Mannatech Inc: Form 10-Q for the period ended Sep 30, 2025
Filed with the SEC on Nov 12, 2025 and accepted by EDGAR at Nov 12, 2025, 21:03 ET.
Management's discussion and analysis
As filed, 46,724 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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, 2025 as compared to the same period in 2024 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 2024 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.
COMPANY OVERVIEW
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 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.
We sell our products principally through network marketing distribution channels via our active associates (“independent associate” or “associates” or “distributors”) and to our “preferred customers,” which we believe is the most cost-effective way to introduce our products and communicate information about our business to the global marketplace quickly and effectively. Network marketing minimizes upfront costs, as compared to conventional marketing methods, and allows us to be more responsive to the ever-changing overall market conditions, as well as continue to research and develop high quality products and focus on controlled successful international expansion. We believe the network marketing channel also allows us to effectively communicate the potential benefits and unique properties of our proprietary products to our consumers. In addition, network marketing provides our associates with an avenue to supplement their income by building their own business centered on our business philosophies and unique products. As of September 30, 2025, we had approximately 119,000 active associates and preferred customer positions held by individuals that purchased our products and/or paid associate fees during the last twelve months. At the time of purchase, a customer may choose to sign up as a “preferred customer” to receive the same pricing on our products as our associates and to receive emails about our products and promotions. Preferred customers do not participate in the Company’s compensation plan.
The Company also operates a non-direct selling business in mainland China. In 2016, we formed our China subsidiary, Meitai Daily Necessities & Health Products Co., Ltd. (“Meitai”). Unlike Mannatech’s business operations in other markets, Meitai operates under a cross-border e-commerce model, where consumers in China can buy Mannatech products manufactured overseas via Meitai’s website. Currently, Meitai is not a direct selling company in China nor can it operate under a multi-level marketing model in China. Products purchased on Meitai’s website are for personal use and not for resale. Meitai offers a rewards program to incentivize existing customers to refer other customers to purchase products from Meitai’s website. Customs regulations in China include purchase limits to ensure that purchased products are for personal consumption.
Our common stock trades on The Nasdaq Capital Markets (“Nasdaq”) under the symbol “MTEX.”
The Company maintains a corporate website at www.mannatech.com (http://www.mannatech.com).
Overview of Operating Results
Consolidated net sales for the three months ended September 30, 2025 was $29.2 million, as compared to $31.7 million for the three months ended September 30, 2024, a decrease of $$2.6 million, or 8.1%. Consolidated net sales for the nine months ended September 30, 2025 was $81.4 million, as compared to $88.9 million for the nine months ended September 30, 2024, a decrease of $7.5 million, or 8.4%. The decline in revenues was principally due to slowing demand in certain regions we operate within, however sales for the third quarter of 2025 were higher than the first two quarters of 2025.
Net realized and unrealized foreign currency gains for the three months ended September 30, 2025 was $0.6 million. For the three months ended September 30, 2024 foreign currency loss was $1.5 million.
Net realized and unrealized foreign currency loss for the nine months ended September 30, 2025 was $2.6 million. For the nine months ended September 30, 2024 foreign currency gains was $0.5 million.
Net income was $1.9 million for the three months ended September 30, 2025, or $1.01 per diluted share, as compared to a net loss of $0.3 million, or $0.17 per diluted share for the three months ended September 30, 2024.
Net loss was $3.9 million for the nine months ended September 30, 2025, or $2.06 per diluted share, as compared to net income of $0.2 million, or $0.12 per diluted share for the nine months ended September 30, 2024. Net realized and unrealized foreign currency loss of $2.6 million contributed to overall net loss for the nine months ended September 30, 2025.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The table below summarizes our consolidated operating results in dollars and as a percentage of net sales for the three months ended September 30, 2025 and 2024 (in thousands, except percentages):
| 2025 Total dollars | % of net sales | 2024 Total dollars | % of net sales | Change from 2024 to 2025 Dollar | Percentage | |
|---|---|---|---|---|---|---|
| Net sales | $29,161 | 100.0% | $31,725 | 100.0% | $(2,564) | (8.1)% |
| Cost of sales | 6,890 | 23.6% | 8,105 | 25.5% | (1,215) | (15.0)% |
| Gross profit | 22,271 | 76.4% | 23,620 | 74.5% | (1,349) | (5.7)% |
| Operating expenses: | ||||||
| Commissions and incentives | 11,192 | 38.4% | 12,893 | 40.6% | (1,701) | (13.2)% |
| Selling and administrative expenses | 9,072 | 31.1% | 9,840 | 31.0% | (768) | (7.8)% |
| Total operating expenses | 20,264 | 69.5% | 22,733 | 71.7% | (2,469) | (10.9)% |
| Income from operations | 2,007 | 6.9% | 887 | 2.8% | 1,120 | 126.3% |
| Interest expense, net | (104) | (0.4)% | (109) | (0.3)% | 5 | (4.6)% |
| Other income (expense), net | 611 | 2.1% | (1,495) | (4.7)% | 2,106 | (140.9)% |
| Income (loss) before income taxes | 2,514 | 8.6% | (717) | (2.3)% | 3,231 | (450.6)% |
| Income tax (expense) benefit | (590) | (2.0)% | 389 | 1.2% | (979) | (251.7)% |
| Net income (loss) | $1,924 | 6.6% | $(328) | (1.0)% | $2,252 | (686.6)% |
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The table below summarizes our consolidated operating results in dollars and as a percentage of net sales for the nine months ended September 30, 2025 and 2024 (in thousands, except percentages):
| 2025 Total dollars | % of net sales | 2024 Total dollars | % of net sales | Change from 2024 to 2025 Dollar | Percentage | |
|---|---|---|---|---|---|---|
| Net sales | $81,403 | 100.0% | $88,858 | 100.0% | $(7,455) | (8.4)% |
| Cost of sales | 20,495 | 25.2% | 20,763 | 23.4% | (268) | (1.3)% |
| Gross profit | 60,908 | 74.8% | 68,095 | 76.6% | (7,187) | (10.6)% |
| Operating expenses: | ||||||
| Commissions and incentives | 31,312 | 38.5% | 36,237 | 40.8% | (4,925) | (13.6)% |
| Selling and administrative expenses | 29,865 | 36.7% | 31,293 | 35.2% | (1,428) | (4.6)% |
| Total operating expenses | 61,177 | 75.2% | 67,530 | 76.0% | (6,353) | (9.4)% |
| (Loss) income from operations | (269) | (0.3)% | 565 | 0.6% | (834) | (147.6)% |
| Interest expense, net | (279) | (0.3)% | (196) | (0.2)% | (83) | 42.3% |
| Other (expense) income, net | (2,551) | (3.1)% | 495 | 0.6% | (3,046) | (615.4)% |
| (Loss) income before income taxes | (3,099) | (3.8)% | 864 | 1.0% | (3,963) | (458.7)% |
| Income tax expense | (819) | (1.0)% | (636) | (0.7)% | (183) | 28.8% |
| Net (loss) income | $(3,918) | (4.8)% | $228 | 0.3% | $(4,146) | (1818.4)% |
24
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with GAAP, we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from Operations. We refer to these adjusted financial measures as Constant dollar items, which are non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends and our operating results. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars in the current year, we calculate current year results at a constant exchange rate utilizing the prior year’s rate. Currency impact is determined as the difference between the actual GAAP results and the recalculated results for the current year at the Constant dollar rates.
For the three and nine months ended September 30, 2025, our net sales decreased $2.3 million and $5.8 million, or 7.3% and 6.5% on a Constant dollar basis, respectively (see reconciliation of Non-GAAP Financial Measures in the tables below); and unfavorable foreign exchange caused a $0.2 million and $1.7 million decrease in GAAP net sales as compared to the same periods in 2024, respectively.
A reconciliation non-GAAP financial measures to GAAP results for the three and nine months ended September 30, 2025 and 2024 is presented as follows (in millions, except percentages):
| Three-month period ended | September 30, 2025 GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | September 30, 2024 GAAP Measure: Total $ | Constant $ Change Dollar | Percent |
|---|---|---|---|---|---|---|
| Net sales | $29.2 | $0.2 | $29.4 | $31.7 | $(2.3) | (7.3)% |
| Gross profit | $22.3 | $0.1 | $22.4 | $23.6 | $(1.2) | (5.1)% |
| Income from operations | $2.0 | $0.1 | $2.1 | $0.9 | $1.2 | 133.3% |
| Nine-month period ended | September 30, 2025 GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | September 30, 2024 GAAP Measure: Total $ | Constant $ Change Dollar | Percent |
|---|---|---|---|---|---|---|
| Net sales | $81.4 | $1.7 | $83.1 | $88.9 | $(5.8) | (6.5)% |
| Gross profit | $60.9 | $1.4 | $62.3 | $68.1 | $(5.8) | (8.5)% |
| (Loss) income from operations | $(0.3) | $0.5 | $0.2 | $0.6 | $(0.4) | (66.7)% |
Net Sales by Region
Operations outside of the Americas accounted for approximately 72.9% of our consolidated net sales in the three months ended September 30, 2025, as compared to 66.6% in the same period last year. Operations outside of the Americas accounted for approximately 69.2% of our consolidated net sales in the nine months ended September 30, 2025, as compared to 65.8% in the same period last year.
Consolidated net sales by region for the three months ended September 30, 2025 and 2024 were as follows (in millions, except percentages):
| Region | Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | ||
|---|---|---|---|---|
| Americas | $7.9 | 27.1% | $10.6 | 33.4% |
| Asia/Pacific | 18.8 | 64.4% | 18.6 | 58.7% |
| EMEA | 2.5 | 8.5% | 2.5 | 7.9% |
| Total | $29.2 | 100.0% | $31.7 | 100.0% |
25
Consolidated net sales by region for the nine months ended September 30, 2025 and 2024 were as follows (in millions, except percentages):
| Region | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | ||
|---|---|---|---|---|
| Americas | $25.1 | 30.8% | $30.4 | 34.2% |
| Asia/Pacific | 49.5 | 60.8% | 51.6 | 58.0% |
| EMEA | 6.8 | 8.4% | 6.9 | 7.8% |
| Total | $81.4 | 100.0% | $88.9 | 100.0% |
For the three months ended September 30, 2025, net sales in the Americas decreased by $2.7 million, or 25.5%, to $7.9 million, as compared to $10.6 million for the same period in 2024. The number of active independent associates and preferred customers decreased by 13.0%. There was a 14.4% decrease in revenue per active independent associate and preferred customer. Foreign currency had no effect on revenue for the three months ended September 30, 2025 when compared to the same period in 2024.
For the nine months ended September 30, 2025, net sales in the Americas decreased by $5.3 million, or 17.4%, to $25.1 million, as compared to $30.4 million for the same period in 2024. The number of active independent associates and preferred customers decreased by 12.5%. There was a 5.1% decrease in revenue per active independent associate and preferred customer. Foreign currency had the effect of decreasing revenue by $0.3 million for the nine months ended September 30, 2025 when compared to the same period in 2024. The currency impact is primarily due to the weakening of the Mexican Peso.
For the three months ended September 30, 2025, Asia/Pacific net sales increased by $0.2 million, or 1.1%, to $18.8 million, as compared to $18.6 million for the same period in 2024. There was a 20.8% increase in revenue per active independent associate and preferred customer, which was partially offset by a 16.3% decrease in the number of active independent associates and preferred customers. Foreign currency exchange had the effect of decreasing revenue by $0.3 million for the three months ended September 30, 2025, as compared to the same period in 2024. The currency impact is primarily due to the weakening of the Korean Won.
For the nine months ended September 30, 2025, Asia/Pacific net sales decreased by $2.1 million, or 4.1%, to $49.5 million, as compared to $51.6 million for the same period in 2024. The number of active independent associates and preferred customers decreased by 12.7%, which was partially offset by a 14.7% increase in revenue per active independent associate and preferred customer. Foreign currency exchange had the effect of decreasing revenue by $1.5 million for the nine months ended September 30, 2025, as compared to the same period in 2024. The currency impact is primarily due to the weakening of the Korean Won.
For the three months ended September 30, 2025, EMEA net sales remained constant at $2.5 million, as compared to the same period in 2024. There was a 1.8% increase in revenue per active independent associate and preferred customer, which was partially offset by a 1.7% decrease in the number of active independent associates and preferred customers. Foreign currency exchange had the effect of increasing revenue by $0.1 million for the three months ended September 30, 2025 as compared to the same period in 2024. The currency impact is primarily due to the strengthening of the South African Rand.
For the nine months ended September 30, 2025, EMEA net sales decreased by $0.1 million, or 1.4%, to $6.8 million, as compared to $6.9 million for the same period in 2024. The decrease was primarily due to a 4.4% decrease in the number of active independent associates and preferred customers, which was partially offset by a 0.3% increase in revenue per active independent associate and preferred customer. Foreign currency exchange had the effect of increasing revenue by $0.1 million for the nine months ended September 30, 2025 as compared to the same period in 2024. The currency impact is primarily due to the strengthening of the South African Rand.
Sales Mix
Our sales mix for the three and nine months ended September 30, was as follows (in millions, except percentages):
| Three-month period ended | September 30, 2025 GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | September 30, 2024 GAAP Measure: Total $ | Constant $ Change Dollar | Percent |
|---|---|---|---|---|---|---|
| Product | $28.7 | $0.2 | $28.9 | $31.3 | $(2.4) | (7.7)% |
| Associate fees | 0.1 | — | 0.1 | 0.1 | — | 0.0% |
| Other | 0.4 | — | 0.4 | 0.3 | 0.1 | 33.3% |
| Total sales | $29.2 | $0.2 | $29.4 | $31.7 | $(2.3) | (7.3)% |
26
| Nine-month period ended | September 30, 2025 GAAP Measure: Total $ | Translation Adjustment | Non-GAAP Measure: Constant $ | September 30, 2024 GAAP Measure: Total $ | Constant $ Change Dollar | Percent |
|---|---|---|---|---|---|---|
| Product | $79.9 | $1.7 | $81.6 | $87.3 | $(5.7) | (6.5)% |
| Associate fees | 0.3 | — | 0.3 | 0.4 | (0.1) | (25.0)% |
| Other | 1.2 | — | 1.2 | 1.2 | — | 0.0% |
| Total sales | $81.4 | $1.7 | $83.1 | $88.9 | $(5.8) | (6.5)% |
Product Sales
Our product sales consist primarily of sales made to our independent associates and preferred customers at published wholesale prices. Product sales for the three months ended September 30, 2025 decreased by $2.6 million, or 8.3%, as compared to the same period in 2024. On a Constant dollar basis, product sales for the three months ended September 30, 2025 decreased $0.2 million, or 0.7% , as compared to the same period in 2024. The decrease in product sales for the three months ended September 30, 2025 reflects a 5.6% decrease in the average order value to $168, as compared to $178 for the same period in 2024 and a 4.5% decrease in the number of orders processed.
Product sales for the nine months ended September 30, 2025 decreased by $7.4 million, or 8.5%, as compared to the same period in 2024. On a Constant dollar basis, product sales for the nine months ended September 30, 2025 declined $1.7million, or 2.1%, as compared to the same period in 2024. The decrease in product sales for the nine months ended September 30, 2025 reflects an 8.2% decrease in the average order value to $157, as compared to $171 for the same period in 2024 and a 1.3% decrease in the number of orders processed.
Associate Fees and Recruiting
Recruitment of new independent associates and preferred customers decreased by 21.9% to 13,078 in the third quarter of 2025, as compared with 16,741 in the third quarter of 2024. We attribute the lower number of orders processed in the three months ended September 30, 2025 to a combination of the lower number of new independent associates and preferred customers recruited during the period.
Associate fees are closely related to recruiting and retention of business-building associates. The approximate number of new and continuing active independent associates and preferred customers who purchased our products or paid associate fees during the twelve months ended September 30, 2025 and 2024 were as follows:
| 2025 | 2024 | |||
|---|---|---|---|---|
| New | 55,000 | 46.2% | 68,000 | 50.0% |
| Continuing | 64,000 | 53.8% | 68,000 | 50.0% |
| Total | 119,000 | 100.0% | 136,000 | 100.0% |
The Company collects associate fees in certain markets. Associate fees are paid annually by new and continuing associates to the Company, which entitle them to earn commissions, benefits and incentives for that year. The Company collected associate fees within the United States, Canada, South Africa, Austria, the Czech Republic, Denmark, Estonia, Finland, Germany, the Republic of Ireland, the Netherlands, Norway, Spain, Sweden the United Kingdom. Japan, Australia, New Zealand, Singapore, Hong Kong, and Taiwan.
In the Republic of Korea and Mexico, packs may still be purchased by our associates who wish to build a Mannatech business, but associate fees are not sold as a standalone item. These packs contain products that are discounted from both the published retail and associate prices. There are several pack options available to our associates. In certain of these markets, pack sales are completed during the final stages of the registration process and can provide new associates with valuable training and promotional materials, as well as products for resale to retail customers, demonstration purposes, and personal consumption. Business-building associates in these markets can also purchase an upgrade pack, which provides the associate with additional promotional materials.
For each of the three months ended September 30, 2025 and 2024, associate fees were $0.1 million.
For the nine months ended September 30, 2025 and 2024, associate fees were $0.3 million and $0.4 million, respectively.
We do not collect associate fees or sell packs in our non-direct selling business in mainland China.
Other Sales
Other sales consisted of: (i) sales of promotional materials; (ii) monthly fees collected for the Success Tracker™ and Mannatech+ customized electronic business-building and educational materials, databases and applications; (iii) training and event registration fees; and (iv) a reserve for estimated sales refunds and returns. Promotional materials, training, database applications and business management tools support our independent associates, which in turn helps stimulate product sales.
For the three months ended September 30, 2025 and 2024, other sales were $0.4 million and $0.3 million, respectively.
For each of the nine months ended September 30, 2025 and 2024, other sales were $1.2 million.
Gross Profit
For the three months ended September 30, 2025, gross profit decreased by $1.3million, or 5.7%, to $22.3 million, as compared to $23.6 million for the same period in 2024. For the three months ended September 30, 2025, gross profit as a percentage of net sales increased to 76.4%, as compared to 74.5% for the same period in 2024. The increase in gross profit as a percentage of net sales was primarily due to higher sales prices which was added in the third quarter of 2025 and lower inventory reserve additions compared to the same period in 2024. The timing of certain sales promotions also increased gross profit as a percentage of net sales during the third quarter of 2025, as compared to the same period in 2024.
For the nine months ended September 30, 2025, gross profit decreased by $7.2 million, or 10.6%, to $60.9 million, as compared to $68.1 million for the same period in 2024. For the nine months ended September 30, 2025, gross profit as a percentage of net sales decreased to 74.8%, as compared to 76.6% for the same period in 2024. The decrease in gross profit in dollar terms is principally due to increased product costs, including inventory markdowns, and increased freight costs.
Commissions and Incentives
Commission expense for the three months ended September 30, 2025 decreased by 10.7%, or $1.3 million, to $10.9 million, as compared to $12.2 million for the same period in 2024. Commissions are earned on sales. Commission expense in dollar terms decreased during the three months ended September 30, 2025 primarily due to a decline in our sales. For the three months ended September 30, 2025, commissions as a percentage of net sales decreased to 37.5% as compared to 38.3% for the same period in 2024.
Commission expense for the nine months ended September 30, 2025 decreased by 11.6%, or $4.0 million, to $30.5 million, as compared to $34.5 million for the same period in 2024. Commissions are earned on sales. Commission expense in dollar terms decreased during the nine months ended September 30, 2025 primarily due to a decline in our sales. For the nine months ended September 30, 2025, commissions as a percentage of net sales decreased to 37.4% as compared to 38.8% for the same period in 2024.
Incentive costs for the three months ended September 30, 2025 and 2024 decreased to $0.2 million, as compared to $0.7 million for the same period in 2024. For the three months ended September 30, 2025, incentives as a percentage of net sales decreased to 0.9% as compared to 2.3% for the same period in 2024.
Incentive costs for the nine months ended September 30, 2025 and 2024 decreased to $0.8 million, as compared to $1.8 million for the same period in 2024. For the nine months ended September 30, 2025, incentives as a percentage of net sales decreased to 1.0% as compared to 2.0% for the same period in 2024.
Selling and Administrative Expenses
Selling and administrative expenses include a combination of both fixed and variable expenses. These expenses consist of compensation and benefits for employees; temporary and contract labor; accounting, legal and consulting fees; compensation to our board of directors; warehouse and fulfillment costs; depreciation and amortization; marketing-related expenses; travel and entertainment expenses; credit card processing fees; costs for software maintenance agreements; insurance; charitable contributions; office lease expense; utilities; bad debt; and other miscellaneous operating expenses.
For the three months ended September 30, 2025, selling and administrative expenses decreased by $0.7 million, or 7.8%, to $9.1 million, as compared to $9.8 million for the same period in 2024. The decrease in selling and administrative expenses was the result of a $0.4 million reduction in payroll costs, a $0.1 million decrease in travel and entertainment costs, a $0.1 million decrease in warehouse costs and a $0.1 million decrease in charitable contributions. Selling and administrative expenses, as a percentage of net sales, for the three months ended September 30, 2025 increased to 31.1% from 31.0% for the same period in 2024.
For the nine months ended September 30, 2025, selling and administrative expenses decreased by $1.4 million, or 4.6%, to $29.9 million, as compared to $31.3 million for the same period in 2024. The decrease in selling and administrative expenses was the result of a $1.7 million decrease in payroll costs, a $0.5 million decrease in warehouse costs and a $0.1 million decrease in charitable contributions, which was offset by a $0.3 million increase in marketing costs, a $0.3 million increase in office expenses and a $0.3 million increase in legal and consulting fees. Selling and administrative expenses, as a percentage of net sales, for the nine months ended September 30, 2025 increased to 36.7% from 35.2% for the same period in 2024.
Other Income (Expense), Net
Foreign exchange gains were $0.6million for the three months ended September 30, 2025. Foreign exchange losses were $1.5 million for the three months ended September 30, 2024.
Foreign exchange losses were $2.6 million for the nine months ended September 30, 2025. Foreign exchange gains were $0.5 million for the nine months ended September 30, 2024.
Income Tax (Provision) Benefit
Income tax expense was $0.6 million for the three months ended September 30, 2025 as compared to income tax benefit of $0.4 million in the same period in 2024. Income tax expense for the nine months ended September 30, 2025 and 2024 was $0.8 million and $0.6 million, respectively.
Income tax (provision) or benefit includes current and deferred income taxes for both our domestic and foreign operations. Our statutory income tax rates for key jurisdictions are as follows, for the nine months ended September 30,:
| Country | 2025 | 2024 |
|---|---|---|
| China(1) | 25.0% | 25.0% |
| Hong Kong | 16.5% | 16.5% |
| Japan | 34.6% | 34.6% |
| Republic of Korea | 20.9% | 20.9% |
| United States(2) | 22.2% | 22.2% |
(1) For 2025, the Company qualified for a reduced tax rate of 5% in China as a Small Low Profit Enterprise.
(2) Includes blended state effective rate of 1.2% for 2025 and 2024 in addition to U.S. federal statutory rate of 21%.
Income from our international operations is subject to taxation in the countries in which we operate. Although we may receive foreign income tax credits that would reduce the total amount of income taxes owed in the United States, we may not be able to fully utilize our foreign income tax credits in the United States.
We use the recognition and measurement provisions of the FASB ASC Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. As a result, we reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets to evaluate the need for a valuation allowance in each tax jurisdiction.
The provision for income taxes is directly related to our profitability and changes in the taxable income across countries of operation. For the three and nine months ended September 30, 2025, the Company’s effective tax rate was 23.5% and (26.4)%, respectively. For the three and nine months ended September 30, 2024, the Company's effective tax rate was 54.3% and 73.6%, respectively.
The effective tax rates for the three and nine months ended September 30, 2025 and 2024 was different from the federal statutory rate due primarily to the mix of earnings across jurisdictions and the associated valuation allowances recorded on losses in certain jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
As of September 30, 2025, our cash and cash equivalents decreased by 37.3%, or $4.3 million, to $7.1 million from $11.4 million as of December 31, 2024. The Company is required to restrict cash for: (i) direct selling insurance premiums and credit card sales in the Republic of Korea; (ii) reserves related to credit card sales in the United States and Canada; and (iii) collateral for a building lease in Australia. The current portion of restricted cash balances was $0.6 million at each of September 30, 2025 and December 31, 2024. The long-term portion of restricted cash balances was $0.2 million and $0.6 million at September 30, 2025 and December 31, 2024
Our principal use of cash is to pay for operating expenses, including commissions and incentives, capital assets, inventory purchases, and periodic cash dividends. We did not pay a dividend in the current quarter. Business objectives, operations, and expansion of operations are funded through net cash flows from operations rather than incurring long-term debt.
Working Capital
Working capital represents total current assets less total current liabilities. At September 30, 2025 and December 31, 2024, our working capital was $2.6 million and $5.2 million, respectively.
Net Cash Flows
Our net consolidated cash flows consisted of the following, for the nine months ended September 30, (in millions):
| Provided by (Used in): | 2025 | 2024 |
|---|---|---|
| Operating activities | $(2.7) | $2.5 |
| Investing activities | $(1.2) | $(0.4) |
| Financing activities | $(0.3) | $2.9 |
Operating Activities
Operating activities used $2.7 million cash for the nine months ended September 30, 2025 as compared to cash provided of $2.5 million for the same period in 2024.
Investing Activities
For the nine months ended September 30, 2025 and 2024, we invested cash of $1.2 million and $0.4 million, respectively, principally for back-office software projects, reported as property and equipment.
Financing Activities
For the nine months ended September 30, 2025, our financing activities used cash of $0.3 million. For the nine months ended September 30, 2025, we used $0.3 million in the repayment of finance lease obligations.
For the nine months ended September 30, 2024, our financing activities provided cash of $2.9 million. We received $3.6 million from the issuance of notes payable (see Note 4) and we used $0.7 million in the repayment of finance lease obligations.
General Liquidity and Cash Flows
Short Term Liquidity
As of September 30, 2025, our cash and cash equivalents was $7.1 million. We believe our existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for the next twelve months.
On April 23, 2024, the Company entered into unsecured Loan and Promissory Note agreements with three related parties, who are members of the Company’s Board of Directors, and who are current stockholders of the Company, in an aggregate principal amount of $3.6 million. The purpose of the borrowing was to provide funds to the Company for general working capital needs, including payment to vendors, expansion of the Company’s non-US operations, technology investment primarily for improving the customer ordering process and software updates to improve visibility of sales associate activity. On September 9, 2025, the Company entered into loan extension agreements extending the maturity date of the notes from September 30, 2026, to March 31, 2027. All other terms of the notes remained unchanged.
We have operating lease liabilities for the property and equipment we use in our business operations. These operating lease liabilities represent our minimum future payment obligations on operating leases, including imputed interest. At September 30, 2025, our operating lease liabilities were $4.4 million, of which $1.7 million is presented as the current portion and $2.7 million is presented as Operating lease liabilities excluding current portion on our Condensed Consolidated Balance Sheets. We also have finance lease liabilities of $0.8 million and lease restoration liabilities of $0.3 million.
As our primary source of liquidity has historically been our cash flows from operations, our liquidity is dependent on our ability to maintain and/or continue to improve revenue as compared to our operational expenses. In this regard, our management has established a business reorganization plan focusing on revenue growth, margin improvement and cost control and reduction, including a plan to improve margin through a price increase, continued focus on supply chain costs, and certain compensation plan adjustments, as well as to reorganize certain functional operations and reduce our fixed selling and administrative overhead.
However, if our reorganization plans are not successful, or if we experience further or unexpected disruption in our supply chain, and/or potential decreases in consumer demands, our sales and our overall liquidity in the next twelve months could be negatively impacted. If our existing capital resources or cash flows become insufficient to meet current business plans, projections, and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
Long Term Liquidity
We believe our cash flows from operations should be adequate to fund our normal expected future business operations and possible international expansion costs for the long term. As our primary source of liquidity is from our cash flows from operations, this will be dependent on our ability to maintain or improve revenue as compared to operational expenses.
However, if our existing capital resources or cash flows become insufficient to meet anticipated business plans and existing capital requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
Our future access to the capital markets may be adversely impacted if we fail to maintain compliance with the Nasdaq Marketplace Rules for the continued listing of our stock. We continuously monitor our compliance with the Nasdaq continued listing rules.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any special-purpose entity arrangements, nor do we have any off-balance sheet arrangements.
CRITICAL ACCOUNTING ESTIMATES
Our condensed consolidated financial statements are prepared in accordance with GAAP. The application of GAAP requires us to make estimates and assumptions that affect the reported values of assets and liabilities at the date of our financial statements, the reported amounts of revenues and expenses during the reporting period, and the related disclosures of contingent assets and liabilities. We use estimates throughout our financial statements, which are influenced by management’s judgment and uncertainties. Our estimates are based on historical trends, industry standards, and various other assumptions that we believe are applicable and reasonable under the circumstances at the time the condensed consolidated financial statements are prepared. Our Audit Committee reviews our significant accounting policies and critical estimates. We continually evaluate and review our policies related to the portrayal of our consolidated financial position and consolidated results of operations that require the application of significant judgment by our management. We also analyze the need for certain estimates, including the need for such items as allowance for credit losses, inventory reserves, long-lived fixed assets and capitalization of internal-use software development costs, reserve for uncertain income tax positions and tax valuation allowances, revenue recognition, sales returns, and deferred revenues, accounting for stock-based compensation, and contingencies and litigation. Historically, actual results have not materially deviated from our estimates. However, we caution readers that actual results could differ from our estimates and assumptions applied in the preparation of our condensed consolidated financial statements. If circumstances change relating to the various assumptions or conditions used in our estimates, we could experience an adverse effect on our financial position, results of operations, and cash flows. We have identified the following applicable significant accounting policies and critical estimates as of September 30, 2025.
Inventory Reserves
Inventory consists of raw materials, finished goods, and promotional materials that are stated at the lower of cost (using standard costs that approximate average costs) or net realizable value. We record the amounts charged by the vendors as the costs of inventory. Typically, the net realizable value of our inventory is higher than the aggregate cost. Determination of net realizable value can be complex and, therefore, requires a high degree of judgment. In order for management to make the appropriate determination of net realizable value, the following items are considered: inventory turnover statistics, current selling prices, seasonality factors, consumer demand, regulatory changes, competitive pricing, and performance of similar products. If we determine the carrying value of inventory is in excess of estimated net realizable value, we write down the value of inventory to the estimated net realizable value.
We also review inventory for obsolescence in a similar manner and any inventory identified as obsolete is reserved or written off. Our determination of obsolescence is based on assumptions about the demand for our products, product expiration dates, estimated future sales, and general future plans. We monitor actual sales compared to original projections, and if actual sales are less favorable than those originally projected by us, we record an additional inventory reserve or write-down. Historically, our estimates have been close to our actual reported amounts. However, if our estimates regarding inventory obsolescence are inaccurate or consumer demand for our products changes in an unforeseen manner, we may be exposed to additional material losses or gains in excess of our established estimated inventory reserves.
Tax Valuation Allowances
As of September 30, 2025, there was nothing recorded in other long-term liabilities on our condensed consolidated balance sheet related to uncertain income tax positions. As required by Topic 740, we use judgments and make estimates and assumptions related to evaluating the probability of uncertain income tax positions. We base our estimates and assumptions on the potential liability related to an assessment of whether the income tax position will “more likely than not” be sustained in an income tax audit. We are also subject to periodic audits from multiple domestic and foreign tax authorities related to income tax and other forms of taxation. These audits examine our tax positions, timing of income and deductions, and allocation procedures across multiple jurisdictions. Depending on the nature of the tax issue, we could be subject to audit over several years. There are ongoing income tax audits in various international jurisdictions that we believe are not material to our financial statements.
Revenue Recognition and Deferred Commissions
Our revenue is derived from sales of individual products and associate fees or, in certain geographic markets, starter packs. Substantially all of our product sales are to associates and preferred customers at published wholesale prices. We record revenue net of any sales taxes and record a reserve for expected sales returns based on historical experience. The Company changed its shipping terms with customers such that ownership transfers upon delivery to the freight carrier, satisfying the Company's performance obligation. Previously, the Company's shipping terms were FOB destination, so the Company recognized revenue upon delivery of the product to the customer. Corporate-sponsored event revenue is recognized when the event is held.
Orders placed by associates or preferred customers constitute our contracts. Product sales placed in the form of an automatic order contain two performance obligations: (1) the sales of the product and (2) the loyalty program. For these contracts, we account for each of these obligations separately as they are each distinct. The transaction price is allocated between the product sale and the loyalty program on a relative standalone selling price basis. Sales placed through a one-time order contain only the first performance obligation noted above – the sale of the product.
We provide associates with access to a complimentary three-month package for the Success Tracker™ and Mannatech+ online business tools with the first payment of an associate fee. The first payment of an associate fee contains three performance obligations: (1) providing new associates with the eligibility to earn commissions, bonuses and incentives for twelve months, (2) three months of complimentary access to utilize the Success Tracker™ online tool, and (3) three months of complimentary access to utilize the Mannatech+ online business tool. The transaction price is allocated between the three performance obligations on a relative standalone selling price basis. Associates do not have complimentary access to online business tools after the first contractual period.
With regard to both of the aforementioned contracts, we determine the standalone selling prices by using observable inputs, which include our standard published price lists.
Product Return Policy
We stand behind our products and believe we offer a reasonable and industry-standard product return policy to all of our customers. We do not resell returned products. Refunds are not processed until proper approval is obtained. All refunds must be processed and returned in the same form of payment that was originally used in the sale. Each country in which we operate has specific product return guidelines. However, we allow our associates and preferred customers to exchange products as long as the products are unopened and in good condition. Our return policies for our retail customers and our associates and preferred customers are as follows:
- Retail Customer Product Return Policy. This policy allows a retail customer to return any of our products to the original associate who sold the product and receive a full cash refund from the associate for the first 180 days following the product’s purchase if located in the United States and Canada, and for the first 90 days following the product’s purchase in other countries where we sell our products. The associate may then return or exchange the product based on the associate product return policy.
- Associate and Preferred Customer Product Return Policy. This policy allows the associate or preferred customer to return an order within one year of the purchase date upon terminating his/her account. If an associate or preferred customer returns a product unopened and in good condition, he/she may receive a full refund minus a 10% restocking fee. We may also allow the associate or preferred customer to receive a full satisfaction guarantee refund if they have tried the product and are not satisfied for any reason, excluding promotional materials. This satisfaction guarantee refund applies in the United States and Canada, only for the first 180 days following the product’s purchase and applies in other countries where we sell our products for the first 90 days following the product’s purchase; however, any commissions earned by an associate will be deducted from the refund. If we discover abuse of the refund policy, we may terminate the associate’s or preferred customer’s account.
Historically, sales returns estimates have not materially deviated from actual sales returns, as the majority of our customers who return merchandise do so within the first 90 days after the original sale. Based upon our return policies and historical experience, we estimate a sales return reserve for expected sales refunds over a rolling six-month period. If actual results differ from our estimated sales returns reserves due to various factors, the amount of revenue recorded each period could be materially affected. Historically, our sales returns have not materially changed through the years and have averaged 0.5% or less of our gross sales.
Market risk
As filed, 2,138 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We do not engage in trading market risk sensitive instruments and do not purchase investments as hedges or for purposes “other than trading” that are likely to expose us to certain types of market risk, including interest rate, commodity price, or equity price risk. Although we have investments, we believe there has been no material change in our exposure to interest rate risk. We have not issued any debt instruments, entered into any forward or futures contracts, purchased any options, or entered into any swap agreements.
We are exposed, however, to other market risks, including changes in currency exchange rates as measured against the United States dollar. Because the change in value of the United States dollar measured against foreign currency may affect our consolidated financial results, changes in foreign currency exchange rates could positively or negatively affect our results as expressed in United States dollars. For example, when the United States dollar strengthens against foreign currencies in which our products are sold or weakens against foreign currencies in which we may incur costs, our consolidated net sales or related costs and expenses could be adversely affected. We translate our revenues and expenses in foreign markets using an average rate.
We maintain policies, procedures, and internal processes in an effort to help monitor any significant market risks and we do not use any financial instruments to manage our exposure to such risks. We assess the anticipated foreign currency working capital requirements of our foreign operations and maintain a portion of our cash and cash equivalents denominated in foreign currencies sufficient to satisfy most of these anticipated requirements.
We caution that we cannot predict with any certainty our future exposure to such currency exchange rate fluctuations or the impact, if any, such fluctuations may have on our future business, product pricing, operating expenses, and on our consolidated financial position, results of operations, or cash flows. However, to combat such market risk, we closely monitor our exposure to currency fluctuations.
Controls and procedures
As filed, 1,270 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2025, there were no changes in our internal control over our financial reporting that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Risk factors
As filed, 3,668 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Our profitability and market competitiveness may be adversely impacted by changes in trade policies, including tariffs or other factors.
Changes in trade policies, including the imposition of new tariffs or increases in existing tariffs between the United States, Mexico, Canada, China, South Korea or other countries, or reactionary measures including retaliatory tariffs, legal challenges, or currency manipulation, could adversely affect our cost structure and profitability. If tariffs on imported materials, components, or finished goods increase, our manufacturing and supply chain costs may rise. Furthermore, changes to trade policies, retaliatory measures, or prolonged uncertainty in trade relationships could result in supply chain disruptions, delayed shipments, or increased operational complexity, adversely affecting our business and financial results. While we take steps to mitigate or avoid these increased costs and disruptions, our ability to do so may be limited by operational and supply chain constraints and uncertainties, especially in the short term. In addition, our ability to recover cost increases and maintain profitability levels through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations.
International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing and transportation costs, limit our ability to sell to certain customers or markets, limit our ability to procure, or increase our costs for, components or raw materials, impede or slow the movement of our goods across borders, or otherwise restrict our ability to conduct operations. Increasing protectionism, economic nationalism, and national security concerns may also lead to further changes in trade policy. We work closely with our manufacturing partners to implement ways to mitigate the impact of these tariffs on our supply chain as promptly and reasonably as practicable, including shifting production outside of areas where tariffs could increase our costs. We cannot predict what further actions may be taken with respect to export regulations, tariffs or other trade regulations between the United States and other countries, what products or companies may be subject to such actions, or what actions may be taken by other countries in retaliation. In addition, actions to mitigate the effect of these tariffs are disruptive on our operations, may not be completely successful and may result in higher long-term manufacturing costs. Moreover, there is no certainty that countries to which we have shifted our manufacturing operations will not be subject to similar tariffs in the future. As a result, we may be required to raise our prices on certain products, which could result in the loss of customers and harm to our revenue, market share, competitive position and operating performance.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2024 Annual Report, which could materially affect our business or our consolidated financial position, results of operations, and cash flows. The risks described in our 2024 Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may become materially adverse or may affect our business in the future or our consolidated financial position, results of operations, or cash flows.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-07-01 to 2025-09-30 | $29.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2025-01-01 to 2025-09-30 | $81.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2025-07-01 to 2025-09-30 | $6.9m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months2025-01-01 to 2025-09-30 | $20.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months2025-07-01 to 2025-09-30 | $22.3m | us-gaap:GrossProfit |
| Gross profit | 9 months2025-01-01 to 2025-09-30 | $60.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months2025-07-01 to 2025-09-30 | $9.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2025-01-01 to 2025-09-30 | $29.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2025-07-01 to 2025-09-30 | $2.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2025-01-01 to 2025-09-30 | −$269.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2025-07-01 to 2025-09-30 | $104.0k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months2025-01-01 to 2025-09-30 | $279.0k | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months2025-07-01 to 2025-09-30 | $590.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2025-01-01 to 2025-09-30 | $819.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-07-01 to 2025-09-30 | $1.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months2025-01-01 to 2025-09-30 | −$3.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-07-01 to 2025-09-30 | $1.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2025-01-01 to 2025-09-30 | −$2.06 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-07-01 to 2025-09-30 | $1.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2025-01-01 to 2025-09-30 | −$2.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-07-01 to 2025-09-30 | 1,901,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2025-01-01 to 2025-09-30 | 1,901,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2025-01-01 to 2025-09-30 | −$2.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2025-01-01 to 2025-09-30 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2025-09-30 | $7.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2025-09-30 | $22.1m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-09-30 | $33.9m | us-gaap:Assets |
| Current liabilities | At period end2025-09-30 | $19.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-09-30 | $27.0m | us-gaap:Liabilities |
| Long-term debt | At period end2025-09-30 | $2.9m | us-gaap:LongTermDebt |
| Shareholders' equity | At period end2025-09-30 | $7.0m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001437749-25-034431. Last ingested by Listed: Oct 24, 2026, 15:03 ET. Listed shows no prices and gives no investment advice.