Headquartered in Los Angeles, California, Natural Health Trends Corporation (NHTC, Financial) is an international direct-selling and e-commerce company that markets premium quality personal care, wellness and “quality of life” products under the NHT Global brand. The company operates subsidiaries throughout Asia, North America and Europe. In most markets, products are sold to a network of members referred to the Company by other members. It offers a line of “NHT Global” branded products in five distinct categories: wellness, herbal, beauty, lifestyle and home.
The company reported a strong second quarter with double-digit, year-over-year increase in revenues. The second quarter witnessed record product orders and operating profit. The quarter reflects the continued momentum it has gathered from the strategies to drive sustainable, long-term growth.
Strong Second Quarter
Total revenue during the quarter increased by 15% and was $80.4 million, which was $69.7 million in the prior year quarter.
Revenue from the company’s Hong Kong operations, which represented 91% of total revenue, increased by 13% and was $73.3 million, which was $64.8 million in the prior year quarter.
Revenue outside of Hong Kong increased by 43% and was $7.0 million, which was $4.9 million in the prior year quarter.
Operating income during the quarter increased by 22% and was $14.9 million, which was $12.3 million in the prior year quarter.
Net income during the quarter was $12.2 million, or $1.07 per diluted share, which was $12.3 million, or 98 cents per diluted share, in the prior year quarter.
Year-to-Date 2016 Financial Highlights
Total revenue increased by 40% and was $154.7 million, which was $110.4 million in the first six months of 2015.
Operating income increased by 51% and was $28.9 million, which was $19.2 million in the first six months of 2015.
Net income was $23.5 million, or $2.03 per diluted share. It was $19.0 million, or $1.52 per diluted share, in the first six months of 2015.
Balance Sheet and Cash Flow
On June 30, cash and cash equivalents totalled at $109.6 million, which was $99.6 million on March 31.
Net cash provided by operating activities in the second quarter of 2016 was $16.6 million, which was $22.9 million in the prior year quarter.
For the first six months of 2016, net cash provided by operating activities was $30.4 million, which was $39.5 million in the prior year period.
Capital Allocation
On July 19, the company’s Board of Directors declared a quarterly cash dividend of 7 cents per share on outstanding common stock, which represents a 17% increase over the prior quarter dividend. The dividend will be payable on Aug. 26 to stockholders of record, as of Aug. 16.
During the six months ended June 30, the company repurchased $23.7 million of its common stock under its existing $70.0 million stock repurchase program. On June 30, approximately $32 million remained available for repurchases, inclusive of related estimated income tax.
Focus
- The company intends to remain focused on expanding its global footprint
- To acquire members in new and existing markets
- Product development initiatives
- To drive sustainable, long-term growth
Going Global
The company continues to add products to its portfolio in China, with the recent inclusion of a line of toothpaste. It recently started its operations in Singapore and is initiating to establish local presence in Vietnam and Malaysia. When it comes to geographical expansion, Southeast Asia is a top priority for this company.
In Summary
The company had an excellent second quarter. The growth in revenues is attributable to the emphasis that the company laid on products, training, services and marketing. The first half of 2016 went well, consumer demand for products remained strong during the second quarter. The company’s active member base grew from 76,400 a year ago to 126,440 at June 30.
It boasts of a strong cash generation and is very well positioned to grow the business organically. The company plans to return value to the shareholders through quarterly cash dividends and execution of its $70 million stock repurchase program.
The company is doing well with its current strong financial performance and it has developed a year-round, multi-faceted promotional plan that targets different segments of membership and has proven most effective in the last few years. I think adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
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