Mannatech(MTEX) - 2022 Q2 - Quarterly Report

Financial Performance - Consolidated net sales decreased by $7.5 million, or 17.7%, to $35.0 million for the three months ended June 30, 2022, compared to $42.5 million for the same period in 2021[107]. - For the six months ended June 30, 2022, consolidated net sales decreased by $13.4 million, or 16.7%, to $67.4 million compared to $80.8 million for the same period in 2021[114]. - Average product order value decreased by 11.4% to $176 for the three months ended June 30, 2022, compared to $198 for the same period in 2021[109]. - For the three months ended June 30, 2022, operations outside of the Americas accounted for approximately 73.7% of consolidated net sales[107]. - Net income for the three months ended June 30, 2022, was $0.7 million, a decrease of 67.4% compared to $2.1 million for the same period in 2021[110]. - For the six months ended June 30, 2022, total consolidated net sales decreased by $13.4 million, or 16.6%, to $67.4 million compared to $80.8 million for the same period in 2021[125]. Cost and Expenses - Cost of sales for the three months ended June 30, 2022, was $7.9 million, representing 22.6% of net sales, compared to $10.1 million, or 23.8%, for the same period in 2021[110]. - Total operating expenses decreased by $4.2 million, or 13.7%, to $26.2 million for the three months ended June 30, 2022, compared to $30.4 million for the same period in 2021[110]. - Commission expense for the three months ended June 30, 2022 decreased by 19.4%, or $3.2 million, to $13.2 million compared to $16.4 million for the same period in 2021[140]. - For the six months ended June 30, 2022, commission expense decreased by 18.4%, or $5.7 million, to $25.5 million compared to $31.2 million for the same period in 2021[141]. - Selling and administrative expenses for the three months ended June 30, 2022 decreased by $0.7 million, or 8.7%, to $6.9 million compared to $7.6 million for the same period in 2021[145]. - Other operating costs for the three months ended June 30, 2022 decreased by $0.6 million, or 11.0%, to $4.9 million compared to $5.4 million for the same period in 2021[148]. Profitability - Gross profit for the three months ended June 30, 2022, was $27.1 million, a decrease of 9.6% on a Constant dollar basis compared to $32.4 million for the same period in 2021[113]. - Income from operations for the three months ended June 30, 2022, was $0.9 million, a decrease of 20.0% on a Constant dollar basis compared to $2.0 million for the same period in 2021[113]. - Gross profit for the six months ended June 30, 2022, decreased by $11.1 million, or 17.5%, to $52.3 million compared to $63.5 million for the same period in 2021[139]. - For the three months ended June 30, 2022, gross profit decreased by $5.3 million, or 16.4%, to $27.1 million compared to $32.4 million for the same period in 2021[138]. Active Associates and Customers - The number of active independent associates and preferred customers declined by 9.7% for the six months ended June 30, 2022[117]. - Revenue per active independent associate and preferred customer decreased by 6.4% for the six months ended June 30, 2022[117]. Supply Chain and Market Conditions - The company is facing supply chain constraints, impacting sales, particularly in North America due to ingredient shortages[108]. - Foreign currency exchange had a negative impact of $3.9 million on revenue for the six months ended June 30, 2022, primarily due to the weakening of the Korean Won, Japanese Yen, and Australian Dollar[121]. - The company is exploring the potential benefits of acquiring a raw material manufacturing facility to control costs and ensure quality[167]. Cash Flow and Financial Position - As of June 30, 2022, cash and cash equivalents decreased by 14.9%, or $3.6 million, to $20.6 million from $24.2 million as of December 31, 2021[158]. - Working capital at June 30, 2022 was $9.9 million, down from $12.7 million at December 31, 2021[160]. - Net cash provided by operating activities for the six months ended June 30, 2022 was $1.5 million, down from $8.3 million for the same period in 2021[161]. - Financing activities used cash of $1.8 million for the six months ended June 30, 2022, compared to $6.2 million for the same period in 2021[164]. Deferred Revenue and Commissions - Deferred revenue increased from $4.9 million as of December 31, 2021, to $6.0 million as of June 30, 2022[188]. - Deferred commissions were $3.2 million as of June 30, 2022, up from $2.4 million at the end of 2021[188]. Internal Controls and Compliance - Management has concluded that disclosure controls and procedures are effective for timely reporting as per SEC rules[202]. - No material changes in internal control over financial reporting were reported during the quarter ended June 30, 2022[203]. - The company is continuously monitoring the impact of COVID-19 on internal controls to maintain their effectiveness[203].