Mannatech(US:MTEX)2024-08-13 20:59Financial 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].