Mannatech(US:MTEX)2024-11-12 21:28Financial 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].