Mannatech Inc.Q1 2010 Earnings Call Transcript

Mannatech Inc.Q1 2010 Earnings Call Transcript
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Mannatech Inc. (MTEX)

Q1 2010 Earnings Call

May 06, 2010 10:00 am ET

Executives

Gary Spinell - SVP of Finance and Administration

Rob Sinnott - Co-CEO & CSO

Steve Fenstermacher - Co-CEO

Randy Bancino - President of Global Business Operations and Expansion

Analysts

Presentation

Operator

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Welcome to the Mannatech Incorporated First Quarter 2010 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator's Instructions) As a reminder, this conference is being recorded. Now I would like to introduce our moderator for the call, Mr. Gary Spinell, Senior Vice President of Finance and Administration. Thank you. Mr. Spinell, you may begin.

Gary Spinell

Thank you and good morning everyone. This is Gary Spinell, and welcome to Mannatech's first quarter 2010 earnings call. Today, you will hear from Mannatech's CO CEOs Dr. Robert Sinnott and Stephen Fenstermacher.

Before we begin the call I will first read the Safe Harbor statement. During this conference call we may make forward-looking statements which can involve future events or future financial performance. Forward-looking statements generally can be identified by the use of phrases or terminology such as will continue, may, believe, intend, expects, potential, should, and plan, or other similar words, or the negative of such terminology. We caution listeners that such forward-looking statements are subject to certain events, risks, uncertainties, and other factors, and speak only as of today. We also refer our listeners to review our SEC submission.

Thank you, and now I will turn the call over to Dr. Robert Sinnott Co-CEO and Chief Science Officer.

Rob Sinnott

Hello and good morning everyone, this is Rob Sinnott, Co-CEO and Chief Science Officer of Mannatech, I am joined on the call by our Co-CEO Stephen Fenstermacher and President of Global Business Operations and Expansion, Randy Bancino. I appreciate your interest in our company. I will make a few opening comments and then turn the call briefly over to Steve.

Since taking on the role of Co-CEO in December, Steve and I have been increasingly involved in all areas of the business. We’re extensively focused on moving the business forward. We’re making moderate yet key changes to several aspects of the business.

Mannatech has products that are second to none and a great compensation program. Therefore this fine-tuning is different that’s required to support our associates in reaching out to new customers. These actions are designed to result in potential growth, increased profitability and increased return for our shareholders.

Before I comment further on the quarter and our future, I’d like to turn the call briefly over to my Co-CEO Steven Fenstermacher.

Steve Fenstermacher

Thanks Rob and good morning everyone. The last few months have been extremely busy with our transition into positions as well as maintaining our prior responsibilities as Chief Science officer in Rob’s case and that’s Chief Financial Officer in my case. Both of these positions could be viewed as more than full time spots on their own. Not to mention addition Chief Executive duties as well.

We are fortunate that our entire senior staff has pitched in strongly to help distribute the load especially Randy Bancino, who is our head of international, handling operations and expansion too.

We’re grateful to these executives who have broadened their list of duties in the interest of returning Mannatech growth in greater profitability. We’re pleased with our team as their efforts will be critical to help us regain momentum. Rob now has commentary.

Rob Sinnott

Thanks Steve. The first quarter of 2010 was one of mix results for Mannatech. We continue to effectively manage our cost of sales, commissions and operating expense levels, while continuing to operate efficiently. The result for the first quarter was that all of these comps were below prior year levels. At the same time, our first quarter sales were below expectations. Sales and recruiting momentum slowed at the end of last year through the holiday period. In addition, this year’s annual incentive did not start until late February versus late January last year.

Lastly, there remains some lingering impact on our business worldwide related to the recent economic environment. Consequently our associates face some additional challenges in the marketplace. However, we are addressing these challenges which I will discuss in greater detail in just a few minutes. For the first quarter, we reported a net loss of $2.8 million or $0.11 per share in the first quarter of 2010.

This compares to a net loss of $4.8 million or $0.18 per share in the first quarter of 2009. However, our EBITDA was a positive $165,000 meaning that we’re cash flow positive from operations.

First quarter 2010 sales were $60.7 million, a decrease of 14% from the same quarter in 2009. North American sales declined 23% compared to the first quarter of 2009 reflecting the delay in starting the incentive program and residual recruiting challenges in the marketplace.

International sales were stable for the first quarter of 2010 compared to the same quarter of 2009. We are seeing pockets of significant growth and potential turnaround. For example, sales in south Africa, Taiwan and Singapore were up collectively 43% in the first quarter compared to the first quarter of last year.

Regarding recruiting activity, we added 20,930 new associates and members in the first quarter versus 36,462 added in the first quarter of 2009. Most of the decrease in recruiting occurred in North America. Total associates and members who made purchase in the past 12 months were approximately 485,000 as of the end of this quarter, compared to 527,000 at the end of March 2009.

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