Natural Health Trends - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $10.7M, down 2% year-over-year, with diluted EPS of $0.01; sequential order intake rose 9%, highlighting underlying demand despite promotional timing differences.
• Gross margin held strong at 73.6% (vs. 73.4% in Q1 2024), while commissions ticked up to 41.8% of revenue and SG&A fell modestly; operating loss improved slightly to $(0.345)M year-over-year.
• Management emphasized supply chain realignment toward Asia to mitigate tariff uncertainty and shorten logistics, and declared a $0.20 quarterly dividend (payable May 23, 2025).
• No formal revenue or EPS guidance provided; Street consensus coverage for Q1 2025 was unavailable, limiting beat/miss analysis and likely focusing investor attention on macro/tariff risk and sequential order momentum [GetEstimates: Q1 2025 data unavailable].

What Went Well and What Went Wrong

What Went Well

• Sequential demand improved: “we managed to sequentially increase orders taken by 9% over the fourth quarter of 2024”.
• Margin resilience: gross margin increased slightly to 73.6% vs. 73.4% in Q1 2024, supported by cost control and SG&A reductions.
• Strategic execution: expanded product portfolio (Twin Slim Coffee & Twin Slim Tomato Soup), nine-city wellness roadshow, and new Bogotá office opening to support Latin America scaling.

What Went Wrong

• Top-line pressure: revenue declined 2% YoY due to promotional calendar timing; active members fell 5% YoY to 30,180, reflecting persistent demand softness in core markets.
• Higher payout intensity: commissions expense rose to 41.8% of revenue vs. 41.0% a year ago, reflecting richer weekly commissions; net income fell to $0.122M from $0.188M.
• Tariff uncertainty: management flagged evolving trade tensions and potential consumer sentiment headwinds as a key risk to near-term sales trajectory.

Transcript

Operator (participant)

Greetings and welcome to the Natural Health Trends Corp Q1 2025 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Michelle Glidewell with Natural Health Trends Corp. Thank you. You may begin.

Michel Glidewell (Head of Investor Relations)

Thank you and welcome to Natural Health Trends Q1 2025 earnings conference call. During today's call, there may be statements made relating to the future results of the company that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results, performance, or achievements could differ materially from those anticipated in such forward-looking statements through the result of certain factors, including those set forth in the company's filings with the Securities and Exchange Commission. It should also be noted that today's call will be webcast live and can be found on the investor section of the company's corporate website at naturalhealthtrendscorp.com. Instructions for accessing the archived version of the conference call can be found in today's financial results press release, which was issued at approximately 9:00 AM Eastern Time.

At this time, I'd like to turn the call over to Chris Sharng, President of Natural Health Trends.

Chris Sharng (President)

Thank you, Michelle. Thank you to everyone for joining us this morning to discuss our Q1 2025 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. During the Q1, revenue was $10.7 million, a 2% decrease compared to the Q1 of 2024, attributable to the timing of our incentive calendars between the two periods. However, we managed to sequentially increase our orders taken by 9% over the Q4 of 2024, demonstrating sustained interest for our products. The Q1 extended our positive progress in the second half of 2024. In China and Hong Kong, we completed a nine-city roadshow, marketing our wellness products with expert insights from Dr. Lyle Wilson.

We also introduced new additions to our TwinSlim weight management line: TwinSlim coffee and Twin Slim tomato soup, both of which received strong feedback from customers and field leaders. In April, we hosted nearly 200 qualifiers on an incentive trip to Paris, where they enjoyed cultural and culinary experiences that strengthened team camaraderie. In March, we opened our new office in Bogota, Colombia. This facility will serve as the central hub for our newest market, delivering customer services and showcasing our brand and products. As soon as the Q1 was behind us, the international trade environment changed significantly. While the impact is difficult to gauge, with the support of our product partners, we are actively working to streamline our supply chain, bring manufacturing closer to our primary markets in Asia, and simplify logistics to weather the uncertainty and improve our long-term efficiency.

With that, I'd like to turn the call over to our CFO, Scott Davidson, to discuss our financial results in greater detail. Scott?

Scott Davidson (SVP and CFO)

Thank you, Chris. Total revenue for the Q1 was $10.7 million, a modest decrease of 2% compared to $11 million in the Q1 of 2024. Our active member base decreased slightly to 30,180 at March 31st from 30,870 at December 31st and was down 5% from 31,620 at March 31st last year. Turning to our cost and operating expenses, gross profit margin increased slightly to 73.6% from 73.4% in the first quarter last year. Commissions expense as a percent of total revenue for the first quarter was 41.8%, compared with 41% a year ago, primarily due to higher weekly commissions earned by our members during the first quarter of this year. Selling, general, and administrative expenses for the quarter were $3.8 million, a decrease of $156,000 compared to a year ago.

As a result, operating loss for the quarter was $345,000 compared to $365,000 in the Q1 last year. Net income for the Q1 was $122,000 or 1 cent per diluted share, compared to $188,000 or 2 cents per diluted share in the Q1 of 2024. Now I'll turn to our balance sheet and cash flow. Net cash provided by operating activities was $484,000 during the first three months of 2025, compared to $549,000 during the first quarter a year ago. Total cash, cash equivalents, and marketable securities were $41.9 million at March 31, down from $43.9 million at December 31, 2024, due to our quarterly dividend payment.

As returning capital to our stockholders remains a top priority, I am pleased to announce that on April 28th, our board of directors declared another quarterly cash dividend of $0.20 per share, which will be payable on May 23rd to stockholders of record as of May 13th. Looking forward, our immediate priority is assessing the potential impact of tariffs on our operations and responding swiftly with strategic actions to optimize our supply chain and streamline logistics, ensuring we continue to meet the needs of our markets, while also remaining focused on the execution of our strategic initiatives and on providing exceptional support to our members every step of the way. That completes our prepared remarks. I will now turn the call back over to the operator.

Operator (participant)

Thank you. Ladies and gentlemen, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.