David Johnson - Chief Accounting Officer Al Bala - CEO & Chief Science Officer.

Greetings and welcome to the Mannatech Incorporated Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. Now, I’d like to introduce our moderator for the call today, Mr. David Johnson, Chief Accounting Officer. Mr. Johnson, you may begin..

Thank you. Good morning, everyone. This is David Johnson, and welcome to Mannatech’s third quarter 2015 earnings call. Today, you will hear from both me, and Mannatech’s new Chief Executive Officer, Al Bala. Before we begin the call, I will first read the Safe Harbor statement.

During this conference call, we may make forward-looking statements which can involve future events or future financial performance.

Forward-looking statements generally can be identified by the use of phrases or terminologies such as will, continue, may, believe, intend, expects, potential, should, and plan or other similar words or the negative of such terminology.

We caution listeners that such forward-looking statements are subject to certain events, risks, uncertainties and other factors and speak only as of today. We also refer our listeners to review our SEC submissions. At this time, I’d like to make a few comments concerning our third quarter of 2015 operating results.

Net income for the third quarter of 2015 was $0.1 million or $0.03 per diluted share as compared to net income of $5.1 million or $1.89 per diluted share for the third quarter of 2014. The third quarter 2015 net sales decreased $11.7 million, a 21.2% to $43.9 million compared to net sales of $55.6 million for the third quarter of 2014.

The net sales comparison for the quarter was affected by foreign exchange and the launch of the Ūth skincare product in our international markets in 2014. Instead of the $11.7 million decrease, on a constant dollar basis net sales for 2015 would have decreased by $7.4 million or 13.3% as compared to the prior year.

Net sales attributable to our Ūth skincare product were $1 million the three months ending September 30, 2015 as compared to $7.2 million for the same period in 2014.

We use constant dollars reporting to supplement our financial results presented in accordance with Generally Accepted Accounting Principles in the United States or GAAP and disclose operating results that had been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S.

dollars including changes in net sales, gross profit and income from operations. We use these non-GAAP measures to provide investors with an additional perspective on trends.

In the third quarter of 2015, we continue to face foreign currency headwinds, especially in our major currencies of the Korean Won, Japanese Yen, Australian Dollar and South African Rand and Euro. Net income was negatively impacted by approximately $2.4 million as compared to a negative impact of $1.2 million in the third quarter of 2014.

In the third quarter of 2015, taxes provided a benefit of $0.2 million due to a refund. For the same period in 2014 our tax provision was $2 million or an effective tax rate of 27.6%. Those occupying a member or an associate position, our network decreased for the quarter by 18.8% compared to the same period in the prior year.

The number of new positions created by independent associates and members for the third quarter of 2015 was approximately 23,600 as compared to 29,000 in 2014.

The total number of active associates and member positions held by individuals in our network based on a 12-month trailing period was approximately 221,000 as of September 30, 2015, as compared to 234,000 as of September 30, 2014.

For the third quarter of 2015, our operations outside of North America accounted for approximately 59.4% of our consolidated net sales whereas in the same period in 2014, our operations outside of North America accounted for approximately 63.4% of our consolidated net sales.

Asia-Pacific net sales decreased by $8.3 million or 27.4% to $22 million in the third quarter of 2015 as compared to $30.3 million for the same period in 2014. Asia-Pacific net sales attributable to our Ūth skincare product were $0.4 million for the three months ending September 30, 2015 as compared to $6 million for the same period in 2014.

In constant dollars, net sales would have been $3.4 million higher or $25.4 million. The currency impact was primarily due to the depreciation of the Korean Won, Japanese Yen and Australian Dollar.

Europe, Mideast and Africa or EMEA net sales decreased by $0.8 million or 16.3% in the third quarter of 2015 to $4.1 million as compared to $4.9 million for the same period in 2014. In constant dollars, net sales for the three months ended September 30, 2015 would have been $4.9 million.

The currency impact was primarily due to the depreciation of the South African Rand and the Euro. North American net sales decreased by $2.6 million or 12.7% in the third quarter of 2015 to $17.8 million as compared to $20.4 million for the same period in 2014 due to a decline in active independent associates and members.

Our operating income for the third quarter of 2015 is $2.2 million as compared to operating income of $8.2 million for the third quarter of 2014. Our cost of sales, commissions and incentives, selling and administrative and other operating costs increased as a percentage of sales. Commissions and incentives were $17.9 million or 40.7% of revenue.

During the third quarter of 2014, commissions and incentives were 37.7% of revenue due to primarily the launch and delivery of the Ūth skincare product in our Asia-Pacific markets.

During the third quarter other operating costs were 13.9% of revenue compared to 11.1% for the same period during 2014 due to increasing legal consulting and travel cost on decreasing revenue.

In review, the balance sheet at September 30, 2015, our cash and cash equivalents increased by approximately $7.3 million to a balance of $35.3 million as compared to the $28 million on hand at December 31, 2014.

For the nine months ended September 30, 2015, cash flow from operating activities was $7.9 million inflow as compared to $14.5 million inflow for the same period in 2014. During 2015, we invested $1.7 million net in the acquisition of finished goods inventory. During the same period in 2014, we had a net inventory adjustment of $0.1 million.

We invested approximately $1.6 million in information technology and lease hold improvements and borrowed $1.1 million during 2015, as compared to approximately $2.2 million invested in the same period of 2014.

In summary, our net cash inflow for the six months of 2015 was approximately $7.3 million as compared to a net cash inflow of $11.8 million for the same period of 2014. Our working capital defined as total current assets less total current liabilities increased by $5.5 million to $21.9 million as compared to $16.4 million at December 31, 2014.

Our net inventory balances increased by approximately $0.8 million to $11.4 million at September 30, 2015 as compared to $10.6 million at December 31, 2014. Total liabilities increased by $2.7 million to $38.7 million at September 30, 2015 as compared to $36 million at December 31, 2014.

Finally, during the first, second and third quarters of 2015, we did not pay dividends and we did not repurchase shares on the open market. At this time, I will turn the call over to Mannatech’s Chief Executive Officer, Mr. Al Bala. Al Bala Thank you, David.

And I would like to welcome our shareholders, associates and customers and thank you for joining us on our third quarter 2015 earnings call. I very much appreciate your time and interest today. I am Al Bala, the new CEO of Mannatech since August 2015. And before I go to the financial results, I would like to introduce myself briefly.

I’ve had 35 years of experience working in a direct sales industry including 28 years in the field. I was serving as President of the company when I was asked to take over as CEO as well.

I am very excited about this opportunity because I have a company built on a strong foundation of scientifically validated products with great value to the end-consumer, a very dynamic international footprint and a leadership team that is committed to a culture of compliance which has now become a model for the industry.

I also inherit over 200,000 highly motivated enthusiastic associates in 24 countries. My focus is to increase our effort on world-class customer service, state-of-the-art field support systems and an aggressive international expansion.

My vision is to shift the company to emphasize sales and marketing initiatives that put customer and sales associates first and drive the company to new sales heights while delivering to the bottom line and increasing shareholder value.

During the time that I’ve been on Mannatech, I’ve had the good fortune to be a part of returning Mannatech to profitability. Another element of this company that is near and dear to me is our international expansion.

During my time at Mannatech, I’ve helped this company expand into 15 new countries including South Africa, Mexico, the Scandinavian countries, Spain and Hong Kong. Soon, we will be opening up in Colombia, our very first South American country which opens the door to a whole new continent for Mannatech.

One of the strongest areas of growth of Mannatech as you have just heard from David is from our Asian markets. I have just returned along with the Board of Directors from a two-week Asia tour where I witnessed the largest Asia Manifest event thus far in Seoul, Korea.

Asia Manifest is an annual regional event where we saw several thousand customers, associates and leaders from Korea, Japan, Taiwan and Hong Kong, gathered to celebrate their many accomplishments.

At this event, Mannatech launched two new products exclusive to Korea, Cognitate a brain-health support product and Freshden, a, premium fluoride free toothpaste containing aloe Vera gel. Both represent new categories that we plan to expand around the world.

At the same time in Japan, we released a new skincare product, the Mannatech CO2 Facial Gel Mask, which is expanding now the company’s suite of skincare products in Asia.

We are finding that Asia has a fast growing middle-class population that is making wellness a priority in their life and natural health products continue to hold a very honorable position. To show how important the Asia initiatives are for the company, we held our November Board of Directors meeting outside of the U.S.

for the very first time in Seoul, Korea. The Board of Directors and many senior executives also took this opportunity to tour our offices in Japan, Taiwan, Hong Kong and Singapore while exploring opportunities in China as well. Our work to continue the company down to path of profitability will not be always an easy path.

And though our third quarter sales were down, we were still able to be profitable and continue to strengthen our cash position. On the other hand, the impact of foreign exchange on a realized income is an issue that is affecting the entire industry, all the companies that have really strong global presence like Mannatech does.

Also in the third quarter, third quarter sales comparison takes into consideration the exceptional success we had last year in launching our Ūth anti-ageing product in Asia.

While Ūth sales in the third quarter were down as compared to third quarter of 2014, we were able to still post a profit this quarter without any major new product initiatives in the third quarter.

We believe that Ūth remains an important part of our global product portfolio and we are exploring a variety of avenues to continue growing the audience for that product and also focusing on the training of our sales associates.

One of the first efforts I took as Mannatech’s CEO, was to realign our corporate leadership in order to help put our customers and associates first, accelerate the introduction of innovative new products and fuel global expansion.

I named Joe Bikman, to the position of Senior Vice President of a Combined Sales And Marketing Organization which also includes our R&D Department and customer service and also promoted Landen Fredrick to the position of Senior Vice President of Supply Chain and IT.

Additionally, Chris Simon, our Regional President of EMEA added North America to his areas of responsibility.

Lastly, Russ Wood, Vice President of Hong Kong Sales and Marketing was promoted to Regional President of Greater China, where he would lead the company’s continued growth in Hong Kong, while bringing the Mannatech product offering to new territories within China.

To help strengthen our position as one of the most innovative supplement developers with product backed by science, I announced in September, plans to create Mannatech’s Global Scientific Advisory Board. This Board would be comprised of third party expert in the nutrition, medical science and health & wellness fields.

This Board would help us to further support in advance, Mannatech’s continued commitment to providing groundbreaking science backed nutritional supplement at a very competitive price to its worldwide customer base.

Also in the third quarter, Mannatech prepared in advance several strategic fourth quarter holiday promotions designed to engage current and past customers and associates through the end of the year. This is a new practice for our company.

In addition, several international markets geared up for the launch of new state-of-the-art products in the fourth quarter. We believe that these initiatives are showing great promise for the fourth quarter and beyond.

I believe that we would be undertaking our biggest effort yet in the coming quarters as we attempt to transform Mannatech from the inside out. We are planning to reshape the company to be more competitive by modernizing many of its core function such as branding and messaging and our associate back-office technologies.

I think that Mannatech is on a verge of new exciting transformational changes that will increase our customer base and hence value to the end-consumer and enable our independent sales associate to grow their businesses globally and make a difference. We believe that there are many exciting things on Mannatech’s horizon.

So, to our shareholders, employees and thousands of customers and associates worldwide, thank you for your continued support. And thank you again for joining us on this call today..

Q - :.

Thank you for listening to Mannatech’s third quarter 2015 earnings call. As a reminder, company information and filings can be found at the company’s Investor Relations website at ir.mannatech.com or by reviewing the SEC submissions. This concludes today’s call..