NATR - Nature's Sunshine Reports First Quarter 2022 Results

LEHI, Utah, May 05, 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 first quarter ended March 31, 2022.

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

• Net sales increased 8% to a quarter record $110.5 million compared to $102.4 million.
• GAAP net income (loss) was $(2.7) million, or $(0.15) per diluted share, compared to $4.2 million, or $0.20 per diluted share.
• Adjusted EBITDA decreased to $8.2 million compared to $11.6 million.
  

Management Commentary

“In the first quarter we delivered strong top-line growth despite headwinds from COVID-19, intensifying global supply chain issues, rampant inflation and the devastating war in Ukraine,” said Terrence Moorehead, CEO of Nature’s Sunshine. “The business displayed incredible resilience, with new customer growth and positive order increases in several strategic markets of the business.

“As expected, productivity was negatively impacted in the quarter by the confluence of externally-driven headwinds, resulting in $4.2 million of inventory-related impairment charges. Sourcing challenges also inhibited our ability to meet product demand and drive growth in our North American segment. Despite these headwinds, we look forward to overcoming these near-term challenges and continue to invest ahead of growth, bolstered by a healthy balance sheet, strong global growth strategies and our firm belief in the long-term potential of our business.”

First Quarter 2022 Financial Results

Net sales in the first quarter increased 7.9% to a company record of $110.5 million compared to $102.4 million in the year-ago quarter. The increase was due to the continued execution of business transformation initiatives, launch of new products, and the easing of COVID-19-related restrictions in our Asian markets, offset by declines in North America due to stock outs of certain products as result of supply chain challenges, and a reduction in the average order size attributed to customer sensitivity due to inflationary pressures, among other factors. Excluding foreign exchange rates, net sales in the first quarter of 2022 increased 10.3% compared to the year-ago quarter.

Gross margin in the first quarter was 68.8% compared to 73.7% in the year-ago quarter. The increase in cost of sales percentage is primarily due to changes in valuation reserves as a result of the conflict between Russia and Ukraine, as well as reserves for other markets, changes in market mix, and increases in both production and transportation costs. For the three months ended March 31, 2022, we had incremental valuation charges of $4.2 million related to inventory. Of that amount, $3.1 million related to the conflict between Russia and Ukraine, and $1.1 million related to changes in forecast demand and production issues, among other factors.

Volume incentives as a percentage of net sales were 30.9% compared to 33.4% in the year-ago quarter. The decrease in volume incentives is partially due to changes in market mix and growth in NSP China. The decrease also reflects costs savings from the September 2020 launch of our new consultant sales and compensation plan in North American and LATAM.

Selling, general and administrative expenses in the first quarter were $40.6 million compared to $33.6 million in the year?ago quarter. The increase was primarily attributable to higher costs associated with incremental variable service fees in China from net sales growth, the implementation of business transformation and sales growth initiatives in other markets, and an increase in planned events and travel-related costs. As a percentage of net sales, SG&A expenses were 36.8% for the first quarter of 2022 compared to 32.8% in the year-ago quarter.

Operating income in the first quarter of 2022 was $1.3 million, or 1.2% of net sales, compared to $7.6 million, or 7.5% of net sales, in the year-ago quarter.

Other loss, net, in the first quarter of 2022 was a loss of $(0.3) million compared to a loss of $(1.9) million in the year-ago quarter. Other loss, net, primarily consists of foreign exchange gains (losses) as a result of net changes in foreign currencies primarily in Asia, Europe and Latin America. The provision for income taxes was $3.7 million in the first quarter of 2022 compared to $1.6 million for the year-ago quarter.

GAAP net income (loss) attributable to common shareholders was a loss of $(3.0) million, or a loss of $(0.15) per diluted common share, compared to income of $4.0 million, or $0.20 per diluted common share, in the year-ago quarter. Net income attributable to NSP China increased to $1.3 million, or $0.07 per diluted common share, for the first quarter of 2022, compared to $0.7 million, or $0.03 per diluted common share, for the year-ago quarter.

Non-GAAP net income (loss) attributable to common shareholders was a loss of $(0.6) million, or a loss of $(0.03) per diluted common share, compared to income of $4.1 million, or $0.21 per diluted common share, in the year-ago quarter. 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 decreased to $8.2 million compared to $11.6 million in the year-ago quarter. This decrease was driven primarily by the aforementioned decrease in gross margins and increase in selling, general and administrative expenses. 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 in operating activities was $7.9 million for the three months ended March 31, 2022, compared to $2.7 million provided in the year-ago quarter. Capital expenditures during the three months ended March 31, 2022 totaled $1.5 million compared to $1.0 million in the year-ago quarter. During the three months ended March 31, 2022, the Company repurchased 451,000 shares at a total cost of $8.0 million. As of March 31, 2022, the Company had cash and cash equivalents of $66.5 million and $2.1 million of debt.

Conference Call

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

Date: Thursday March 5, 2022
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Toll-free dial-in number: 1-800-768-5121
International dial-in number: 1-312-429-0440
Conference ID: 22017486

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 Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay here .

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through May 19, 2022.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 22017486

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 the Company’s objectives, plans, strategies and financial results. All statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates 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 by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they 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 Nature’s Sunshine Products’ 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

* Other loss, net is primarily comprised of foreign exchange (gains) losses, interest income, and interest expense.
** As a result of the conflict between Russia and Ukraine, the Company has recorded a non-cash reserve above and beyond usual operating levels based on its estimates of actual future inventory consumption and operating results.