Mannatech, Incorporated ( MTEX)

Q3 2011 Earnings Conference Call

November 3, 2011 10:00 AM ET

Executives

Mark Nicholls – VP, Treasury & Tax

Steve Fenstermacher – Co-CEO and CFO

Rob Sinnott – Co-CEO & Chief Science Officer

Presentation

Operator

Greetings and welcome to the Mannatech Incorporated Third Quarter 2011 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 instructions) As a reminder, this conference is being recorded.

Now, I would like to introduce our moderator for the call today, Mr. Mark Nicholls, Vice President, Treasury & Tax. Thank you. Mr. Nicholls, you may begin.

Mark Nicholls

Thank you. Good morning, everyone. This is Mark Nicholls, and welcome to Mannatech's third quarter 2011 earnings call. Today, you will hear from both Mannatech CEOs, Dr. Robert Sinnott and Steve 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 terminologies 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 may speak only as of today. We also refer our listeners to review our SEC submissions.

Thank you. And now, I will turn the call over to Steve Fenstermacher, Co-CEO and Chief Financial Officer.

Steve Fenstermacher

Thanks Mark. Good day, everyone. Our third quarter of 2011 saw continued progress in a number of areas, which we believe are important to the business.

Over the Labor Day weekend, we held MannaQuest, our annual North American sales event in Seattle. We were quite pleased with strong attendance for MannaQuest, which was essentially sold-out for us with almost 1,200 in attendance.

At this event, our Executive Vice President of Sales, Al Bala, announced a new incentive for our domestic market. The new incentive rewards qualifying downline growth and personal business growth with an iPad. This iPad can become the cornerstone for building a successful Mannatech business by showing our website, our videos, and our online tracking software to new recruits and product consumers.

Also, for those who continue to progress up the associate ranks in Mannatech, new business builders can qualify for substantial cash awards as well. We believe this change in direction for our incentive activity will result in greater activation of new recruits and emphasize the value within the Mannatech compensation system.

We began thinking of ways to add excitement and interest to our incentives months ago and this new program has caused greater activity almost from the day it was announced. We are concluding the planning for additional changes to the incentive program currently so that for 2012 all Mannatech associates will have the opportunity to invest in their own business futures, qualifying as – such as the iPad and cash payments as well.

We believe these changes to our incentives will resonate with both new and established associate leaders, and once again demonstrate that our commission plan is the best in the industry.

Also in Q3, we continued the rollout of our Give for Real program in our international markets. This program, which funds donation of our PhytoMatrix natural vitamin and mineral blend to underprivileged children around the world, was initiated in our domestic market in the summer of 2010. We are now beginning the program in our other markets and by year-end the overall donation should essentially double what the domestic market is generating.

Give for Real is a donation-through-consumption program and so Mannatech associates fund our donations by growing their downlines and increasing their level of recruiting. We've chosen to incorporate a direct marketing distribution and compensation model into our social entrepreneur business strategy. This allows us to financially reward individuals who choose to participate in our world-changing fight against under-nutrition in direct proportion to their level of activity.

So by December, Give for Real should be supplying our natural nutrient blend to about 60,000 needy children every month. Our associates in our foreign countries have expressed to us their strong desire to participate in this giving program. And so, Give for Real is now a reality in their recruiting and business activities.

We have also put the finishing touches on a few improvements to our global seamless commission plan as well. These changes encourage leadership and we will be monitoring the commission plan to confirm that the desired activities are being rewarded correctly. These changes have been rolled out also and will be fully in effect by December.

This past spring an idea for promoting our Optimal Support Packets product, when ordered along with bulk Ambrotose powder, was created and implemented to provide a strong value innovation for our loyal consumers. Our history in Mannatech has revolved around technical innovation in bringing our Real Food Technology to the fore. These days, in this continuingly uncertain and difficult economic environment, we feel that continued combination of economic and value innovation is the best direction for Mannatech.

So, an associate consumer can receive our Optimal Support Packets product at a value price by ordering through our regular Auto Order system in combination with bulk Ambrotose powder. These OSP packets are individual convenience packs, which contain our premium PhytoMatrix natural vitamin and mineral tablets, our Plus tablets, and our AO antioxidant capsules. This combo kit creates incremental sales, it provides an economic discount to the consumer, and it has given our associate leaders in the U.S. and Canada a reason to reconnect with both existing and newer people in their downlines, as well as those who had cancelled their orders.

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