Natural Health Trends Corp. Q2 2026 Earnings Call

Good day, welcome to the Natural Health Trends Corp quarter two 2026 earnings conference call. At this time, I would like to turn the conference over to Michelle Glidewell.

Thank you, welcome to Natural Health Trends second quarter 2026 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 due to 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 a replay of today's call can be found on the investor section of the company's corporate website at naturalhealthtrendscorp.com. At this time, I'd like to turn the call over to Chris Sharng, President of Natural Health Trends.

Thank you, Michelle. Good morning, thanks to everyone joining us to discuss our second quarter 2026 financial results. Scott Davidson, our Senior Vice President and Chief Financial Officer, is also here today. Second quarter net sales were $7.6 million, a 23% decrease compared to the second quarter of 2025. In China, consumers continue to be cautious about spending and investing. While regulatory uncertainty caused some members to pause activities during the quarter. We also identified conduct by certain members that violated the company's Hong Kong policies, procedures, and professional code of conduct. These activities disrupted our business and adversely affected our second quarter revenue and operating results. At the same time, the restructuring initiatives implemented late last year showed improvements in gross margin and reduced operating expenses by approximately $300,000 during the quarter.

Year to date, these actions have generated more than $600,000 in savings, with additional savings expected to be realized in the second half of the year. During the quarter, we launched Super Nutri One, our new tropical flavored greens powder formulated to support digestion, detoxification, and immune health. Early customer response has been encouraging, with positive feedback across our markets on the product's taste, convenience, and overall value proposition. We also reinforced our commitment to product quality by hosting a group of field leaders at one of our primary manufacturing facilities in Korea, providing them with firsthand insight into our manufacturing processes and quality standards. Across our global markets, we continue to execute targeted product launches, promotions, recognition programs, and incentive initiatives designed to increase engagement, strengthen customer loyalty, and support long-term sales growth. We look forward to celebrating our 25th anniversary in Hong Kong next month.

Leading up to and throughout the event, customers will have the opportunity to qualify for a range of prizes and rewards. We expect to welcome more than 1,000 attendees from around the world as we reaffirm our long-term strategy, strengthen engagement with our global field leadership, and reinforce our commitment to future growth. As we look ahead, our priorities remain clear. Execute with financial discipline, invest in initiatives that strengthen our competitive position, and support our field with innovative products, enhanced digital capabilities and tools, and meaningful engagement. These actions position us to capitalize on opportunities as market conditions improve. On that note, our board of directors authorized the resumption of share repurchases under our existing stock repurchase program with $15.9 million remaining available. This initiative indicates our confidence in the business as well as continued commitment to returning cash to the shareholders.

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 $7.6 million compared to $9.8 million in the second quarter of 2025.

A decline of 23% primarily due to, as Chris mentioned, Chinese consumers' continued hesitancy to spend and regulatory uncertainty in China that caused some of our members to pause activities during the quarter. We also identified conduct by certain members that violated the company's Hong Kong policies, procedures, and code of conduct that disrupted our business and impacted second quarter results. Turning to our costs and operating expenses. We are seeing the impact of strong execution on our previously announced restructuring program with improved margin and reduced operating expenses.

Gross profit margin increased to 75.2% from 73.9% in the second quarter of last year, due to the transition of much of our product manufacturing from the United States to East Asia, closer to our main markets. Commissions expense as a percent of total revenue for the second quarter was 40.9%, consistent with the second quarter of last year. Selling, general, and administrative expenses for the quarter were $3.3 million, a decrease of $323,000 compared to a year ago. Operating loss for the quarter was $643,000 compared to $333,000 in the second quarter of last year. Net loss for the second quarter was $451,000 or $0.05 per diluted share, compared to a net income of $15,000 or breakeven per diluted share in the second quarter of 2025.

Now I'll turn to our balance sheet and cash flow. Net cash used in operating activities was $2.2 million during the first six months of 2026, compared to $5.2 million in the first six months of 2025. Total cash equivalents, and marketable securities were $18.6 million at June 30th, down from $28.9 million at December 31st, 2025, primarily due to the repurchase of shares of common stock and dividends paid during the first six months of 2026. On April 27th, our board of directors authorized the resumption of share repurchases under our existing stock repurchase program, with $15.9 million remaining available. While the operating environment remains challenging, we continue to take proactive steps to strengthen the business through disciplined execution, operational efficiency, and targeted investments that support long-term growth.

The restructuring initiatives implemented late last year are delivering the expected financial benefits and contributing to improved gross margin, and we expect additional savings to be realized in the second half of the year. We remain confident in our strategy and focused on building a stronger foundation for the future through continued innovation, enhanced digital capabilities, and deeper engagement with our global field. Our upcoming 25th anniversary celebration in Hong Kong represents an important milestone as we bring our global community together and reaffirm our commitment to the next chapter of growth. That concludes our prepared remarks. I will now turn the call back over to the operator.

This concludes today's call. Thank you for your participation.