UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2025 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________. Commission File No. 000-24657 MANNATECH, INCORPORATED (Exact Name of Registrant as Specified in its Charter) (State or other Juris ...

Financial Performance - Consolidated net sales for Q1 2025 were $26.6 million, a decrease of $2.8 million or 9.6% compared to $29.4 million in Q1 2024, primarily due to slowing demand in Asia [118]. - The net loss for Q1 2025 was $1.5 million, or $0.80 per diluted share, compared to a net income of $1.2 million, or $0.63 per diluted share in Q1 2024 [120]. - Net sales in the Americas decreased by $1.2 million, or 11.8%, to $9.0 million in Q1 2025, while Asia/Pacific net sales decreased by $1.7 million, or 9.9%, to $15.4 million [124][125]. - Product sales decreased by $2.4 million, or 8.6%, in Q1 2025, with a decrease in average order value to $153 from $168 in Q1 2024 [128]. - Gross profit for the three months ended March 31, 2025, decreased by $3.4 million, or 14.6%, to $19.7 million, with gross profit as a percentage of net sales decreasing to 74.3% from 78.6% in 2024 [136]. Customer Metrics - Active independent associates and preferred customers decreased by 12.0% to approximately 129,000 as of March 31, 2025, down from 143,000 in the same period last year [130]. - Recruitment of new independent associates and preferred customers decreased by 13.9% to 13,749 in Q1 2025 compared to 15,970 in Q1 2024 [129]. - Pack sales and associate fees decreased by $0.4 million, or 36.4%, to $0.7 million for the three months ended March 31, 2025, compared to $1.1 million in 2024 [132]. Operating Expenses - Total operating expenses decreased by $1.7 million, or 7.7%, to $20.6 million in Q1 2025, with commissions and incentives accounting for 39.7% of net sales [121]. - Commission expense decreased by 10.5%, or $1.2 million, to $10.0 million for the three months ended March 31, 2025, with commissions as a percentage of net sales decreasing to 37.7% from 38.1% in 2024 [137]. - Selling and administrative expenses decreased by $0.6 million, or 5.4%, to $10.0 million for the three months ended March 31, 2025, with expenses as a percentage of net sales increasing to 37.7% from 36.0% in 2024 [140]. Cash Flow and Working Capital - Cash and cash equivalents decreased by 18.2%, or $2.1 million, to $9.3 million as of March 31, 2025, from $11.4 million as of December 31, 2024 [146]. - Working capital decreased to $4.0 million as of March 31, 2025, from $5.2 million as of December 31, 2024 [148]. - Net cash flows from operating activities used $1.4 million for the three months ended March 31, 2025, compared to cash provided of $1.9 million in the same period in 2024 [150]. Tax and Regulatory Matters - The effective tax rate for the three months ended March 31, 2025, was (15.1)%, compared to 36.0% in 2024 [144]. - As of March 31, 2025, there were no uncertain income tax positions recorded in long-term liabilities, indicating a stable tax position [166]. - There are ongoing income tax audits in various international jurisdictions, but these are not expected to materially affect financial statements [166]. Business Strategy and Risk Management - The company has established a business reorganization plan focusing on revenue growth, margin improvement, and cost control [157]. - The company changed its shipping terms, now recognizing revenue upon delivery to the freight carrier, which affects revenue recognition timing [168]. - The company does not engage in trading market risk-sensitive instruments, maintaining a conservative approach to market risk management [175]. - Currency exchange rate fluctuations could positively or negatively impact consolidated financial results, emphasizing the importance of monitoring foreign currency exposure [176]. - The company maintains a portion of cash and cash equivalents in foreign currencies to meet anticipated working capital requirements [177]. - The company does not use financial instruments to manage exposure to market risks, relying instead on internal monitoring processes [177]. Customer Policies - Sales returns have historically averaged 0.5% or less of gross sales, indicating effective management of product returns [173]. - Retail customers can return products for a full cash refund within 180 days in the U.S. and Canada, and 90 days in other countries, reflecting a customer-friendly return policy [174]. - The company has implemented a satisfaction guarantee refund policy for associates and preferred customers, enhancing customer satisfaction [174].

Company Overview - As of December 31, 2024, Mannatech had approximately 133,000 active associate and preferred customer positions[23]. - The company operates in three regions: the Americas, EMEA, and Asia/Pacific, with a focus on network marketing distribution channels[22]. - Mannatech's product offerings include proprietary nutritional supplements, skin care, anti-aging products, and weight-management products[28]. - Mannatech's subsidiary in China operates under a cross-border e-commerce model, allowing consumers to purchase products online[24]. - The company has 38 registered trademarks in the United States and 532 registered trademarks in 35 foreign jurisdictions as of December 31, 2024[63]. Product Development and Offerings - In 2024, Mannatech launched new products including TruEdge Coffee, TruEdge Energy, and TruHealth Satiety in the United States[36]. - Mannatech's revenue is significantly derived from products such as Ambrotose Life, TruHealth, and Optimal Support Packets[36]. - The company continues to focus on product development targeting overall health and wellness, considering new products and compounds[36]. - The company is focused on developing new products and enhancing existing ones, with a commitment to using high-quality, effective ingredients[60]. - The company holds 74 patents related to its product formulations, with 17 patents specifically for the Ambrotose formulation across 15 foreign jurisdictions[64]. Quality Assurance and Compliance - The company has established a quality assurance program to ensure compliance with Good Manufacturing Practices and maintain product safety and quality[50]. - The FDA regulates the formulation, manufacturing, and labeling of dietary supplements, which are a significant portion of the company's products[83]. - The company is committed to complying with various regulations, including those related to dietary supplements and marketing practices[92]. - The company operates under extensive regulations across three regions: Americas, EMEA, and Asia/Pacific, ensuring compliance with local laws[94]. - The company is subject to extensive laws and regulations concerning product formulation, manufacturing, and marketing, which could adversely affect its operations if not complied with[199]. Financial Performance and Risks - The company aims to strengthen financial results by increasing revenues in both domestic and foreign operations while controlling operating costs[57]. - The company experienced an 8.6% decrease in net sales on a Constant dollar basis for 2024, with unfavorable foreign exchange causing a $2.7 million decrease in GAAP net sales compared to 2023[179]. - The company is subject to liquidity risk, which could adversely affect its financial condition and results of operations[174]. - The company has outstanding debt of $2.9 million as of December 31, 2024, with an interest payable of $0.1 million, related to unsecured loans from board members[173]. - The company is exposed to product liability claims, which could lead to significant financial liability and adversely affect overall financial condition[148]. Associate Management and Compensation - The company emphasizes attracting and retaining independent associates through a global career and compensation plan, offering incentives to enhance motivation and productivity[58]. - The global associate career and compensation plan offers commissions and incentives ranging from 35% to 43% of consolidated net sales[70]. - Independent associates can earn commissions based on a point system that calculates a percentage of their direct and indirect net product sales[71]. - The company actively monitors independent associates' sales activities and provides training and promotional materials to support their efforts[72]. - The company is subject to risks related to the loss of key independent associate leaders, which could negatively impact revenue and associate growth[133]. Regulatory Environment - The company must comply with Canada's Federal Competition Act, ensuring fair and reasonable disclosure of compensation to independent associates[98]. - In Mexico, product sales must adhere to the Consumer Protection Law and various health regulations enforced by the Health Ministry[99]. - The network marketing system in Australia is regulated by the Trade Practices Act, ensuring compliance with local business practices[101]. - The company’s operations in China require a direct selling license, and dietary supplements must be registered with the China Food Safety Administration[108]. - Regulatory scrutiny of nutritional supplements is increasing, with potential new regulations that could impose additional restrictions and increase operational costs[206]. Technology and Innovation - The company utilizes advanced artificial intelligence technologies to enhance customer experience and optimize marketing execution[79]. - A comprehensive management tool called Success Tracker is available for independent associates to manage and optimize their business organizations[80]. - The company utilizes artificial intelligence in its operations, and challenges in managing its use could result in reputational harm and adversely affect results of operations[164]. - The company has implemented practices to maintain the availability of its information technology systems, but unplanned outages or technical difficulties could harm its business[166]. Market Competition - The company faces intense competition in the nutritional supplement industry, with key competitors including Herbalife Nutrition Ltd. and GNC Holdings, Inc.[126]. - The global nutrition and skin care industries are highly competitive, and competitors with greater resources may adversely affect the company's market share and business[153]. - The company is subject to changing consumer preferences and demand for new products, which could negatively impact sales and financial condition if not addressed timely[142]. Corporate Governance and Shareholder Matters - As of December 31, 2024, directors and executive officers, along with their families and affiliates, owned approximately 43.81% of the total outstanding common stock, allowing significant influence over corporate transactions[212]. - The company received a notice from Nasdaq on August 19, 2024, indicating non-compliance with the minimum net equity requirement of $10.0 million, leading to a transfer of its common stock listing to the Nasdaq Capital Market on September 30, 2024[216][217]. - Continued listing on Nasdaq is contingent upon compliance with various standards, and failure to meet these could result in delisting, affecting liquidity and investor interest[218]. - The company is classified as a "smaller reporting company," which may result in reduced disclosure requirements, potentially making its common stock less attractive to investors[221]. - The stock price is subject to significant volatility due to various factors, including market conditions and company performance[211].

Financial Performance - Net sales for Q3 2024 were $31.7 million, a decrease of $0.9 million or 2.5% compared to Q3 2023[2] - Net sales for Q3 2024 were $31.725 million, a decrease of 2.5% from $32.553 million in Q3 2023[9] - For the nine months ended September 30, 2024, net sales were $88.858 million, down 10.5% from $99.261 million in the same period of 2023[9] - Constant dollar net sales for Q3 2024 were $32.2 million, reflecting a decrease of 1.2% compared to Q3 2023[11] - The translation adjustment for nine months ended September 30, 2024, resulted in a non-GAAP measure of constant dollar net sales of $90.8 million, down 8.6% from the prior year[12] Profitability - Gross profit margin decreased to 74.5% in Q3 2024 from 79.6% in Q3 2023, attributed to increased freight costs and sales promotions[2] - Gross profit for Q3 2024 was $23.620 million, down 8.9% from $25.928 million in Q3 2023[9] - The gross profit for the nine months ended September 30, 2024, was $68.095 million, a decrease of 12.9% from $78.219 million in 2023[9] - Income from operations increased to $0.9 million in Q3 2024, compared to $0.2 million in the same period last year[2] - The income from operations for the nine months ended September 30, 2024, was $565,000, compared to a loss of $69,000 in the same period of 2023[9] - The company experienced a significant increase in income from operations of 400.0% in Q3 2024 when adjusted for constant dollars[11] Expenses - Commission expenses decreased by 2.0% to $12.2 million in Q3 2024, while commissions as a percentage of net sales increased to 38.3%[2] - Selling and administrative expenses decreased by 21.8% to $9.8 million in Q3 2024, down from $12.6 million in Q3 2023[2] - Operating expenses decreased to $22.733 million in Q3 2024 from $25.756 million in Q3 2023, a reduction of 11.8%[9] Net Income/Loss - Net loss for Q3 2024 was $0.3 million, or $0.17 per diluted share, compared to net income of $18,000, or $0.01 per diluted share in Q3 2023[2] - The company reported a net loss of $328,000 in Q3 2024 compared to a net income of $18,000 in Q3 2023[9] Cash Position - Cash and cash equivalents increased by 57.2% to $12.2 million as of September 30, 2024, from $7.7 million at the end of 2023[2] - Foreign exchange effects decreased the company's cash position by $0.6 million in the nine months ended September 30, 2024, compared to a $2.3 million effect in the same period in 2023[2] Customer Base - The number of independent associates and preferred customers decreased to approximately 136,000, down 28.1% from 146,000 in Q3 2023[2] Future Outlook - The company anticipates continued economic difficulties for the remainder of 2024 but aims to grow revenue by expanding its sales associate team and customer base[3]

Financial Performance - Consolidated net sales for Q3 2024 were $31.7 million, a decrease of $0.9 million or 2.5% compared to Q3 2023[84]. - For the nine months ended September 30, 2024, consolidated net sales were $88.9 million, down $10.4 million or 10.5% from the same period in 2023[84]. - Net loss for Q3 2024 was $0.3 million, or $0.17 per diluted share, compared to a net income of $18,000, or $0.01 per diluted share in Q3 2023[84]. - For the nine months ended September 30, 2024, net income was $0.2 million, or $0.12 per diluted share, compared to a net loss of $0.5 million, or $0.26 per diluted share in the same period of 2023[84]. - The company reported a decrease in Constant dollar net sales of $0.4 million or 1.2% for Q3 2024 compared to Q3 2023[89]. - Net sales for the three months ended September 30, 2024, decreased by $0.9 million, or 2.9%, to $31.7 million compared to $32.6 million for the same period in 2023[90]. - For the nine months ended September 30, 2024, net sales totaled $88.9 million, down $8.5 million or 8.8% from $99.3 million in the same period in 2023[90]. Gross Profit and Margins - Gross profit margin for Q3 2024 decreased by 2.2% due to increased product costs and $0.6 million in inventory markdowns[84]. - Gross profit for the three months ended September 30, 2024, was $23.6 million, a decrease of $1.9 million or 7% from $25.9 million in the same period last year[90]. - Gross profit for the three months ended September 30, 2024, decreased by $2.3 million, or 8.9%, to $23.6 million, with gross profit as a percentage of net sales dropping to 74.5% from 79.6% in 2023[102]. Operating Expenses - Total operating expenses for Q3 2024 were $22.7 million, a decrease of $3.0 million or 11.7% from Q3 2023[86]. - Commissions and incentives for Q3 2024 were $12.9 million, a decrease of $0.3 million or 2.2% compared to Q3 2023[86]. - Selling and administrative expenses for the three months ended September 30, 2024, decreased by $2.8 million, or 21.8%, to $9.8 million, with expenses as a percentage of net sales decreasing to 31.0% from 38.6% in 2023[106]. - Commission expense for the three months ended September 30, 2024, decreased by 2.0%, or $0.2 million, to $12.2 million, while for the nine months, it decreased by 9.2%, or $3.5 million, to $34.5 million[103]. Foreign Currency and Tax - The company experienced a net realized and unrealized foreign currency loss of $1.5 million in Q3 2024, compared to a gain of $0.3 million in Q3 2023[84]. - The effective tax rate for the three months ended September 30, 2024, was 83.9%, significantly higher than the 43.0% for the same period in 2023[112]. - As of September 30, 2024, there were no uncertain income tax positions recorded in other long-term liabilities on the balance sheet[127]. - There are ongoing income tax audits in various international jurisdictions, but these are not expected to materially impact financial statements[127]. Cash Flow and Working Capital - As of September 30, 2024, cash and cash equivalents increased by 57.2%, or $4.5 million, to $12.2 million from $7.7 million as of December 31, 2023[114]. - Operating activities provided $2.5 million cash for the nine months ended September 30, 2024, compared to a use of $1.0 million in the same period in 2023[116]. - Financing activities provided cash of $2.9 million for the nine months ended September 30, 2024, compared to a use of $1.6 million in the same period in 2023[118]. - Working capital increased to $5.7 million as of September 30, 2024, from $1.9 million as of December 31, 2023[115]. Sales and Recruitment - Recruitment of new independent associates decreased by 28.1% to 16,741 in Q3 2024 compared to 23,296 in Q3 2023[99]. - Product sales for the three months ended September 30, 2024, decreased by $0.9 million, or 2.9%, reflecting a 6.4% decrease in the number of orders processed[98]. - The average order value decreased to $178 for the three months ended September 30, 2024, compared to $177 for the same period in 2023[98]. - Other sales for the three months ended September 30, 2024, were $0.3 million, a decrease from $0.4 million in the same period in 2023, while for the nine months, other sales increased to $1.2 million from $0.7 million[101]. Inventory and Revenue Recognition - The company changed its shipping terms, recognizing revenue upon delivery to the freight carrier, which resulted in recording orders shipped but not yet delivered as deferred revenue[129]. - Historical sales returns have averaged 0.5% or less of gross sales, indicating stable return estimates[130]. - The company monitors inventory for obsolescence and adjusts reserves based on demand, expiration dates, and future sales projections[126]. - The determination of net realizable value for inventory requires significant judgment, considering factors like inventory turnover and consumer demand[126]. - Revenue is derived from product sales and associated fees, with a reserve for expected sales returns based on historical experience[128]. - The company provides associates with a complimentary three-month package for online business tools upon the first payment of an associate fee, which includes multiple performance obligations[129]. Geographic Sales Performance - The Americas accounted for 34.2% of consolidated net sales for the nine months ended September 30, 2024, down from 32.0% in the same period last year[94]. - Asia/Pacific net sales for the nine months ended September 30, 2024, decreased by $8.4 million, or 14%, to $51.6 million compared to $60.0 million in the same period in 2023[94]. - EMEA net sales for the three months ended September 30, 2024, increased by $0.2 million, or 8.7%, to $2.5 million compared to $2.3 million in the same period in 2023[94].

Sales Performance - Net sales for Q2 2024 decreased by $4.9 million (14.9%) to $27.7 million compared to $32.6 million in Q2 2023, primarily due to supply chain constraints and economic weakening in Asia[3] - Asia/Pacific region sales accounted for 57.4% of total sales in Q2 2024, down from 59.2% in Q2 2023, reflecting weaker economic conditions[10] - Q2 2024 GAAP net sales were $27.7 million, with a constant dollar adjustment of $0.7 million, resulting in non-GAAP net sales of $28.4 million, a 12.9% decrease compared to Q2 2023[12] - YTD 2024 GAAP net sales were $57.1 million, with a constant dollar adjustment of $1.5 million, resulting in non-GAAP net sales of $58.6 million, a 12.1% decrease compared to YTD 2023[13] Profitability and Margins - Gross profit margin decreased to 77.1% in Q2 2024 from 78.5% in Q2 2023, driven by increased freight costs and sales promotions[3] - Q2 2024 GAAP gross profit was $21.4 million, with a constant dollar adjustment of $0.5 million, resulting in non-GAAP gross profit of $21.9 million, a 14.5% decrease compared to Q2 2023[12] - YTD 2024 GAAP gross profit was $44.5 million, with a constant dollar adjustment of $1.2 million, resulting in non-GAAP gross profit of $45.7 million, a 12.6% decrease compared to YTD 2023[13] Expenses and Costs - Commission expenses decreased by 12.5% ($1.6 million) to $11.1 million in Q2 2024, but as a percentage of net sales, it increased to 40.0% from 38.9% in Q2 2023[3] - Selling and administrative expenses decreased by 17.0% ($2.2 million) to $10.9 million in Q2 2024, with payroll costs reduced by $0.9 million and legal fees by $0.7 million[3] Net Loss and Operational Performance - Net loss for Q2 2024 was $0.6 million ($0.33 per diluted share), compared to a net loss of $1.1 million ($0.59 per diluted share) in Q2 2023[3] - Q2 2024 GAAP loss from operations was $1.1 million, with a constant dollar adjustment of $0.1 million, resulting in non-GAAP loss from operations of $1.0 million, unchanged from Q2 2023[12] - YTD 2024 GAAP loss from operations was $0.3 million, with a constant dollar adjustment of $0.4 million, resulting in non-GAAP income from operations of $0.1 million, a 150.0% change compared to YTD 2023[13] Cash and Financial Position - Cash and cash equivalents increased by 18.9% ($1.5 million) to $9.2 million as of June 30, 2024, compared to $7.7 million at the end of 2023[3] - Foreign exchange gains contributed $1.1 million in Q2 2024, including a one-time gain of $0.2 million from the liquidation of the company's entity in Sweden[3] Associate and Customer Metrics - The number of independent associates and preferred customers remained constant at approximately 142,000 as of June 30, 2024, with a 21% decrease in associate attrition rate[5] Outlook and Strategy - The company expects continued economic challenges for the remainder of 2024 but remains committed to increasing revenues through disciplined cost controls and expanding its sales network[6]

Financial Performance - Consolidated net sales for Q2 2024 were $27.7 million, a decrease of $4.9 million or 14.9% compared to Q2 2023's $32.6 million[75]. - For the first half of 2024, consolidated net sales were $57.1 million, down $9.6 million or 14.4% from $66.7 million in the same period of 2023[75]. - The company achieved a net loss of $0.6 million for Q2 2024, an improvement from a net loss of $1.1 million in Q2 2023[75]. - For the first half of 2024, the company reported a net income of $0.6 million, compared to a net loss of $0.5 million in the same period of 2023[75]. - For the three months ended June 30, 2024, consolidated net sales decreased by $4.9 million, or 15.0%, to $27.7 million compared to $32.6 million for the same period in 2023[82]. - For the six months ended June 30, 2024, consolidated net sales decreased by $9.6 million, or 14.4%, to $57.1 million compared to $66.7 million for the same period in 2023[84]. Cost and Expenses - Gross profit margin decreased by 1.4% due to supply chain disruptions, leading to increased fulfillment costs[75]. - Commissions and incentives decreased by $1.8 million or 13.4% in Q2 2024 compared to Q2 2023[77]. - Selling and administrative expenses were reduced by $2.2 million or 17.0% in Q2 2024 compared to Q2 2023[77]. - Commission expense for Q2 2024 decreased by 12.5% to $11.1 million from $12.7 million in Q2 2023, while as a percentage of net sales, it increased to 40.0% from 38.9%[93]. - Selling and administrative expenses for Q2 2024 decreased by 17.0% to $10.9 million from $13.1 million in Q2 2023, with expenses as a percentage of net sales decreasing to 39.1% from 40.1%[94]. Sales and Revenue Trends - Net sales in the Americas for the three months ended June 30, 2024, decreased by $1.1 million, or 10.4%, to $9.5 million, while Asia/Pacific net sales decreased by $3.4 million, or 17.6%, to $15.9 million[84]. - Revenue per active independent associate and preferred customer decreased by 13.3% for the three months ended June 30, 2024, partially offset by a 3.3% increase in the number of active independent associates and preferred customers[84]. - Recruitment of new independent associates and preferred customers decreased by 13.6% to 16,690 in the second quarter of 2024 from 19,309 in the second quarter of 2023[89]. - Product sales for the three months ended June 30, 2024, decreased by $4.7 million, or 15.2%, reflecting a 7.9% decrease in the number of orders processed[88]. - For the six months ended June 30, 2024, product sales decreased by $8.7 million, or 13.8%, with a decrease in average order value to $167 compared to $179 for the same period in 2023[88]. Foreign Currency and Tax - Foreign currency gains contributed $1.1 million in Q2 2024, including a one-time gain of $0.2 million from the liquidation of the Swedish entity[75]. - Foreign exchange gains for Q2 2024 were $1.1 million compared to $0.2 million in Q2 2023, and for the six months ended June 30, 2024, gains were $2.0 million compared to $0.5 million in the same period in 2023[96]. - Income tax expense for Q2 2024 was $0.5 million, up from $0.3 million in Q2 2023, with an effective tax rate of (277.4)% for Q2 2024 compared to (20.8)% for Q2 2023[97][98]. - As of June 30, 2024, there were no uncertain income tax positions recorded in long-term liabilities, indicating a stable tax position[113]. - The company has ongoing income tax audits in various international jurisdictions, which are not expected to materially affect financial statements[113]. Cash Flow and Working Capital - Cash and cash equivalents increased by 18.9% to $9.2 million as of June 30, 2024, from $7.7 million as of December 31, 2023[100]. - Working capital improved to $4.0 million as of June 30, 2024, up from $1.9 million as of December 31, 2023[101]. - Operating activities used $0.8 million in cash for the six months ended June 30, 2024, an improvement from $1.3 million used in the same period in 2023[102]. - Financing activities provided cash of $3.1 million for the six months ended June 30, 2024, compared to a cash use of $1.3 million in the same period in 2023[104]. Business Operations and Strategy - The company operates in 25 countries, with approximately 142,000 active associates and preferred customers[74]. - The subsidiary in China operates under a traditional retail model due to regulatory constraints on direct selling[74]. - The company has established a 2024 business reorganization plan focusing on revenue growth, margin improvement, and cost control[107]. - The company has a supply agreement requiring a minimum purchase of $2.6 million through 2025, with no purchase commitments thereafter[107]. Inventory and Revenue Recognition - The company monitors inventory for obsolescence and adjusts reserves based on actual sales compared to projections, mitigating potential losses[112]. - The company recognizes revenue from shipped products upon receipt by the customer, with deferred revenue recorded for orders shipped but not yet delivered[114]. - The company allocates transaction prices between product sales and loyalty programs based on standalone selling prices, ensuring accurate revenue recognition[115]. - Historical sales returns have averaged 0.5% or less of gross sales, reflecting a consistent return policy and customer satisfaction[116]. - The product return policy allows retail customers in the U.S. and Canada to return products for a full refund within 180 days, promoting customer confidence[116]. Risk Management - The company does not engage in trading market risk-sensitive instruments and has not issued any debt instruments, indicating a conservative financial strategy[118]. - Currency exchange rate fluctuations may impact consolidated financial results, with the company maintaining cash in foreign currencies to manage anticipated requirements[118]. - The company uses historical delivery data to estimate order delivery dates, which could materially impact revenue if assumptions change[114].

Financial Performance - Q1 2024 net sales were $29.4 million, a decrease of $4.7 million or 13.8% compared to $34.1 million in Q1 2023[5] - Gross profit margin increased to 78.6% in Q1 2024 from 78.3% in Q1 2023, attributed to reduced freight and shipping costs[5] - Operating income for Q1 2024 was $0.8 million, compared to $0.7 million in the same period last year[5] - Net income for Q1 2024 was $1.2 million, or $0.63 per diluted share, compared to $0.6 million, or $0.32 per diluted share in Q1 2023[5] - Cash and cash equivalents increased by 2.3%, or $0.2 million, to $7.9 million as of March 31, 2024[5] - The company reported a foreign exchange gain of $0.8 million in Q1 2024, contributing to net income[4] Recruitment and Market Conditions - The number of independent associates and preferred customers remained constant at approximately 143,000, with a 13.6% decline in recruiting compared to Q1 2023[5] - The Asia/Pacific region experienced the most significant revenue decline, reflecting weak economic conditions and reduced recruiting efforts[4] - Mannatech anticipates continued economic challenges for the remainder of 2024 but aims to increase revenues through expanding its sales associate and preferred customer base[4] Liabilities - Total liabilities decreased slightly from $30.722 million as of December 31, 2023, to $30.613 million as of March 31, 2024[12]

Financial Performance - Consolidated net sales for Q1 2024 were $29.4 million, a decrease of $4.7 million or 13.8% compared to $34.1 million in Q1 2023[113] - Net income for Q1 2024 was $1.2 million, or $0.63 per diluted share, compared to $0.6 million, or $0.32 per diluted share in Q1 2023, representing a 95.4% increase[115] - Gross profit for Q1 2024 was $23.1 million, a decrease of $3.6 million or 13.5% compared to $26.7 million in Q1 2023[116] - Operating income for Q1 2024 was $0.8 million, an increase of $0.1 million or 15.0% compared to $0.7 million in Q1 2023[114] - Product sales for Q1 2024 decreased by $4.0 million or 12.5%, reflecting a 7.1% decrease in the number of orders processed[125] Regional Performance - Net sales in the Asia/Pacific region decreased by $4.0 million or 19.0% to $17.1 million, primarily due to a 21.9% decrease in revenue per active independent associate and preferred customer[122] - The Americas accounted for 34.7% of consolidated net sales in Q1 2024, down from 30.8% in Q1 2023, with net sales decreasing by $0.3 million or 2.9%[121] - The company’s operations outside of the Americas accounted for approximately 65.3% of consolidated net sales in Q1 2024, down from 69.2% in Q1 2023[120] Associate and Customer Metrics - The number of new independent associates and preferred customers recruited decreased by 13.6% to 16,027 in Q1 2024 from 18,547 in Q1 2023[126] - Revenue per active independent associate and preferred customer decreased by 4.4% in the Americas, while the number of active associates and preferred customers increased by 1.6%[121] Expenses and Cash Flow - Commission expense decreased by 13.4%, or $1.7 million, to $11.2 million for the three months ended March 31, 2024, compared to $12.9 million for the same period in 2023[132] - Selling and administrative expenses decreased by $1.9 million, or 15.5%, to $10.1 million for the three months ended March 31, 2024, from $12.0 million in the same period in 2023[135] - Cash and cash equivalents increased by 2.3%, or $0.2 million, to $7.9 million as of March 31, 2024, from $7.7 million as of December 31, 2023[142] - Operating activities provided $1.9 million cash for the three months ended March 31, 2024, compared to $1.4 million for the same period in 2023[146] Tax and Working Capital - The effective tax rate for the three months ended March 31, 2024, was 36.0%, down from 43.6% for the same period in 2023[139] - Working capital increased to $2.1 million as of March 31, 2024, from $1.9 million as of December 31, 2023[144] Supply Agreements and Financial Instruments - The company has a supply agreement requiring a total purchase of $3.4 million through 2025[150] - The company authorized unsecured Loan and Promissory Note agreements totaling $3.6 million for general working capital needs[154] Revenue Recognition and Return Policies - The company recognizes revenue from shipped products upon receipt by the customer, with deferred revenue recorded for orders shipped but not yet delivered[164] - The product return policy allows retail customers in the U.S. and Canada to return products for a full cash refund within 180 days, while other countries have a 90-day return window[169] - Historical estimates of sales returns have averaged 0.5% or less of gross sales, reflecting consistent return policies[168] - The estimated sales return reserve is based on historical experience over a rolling six-month period, which could materially affect revenue if actual results differ[168] Market Risk and Currency Exchange - The company does not engage in trading market risk-sensitive instruments, maintaining a conservative approach to market risk exposure[170] - The company monitors foreign currency exchange rate risks across multiple regions, including the Americas, EMEA, and Asia/Pacific[173] - The average currency exchange rates for the three months ended March 31, 2024, show fluctuations against the U.S. dollar, with the Canadian dollar averaging 0.74205 and the British pound averaging 1.26847[171] Performance Obligations - The product sales placed through automatic orders contain two performance obligations, with revenue allocated based on relative standalone selling prices[165] - The company provides associates with a complimentary three-month package for online business tools upon the first payment of an associate fee, which includes multiple performance obligations[165]

Business Operations - As of December 31, 2023, Mannatech had approximately 145,000 active associate and preferred customer positions[23]. - The company operates a non-direct selling business in mainland China through its subsidiary, Meitai, which utilizes a cross-border e-commerce model[24]. - Mannatech operates in three regions: the Americas, EMEA, and Asia/Pacific, with a focus on controlled international expansion[22]. - The company employed 213 full-time employees as of December 31, 2023, down from 228 in 2022, indicating a reduction of approximately 6.6%[126]. - The company has third-party distribution agreements in the Americas, EMEA, and Asia/Pacific to enhance operational flexibility and minimize shipping costs[215]. Product Development - Mannatech's product offerings include proprietary nutritional supplements, skin care, anti-aging products, and weight-management products, with significant revenue derived from Ambrotose, Ambrotose Life, and TruHealth[36]. - The company continues to focus on product development, considering factors such as marketability, demand, and regulatory considerations[40]. - Mannatech's product development team is exploring new products and compounds to promote overall health and wellness[38]. - Mannatech introduced several new products in 2023, including the Korean Luminovation skincare line in the U.S. and Australia, and Sleep and Stress Support gummies[36]. - The company focuses on developing high-quality, innovative proprietary products based on scientific findings related to glyconutrients[44]. Regulatory Compliance - The company is subject to extensive regulations in the U.S. and other countries, including oversight by the FDA and FTC[80][86]. - The Modernization of Cosmetics Regulation Act of 2022 expands FDA oversight of the cosmetic industry, with most requirements effective December 2023[82]. - The company must comply with various regulations across different markets, including consumer protection and product safety laws[114]. - The company is subject to evolving laws regarding independent contractor status, which could result in additional financial obligations if associates are deemed employees[178]. - The company is currently exempt from the Business Opportunity Rule, but potential changes could impose burdensome administrative disclosure obligations[173]. Financial Performance - The company aims to strengthen financial results by increasing revenues in both domestic and foreign operations while controlling operating costs[58]. - The company is subject to liquidity risk, which could adversely affect its financial condition and results of operations[161]. - The company experienced a 2.1% decrease in net sales on a Constant dollar basis for 2023, with unfavorable foreign exchange causing a $2.3 million decrease in GAAP net sales compared to 2022[166]. - As of December 31, 2023, cash and cash equivalents held in foreign bank accounts totaled $3.5 million, down from $11.3 million in 2022[159]. - The company may be held responsible for taxes related to independent associates, which could harm its financial condition and operating results[177]. Associate Management - The company provides extensive training and support services to independent associates to enhance their productivity and retention[68]. - The global associate career and compensation plan offers commissions and incentives ranging from 35% to 43% of consolidated net sales[70]. - The plan includes six types of commissions based on a point system related to independent associates' commissionable direct and indirect net product sales[71]. - The company’s ability to attract and retain independent associates is critical for growth, with several factors influencing this dynamic[129]. - The loss of high-level independent associate leaders could negatively impact associate growth and revenue, highlighting the importance of retention strategies[130]. Market Challenges - The company faces intense competition in the nutritional supplement industry, with key competitors including Herbalife Nutrition Ltd. and GNC Holdings, Inc.[122]. - Economic downturns, including those related to COVID-19, could adversely affect consumer purchases of discretionary health and wellness products[151]. - The company faces intense competition in the global nutrition and skin care industries, which could impact market share and profitability[150]. - The Republic of Korea is the largest market for the company, with potential adverse effects from economic declines or regulatory changes in this region[148]. - The company experienced challenges in obtaining certain materials and ingredients due to global transportation capacity reductions from 2020 to 2023, impacting product availability[142]. Corporate Governance - As of December 31, 2023, directors and executive officers collectively own approximately 45.1% of the total outstanding common stock, potentially influencing corporate decisions[198]. - The company has implemented anti-takeover provisions that may deter unsolicited acquisition proposals, including the ability to issue preferred stock without shareholder approval[199]. - The common stock is currently listed on The Nasdaq Global Select Market, and failure to comply with continued listing standards could lead to delisting and reduced liquidity[201]. - The company is classified as a "smaller reporting company," which may result in less comprehensive disclosures and potentially less attractive stock for investors[204]. Cybersecurity - The cybersecurity program is integrated into the overall risk management systems, focusing on managing and mitigating material cybersecurity threats[207]. - The Senior Director of IT Operations oversees the cybersecurity governance program, ensuring effective management of cybersecurity risks[210]. - Management is not currently aware of any cybersecurity threats that have materially affected the business, although attempts at cyber intrusions are ongoing[212]. - The Board of Directors oversees the cybersecurity risk management program, ensuring compliance with disclosure obligations and monitoring of risks[213]. Supply Chain Management - The company has a supply agreement requiring a minimum purchase of $4.2 million in aloe vera-based raw materials through 2024, with potential loss of exclusivity if not met[143]. - The company relies on outside suppliers for raw materials, and any loss of significant suppliers could lead to product shortages[142]. - Mannatech contracts with third parties for manufacturing, allowing flexibility in production capacity and cost control[38]. - The company maintains rigorous product safety and quality standards, but failures by contract manufacturers could lead to costly remediation efforts[141]. Legal and Regulatory Issues - The FTC issued a letter to the company regarding false or misleading income claims, which could lead to civil monetary penalties of up to $43,792 per violation[171]. - The company has experienced inquiries regarding specific independent associates, indicating ongoing regulatory scrutiny in the direct selling industry[183]. - The company must comply with extensive laws and regulations concerning product formulation, labeling, and marketing, which could impact its ability to operate effectively[185]. - Increased regulatory scrutiny of nutritional supplements may impose additional restrictions and increase operational costs for the company[192]. - The company is subject to new regulations in various markets, including Europe and South Africa, which may impose additional requirements and scrutiny on nutritional supplements[193].