• Nature's Sunshine Reports Third Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 03 Nov 2022 15:05:01   America/Chicago

    LEHI, Utah, Nov. 03, 2022 (GLOBE NEWSWIRE) -- Nature’s Sunshine Products, Inc. (Nasdaq: NATR) (Nature’s Sunshine), a leading natural health and wellness company of high-quality herbal and nutritional products, reported financial results for the third quarter ended September 30, 2022.

    Third Quarter 2022 Financial Summary vs. Same Year-Ago Quarter

    • Net sales were $104.5 million compared to $114.7 million (down 2% in constant currency).
    • GAAP net income was $0.2 million, or $0.00 per diluted common share, compared to $5.5 million, or $0.24 per diluted common share.
    • Adjusted EBITDA was $6.8 million compared to $12.9 million.

    Management Commentary

    “Despite unprecedented external headwinds, we delivered third quarter sales of $105 million on a reported basis, or $112 million when removing the impact of foreign exchange,” said CEO Terrence Moorehead. “The resilience of our portfolio was on full display, where despite the macroeconomic challenges, we were only down 2% versus prior year on a constant currency basis and year-to-date, sales were actually up 3% in local currency. Both measures reflect the underlying strength of our business.

    “The current environment represents a unique challenge as inflation and volatile foreign exchange has dramatically increased our cost of goods, negatively impacting third quarter gross margins by as much as 300 basis points. We are meeting these challenges head-on by committing to gross savings of $10 - $12 million through gross margin and SG&A expense improvement and expect the key initiatives will be launched over the next 18 months. We remain confident that we will navigate this unique period of volatility and uncertainty, bolstered by our strong balance sheet and team of experts on the ground.”

    Third Quarter 2022 Financial Results

     Net Sales by Operating Segment (Amounts in Thousands)
     Three Months
    Ended
    September 30,
    2022    		 Three Months
    Ended
    September 30,
    2021    		 Percent
    Change    		 Impact of
    Currency
    Exchange    		 Percent
    Change
    Excluding
    Impact of
    Currency
    Asia$47,878 $48,417 (1.1)% $(6,307) 11.9%
    Europe 19,328  21,813 (11.4)  (1,166) (6.0)
    North America 31,504  37,738 (16.5)  (89) (16.3)
    Latin America and Other 5,796  6,778 (14.5)  (81) (13.3)
     $104,506 $114,746 (8.9)% $(7,643) (2.3)%
                  

    Net sales in the third quarter were $104.5 million compared to $114.7 million in the same year-ago quarter. Excluding the impact from foreign exchange rates, net sales in the third quarter of 2022 decreased 2.3% compared to the year-ago quarter.

    Gross profit margin in the third quarter was 71.6% compared to 74.4% in the year-ago quarter. The decline was driven by changes in market mix, increases in material, production, transportation and distribution costs, as well as changes in exchange rates.

    Volume incentives as a percentage of net sales were 31.6% compared to 31.2% in the year-ago quarter. The increase is primarily due to changes in market mix.

    Selling, general and administrative expenses (“SG&A”) in the third quarter were $36.8 million compared to $39.5 million in the year‐ago quarter. Reduced service fees in China and current year compensation costs more than offset higher costs associated with the implementation of business transformation and sales growth initiatives in some markets and an increase in planned events and travel-related costs. As a percentage of net sales, SG&A expenses were 35.2% for the third quarter of 2022 compared to 34.4% in the year-ago quarter.

    Operating income in the third quarter was $5.0 million, or 4.8% of net sales, compared to $10.0 million, or 8.7% of net sales, in the year-ago quarter.

    Other loss, net, in the third quarter of 2022 was a loss of $2.3 million compared to a loss of $0.9 million in the third quarter of 2021. Other loss, net, primarily consists of foreign exchange losses as a result of net changes in foreign currencies, mostly in Asia, Europe and Latin America. The provision for income taxes was $2.5 million in the third quarter of 2022 compared to $3.7 million for the year-ago quarter.

    GAAP net income attributable to common shareholders was $0.1 million, or $0.00 per diluted common share, compared to $4.9 million, or $0.24 per diluted common share, in the third quarter of 2021. Net income attributable to NSP China decreased to $0.6 million, or $0.03 per diluted common share, for the third quarter of 2022, compared to $3.0 million, or $0.15 per diluted common share, for the third quarter of 2021.

    Non-GAAP net loss attributable to common shareholders in the third quarter of 2022 was $1.1 million, or $0.06 per diluted common share, compared to non-GAAP net income of $4.1 million, or $0.21 per diluted common share, in the prior year period. Non-GAAP net income (loss), which is a non-GAAP financial measure, is defined here as net income (loss) from continuing operations before less-frequent items including, among other things, value-added-tax (VAT) refunds. A reconciliation of Non-GAAP net income (loss) to GAAP net income (loss) is provided in the attached financial tables.

    Adjusted EBITDA was $6.8 million in the third quarter of 2022 compared to $12.9 million in the third quarter of 2021. The decrease was driven primarily by the aforementioned decrease in gross profit. Adjusted EBITDA, which is a non-GAAP financial measure, is defined here as net income (loss) from continuing operations before taxes, depreciation, amortization, and other income (loss) adjusted to exclude share-based compensation expense and certain noted adjustments. A reconciliation of net income (loss) to Adjusted EBITDA is provided in the attached financial tables.

    Balance Sheet and Cash Flow

    Net cash used by operating activities was $2.9 million for the nine months ended September 30, 2022, compared to $20.3 million provided in the prior year period. Capital expenditures during the nine months ended September 30, 2022 totaled $4.7 million compared to $4.6 million in the comparable period of 2021. During the nine months ended September 30, 2022, the Company repurchased 834,000 shares at a total cost of $12.9 million. As of September 30, 2022, the Company had cash and cash equivalents of $57.0 million and $1.5 million of debt.

    Conference Call

    The Company will hold a conference call today at 5:00 p.m. Eastern time to discuss its third quarter of 2022 results.

    Date: Thursday November 3, 2022
    Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
    Toll-free dial-in number: 1-888-394-8218
    International dial-in number: 1-323-701-0225
    Conference ID: 5371897

    Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

    The conference call will be broadcast live and available for replay here and via the Events section of the Nature’s Sunshine website here.

    A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through November 17, 2022.

    Toll-free replay number: 1-844-512-2921
    International replay number: 1-412-317-6671
    Replay ID: 5371897

    About Nature’s Sunshine Products

    Nature’s Sunshine Products (Nasdaq: NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products in more than 40 countries. Nature’s Sunshine manufactures most of its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on the market today. Additional information about the company can be obtained at its website, www.naturessunshine.com.

    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements regarding the Company’s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans, strategies and financial results, including expected improvement in gross profit and gross margin. All statements (other than statements of historical fact) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including the following:

    • extensive government regulations to which the Company’s products, business practices and manufacturing activities are subject;
    • registration of products for sale in foreign markets, or difficulty or increased cost of importing products into foreign markets;
    • legal challenges to the Company’s direct selling program or to the classification of its independent consultants;
    • laws and regulations regarding direct selling may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets;
    • liabilities and obligations arising from improper activity by the Company’s independent consultants;
    • product liability claims;
    • impact of anti-bribery laws, including the U.S. Foreign Corrupt Practices Act;
    • the Company’s ability to attract and retain independent consultants;
    • the loss of one or more key independent consultants who have a significant sales network;
    • the Company’s joint venture for operations in China with Fosun Industrial Co., Ltd.;
    • the effect of fluctuating foreign exchange rates;
    • failure of the Company’s independent consultants to comply with advertising laws;
    • changes to the Company’s independent consultants compensation plans;
    • geopolitical issues and conflicts;
    • adverse effects caused by the ongoing coronavirus pandemic;
    • negative consequences resulting from difficult economic conditions, including the availability of liquidity or the willingness of the Company’s customers to purchase products;
    • risks associated with the manufacturing of the Company’s products;
    • supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand;
    • failure to timely and effectively obtain shipments of products from our manufacturers and deliver products to our independent consultants and customers;
    • world-wide slowdowns and delays related to supply chain, ingredient shortages and logistical challenges;
    • uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto;
    • changes in tax laws, treaties or regulations, or their interpretation;
    • cybersecurity threats and exposure to data loss;
    • the storage, processing, and use of data, some of which contain personal information, are subject to complex and evolving privacy and data protection laws and regulations;
    • reliance on information technology infrastructure; and
    • the sufficiency of trademarks and other intellectual property rights.

    These and other risks and uncertainties that could cause actual results to differ from predicted results are more fully detailed under the caption “Risk Factors” in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports filed on Form 10-Q.

    All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this press release. Except as is required by law, the Company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this press release.

    Non-GAAP Financial Measures

    We have included information which has not been prepared in accordance with generally accepted accounting principles (GAAP), such as information concerning non-GAAP net income (loss), Adjusted EBITDA and net sales excluding the impact of foreign currency exchange fluctuations.

    We utilize the non-GAAP measures of non-GAAP net income (loss) and Adjusted EBITDA in the evaluation of our operations and believe that these measures are useful indicators of our ability to fund our business. These non-GAAP financial measures should not be considered as an alternative to, or more meaningful than, U.S. GAAP net income (loss) as an indicator of our operating performance.

    Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We have included a reconciliation of net income to Adjusted EBITDA, the most comparable GAAP measure. We have also included a reconciliation of GAAP net income (loss) to Non-GAAP net income (loss) and Non-GAAP Adjusted EPS, in the attached financial tables.

    Net sales in local currency removes, from net sales in U.S. dollars, the impact of changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries. This is accomplished by translating the current period net sales into U.S. dollars using the same foreign currency exchange rates that were used to translate the net sales for the previous comparable period.

    We believe presenting the impact of foreign currency fluctuations is useful to investors because it allows a more meaningful comparison of net sales of our foreign operations from period to period. Net sales excluding the impact of foreign currency fluctuations should not be considered in isolation or as an alternative to net sales in U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

    Investor Relations:

    Gateway Group, Inc.
    Cody Slach
    1-949-574-3860
    NATR@gatewayir.com 

    NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Amounts in thousands, except per share information)
    (Unaudited)

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2022   2021   2022   2021 
    Net sales$104,506  $114,746  $319,161  $326,145 
    Cost of sales 29,632   29,419   93,563   84,861 
    Gross profit 74,874   85,327   225,598   241,284 
            
    Operating expenses:       
    Volume incentives 33,070   35,793   99,241   105,491 
    Selling, general and administrative 36,792   39,528   114,281   108,666 
    Operating income 5,012   10,006   12,076   27,127 
    Other loss, net (2,281)  (886)  (3,037)  (2,290)
    Income before provision for income taxes 2,731   9,120   9,039   24,837 
    Provision for income taxes 2,531   3,662   10,573   8,433 
    Net income (loss) 200   5,458   (1,534)  16,404 
    Net income attributable to noncontrolling interests 110   600   810   990 
    Net income (loss) attributable to common shareholders$90  $4,858  $(2,344) $15,414 
            
    Basic and diluted net income (loss) per common share:       
            
    Basic earnings (loss) per share attributable to common shareholders$—  $0.24  $(0.12) $0.77 
            
    Diluted earnings (loss) per share attributable to common shareholders$—  $0.24  $(0.12) $0.76 
            
    Weighted average basic common shares outstanding 19,198   19,894   19,384   19,896 
    Weighted average diluted common shares outstanding 19,482   20,375   19,384   20,292 
            
    Dividends declared per common share$—  $—  $—  $1.00 


    NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (Amounts in thousands)
    (Unaudited)

     September 30,
    2022    		 December 31,
    2021
    Assets   
    Current assets:   
    Cash and cash equivalents$56,984  $86,184 
    Accounts receivable, net of allowance for doubtful accounts of $673 and $143, respectively 9,977   8,871 
    Inventories 67,603   60,852 
    Prepaid expenses and other 8,237   8,760 
    Total current assets 142,801   164,667 
        
    Property, plant and equipment, net 47,354   50,857 
    Operating lease right-of-use assets 16,541   18,349 
    Investment securities - trading 692   964 
    Deferred income tax assets 7,011   13,590 
    Other assets 9,109   10,447 
    Total assets$223,508  $258,874 
        
    Liabilities and Shareholders’ Equity   
    Current liabilities:   
    Accounts payable$7,475  $9,702 
    Accrued volume incentives and service fees 21,177   23,131 
    Accrued liabilities 24,856   31,600 
    Deferred revenue 1,460   3,694 
    Related party notes payable —   302 
    Income taxes payable 3,582   2,647 
    Current portion of operating lease liabilities 4,065   4,350 
    Current portion of note payable 1,272   1,244 
    Total current liabilities 63,887   76,670 
        
    Liability related to unrecognized tax benefits 213   — 
    Long-term portion of operating lease liabilities 14,474   15,919 
    Long-term note payable 216   1,174 
    Deferred compensation payable 692   964 
    Deferred income tax liabilities 1,218   1,566 
    Other liabilities 1,054   1,177 
    Total liabilities 81,754   97,470 
        
    Shareholders’ equity:   
    Common stock, no par value, 50,000 shares authorized, 19,166 and 19,724 shares issued and outstanding, respectively 121,242   133,382 
    Retained earnings 32,681   35,025 
    Noncontrolling interest 4,012   3,202 
    Accumulated other comprehensive loss (16,181)  (10,205)
    Total shareholders’ equity 141,754   161,404 
    Total liabilities and shareholders’ equity$223,508  $258,874 


    NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Amounts in thousands)
    (Unaudited)

     Nine Months Ended
    September 30,
      2022   2021 
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income (loss)$(1,534) $16,404 
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
    Provision for doubtful accounts 1,017   — 
    Depreciation and amortization 8,112   8,276 
    Non-cash lease expense 3,859   4,043 
    Share-based compensation expense 1,934   2,957 
    Loss on sale of property, plant and equipment —   24 
    Deferred income taxes 5,967   2,891 
    Purchase of trading investment securities (26)  (30)
    Proceeds from sale of trading investment securities 102   175 
    Realized and unrealized gains (losses) on investments 195   (62)
    Foreign exchange losses 2,938   2,483 
    Changes in assets and liabilities:   
    Accounts receivable (3,233)  (2,054)
    Inventories (10,809)  (10,771)
    Prepaid expenses and other current assets (116)  (1,787)
    Other assets 368   (267)
    Accounts payable (1,626)  421 
    Accrued volume incentives and service fees (253)  2,750 
    Accrued liabilities (5,172)  (1,646)
    Deferred revenue (2,040)  (551)
    Lease liabilities (3,692)  (4,170)
    Income taxes payable 1,201   1,316 
    Liability related to unrecognized tax benefits 213   (87)
    Deferred compensation payable (271)  (34)
    Net cash provided by (used in) operating activities (2,866)  20,281 
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Purchases of property, plant and equipment (4,730)  (4,626)
    Net cash used in investing activities (4,730)  (4,626)
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Payments of cash dividends —   (19,858)
    Principal payments of long-term debt (931)  (1,001)
    Proceeds from revolving credit facility 31,538   — 
    Principal payments of revolving credit facility (31,538)  — 
    Principal payments of related party borrowing (300)  (600)
    Payments related to tax withholding for net-share settled equity awards (1,129)  (2,016)
    Repurchase of common stock (12,945)  (6,000)
    Net cash used in financing activities (15,305)  (29,475)
    Effect of exchange rates on cash and cash equivalents (6,299)  (2,714)
    Net decrease in cash and cash equivalents (29,200)  (16,534)
    Cash and cash equivalents at the beginning of the period 86,184   92,069 
    Cash and cash equivalents at the end of the period$56,984  $75,535 
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   
    Cash paid for income taxes, net of refunds$3,386  $4,431 
    Cash paid for interest 195   156 


    NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
    RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
    (Amounts in thousands)
    (Unaudited)

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2022   2021   2022   2021 
    Net income (loss)$200  $5,458  $(1,534) $16,404 
    Adjustments:       
    Depreciation and amortization 2,661   2,735   8,112   8,276 
    Share-based compensation expense 593   886   1,934   2,957 
    Other loss, net* 2,281   886   3,037   2,290 
    Provision for income taxes 2,531   3,662   10,573   8,433 
    Other adjustments (1) (1,430)  (687)  1,877   (512)
    Adjusted EBITDA$6,836  $12,940  $23,999  $37,848 
            
            
    (1) Other adjustments       
    Impact of Russia/Ukraine war$(750) $—  $2,300  $— 
    Restructuring and other related expenses 130   —   387   — 
    Capital allocation and other expenses —   90   —   265 
    VAT refunds (810)  (777)  (810)  (777)
    Total adjustments$(1,430) $(687) $1,877  $(512)

    * Other loss, net is primarily comprised of foreign exchange (gains) losses, interest income, and interest expense.


    NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
    RECONCILIATION OF GAAP NET INCOME (LOSS) TO
    NON-GAAP NET INCOME (LOSS) and NON-GAAP ADJUSTED EPS
    (Amounts in thousands)
    (Unaudited)

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2022   2021   2022   2021 
    Net income (loss)$200  $5,458  $(1,534) $16,404 
    Adjustments:       
    Impact of Russia/Ukraine war (750)  —   2,300   — 
    Restructuring and other related expenses 130   —   387   — 
    Capital allocation and other expenses —   90   —   265 
    VAT Refund (810)  (777)  (810)  (777)
    Tax impact of adjustments 287   (22)  (672)  (66)
    Total adjustments (1,143)  (709)  1,205   (578)
    Non-GAAP net income (loss)$(943) $4,749  $(329) $15,826 
            
    Reported income (loss) attributable to common shareholders$90  $4,858  $(2,344) $15,414 
    Total adjustments (1,143)  (709)  1,205   (578)
    Non-GAAP net income (loss) attributable to common shareholders$(1,053) $4,149  $(1,139) $14,836 
            
    Basic income (loss) per share, as reported$—  $0.24  $(0.12) $0.77 
    Total adjustments, net of tax (0.06)  (0.04)  0.06   (0.03)
    Basic income (loss) per share, as adjusted$(0.06) $0.20  $(0.06) $0.74 
            
    Diluted income (loss) per share, as reported$—  $0.24  $(0.12) $0.76 
    Total adjustments, net of tax (0.06)  (0.03)  0.06   (0.03)
    Diluted income (loss) per share, as adjusted$(0.06) $0.21  $(0.06) $0.73 

     


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