As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kimberly Orlando of ADDO Investor Relations.
Thank you. You may begin.
Thank you, and welcome to Natural Health Trends' Q1 2018 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, will be 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 today's call will be webcast live and can be found on the Investors section of the company's corporate website at naturalhealthtrends corp.com. Instructions can be found for accessing the archived version of the conference call in today's financial results press release, which was issued at approximately 9 o'clock am Eastern Time.
At this time, I would like to turn the call over to Chris Sharf, President of Natural Health Trends.
Thank you, Kim, and thanks to everyone for joining us. With me today is Scott Davidson, our Senior Vice President and Chief Financial Officer. Our momentum in the back half of twenty seventeen carry into the Q1 with total revenue of $52,400,000 increasing 14% compared to the Q4 of 2017 and decreasing 13% year over year. Importantly, the Q1 of 2018 marked our 2nd consecutive quarter of sales growth since the Q2 of 2016. Our improved top line performance versus the prior quarter is a direct result of the substantial advancements we made during the prior two quarters to revitalize sales.
Specifically, we believe that the enhancements made to our commission plan to better incentivize up in commerce and ease rank advancements along with our effective marketing programs drove the sequential sales growth. As previously discussed, we began implementing additional enhancements to help direct more resources to lower and mid level ranked members, including a one time cash bonus for new participants in the international recognition program. In January, we held our International Ambassador Academy in Hong Kong, attended by over 5,500 people. This year, the orders generated by promotions directly related to the event exceeded those of the last 3 years. As part of the occasion, we introduced our new product, Kirkimoire, producing nearly $600,000 in orders during the quarter, as well as announced various new and exciting programs for the year ahead, which I will discuss in a moment.
Our revenue for the quarter improved despite the Chinese New Year and the holiday related customs shutdown in mid February. In anticipation of the closure, we did as much as we could to prepare by working directly with our leaders to pre ship products and we're therefore able to mitigate some, but not all of this logistic challenge. Our gross profit margin for the Q1 remained strong at 80.5% compared to a record 81.2% in the Q1 of 2017. Through our ongoing proactive expense management, to better align our cost structure with current sales levels, we also reported a robust operating income margin of 19.2%, as we stated that we will try targeting our profit margin to be in the high teens compared to 21.7 percent in the Q1 of 2017. During the quarter, we hosted several excursions with many more planned for the remainder of the year.
The qualification period for our 1st trip of 2018 ran through the end of 2017, where a group of over 240 traveled to Melbourne and Sydney, Australia in mid April. The 7 day affair involves phenomenal performances, motivational speakers, coaching and team building exercises. Our top qualifiers and global ambassadors enjoy an extended stay in Gold Coast as part of our Annual Royal Summit. During this high profile experience in Australia, where all of our top leaders were present, we announced a 2 month qualification for elite members to participate in an exclusive journey to Northern California scheduled for July. Here, they will have the opportunity to take part in targeted training sessions and to share best practices with their North American counterparts.
Additionally, the qualification period for Greater China and North American members to travel to South Africa in the Q4 concludes in June. In the Peruvian market, those meeting the criteria are entitled to 3 separate rewards, either travel to Cartagena, which took place in early April, Hong Kong in August for our 2018 Ambassador Academy or Cancun this coming September. Not only are these events hugely impactful when it comes to team building and engagement, but they also help to boost order volume and rank advancement in our international recognition program. Those that are eligible will also have the opportunity to attend several upcoming flight high trainings, key to the development and success of those that are considered up in commerce or for those newer to NHD Global. We already have roughly 1,000 set to participate in May for our flight hire in Chengdu in Southwest China as well as more than 400 for Seattle in June and over 2,000 for Malaysia in early July.
We also conducted product road shows in China and Kuala Lumpur on both stamp renewal and rest factor, generating a lot of excitement in those regions. It is clear that the leaders are responding positively to the enhancement we made and that our efforts to continue strengthening their product knowledge by providing the necessary toolset to expand their business and attract new customers is paying off. Geographical expansion remains a key focus as we continue to concentrate not only on growth in our existing markets, but on entry into new attractive markets to help diversify our presence. In China, we are still in process with our application for a direct selling license. So the timing of obtaining such a license and whether or not we can obtain 1 remains beyond our control.
As communicated previously, we plan to be transparent as material developments arise. In Germany and in Mexico, while it is still early, we have identified potential leaders in both countries and are continuing to work through the associated product and business registration requirements. In Mexico, we have an event this upcoming weekend with 100 confirmed attendees. In Germany, we recently consulted with local professionals and received a green light on our global marketing plan. We are actively registering dietary and food supplements according to German regulations.
Southeast Asia as a natural expansion to our already significant Greater China market continues to be a priority for us as well, and we are in the process of product and business registration in Thailand, Indonesia and Vietnam. Returning capital to our valued stockholders remains a priority. We generated $11,100,000 in cash flow from operations during the Q1, as well as paid out $1,500,000 in quarterly dividends. Additionally, following an evaluation of the 2017 Tax Cuts and Jobs Act, our Board of Directors declared a special dividend in the amount of $20,000,000 or $1.76 per share. In closing, 2018 is off to
a good
start despite the adverse effect that the customs slowdown had in our Hong Kong business. Our leaders remain energized and enthusiastic, and we look forward to more productive incentive trips and targeted training programs in 2018 to drive further progress and growth. With that, I'd like to turn the call over to Scott Davidson, our CFO, to discuss our Q1 financials in detail. Scott? Thank you, Chris.
Total revenue for the Q1 was $52,400,000 a 13% decrease compared to $59,900,000 in the Q1 of 2017 and a 14% increase compared to 46,100,000 in the Q4 of 2017. Sales in Hong Kong, which accounted for 91% of our Q1 revenue, decreased 13% year over year to 47,600,000. Outside of Hong Kong, revenue decreased 11% year over year to 4,700,000. Our active member base declined slightly to 95,000 at March 31 from 95,700 at December 31 and from 114,000 at March 31 last year. Turning to our cost and operating expenses, our gross profit margin for the Q1 remained strong at 80.5%.
The prior year margin of 81.2% was higher due to greater event ticket revenue. Commissions expense as a percent of total revenue increased to 43.9% from 43.4% in the Q1 last year and is in line with the full year 2017 rate. Selling, general and administrative expenses for the quarter decreased 6 percent to $9,100,000 versus $9,700,000 a year ago. As a result, operating income for the quarter totaled $10,000,000 a decrease of 23% compared to $13,000,000 in the Q1 last year. Our operating income margin was 19.2% compared to 21.7% in the Q1 last year.
Our effective tax rate was 14% for the Q1 compared to 21% in the prior year period due to the enactment of the Tax Cuts and Jobs Act. Net income for the Q1 totaled $8,800,000 or $0.78 per diluted share compared to net income of $10,400,000 or $0.93 per diluted share in the Q1 of 2017. We generated $11,100,000 in cash provided by operations during the quarter compared to $13,800,000 in the prior year quarter. Total cash and cash equivalents of $145,100,000 as of March 31 were up from $135,300,000 at December 31. We used our available cash to pay out $1,500,000 in dividends during the quarter.
On April 17, 2018, our Board of Directors declared a quarterly cash dividend of $0.14 per share, representing an 8% increase over the prior quarter dividend,
as well as a special cash dividend
of $20,000,000 or $1.76 per share, both of which will be payable on May 25 to stockholders of record as of May 15.
We think our Q1 results represent a good start
to the year and we look forward to continuing to revitalize growth and deliver improved financial performance in 2018 and beyond. That completes our prepared remarks. I will now turn the call back over to the operator to begin the question and answer session. Operator?
Thank you.