Q3 2020 Newage Inc Earnings Call

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This conference is being recorded I would now like to turn the conference over to your host Mr. Riley <unk> Global head of Investor Relations you may begin.

Thank you Laura good morning, and thank you for joining new age Inc.

Third quarter 2020 financial results Investor Conference call.

I'm pleased to be with you all today and on today's call we have Brett well.

If executive officer.

Great Gould, Chief Financial Officer, and Mark Wilson, the incoming group President of the combined company I'd.

I'd like to remind everyone that this conference call may contain certain forward looking statements, reflecting managements current expectations regarding future results of operations.

Performance financial condition and achievement of the company.

Forward looking statements, especially those concerning future performance are subject to certain risks and uncertainties factors that could cause either at all to differ materially are set forth in our annual report on form 10-K, and 10-Q filed with the S.P.C.

Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

During this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is available on our website and new age Dot com.

Transcript of today's conference call will be available on the company's website within the Investor section again, new ways Dot com.

I'll now turn the call good grade gold, our Chief Financial Officer.

Thank you Robert good morning, everyone.

For the third quarter ended September 30, 2020, net revenue was 62.7 million.

Well ahead of the previous quarter, and Q2, 2020 and behind the third quarter up 19, where we did $69.8 million.

During the quarter.

Coburn Knight team.

And the timing.

I forget qualifying events related to our IP sees compensation in China.

Most significantly impacted the result.

We have seen the continued effect of COVID-19 across virtually all markets, but despite that impact.

We saw good growth in a number of our markets, especially in the U.S., where overall revenue growth was up 11% led by the new age correct store distribution, which was up 15%.

We also showed improving growth in Latin America, and Western Europe, India.

In Japan, our largest market we saw continuing improvement.

In our trends.

Gross profit was $37.5 million or 60% of net sales compared to $40.3 million or 58% of net sales in the same quarter of the prior year.

This improvement of 207 basis points in gross margin percentage was driven by product by positive product and channel mix overall improvement in cost of goods sold on the direct selling side of the business.

An improved inventory management in our new age segment.

That's true that in the third quarter, <unk> increased 7% compared to the prior year quarter as a result of a nonrecurring severance expense of $1.7 million.

If we did not have this nonrecurring expense during the quarter unless you name it would have been nearly flat year over year.

Moving forward into the fourth quarter, we will also be removing the divested businesses. That's you know which was $1.3 million in the third quarter up 2020.

[noise] or bigger picture and as she anyway yeah.

He is the fact that in the last two quarters, we have eliminated approximately $10 million and headcount related cost.

This will really benefit us and.

Four of this year and all of next year throughout 2021 at the bottom line.

Coupled with the elimination of a B.W.R. that cost the company approximately $7 million in EBITDA during the first nine months of fiscal 2020.

And the loss on the disposal of BW are up $3.4 million.

These three items should impact our going forward adjusted EBITDA by more than $20 million annually.

It also puts the company in a much stronger profit position.

And this is on a standalone basis before the addition of Aerex.

Which is a profitable on a standalone basis.

And.

This all.

Before the benefit of the additional cost synergies, we expect that we will accrue from the transaction during 2021.

Net loss increased to 14.1 million or 14 cents per share during the third quarter up 2020 reflective of the severance and B.W.R. eliminations and other nonrecurring charges compared to a net loss of 10.7 million also 14 cents per.

Share in the third quarter of 2019.

We had an adjusted EBITDA loss of $10.2 million.

For the third quarter, a 2020 compared to a break even adjusted EBITDA for the same quarter in 2019.

If you remove the nonrecurring expenses for the third quarter, a 2020 related to severance the BW, our disposal and the loss incurred by B.W.R. during the quarter, our adjusted recurring EBITDA was a negative $2.9 million.

Switching to the balance sheet.

New wages cash balance was $26.9 million at September 32020.

New H. also holds additional restricted cash of $18.3 million in the U.S., China and other markets for a total of 45.2 million in cash restricted cash as of September 30, 2020.

Total current assets were 73.5 million at September 32020, and total current liabilities.

$52.2 million.

Importantly, current liabilities were reduced by $7.6 million versus the previous quarter and the total working capital was $21.3 million at September Thirtyth.

2020.

Yeah.

As we look to the future and the probable closing of the ARX transaction. We believe the company should have significantly improved financial performance.

Yeah, but the Rx transaction had closed on June 32020, we believe that our unaudited financials for the third quarter, a 2020 on a preliminary pro forma basis.

This holiday with Rx would have had revenues in excess of $130 million with.

With a gross margin in the high 60% range and a positive adjusted recurring EBITDA.

With that I'm going to turn the conference back over to Brett.

Thanks, Greg.

It's a little counterintuitive for us to talk about new age stand alone for Q3 because with.

The announcement of the five company merger on July 20th our company looks completely different.

That notwithstanding let me personally the results looking back to Q3.

China really impacted their results again as did cove. It again as did the retail brands in the U.S. the BW our group again.

Affecting us at both the top and bottom lines.

Those are all the negatives and they are 100% my accountability.

Our second and third quarters. They are usually our biggest quarters and we actually eked out a bit of growth versus second quarter of this year, but if it weren't for the three impacts I just referenced.

Believe we could have been well into the 70 million dollar range for the quarter net revenue.

Given our infrastructure, a disproportionate amount of that drops to the bottom line and the EBITDA.

We're gonna China, It's both the result of code Red and our own historical weakness is the organization. Please don't forget that when we acquired the rents are at the very end of 2018, beginning at 2018, it had been declining for 10 years.

Financially and resource wise, it was incredible and highly accretive for our shareowners, but that does not make it any easier to turn around after.

After a freefall for 10 years honestly, you need a bit of time.

Before we acquired it China had been growing double digits for Miranda then in 2018 the.

The Chinese government impacted the entire industry.

In 2020.

Right in 2020, we had to make a compensation system change to stay competitive and we have just not been able to get consistent growth month to month in the context of what we believe is still quite an attractive market, but a rapidly changing one.

We're very anxious and enthusiastic about the merger as the prospects of doubling our local scale.

New products and our broader portfolio.

New management from Rx and new distributor leadership is all going to have a tremendous impact in this very important market.

I also own BW are.

Mid last year strategically, we tried to add scale to the retail brands.

And improved sales management those are the right things to do.

But in the context of coated and changing traditional retail dynamics cost of goods sold gets negatively impacted distribution costs get negatively impacted.

Cost of doing business with retailers goes out at retail were stopped adding anything new and they gravitate towards third largest suppliers and it just becomes too expensive and less attractive versus our other significantly higher profit opportunities.

So I admire our teams for trying certain things, but I respect them, even more when they have the courage and disciplined to cut bait on things that just aren't working.

In this case, the dispositions should add more than 15 million and adjusted EBITDA to new age stand alone on an annualized basis, which is also the right thing to do in this current business environment.

Now on the positive side of the Ledger, we are seeing good growth in a number of markets worldwide spread.

Especially in the U.S., where overall growth was 11% primarily.

Primarily driven by our direct distribution division that was up 15% in the quarter.

And continuing trend improvements in Japan, our largest market correct.

Not that we don't have complexities in these areas and cobot impacts we've just been building on that momentum. It has some very good management and leadership teams in these geographies that are overcoming the obstacles.

Now speaking of momentum I'd like to respectfully ask Marc Wilson, who is the incoming group president to discuss what's been happening both with our Acs pre merger and new age in the field and with sales during that transition.

Thanks, Brad.

Whether you are looking for organic growth or growth via acquisition. Neither one is actually all that easy I have over 30 years of experience in this industry. So I've seen a few things in my career.

Even with the Rx over the past nine years, we have been one of the fastest growing companies in the industry during that period growing both both organically and via acquisition.

Virtually all the acquisitions, we have done most of the time, you get a little bit of pull back and not all the distributors transitioned over this in the short term. So you typically get a short term dip in revenue impacting results during the transition.

This is the first time ever if I could emphasize that we are not seeing that pullback, we're getting very good growth virtually everywhere on both the Rx and the new age side.

And instead of distributors opting out the news of the merger and how we've handled that so far has actually been a catalyst for new distributors join us and new companies asking if we let them join us.

Now as investors know, we're not yet closed or.

We're not even close or merge so we have to continue to operate separately technically but we are allowed to converge and coordinate so we've been doing this with everything we can do to get a head start.

Greg already talked about that $10 million in head count that was taken out on the new age. So well we have used this merger is an opt to do the same thing on the Rx side as well. So it will also benefit the company in the next year.

We've also had a head start in sales and we've been building on momentum we've had at Rx coming into the merger in Europe for Q3, Rx was up over 200% versus the same quarter last year and separately, Russia, and the baltics were up over 250% versus prior year.

Our business in Western Europe is now trending at over at above 100 million annually. So we're very optimistic and its continued growth and contribution.

Japan, our largest market across all companies were combined 1.3% up 1.3% to more than $35 million in revenue for the quarter I think it's important because culturally. This is probably the most difficult market didn't respond to change and continued the long term trend reversal and.

Tony Miranda side is.

Positive result.

In greater China, we were down very similar to new age, but in Australia, New Zealand, we were up quarter versus the prior year.

Switching to the Americas, Brent already talked about the growth we saw in the new age side and we experienced the same thing with Rx. The U.S. was up over 100% in net revenue quarter compared to the third quarter in the prior year.

And in Mexico, Rx was up 70% prior to the year and up nearly 300% versus last quarter and in emerging market, where we have good momentum we have a number of new brands from respected with respective companies. We are launching bear and will continue to grow.

Now as investors know with all these numbers from a preliminary and unaudited and on the Rx side.

And not included in the results Greg communicated on the new age Standalone, but my point in sharing is where we are is we are trending if theres threefold number one we have great scale and momentum and sales sales growth in most markets come into the merger.

And number two that momentum really sets us up combined group into the quarter Q4, and the next year and number three when you look at what we've just done on the profit side with new age taking out the 10 million then head count costs, eliminating the 15 million drag from the retail brands on an annualized basis the cost reductions.

We have done on the Rx side added to an already near 10% EBITDA margin. We did last year leaves us well positioned for the coming year I.

I can tell you I am very very pleased with how well we are integrating how seamlessly we're bringing the two companies together and how well we are connecting with our field and top leaders. It is very motivating for our distributors with how much buzz the merger is creating in our industry with new distributors and new companies trying to join us.

And how well we're setting ourselves up for Q4 and thereafter after 30 years in the industry working with some of the leading companies in the sector. This is probably the most excited I've ever been and I'm confident about the future of our combined companies and what.

With that let me pass it back to Brad.

Thanks, Mark great job and great job.

Leading all of the the sales team said, they really gravitate towards you and all your experience.

I hope that.

We can all see the momentum.

With our merger with Ericsson the completely different scale it provides us.

When can just add up the profitability and the cost that we've taken out both with head count the disposition of BW are and the other actions we've already taken.

On top of the additional cost synergies that we've already communicated we said we would do it and we have indeed executed.

If I were to summarize Q3, but China has been a problem for us for the past two years and it's not unique to new age.

And Rx and virtually all others in the direct selling in the direct selling industry have similar issues.

We believe we have our arms around that as Mark mentioned.

But aside from China, our momentum in many markets around the world from Japan to Southeast Asia to Europe in the U.S. and Latin America looks encouraging.

Of course, I am disappointed with the BW our performance in China in the quarter and I take full responsibility for it all.

Also however in the quarter getting rid of the BW our drain.

Taking out the cost number.

Number three integrating in converging the merger with Rx and the other companies number for establishing our new integrated vision and culture and number five keeping the pace keeping the growth in attracting all these new leaders that are joining us in droves is commendable.

So I'm happy to have quote clay.

Cleaned up in Q3.

Created a major step up.

And organized a powerful setup for both Q4 and 2021 in top and bottom line.

New age is now 40 half years old and it's never fast enough for our investors or ourselves, but I give the team credit for going from virtually a couple million dollars in sales to more than 500 million in sales with the 60% plus gross margin when.

When you do the math on the numbers, we have shared a run rate in the near term that is positive and profitability.

The potential for further significant growth in 2021.

That reality is not yet built into our new age stock, which is exactly why the air skies joined us with all of their success because they see the same thing and they have experience of what they did with the USANA stock when they ran that company.

The new eight stock has gone from around 18 cents on the Otcs pinks when I started four years ago to more now with around 2 million shares of daily liquidity, a good institutional shareholder base starting point, it's not success and we are not arguing it success, but it doesn't happen.

It overnight, but it does happen when you have the kind of committed and quality team that has been there and done it before and has the perseverance like this management team does.

Now, we're not going to be providing guidance for Q4, but once the Aerex acquisition is completed and we believe that we'll all have a positive we believe that will be positive EBITDA for for the quarter.

As Greg mentioned, we have been.

I had we been combined with Eric's for the third quarter pro forma revenue would have been greater than a 130 million gross margin in the high 60%.

Range and recurring adjusted EBITDA would have been positive we expect to build on that scale and momentum both in Q4 and throughout 2000 2021 or 2021.

Closing of the transaction is imminent as we are almost done with the Rx audit that will take it away any distractions and eliminate a bunch of complexities and enable us to truly operate is one and capture the full potential of our great company with that what we view is limitless opportunities in front of it and with that.

I'd like to pass it back to you operator.

Yes.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue. You May press star to if you would like to your love your questions from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star key one moment, while we poll for questions.

Our first question comes from the line of Eric Great with the line Global Partners. You May proceed with your question.

Hi, good morning, Thanks for the questions.

Hey, how are you guys doing really appreciate the color you guys gaming gave especially on Rx from a geography basis, but just want to kind of clarify so if I look at the 130, roughly pro forma how would that compare sequentially versus twoq pro forma.

It looks like you guys had great momentum in Europe, and some others and then also just on top of that just can you talk about any.

Any potential impact that a second wave potentially could have in terms of coven and maybe how you adjusted the business models, either what can only buy new age or Rx in terms of being able to adjust for that thanks.

I'm going to give you something that's anecdotal Aaron but I'll give you the trends and then I'll ask Marc for his perspective right. So.

First off I mean big.

The audit that is being done with Rx is 2018, and 2018 right. Greg So it isnt until 2020. So these are our preliminary unaudited numbers I have to qualify that.

But if.

If we do.

Did a bit more than 130 in Q3, what we are seeing on the Rx side.

Is really good trends quarter to quarter and we are seeing.

Stability and growth in most markets Q3 versus Q2 on the Nnone by new exciting, especially on the on the DSD distribution side, but nowhere near the growth rates that you have with Rx. So they've got some of the best momentum in the entire industry.

That is.

It's coming from all these new leaders joining us and just good organic growth, but it is anecdotal because the numbers are unaudited, but mark what are you seeing on the Rx side Q3 versus Q2, so sequentially.

Yes. Thank you Brent and Great question, we are continuing to see solid growth and the beautiful thing about being very diverse around the world and having solid business growing not only in Europe, but now we're starting to see it coming together in Latin America, albeit much smaller north.

America, continuing to grow and and Thats one of those things that you want to see in a business, especially at our age to continue to grow and develop.

I think adding to it with.

We're focused on on greater China to make sure that continues to grow I'm very optimistic of where we're headed and as mentioned earlier normally when you are coming together like this there is a little bit of paralysis in the field, where they they get a little hesitant until they stop for a minute until they can figure. This out one of the things I think we've done it.

Absolutely well on both side. This year is continue to keep everybody growing and focused on the opportunities that are there. So I think you're going to see continued growth and continued great results as we as we work towards making sure both sides stay excited and stay engaged and we're going to be.

Offering both brands to each other so that convergence coming together in the coming months and quarters will only help an add to the excitement and opportunity that I think our representatives and ibcs fulfill.

Yes, Mark brings up a good point area and I'll just build on this and then we can go onto the other questions is he talked about that what I call Cross pollination of brands as a revenue synergy we haven't really built that into our projections and we communicated that we would do at least 20 million in cost synergy.

These.

You know, we still believe that that number.

Number to be 90, plus percent likely to get that 20 million of cost synergies out, but we've kept all of the revenue synergies is that upside and so we are seeing some of that growth already in Mexico that we communicated to investors I don't know about three or four weeks ago on some of the cross pollination of brands, but there's.

Page excitement amongst all of our distributor base, which is larger than 400000 people between our distributors and our customers out there in getting access to all of the brands are more of the brands.

And the portfolio to be able to sell those so.

A lot of excitement and upside in revenue synergies and on top of good growth I would say good growth that we're seeing on the Rx side and stable.

And slight growth on the new age side with the exception of China.

Okay, great. Thanks, so much that's super helpful color and then just.

I am thinking about near term dynamics I know you mentioned, you're not giving any guidance on the fourth quarter, but just wanted to talk about obviously there has been concerns and what you are seeing kind of a second wave.

From COVID-19 in different geographies, just because you have exposure to so many different countries you talk about what you might be seeing a little bit more near term kind of you know the playbook that you guys now have having implemented kind of virtual meetings and also maybe differences in terms of products that are kind of especially with your new products. You know, what's been kind of gain momentum and maybe.

What kind of impact you might expect if there is more of a second wave as we continue to go through the winter. Thanks, Yes.

Yes, the testing is when countries shut down when like Japan, shuts down or Indonesia, shuts down it's really tough to build the business, even though our infrastructure is 80% ordered and fulfilled online and more than 80% delivered to home.

Even.

With that infrastructure, it's still negatively impacts us, but what we've seen in most markets.

His and ability to navigate.

Abigail through that so even as we get a second wave in the United States Mark talked about this right. So yeah, we've got.

This global business with good scale in Europe, good scale in a number of Asia Pacific markets, Latin America, and the U.S. and as long as the markets don't shut down completely.

We're in a very real.

Reasonable position I would say from an infrastructure in route to market standpoint, too to navigate through those waters I think better than.

Virtually any other kind of big infrastructure or a route to market structure that I can think of Mark what would you say because I mean, you see a daily with all the cobot impacts happening around the world.

I would agree with that and I think our representatives have learned that doing business completely differently Europe.

Europe was already online so the nice thing about them is they were able to respond to this very positively and many of our brands, which are you know.

Focused on boosting the immunity system.

In your immune system that not only helped but positioned us well for a product that people are looking for so I think that's a good thing and there are certain markets like Asia Pacific Asian Asia, but it is a little more difficult as Brent mentioned during these times, but even they have begun shifting to a new style of business and and are interested.

Obviously in the products and moving forward. In addition to that we've upped our inventories to position ourselves because sometimes that was probably the most difficult piece to make sure. We navigated through during coated type shut down. So I think we're fairly well positioned as Brent said and cautiously optimistic.

Of how we're going to be able to manage through this.

Okay, all right great. Thanks for that color and just one last one from me and then I'll jump back into queue guys.

You guys gave some you know a lot of color on China.

That's a market that continue to see some sequential decline.

Just curious in terms of do you think it's more of an impact from co but I know we had some things are even for coverage in 2019 that you mentioned earlier on the call. So you know what do you think is going to be the catalyst for you guys and for the industry. Because you mentioned others are having a similar impact in terms of when you guys start to see growth kind of start to reignite within that country because.

When you guys first made the acquisition of Miranda, Brent, obviously, China was doing very well and kind.

Kind of starting to roll right over right. Afterwards, so just wondering what you might think will be the kind of catalyst kind of get that back to growth because it was a great market for you guys. When you guys first off you. It it was great Aaron just until we acquired it and then right. After we acquired it even though financially it was tremendous and Nina total resource wise it was tremendous for our.

Investors way that was.

A nice punch in the face.

From China right after acquiring the business right that affected us all throughout 2019, and we actually started off pretty well in China in 2020, but just to stay competitive with all of the changing dynamics, we had to change the compensation system and you know you get good month.

Here and then I had a good month, there in Q3, and it's a little bit cryptic, but Greg talked about we didn't do another qualifying promo.

Promotion that we did in <unk>.

We didnt cycle in 2020, as we did in 2018 part of the reason for that was it wasn't profitable and 2018, when we did that and we saw that people just loaded up on inventory and it just ends up costing us money so by eliminating those promotional kinds of behaviors, we improve our overall profitability.

But from a revenue standpoint, it to it it didnt cycle and so thats somewhat positive on the bought more positive on the bottom line, but but you see the impact on the topline and that was the most profound impact of any of the group, but but going forward on the catalyst, let me turn it over to Mark right to see with.

He sees as the benefits of the combination both.

Both for the Rx and new eight side and our distributors in China and what his outlook is for China Mark Yes.

Yes, Thanks Grant.

I think that's why we're so excited about getting that close done as we can get the merger closed and finally get through that the audit portion of this week.

We can take full advantage of of what the merger offers with the you know the.

The license in China, that's a big deal I think it will be interesting to see not only politically but just China's opening up their economy and not seen this is quite a struggle I think we're just now starting to see traditionally our Chinese reps had done a lot of meetings in person face to face.

And these kind of things and they've had the luxury of having us over there quite a bit traveling which all of that has had to change this year up until this point and so we're we're anticipating as those things start to open up a little bit, especially April now now they're able to do meetings and whatnot, we're going to see some strength there as it comes back in.

Beginning in the fourth quarter, and especially into 2021 as we look forward to that so.

I'm still very optimistic of what we're going to be able to to achieve in China moving forward I think thats going to be a strong market for us ongoing and in the future. So.

All right. Thanks for the color look forward to the closing of acquisition I will jump back in the queue.

Thanks, Sir.

Our next question comes from the line of David Bain with Roth Capital Partners. Please proceed with your question.

Great.

Actually some of my questions were asked but maybe I could dive in a little more deeply affect could.

I'm trying to understand the big picture I PC growth you talked about convention and maybe other in person opportunities. Those are canceled for now but are we seeing some cost offsets number one and the maintenance of the associate base.

And then you mentioned out of coal that perhaps that the resumption of.

In person events being a forward catalyst.

Is there a way now to combine the technology and everything that you've learned to sort of reinvigorate that that IP see growth it and and kind of merged those two two things together.

I'm going to throw it over to Greg on the cost side first off just on the business side, we executed.

I think first week in October our global business summit.

And normally in those kinds of things we get.

Four or 500 people or maybe a thousand people that come to that stuff because we were able to do it all virtually we had more than 10000 people come and for the first time, we actually charge people to come so.

And so.

So completely different model and virtual we were able to just connect with so many people. It's interesting on the Rx side. They they're doing these things like once every other month and they get five 7000 people at a pop and their virtual conferences. So we're learning very very quickly how to.

Operate in the new norm and connect with our with our folks versus in person meetings that being said they still do some of the in person meetings in certain places and.

And the events just because it energizes everybody together.

Before I pass it over to Greg in terms of any financial impact or.

What happens from a TV standpoint, Mark what are you seeing in terms of the virtual events were doing and how we're connecting with the field and the digital and virtual way in a different way and what you see.

That process looking like going forward.

Yes, I think you summarized that very well and what we're doing is we're getting we're only getting better.

You know what we've found is there is a new way of doing business through these virtual events, where you can get literally.

Thousands and thousands of individuals from all around on these activities and to celebrate with them celebrate the thing that they enjoy doing introduced new products and brands. This is continuing and it's allowing us to reach it is a perfect example is down in Mexico, where they.

They actually shut our meeting down that we had planned they went to a drive in theater people drove into their cars and participated but the the fun thing was it was online had a presence of over 3000 people that were in a joined in throughout Mexico could.

Couldn't attend the event. So we're we're learning this and were getting very very good at that so we have events planned November into December into the new year and this will continue our new way of doing business my.

My only point was earlier is just that China typically has not been a real social online.

Then planning and they're just now learning how to do that so they are a little behind on that piece and we're going to keep that even for them, but I think as their market now is opening up you're going to see some opportunity there as well.

Right and.

Go ahead, Hey, Dave can I can can we just hit the cost pieces relates the teacher in that kind of go ahead Greg.

Yes, its cost piece you know the big thing this year we.

I'd actually plan to do a live conference clear up until one submarket, but basically with these conferences six.

Six months out you start spending the money and signed the contract. So this year, we didn't really see a huge benefit from it but one thing. We did do this year was that we really learned the white the right way to do a virtual conference. So that we see now going forward into 2021, we should be saving a lot of money by doing some are more.

Virtual compromises I'm.

Im sure with.

With Pfizers, new vaccine will try to get back in line and start having some more face to face conferences as well, but with with our own immunity product yet by the way, Dave, yes, but but.

But with where we sit today, we do see some nice cost synergies, where we should should see some benefit during 2021 going to some more virtual conferences, which could save us a couple of million dollars per year actually and as you know.

Great.

Just one follow up on China I know this has been discussed a lot but.

As you mentioned other others haven't seen a real bounced back since the review process early last year that was pre pull that outside of coal that are we seeing any thing structurally that's changed there in terms of maybe competition outside the direct space like Alibaba T Mall.

Or is there just been a cooling impact from that review process that never really.

Dissipated and specific to known you for new agents the comp structure, there aggravate trends did.

Obviously, the same the same kind of trends or maybe a little bit better and we're going to be changing the cost structure. There again.

In terms of I would say our extra results are about the same as ours, but there are some companies that basically just had to exit or.

Had a really challenging results others.

Through frankly better than than we have.

I think our biggest challenge was.

You know, we kind of road this way before we acquired the business and it's still had some some weaknesses in our company we were kind of a one trick pony with just know any which local consumers love frankly, we've got great stability with no money in those kinds of things, but it isn't necessarily now.

A huge growth engine and we have seen some Korean competitors come into the market and we were just we were not competitive from our compensation system and we were we were starting to lose leader in the beginning part of the year because our compensation system wasn't competitive. This is why it's still import.

And to integrate with our it's important for them because they get access to our China license and it's important for us because on an integrated basis, we get more products, we get more a broader portfolio, we get more leaders and we integrate the compensation system that is going to be very attractive and one of the most.

Attractive in the industry that that will.

Be positive for us going forward Mark is on this like every single day, what else would you say mark in terms of.

China, and and the compensation system and is.

Your assessment of the the positives.

Positives and negatives or risks that pros pros and cons.

Risks and opportunities as you see in the market as we come together.

Yeah, I think the brand diversity that we have as a company now Brent touched on this is a really strong one that youre going to see advantage to coming forward in the year.

As we as we merged together I think that's a big thing when we talk about this cross pollination and cross selling that gives us a great opportunity. For example, we just launched in our exciting new skin care brand, which is already seen some fun and some excitement there in Europe and some of that some of our other markets, but adding to that just the brand diversity that we have to.

Offer our consumers is I think a powerful thing as well as we touched on it known he's a well known brand a strong brand. It's got good history. Good science behind it. So that is a stable good brand that we can build on but in addition to that adding these other segments were coming together.

Is a big piece for us.

Well as the again Im just going to touch on the diversity, having the two companies come together and having Europe be a strong growth opportunity for us as well as Latin America, starting to kick in.

And and going back to Asia, just seen that.

Things are starting to come together, there and as they do I believe that you're going to see some good results moving forward even in greater China.

Great looking forward to the combo.

Thank you.

Thanks Mark.

Ladies and gentlemen, we have reached the end.

Today's question and answer session I would like to turn this call back over to Mr. Brent was for closing remarks.

Yes, the only closing remarks, I would say is look I and.

Owning 100% of the BW our decision it was the right strategic thing to try it just didn't work. So the fact that we have made the decision we have executed on the close has a very positive impact on us financially.

And if you look at that coupled with the cost reductions that we've taken out look those things very positively add to the overall EBITDA of the business, coupled with Rx and their performance on a standalone basis it.

Really sets us sets us up nicely for Q4. It is a very different company and it takes time to build and you get positives and negatives when you're building. These things over time right. We've had the positive every single business does but like Mark said, we've got the benefit of being a global business operating in a number of countries around the world and we can navigate.

Those waters to.

To really build the business very attractively for investors going forward and.

I want to thank everybody for joining us on the call today.

Thank you.

Thanks, everybody for joining US today. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.

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Okay.

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