MANNATECH INC

Previous wording

The following discussion is intended to assist in the understanding of our consolidated financial position and results of operations for the three and six months ended June 30, 2024 as compared to the same period in 2023 and should be read in conjunction with Item 1 “Financial Statements” in Part I of this quarterly report on Form 10-Q and Item 1A “Risk Factors” in Part I of our 2023 Annual Report. Unless stated otherwise, all financial information presented below, throughout this report, and in the condensed consolidated financial statements and related notes includes Mannatech and all of our subsidiaries on a consolidated basis. To supplement our financial results presented in accordance with GAAP, we disclose certain adjusted financial measures which we refer to as Constant dollar (“Constant dollar”) measures, which are non-GAAP financial measures. Refer to the Non-GAAP Financial Measures section herein for a description of how such Constant dollar measures are determined.

Current wording

The following discussion is intended to assist in the understanding of our consolidated financial position and results of operations for the three and nine months ended September 30, 2024 as compared to the same period in 2023 and should be read in conjunction with Item 1 “Financial Statements” in Part I of this quarterly report on Form 10-Q and Item 1A “Risk Factors” in Part I of our 2023 Annual Report. Unless stated otherwise, all financial information presented below, throughout this report, and in the condensed consolidated financial statements and related notes includes Mannatech and all of our subsidiaries on a consolidated basis. To supplement our financial results presented in accordance with GAAP, we disclose certain adjusted financial measures which we refer to as Constant dollar (“Constant dollar”) measures, which are non-GAAP financial measures. Refer to the Non-GAAP Financial Measures section herein for a description of how such Constant dollar measures are determined.

Previous wording

The Company is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products that target optimal health and wellness. We currently sell our products in twenty-five countries which we group into three regions: (i) the Americas (the United States, Canada and Mexico); (ii) Europe/the Middle East/Africa (“EMEA”) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Taiwan, Thailand, Hong Kong, and China). We also ship our products to customers in the following countries: Belgium, France, Greece, Italy, Luxembourg, and Poland. During the quarter ended June 30, 2024 the Company liquidated its entity in Sweden, Mannatech Sverige AB.

Current wording

The Company is a global wellness solution provider, which was incorporated and began operations in November 1993. We develop and sell innovative, high quality, proprietary nutritional supplements, topical and skin care and anti-aging products, and weight-management products that target optimal health and wellness. We currently sell our products in twenty-five countries which we group into three regions: (i) the Americas (the United States, Canada and Mexico); (ii) Europe/the Middle East/Africa (“EMEA”) (Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, Namibia, the Netherlands, Norway, South Africa, Spain, Sweden and the United Kingdom); and (iii) Asia/Pacific (Australia, Japan, New Zealand, the Republic of Korea, Singapore, Thailand, Hong Kong, Taiwan and China). We also ship our products to customers in the following countries: Belgium, France, Greece, Italy, Luxembourg, and Poland. During the second quarter of 2024 the Company liquidated its entity in Sweden, Mannatech Sverige AB.

Previous wording

We conduct our business as a single operating segment and primarily sell our products through a network of approximately 142,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last twelve months, who we refer to ascurrent associatesand preferred customers. New pack sales and the receipt of new associate fees in connection with new positions in our network are leading indicators for the long-term success of our business. New associate or preferred customer positions are created in our network when our associate fees are paid, or packs and products are purchased for the first time under a new account. We review and analyze net sales by geographical location and by packs and products on a consolidated basis. Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices and gross margins.

Current wording

We conduct our business as a single operating segment and primarily sell our products through a network of approximately 136,000 active associates and preferred customer positions held by individuals that purchased our products and/or packs or paid associate fees during the last twelve months, who we refer to ascurrent associatesand preferred customers. New pack sales and the receipt of new associate fees in connection with new positions in our network are leading indicators for the long-term success of our business. New associate or preferred customer positions are created in our network when our associate fees are paid, or packs and products are purchased for the first time under a new account. We review and analyze net sales by geographical location and by packs and products on a consolidated basis. Each of our subsidiaries sells similar products and exhibits similar economic characteristics, such as selling prices and gross margins.

Previous wording

Consolidated net sales for the three months ended June 30, 2024 was $27.7 million, as compared to $32.6 million for the three months ended June 30, 2023, a decrease of $4.9 million, or 14.9%. Consolidated net sales for the six months ended June 30, 2024 was $57.1 million, as compared to $66.7 million for the six months ended June 30, 2023, a decrease of $9.6 million, or 14.4%. The decline in revenues was principally due to supply chain constraints, items on back order, and some weakening of economic conditions in Asia.

Current wording

Consolidated net sales for the three months ended September 30, 2024 was $31.7 million, as compared to $32.6 million for the three months ended September 30, 2023, a decrease of $0.9 million, or 2.5%. Consolidated net sales for the nine months ended September 30, 2024 was $88.9 million, as compared to $99.3 million for the nine months ended September 30, 2023, a decrease of $10.4 million, or 10.5%. The decline in revenues was principally due to slowing demand in Asia due to weakened economic conditions, relative to the prior year.

Previous wording

The decrease in revenue during the six months ended June 30, 2024 was accompanied by a 1.4% drop in gross profit margins due to the effects of supply chain disruptions, which increased fulfillment costs. Despite these challenges, management continued to prioritize the reduction of selling and administrative expenses as a countermeasure to soften the impact on profitability. These efforts yielded a $1.4 million reduction in payroll costs and $1.3 million reduction in consulting fees, compared with the six months ended June 30, 2023.

Current wording

The decrease in revenue during the nine months ended September 30, 2024 was accompanied by a 2.2% decrease in gross profit margins, primarily due to increases in product costs and $0.6 million of inventory markdowns. To mitigate the impacts to profitability, management continued to prioritize the reduction of selling and administrative expenses, which yielded a $4.3 million reduction in payroll costs and $1.5 million reduction in consulting and professional services costs, compared with the nine months ended September 30, 2023.

Previous wording

Foreign currency gains of $0.9 million and $1.1 million in the quarters ended March 31, 2024 and June 30, 2024, respectively, were related to the strengthening of the U.S. Dollar. Foreign exchange gains also included a one-time gain of $0.2 million during the quarter ended June 30, 2024 attributable to the liquidation of the Company’s entity in Sweden.

Current wording

Net realized and unrealized foreign currency gains for the nine months ended September 30, 2024 and September 30, 2023 were $0.5 million and $0.8 million, respectively. These were primarily related to the effects of translation gains and losses on the Company's balance sheet as the U.S. Dollar strengthened relative to other currencies. Foreign currency gains also included a one-time gain of $0.2 million during the quarter ended September 30, 2024 attributable to the liquidation of the Company’s entity in Sweden.

Previous wording

Net loss was $0.6 million for the three months ended June 30, 2024, or $0.33 per diluted share, as compared to a net loss of $1.1 million, or $0.59 per diluted share for the three months ended June 30, 2023.

Current wording

Net loss was $0.3 million for the three months ended September 30, 2024, or $0.17 per diluted share, as compared to net income of $18,000, or $0.01 per diluted share for the three months ended September 30, 2023.

Previous wording

Net income was $0.6 million for the six months ended June 30, 2024, or $0.30 per diluted share, as compared to a net loss of $0.5 million , or $0.27 per diluted share for the three months ended June 30, 2023.

Current wording

Net income was $0.2 million for the nine months ended September 30, 2024, or $0.12 per diluted share, as compared to a net loss of $0.5 million , or $0.26 per diluted share for the nine months ended September 30, 2023.