Nature's Sunshine(NATR) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Performance Financial Highlights Nature's Sunshine reported strong Q1 2024 results with net sales up 2% to $111.0 million, gross margin improving to 71.2%, and GAAP net income more than doubling to $2.3 million Q1 2024 Key Financial Metrics vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $111.0 million | $108.6 million | +2.2% | | Gross Margin | 71.2% | 70.8% | +33 bps | | GAAP Net Income (to common shareholders) | $2.3 million | $0.9 million | +155.6% | | Diluted EPS | $0.12 | $0.04 | +200% | | Adjusted EBITDA | $9.2 million | $9.1 million | +0.2% | Management Commentary Management highlighted strong digital sales and new customer growth driving North American performance, despite challenges from Asia/Pacific slowdown and inflationary cost pressures - Strong digital performance drove growth, with digital sales surging 33% and new customers increasing by 34%, leading to a 5% growth in the North American business unit[2] - The successful launch of new Power Line products contributed to improved performance in the European business[2] - Sales in Asia/Pacific grew 5% in local currency but were negatively impacted by the weak economic environment in China[3] - Inflationary pressures and volatile foreign exchange rates negatively impacted ingredient costs, challenging gross margin expansion efforts. The company maintains its goal of achieving $10 million in cost of goods savings[4] Detailed Financial Results Q1 2024 net sales increased 2.2% to $111.0 million, driven by North America and Europe, while gross margin improved to 71.2% and operating income significantly rose to $4.6 million Net Sales by Operating Segment (Q1 2024 vs Q1 2023) | Region | Q1 2024 Net Sales (in thousands) | Q1 2023 Net Sales (in thousands) | % Change (Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Asia | $46,220 | $46,345 | (0.3)% | 5.2% | | Europe | $22,296 | $21,405 | 4.2% | 1.9% | | North America | $36,525 | $34,648 | 5.4% | 5.4% | | Latin America & Other | $5,952 | $6,236 | (4.6)% | (8.0)% | | Total | $110,993 | $108,634 | 2.2% | 3.8% | - Gross profit margin increased by 33 basis points to 71.2%, driven by market mix improvements and price increases, partially offset by inflation and unfavorable foreign currency exchange[5][6] - SG&A expenses decreased to $40.8 million (36.7% of net sales) from $43.6 million (40.2% of net sales) in the prior year, primarily due to a non-recurring loss in Japan in Q1 2023[7] - Operating income significantly increased to $4.6 million, or 4.2% of net sales, compared to $0.2 million in the year-ago quarter[8] Balance Sheet and Cash Flow The company maintained a solid financial position with $77.8 million in cash and $2.1 million in debt, while net cash from operations decreased to $2.2 million Key Balance Sheet and Cash Flow Data | Metric | As of March 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $77.8 million | $82.4 million | | Total Debt | $2.1 million | $0 | | Total Assets | $247.3 million | $249.8 million | | Total Shareholders' Equity | $159.7 million | $159.5 million | - Net cash provided by operating activities was $2.2 million for Q1 2024, compared to $9.3 million in Q1 2023[12] - The company repurchased 105,000 shares for a total of $1.8 million during the quarter[12] 2024 Outlook The company reaffirmed its full-year 2024 guidance, projecting net sales to be in the range of $455 to $480 million and adjusted EBITDA to be between $42 and $48 million Full Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $455 - $480 million | | Adjusted EBITDA | $42 - $48 million | Financial Statements and Reconciliations Condensed Consolidated Statements of Income For Q1 2024, the company reported $111.0 million in net sales, $4.6 million in operating income, and $2.3 million in net income attributable to common shareholders Condensed Consolidated Statements of Income (Unaudited, in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales | $110,993 | $108,634 | | Gross profit | $78,978 | $76,942 | | Operating income | $4,624 | $172 | | Net income | $2,490 | $1,253 | | Net income attributable to common shareholders | $2,321 | $860 | | Diluted earnings per share | $0.12 | $0.04 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $247.3 million, total liabilities decreased to $87.6 million, and total shareholders' equity remained stable at $159.7 million Condensed Consolidated Balance Sheets (Unaudited, in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $160,156 | $165,817 | | Total assets | $247,267 | $249,773 | | Liabilities and Shareholders' Equity | | | | Total current liabilities | $68,881 | $76,753 | | Total liabilities | $87,560 | $90,233 | | Total shareholders' equity | $159,707 | $159,540 | | Total liabilities and shareholders' equity | $247,267 | $249,773 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $2.2 million for Q1 2024, with cash and cash equivalents decreasing by $4.6 million to $77.8 million at period-end Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,190 | $9,325 | | Net cash used in investing activities | ($3,689) | ($2,325) | | Net cash provided by (used in) financing activities | $107 | ($1,156) | | Net (decrease) increase in cash and cash equivalents | ($4,600) | $5,688 | | Cash and cash equivalents at end of period | $77,773 | $65,720 | Non-GAAP Reconciliations The company provides non-GAAP reconciliations, reporting Adjusted EBITDA of $9.2 million and non-GAAP net income of $2.5 million for Q1 2024 Reconciliation to Adjusted EBITDA Reconciliation of Net Income to Adjusted EBITDA (Unaudited, in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income | $2,490 | $1,253 | | Adjustments: | | | | Depreciation and amortization | $3,160 | $2,805 | | Share-based compensation expense | $1,369 | $1,058 | | Other income, net | ($31) | ($1,514) | | Provision for income taxes | $2,165 | $433 | | Other adjustments (e.g., Japan loss, VAT refunds) | $0 | $5,098 | | Adjusted EBITDA | $9,153 | $9,133 | Reconciliation to Non-GAAP Net Income and EPS Reconciliation to Non-GAAP Net Income and EPS (Unaudited) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Non-GAAP Net Income (in thousands) | $2,490 | $4,889 | | Diluted EPS, as reported | $0.12 | $0.04 | | Total adjustments, net of tax | $0.00 | $0.19 | | Diluted EPS, as adjusted | $0.12 | $0.23 | Supplementary Information Conference Call Information The company held a conference call on May 7, 2024, to discuss its first-quarter results, with a replay available until May 21, 2024 - A conference call to discuss Q1 2024 results was held on May 7, 2024. A replay is available through May 21, 2024[14][16] Forward-Looking Statements & Risk Factors The report contains forward-looking statements subject to risks including government regulations, foreign market challenges, economic conditions, and supply chain disruptions - The report includes forward-looking statements based on management's current expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[17] - Key risks include government regulation, foreign market operations, challenges to the direct selling model, economic conditions, supply chain disruptions, and cybersecurity threats[18][20] - Investors are directed to the "Risk Factors" section of the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a more comprehensive discussion of risks[19] About Non-GAAP Financial Measures The company uses non-GAAP financial measures like adjusted EBITDA and constant currency net sales to provide a more meaningful period-over-period performance comparison - The company utilizes non-GAAP measures like adjusted EBITDA and non-GAAP net income to evaluate its operations and believes they are useful indicators of its ability to fund the business[21][22] - Net sales in local currency (constant currency) is presented to allow a more meaningful comparison of foreign operations' sales by removing the impact of foreign exchange rate fluctuations[24][25] - A reconciliation of the full-year 2024 adjusted EBITDA outlook to GAAP information is not provided due to the inherent difficulty in forecasting certain adjusting items[26]