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NHT Global(NHTC) - 2024 Q3 - Quarterly Report
NHTCNHT Global(NHTC)2024-10-30 13:20
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Financial Performance - Net sales for Q3 2024 were 10.691million,slightlyupfrom10.691 million, slightly up from 10.615 million in Q3 2023[13] - Gross profit for Q3 2024 remained flat at 7.926millioncomparedtoQ32023[13]−NetincomeforQ32024droppedto7.926 million compared to Q3 2023[13] - Net income for Q3 2024 dropped to 35,000 from 172,000inQ32023[13]−ComprehensiveincomeforQ32024was172,000 in Q3 2023[13] - Comprehensive income for Q3 2024 was 324,000, up from 150,000inQ32023[16]−NetincomeforQ12024was150,000 in Q3 2023[16] - Net income for Q1 2024 was 188 thousand, contributing to a total stockholders' equity of 39,370thousand[19]−NetincomeforQ22024was39,370 thousand[19] - Net income for Q2 2024 was 173 thousand, with total stockholders' equity decreasing to 37,250thousand[19]−NetincomeforQ32024was37,250 thousand[19] - Net income for Q3 2024 was 35 thousand, with total stockholders' equity further decreasing to 35,305thousand[19]−NetincomefortheninemonthsendedSeptember30,2024,was35,305 thousand[19] - Net income for the nine months ended September 30, 2024, was 396 thousand, compared to 210thousandinthesameperiodin2023[22]−NetsalesforthethreemonthsendedSeptember30,2024were210 thousand in the same period in 2023[22] - Net sales for the three months ended September 30, 2024 were 10,691 thousand, compared to 10,615thousandforthesameperiodin2023[40]−NetsalesfortheninemonthsendedSeptember30,2024were10,615 thousand for the same period in 2023[40] - Net sales for the nine months ended September 30, 2024 were 32,117 thousand, compared to 32,987thousandforthesameperiodin2023[40]−NetsalesforthePrimaryReportingSegmentwere32,987 thousand for the same period in 2023[40] - Net sales for the Primary Reporting Segment were 9,951 thousand for the three months ended September 30, 2024, compared to 10,249thousandinthesameperiodin2023[77]−NetsalesfromexternalcustomersinHongKongwere10,249 thousand in the same period in 2023[77] - Net sales from external customers in Hong Kong were 8,356 thousand for the three months ended September 30, 2024, compared to 8,412thousandinthesameperiodin2023[78]−TotalnetsalesfortheninemonthsendedSeptember30,2024were8,412 thousand in the same period in 2023[78] - Total net sales for the nine months ended September 30, 2024 were 32,117 thousand, compared to 32,987thousandinthesameperiodin2023[78]−NetsalesforthethreemonthsendedSeptember30,2024were32,987 thousand in the same period in 2023[78] - Net sales for the three months ended September 30, 2024 were 10.7 million, a 1% increase compared to 10.6millioninthesameperiodlastyear[100]−HongKongnetsales,primarilyfromproductsshippedtoChina,decreasedby10.6 million in the same period last year[100] - Hong Kong net sales, primarily from products shipped to China, decreased by 56,000 (less than 1%) for the three months ended September 30, 2024 compared to the same period last year[100] - Gross profit margin declined to 74.1% for the three months ended September 30, 2024 from 74.7% in the same period last year, primarily due to higher costs related to the Premium Noni Juice product[102] - Commissions expense decreased to 40.5% of net sales for the three months ended September 30, 2024 from 41.1% in the same period last year, mainly due to lower weekly commissions earned outside of Hong Kong[103] - Selling, general and administrative expenses were 3.9millionforboththethreemonthsendedSeptember30,2024and2023[104]−Otherincomedecreasedto3.9 million for both the three months ended September 30, 2024 and 2023[104] - Other income decreased to 441,000 for the three months ended September 30, 2024 from 585,000inthesameperiodlastyear,primarilyduetolessinterestincomeearned[106]−DilutednetincomepercommonsharefortheninemonthsendedSeptember30,2024,was585,000 in the same period last year, primarily due to less interest income earned[106] - Diluted net income per common share for the nine months ended September 30, 2024, was 0.03, compared to 0.02inthesameperiodin2023[30]CashFlowandLiquidity−Operatingcashflowswerenegativein2022and2023,withonlymodestpositiveflowsin2020and2021[7]−NetcashusedinoperatingactivitiesfortheninemonthsendedSeptember30,2024,was0.02 in the same period in 2023[30] Cash Flow and Liquidity - Operating cash flows were negative in 2022 and 2023, with only modest positive flows in 2020 and 2021[7] - Net cash used in operating activities for the nine months ended September 30, 2024, was 3.455 million, compared to 4.209millioninthesameperiodin2023[22]−NetcashusedininvestingactivitiesfortheninemonthsendedSeptember30,2024,was4.209 million in the same period in 2023[22] - Net cash used in investing activities for the nine months ended September 30, 2024, was 23.090 million, primarily due to purchases of marketable securities[22] - Dividends paid during the nine months ended September 30, 2024, were 6.909million,consistentwiththesameperiodin2023[22]−Cash,cashequivalents,andrestrictedcashdecreasedby6.909 million, consistent with the same period in 2023[22] - Cash, cash equivalents, and restricted cash decreased by 33.280 million to 22.937millionasofSeptember30,2024,comparedto22.937 million as of September 30, 2024, compared to 58.449 million as of September 30, 2023[22] - Cash and cash equivalents decreased to 22,937thousandasofSeptember30,2024,from22,937 thousand as of September 30, 2024, from 56,217 thousand as of December 31, 2023[45] - Total investments in cash equivalents and marketable securities were 37,905thousandasofSeptember30,2024,comparedto37,905 thousand as of September 30, 2024, compared to 47,207 thousand as of December 31, 2023[48] - Cash, cash equivalents, and marketable securities totaled 46.3millionasofSeptember30,2024,adecreaseof46.3 million as of September 30, 2024, a decrease of 9.9 million from December 31, 2023 due to dividend payments and repatriation tax payments[109] - Working capital decreased by 11.5millionto11.5 million to 32.7 million as of September 30, 2024 compared to December 31, 2023[110] - Cash used in operations improved by 1.7millionforthefirstninemonthsof2024comparedtothesameperiodlastyear,primarilyduetobetterinventoryandoperatingcostmanagement[111]DividendsandShareholderEquity−Dividendsdeclaredat1.7 million for the first nine months of 2024 compared to the same period last year, primarily due to better inventory and operating cost management[111] Dividends and Shareholder Equity - Dividends declared at 0.20 per share resulted in a total payout of 2,303thousandinQ12024[19]−Dividendsdeclaredat2,303 thousand in Q1 2024[19] - Dividends declared at 0.20 per share resulted in a total payout of 2,303thousandinQ32024[19]−TheCompanydeclaredandpaidcashdividendsof2,303 thousand in Q3 2024[19] - The Company declared and paid cash dividends of 0.20 per common share during each of the first three quarters of 2024, totaling 6.9million[70]−Quarterlycashdividendof6.9 million[70] - Quarterly cash dividend of 0.20 per share declared, payable on November 22, 2024[79] - Total stockholders' equity as of September 30, 2024, stood at 35,305thousand[19]−Accumulatedothercomprehensivelossdecreasedfrom35,305 thousand[19] - Accumulated other comprehensive loss decreased from (1,069) thousand at December 31, 2023 to (960)thousandatSeptember30,2024[72]−AsofSeptember30,2024,(960) thousand at September 30, 2024[72] - As of September 30, 2024, 21.9 million of the 70.0millionstockrepurchaseprogramremainedavailableforfuturepurchases[71]MarketandOperationalRisks−Thecompanyexperiencedasignificantlossofmembers,whichisadverselyaffectingitsbusiness[7]−HongKongoperations,asubstantialportionofthebusiness,arebeingadverselyaffectedbyrecentpoliticalandsocialdevelopments[7]−Thecompanyfacesrisksfromproductconcentrationandlackofrevenuediversification[7]−Currencyexchangeratefluctuationscouldlowerrevenueandnetincome[8]−Thecompanyissubjecttoextensivegovernmentregulation,whichcoulddelayorlimitproductsalesinsomemarkets[8]−Salesandnetearningsareaffectedbycurrencyexchangerates,withsalesandearningsgenerallyincreasingwithaweakeningU.S.dollaranddecreasingwithastrengtheningU.S.dollar[96]−COVID−19pandemicandrelatedgovernmentmeasuressignificantlyimpactedfinancialresultsfrom2020through2022,withrecoveryobservedin2023andthefirstninemonthsof2024[87]−RecentpoliticalandsocialdevelopmentsinHongKong,alongwithCOVID−19,ledtothecessationofmembermeetingsandeventsinHongKongin2020,withpartialresumptioninrecentquarters[88]Share−BasedCompensationandEquityAdjustments−Share−basedcompensationadded70.0 million stock repurchase program remained available for future purchases[71] Market and Operational Risks - The company experienced a significant loss of members, which is adversely affecting its business[7] - Hong Kong operations, a substantial portion of the business, are being adversely affected by recent political and social developments[7] - The company faces risks from product concentration and lack of revenue diversification[7] - Currency exchange rate fluctuations could lower revenue and net income[8] - The company is subject to extensive government regulation, which could delay or limit product sales in some markets[8] - Sales and net earnings are affected by currency exchange rates, with sales and earnings generally increasing with a weakening U.S. dollar and decreasing with a strengthening U.S. dollar[96] - COVID-19 pandemic and related government measures significantly impacted financial results from 2020 through 2022, with recovery observed in 2023 and the first nine months of 2024[87] - Recent political and social developments in Hong Kong, along with COVID-19, led to the cessation of member meetings and events in Hong Kong in 2020, with partial resumption in recent quarters[88] Share-Based Compensation and Equity Adjustments - Share-based compensation added 38 thousand to equity in Q2 2024[19] - Foreign currency translation adjustments negatively impacted equity by 114thousandinQ12024[19]−Foreigncurrencytranslationadjustmentspositivelyimpactedequityby114 thousand in Q1 2024[19] - Foreign currency translation adjustments positively impacted equity by 252 thousand in Q3 2024[19] - Unrealized gains on available-for-sale securities added 37thousandtoequityinQ32024[19]−Share−basedcompensationexpenserecognizedduringthethreemonthsendedSeptember30,2024was37 thousand to equity in Q3 2024[19] - Share-based compensation expense recognized during the three months ended September 30, 2024 was 34,000, compared to 38,000inthesameperiodin2023[64]−Totalunrecognizedshare−basedcompensationexpenserelatedtonon−vestedrestrictedstockasofSeptember30,2024was38,000 in the same period in 2023[64] - Total unrecognized share-based compensation expense related to non-vested restricted stock as of September 30, 2024 was 167,000, expected to be recognized over a weighted-average period of 0.7 years[64] - The Company granted 212,937 phantom shares on February 7, 2023, with 159,702 vested, 26,618 unvested, and 26,617 forfeited as of September 30, 2024[66] - Compensation expense related to the cash settlement of phantom shares was 181,000forthethreemonthsendedSeptember30,2024,comparedto181,000 for the three months ended September 30, 2024, compared to 144,000 in the same period in 2023[68] Inventory and Contract Liabilities - Inventories decreased to 3,684thousandasofSeptember30,2024,from3,684 thousand as of September 30, 2024, from 4,293 thousand as of December 31, 2023[45] - Contract liabilities increased to 5.2millionasofSeptember30,2024,from5.2 million as of September 30, 2024, from 4.4 million as of December 31, 2023, due to unshipped product orders and unredeemed product vouchers[38] Geographic and Market Operations - The company operates in multiple markets, including the Americas, Greater China, Southeast Asia, South Korea, Japan, India, and Europe, with additional operations in Russia and Kazakhstan through a local service provider[25] - 93% of net sales generated from subsidiaries outside the Americas, with Hong Kong subsidiary contributing 78% of net sales in the latest fiscal quarter[83] - 79% of revenue in 2023 generated in Hong Kong, substantially all from product sales to members in China[87] - Company operates an e-commerce direct selling platform in Hong Kong and a retail platform in China, with plans to reapply for a direct selling license in China[84] - The company plans to focus resources on investing in Greater China and other key markets, including establishing China-based manufacturing capabilities and increasing brand awareness[116] Lease and Other Expenses - Lease cost for the three months ended September 30, 2024 was 353thousand,comparedto353 thousand, compared to 358 thousand for the same period in 2023[52] - Lease cost for the nine months ended September 30, 2024 was 1,069thousand,comparedto1,069 thousand, compared to 1,085 thousand for the same period in 2023[52] - The weighted-average remaining lease term as of September 30, 2024 was 3.7 years, with a weighted-average discount rate of 4.3%[53] - The present value of lease liabilities as of September 30, 2024 was 2,930thousand[54]TaxandForeignOperations−Thecompanyhasforeignnetoperatinglosscarryforwardsofapproximately2,930 thousand[54] Tax and Foreign Operations - The company has foreign net operating loss carryforwards of approximately 2.3 million as of September 30, 2024[57] - The company's cash and cash equivalents include $3.8 million held in bank accounts in China subject to foreign currency controls as of September 30, 2024[27] Sales Returns and Commissions - Sales returns were 1% of sales for both the nine months ended September 30, 2024, and 2023[35] - Member commissions represented 41% of net sales for the first nine months of 2024, compared to 42% in the same period of 2023[93] Membership and Sales Trends - Active members decreased to 30,880 as of September 30, 2024, from 32,410 at December 31, 2023, and 34,660 at September 30, 2023[82] Miscellaneous - Not applicable under smaller reporting company disclosure rules[120]