Mannatech(US:MTEX)2025-05-13 20:57Financial 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].