Natural Health Trends Corp.

Greetings and welcome to Natural Health Trends Corp. Third quarter 2024 Ernie's Conference Call. At this time, all participants are on a listen only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the conference over to your host, Michelle Gladwell with Natural Health Trends Corp. Thank you, you may begin.

Thank you and welcome

to Natural Health Trends Third Quarter 2024 Ernie's Conference Call. During today's call, there may be statements made relating to the future results of the company, but 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 results of certain factors, including those set forth in the company's filing with the security and security authority. And third quarter, we have the The National Security 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 naturalhealthtrends.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 nine o'clock a.m. Eastern Time. At this time, I'd like to turn the call over to Chris Scharn, President of Natural Health Trends.

Thank you, Musham, and thanks to everyone for joining us this morning to discuss our third quarter of 2024 financial results. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. During the third quarter, revenue was $10.7 million, a 1% increase compared to the third quarter of 2023. Our business has been affected by the widely reported consumer hesitancy to invest or spend in our main market. Still, we managed to increase net sales sequentially and year over year, at the same time improving our operating bottom line over three consecutive quarters. So the pace of growth is not where we'd like it to be. Our customers and leaders continue to demonstrate strong engagement, and we are working closely with them to navigate these changing times. Our ability to adapt, adjust programs, and fine-tune our plans has been instrumental in supporting our customer base, while also acting in the best interest of our shareholders. In China and Hong Kong, our teams maintain aggressive calendars of activities, ranging from local, smaller-scale in-person meetings to two-day -the-trainer professional and personal development sessions, and charity activities to help drive business growth and support our branding. Also in Q3, more than 200 members join us on an incentive trip to Turkey, a great opportunity for knowledge sharing, motivation, personal growth, and cultural exposure. This ambitious calendar of activities will continue through Q4 as we roll out new products in the region, including our SkinDulgence Revitalizing Serum and Eye Cream, along with a new flavor, Collagen Supreme Supplement, and Root Revive, a new hair growth serum to promote healthier, stronger-looking hair. Around the world, our global staff and field teams are hard at work hosting local and regional meetings, providing team training, and conducting recognition events. Their focus is on expanding product education, growing our member and customer base, driving product repurchase, and developing strong teams to carry the business forward. In September, we held pre-launch activities in Colombia, and on October 1st, we officially opened the market. We look forward to what this market may bring in terms of new customers and exposure to a broader Latin America base of entrepreneurs. During the quarter, we embark on incentive trips to destinations abroad. In August, members from North America traveled together to Peru, visiting Lima and Machu Picchu for some inspiring team building and sightseeing. Earlier this month, several markets combined incentive activities, as our leaders and qualifiers from Peru, Mexico, and Japan were treated to an incredible incentive trip to Paris. We continue to make steady advancements toward our digital enhancement project, which we believe will fuel future growth by boosting member productivity and improving the overall selling and shopping experience. We anticipate rolling out these developments to our members and customers early next year. We appreciate the hard work and dedication that our field leaders and members continue to demonstrate in spite of a complicated sales landscape. Our thoughtful planning and careful execution of strategies to support business growth and navigate this challenging economic environment remains key. Including that is maintaining a vigilant focus on cost control, including expense management, inventory, and product optimization to ensure the company remains positioned for future success. 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 third quarter was $10.7 million, an increase of 1% compared to $10.6 million in the third quarter of 2023. As Chris stated, this represents an increase in net sales, coincidentally, and -over-year. Our active member base decreased slightly at 30,880 at September 30 from 31,110 at June 30 and was down 11% from 34,660 at September 30 last year. Turning to our cost and operating expenses, gross profit margin declined to .1% from .7% in the third quarter last year due to higher costs related to our premium noni juice product. Commission's expense as a percent of total revenue for the third quarter was .5% compared to .1% a year ago due to lower weekly commissions earned outside of our Hong Kong business. Selling general and administrative expenses for the quarter were $3.9 million, flat compared to a year ago. As a result, operating loss for the quarter was $275,000 compared to $292,000 in the third quarter last year. And improvement in our operating bottom line for three consecutive quarters. However, due to less interest income and a higher effective tax rate, net income for the third quarter was $35,000 or break-even per diluted share compared to $172,000 or two cents per diluted share in the third quarter of 2023. Now I'll turn to our balance sheet and cash flow. Net cash used in operating activities was $3.5 million during the first nine months of 2024 compared to $4.2 million during the comparable period a year ago. Excluding our required annual tax installment payment related to the 2017 U.S. Tax Cuts and Jobs Act, we generated $514,000 in cash flows from operations during this period, which is an improvement of $1.7 million over the comparable prior year period. Total cash, cash equivalents, and marketable securities was $46.3 million at September 30th, down from $48.7 million at June 30th due to our quarterly dividend payment. As returning capital to our stockholders remains a top priority, I am pleased to announce that on October 28th, our board of directors declared another quarterly cash dividend of 20 cents per share, which will be payable on November 22nd, to stockholders' record as of November 12th. Navigating the constantly evolving business landscape requires thoughtful development and implementation of programs that enhance performance and productivity of our members. We remain committed to this practice and to working alongside our leaders to support them and their team's advancement by focusing on key strategic initiatives, including product innovation, digital enhancement, market expansion, and training. Our primary goal is to return to a healthy growth phase by executing strategies that increase top-line revenue, ultimately delivering value to our shareholders. That completes our prepared remarks. I will

now turn the call back over to the operator. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.