

Gross profit 31,097 29,597

Operating expenses:

Commissions and incentives 15,598 14,889

Selling and administrative expenses 7,111 6,855

Depreciation and amortization expense 510 520

Other operating costs 5,089 5,322

Total operating expenses 28,308 27,586

Income from operations 2,789 2,011

Interest income, net 22 50

Other expense, net (282 ) (208 )

Income before income taxes 2,529 1,853

Income tax (provision) benefit (335 ) 934

Net income $ 2,194 $ 2,787

Earnings per common share:

Basic $ 1.06 $ 1.17

Diluted $ 1.04 $ 1.15

Weighted-average common shares outstanding:

Basic 2,071 2,391

Diluted 2,116 2,415

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 first quarter 2021 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.

March 31, March 31, 2021 2020 Constant $ Change

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

Net Sales $ 38.3 $ 36.8 $ 36.6 $ 0.2 0.5 %

Product 35.9 34.6 35.9 (1.3 ) (3.6 )%

Pack and associate 2.2 2.1 0.5 1.6 320.0 %fees

Other 0.2 0.2 0.2 - - %

Gross profit 31.1 29.9 29.6 0.3 1.0 %

Income from operations 2.8 2.4 2.0 0.4 20.0 %

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