Chris Sharng - President and Director Scott Davidson - Senior VP and Chief Financial Officer.

Greetings, and welcome to Natural Health Trends Corp Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded..

Orlando:.

Thank you, and welcome to Natural Health Trends' second quarter 2022 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 Investors section of the company's corporate website at naturalhealthtrendscorp.com. Instructions can be found for accessing the archived version of the conference call in today's financial results press release, which was issued at approximately 9:00 a.m.

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

Thank you, Michelle, and thanks to everyone for joining us this morning to discuss our second quarter 2022 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer.

In the second quarter we continued to face significant COVID-related disruptions as lockdowns and social restrictions, along with supply chain bottlenecks persisted in greater China. Despite these challenges, we generated revenue of $13.4 million, an increase of 16% compared to the first quarter of 2022.

The increase over prior quarter can be attributed to a well-attended virtual event held in late June, as well as a promotional incentive to which our members strongly responded..

It is admittedly difficult to replicate online the excitement and energy that comes from live events. We appreciate and recognize that our teams continued to work hard and adapt to the ever-changing regulations and social restrictions.

Collaborating with our leaders, we implemented a new virtual training system which incorporates company-sponsored product training and member-led business, motivational and leadership training, to better support the ongoing development and engagement of our members.

Turning to our markets outside of China and Hong Kong, we managed to return to growth in our European market fueled by our business in Sweden. In April we held a successful product training event with more than 150 attendees.

Additionally, in-person and virtual activities coupled with self-initiatives designed at the local level continued to be key elements of our strategy to support the markets of North America, India, Peru, Mexico, Japan and CIS. These activities included leadership development trainings, product education sessions, and incentive trips.

In May we celebrated Peru’s fifth anniversary joining 250 plus members on a virtual session to commemorate the milestone.

Despite the general global economic downturn impacting many of our markets, we remain committed to the fundamentals of our business and to driving future growth through new local level promotional initiatives, ongoing leader development and training, technology advancements to enhance the user experience, and provide insights for improved business management and market expansion.

In summary, we are pleased with the second quarter financial performance to achieve sequential topline growth and deliver bottom-line profitability due to our ongoing efforts to manage costs in alignment to sales. With that, I’d like to turn the call over to our CFO, Scott Davidson to discuss our financial results in greater detail.

Scott?.

Thank you, Chris. Total revenue for the second quarter was $13.4 million, an increase of 16% compared to a $11.5 million the first quarter of 2022 and a decrease of 17% compared to $16.2 million in the second quarter of 2021.

The spread of COVID-19 bans in greater China, along with strong government control measures, momentarily impacted our results in the first half of 2022. As Chris mentioned, the sequential quarter increase in revenue was primarily due to a special virtual event and incentive held in June designed to encourage new member engagement.

The year-over-year decline in revenue was challenging due to a busy calendar of in-person event-intensive sales and training activities throughout greater China in the second quarter of 2021.

As we continue to navigate through this pandemic, we expect our financial results will continue to be adversely impacted given that the operating environment remains fragile. Many restrictions continue in effect and the potential for more disruptive measures is still unpredictable.

Our active member base decreased 3% to 43,020 at June 30th, from 44,490 at March 31st and was down 8% from 46,860 at June 30th last year. Turning to our cost and operating expenses.

Gross profit margin of 74.6% decreased from 75.7% in the second quarter last year due to the impact of relatively fixed cost on a lower level of net sales, as well as a decrease in administrative fee revenue. Commissions expense as a percent of total revenues for the second quarter increased to 43.2% from 42.9% in the prior quarter.

Selling general and administrative expense for the quarter were $4 million compared to $4.9 million a year ago. The decrease in our SG&A from the prior year quarter reflects lower event costs as we held a major event in June 2021, as well as lower professional and credit card fees.

As a result, operating income for the quarter was $215,000 compared to $385,000 in the second quarter last year. We recorded income tax provision of $207,000 for the quarter compared to $97,000 in the second quarter last year.

Net income for the second quarter totaled $183,000 or $0.02 per diluted share compared to $229,000 or $0.02 per diluted share in the second quarter of 2021. Now I will turn to our balance sheet and cash flow. Total cash and cash equivalents were $75.6 million at June 30, down from $79.4 million at March 31.

Net cash used in operating activities was $1.2 million in the second quarter compared to net cash provided by operating activities of $134,000 in the second quarter last year.

As returning capital to our stockholders remains a top priority, I am pleased to announce that on August 1, Board of Directors declared another quarterly cash dividend of $0.20 per share, which will be payable on August 26 to stockholders of record as of August 16.

We continue to fine tune and hone our efforts while navigating this complex operating environment. While this quarter represents a positive trend in top line improvement, we look forward to continuing to revitalize growth and deliver improved financial performance in 2022 and beyond. That completes our prepared remarks.

I will now turn the call back over to the operator..

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day..

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