Q4 2020 Natures Sunshine Products Inc Earnings Call
Afternoon, everyone and thank you for participating in today's conference call to discuss natures Sunshine and financial results for the fourth quarter and full year.
And with 31 2020 joint.
Joining us today, our natures Sunshine CEO, Terrence Moorehead, CFO, Joseph Haiti, and General Counsel and Dave Growler.
Following their remarks, we'll open your call up the call for questions.
We grew from there I would like to turn the call over to Mr. Brower would you read the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of net 95 provides important cautions regarding forward looking statements.
Please go ahead.
Thank you.
Good afternoon, and thanks to all of you for joining our conference call to discuss our fourth quarter and full.
Full year 2020 financial results.
I'd like to remind everyone that this call is available for replay via telephone at Donlin through March 24.
And be a live webcast that will be posted on the investor relations portion of <unk>.
Web site at Www Dot natures Sunshine Dot com.
The information on this call.
And it contains forward looking statements.
Such statements are often characterized by words, such as believe hope may anticipate expect will.
Forward looking statements are not guarantees of future performance.
And the actual results may there may be materially different from the results implied by forward looking statements.
Factors that could cause results to differ materially Inc.
But are not limited to those factors disclosed in the company's annual report.
And form 10-K under the caption risk factors and other reports filed with the Securities and Exchange Commission.
The information on this call speaks only as of today's date.
And the company disclaims any duty to update the information provided here and.
Now I will turn the call over to the CEO of natures Sunshine parents Moorhead Gareth.
Thank you, Dave and good afternoon, everyone and thank you for joining today's call and I Hope you all can change.
And well during the ongoing challenges from the pandemic.
2021.
It sounds and here marked by unprecedented change from.
COVID-19, but our but our management teams around the world, we're able to sort of rise to the challenge as our fourth quarter results closed out the year strong, resulting in what we believe to be a transformational period for our company.
During the fourth quarter, we saw a net sales reached their highest level and the companies 48 year history.
And it eclipses the record we set last quarter and.
In addition, we drove absolute growth across all four of our operating business units for the second straight quarter and.
And we generated record breaking net sales growth and why.
Bottom line improvements for the full year.
All of this was made possible by our unwavering commitment to our vision and drive.
The share of the healing power of nature with everyone.
The amount of 2000 and 'twenty, our management team showed incredible resolve and <unk>.
And one of our business and bring that vision to life and Walmart.
While our practitioners and retailers show and incredible stamina and determination.
To deliver the highest quality and natural products to our customers.
That combination and that.
Partnership helps mid to late 'twenty and tremendous success.
Throughout the second half of the year.
We benefited from improved field fundamentals and the strength of our recently revamped business model.
And the fourth quarter net sales increased 11% to 101 $7 million, reflecting strong sales practices growth and new customer acquisition and continued positive response from our new.
Branding and profit watches.
Well, we maintained our momentum and markets that experienced strong growth last quarter and such.
And as NSP U S, and China, which grew 7% and 24% respectively and.
Local currency.
In addition, we continue to see.
Strong momentum from our transformation initiatives, and Latam, which grew 21% and local currency and our product introductions and central Eastern Europe, which contributed to Europe's overall growth of 35% in local currency.
While we saw significant improvement and net income during the fourth quarter driven by a favorable tax rate from a release of valuation allowances.
Adjusted EBITDA reflects several seasonal initiatives and key strategic investments to support ongoing growth.
I'll provide more comprehensive overview of the fourth quarter results and and all that.
And we play and shortly but first I'd like to provide some additional detail on the performance of each of our overuse.
Let me start with North America.
And what we saw continued positive momentum throughout the region net sales increased 6% overall.
And NSP U S sales increased for the fourth consecutive quarter delivering growth of 7%.
We continue to benefit from improved sales fundamentals as well as increases and new customer activation and engagement driven by positive consumer responses to our new branding and messaging.
And with consumers continuing to place a high priority on their health. We believe we are well positioned to attract customers and address their needs.
To help navigate the early stages of our transformation and identify potential areas, where appropriate and we've continued to partner with our incredible practitioners and retailers and <unk>.
And sure so.
We continue to enhance the business model and fully integrate the new initiatives and through our distributors daily routines.
And I'll talk about our progress on the transformation of it later in the call, but for now I'll summarize by saying that we're very pleased with the rollout and the overall reception to the plan so far.
Moving to Asia, while our sales increased by 2% on an absolute pickup on an absolute level.
We experienced a slight year over year decline and local currency due to reinstated lockdowns across our second largest our largest market and south Korea.
And while we grew in Korea in the third quarter.
No restrictions constrained our ability to maintain the positive momentum into the fourth quarter net sales fell by 23%.
Due to the market's strong reliance on in person gatherings and events.
And the last day.
We'll continue to focus on the health and safety of our South Korea and distributors as we develop new initiatives that will allow customers to more easily access the products they desire.
Excluding South Korea, Asia sales increased 18% and local currency.
And China, and Japan, we continue to see strong growth and those markets delivered significant increases in orders and new customers and average order size.
Starting with fourth quarter sales grew 44% on a local currency basis, while sales in Japan increased 30% and local currency.
We're also starting to see robust growth, even one of our smaller strategic markets, Taiwan, which experienced 200% growth and local currency during the fourth quarter and we expect to see continued strong growth and this market has just begun.
And to reach scale and.
In Europe, we saw growth of 35% led by continued strength in central and Eastern Europe.
Strong fundamentals and targeted new product launches and fueled our performance and both Russia and Poland and we.
And look forward to officially launching our rebranding initiatives and the second half of 2021.
Despite the recent social unrest in Russia are per.
<unk> remained strong as sales and the fourth quarter grew 37% and local currency.
Paul and continues to deliver explosive growth with fourth quarter over fourth quarter sales, increasing 64% versus prior year and local currency.
And Western Europe, we struggled for most of the year to deal with and crushing effects of COVID-19, However, in the fourth quarter, and we were able to deliver 13% growth in local currency sales driven by strong profit progress and the UK, which was up 32% and Italy, which was up 47 per cent.
Moving forward there is still some uncertainty with respect to the impact of the pandemic. So we anticipate a gradual recovery for western Europe.
Finally, and Latin America, we continue to see strong growth from our revamped and go to market strategy.
And the fourth quarter sales increased 21% versus prior year and local currency.
The rollout and implementation of their business model is still underway, but we saw a strong improvement and new customer growth throughout the quarter.
Of course meaningful improvement to a few fundamentals will take time, Inc.
Increase the amount of field contact and improved communication and the move to a single compensation plan appears to be having a positive impact on sales force productivity.
At the same time, Inc.
And of new digital capabilities and seems to be helping to drive new customer growth.
Overall, we're pleased with our customers and distributors have responded to the transfer of our transformation and we expect to experience continued growth as we move forward over the long term.
Our performance across our four over us demonstrate that our transformational initiatives are gaining momentum.
Over the course of 2020, we saw momentum build as the team focused on implementing our global growth strategies.
For the full year 2020 sales grew 6%.
Through our record.
800, $300 million to $385 million and sales.
Which is the highest sales and the company's history.
Operating profit has also increased 33% delivering $21 million, while adjusted EBITDA increased 16% to $36 million.
We're very pleased and encouraged by the favorable response, we've received from our customers and distributors to our revamped business model and the new branding and the new website.
We still have a lot of work to do but we've made tremendous progress and are deeply grateful for the amount of flexibility and adaptability our distributors have shown and we're very.
And fortunate to have such incredibly skills and savvy partners as we navigate through this transition together.
The changes we've implemented have only just begun to unlock the power of natures Sunshine and there are still many new and exciting elements of our plans and Collin and I look for.
And to share those plans with you sometime in the future for now however, I'd like to give you a brief update on our progress on our five global growth strategies.
I'll begin with brand power.
We're all updated packaging and branding are already receiving strong free from our customers and distributors around the world.
Our new clean modern design and highlights the total day and effectiveness of our products.
And the positioning natures Sunshine as a clear choice for consumers looking for quality products that deliver significant health benefits.
And the fourth quarter. We also began testing our new force of nature is the marketing campaign and I'm pleased to announce that the initial result has exciting implications for the business.
The test campaign exceeded our expectations as the results revealed a high level of customer engagement and surpassed our initial objectives and industry benchmarks.
It's still early to come to any final conclusions, but based on the results. We've seen so far we feel confident that our new branding.
And secondly to support our customer growth initiatives moving forward.
In summary, we continue to see strong consumer response to our initial marketing efforts and believes that our performance based products and industry, leading quality and unique branding truly distinguishes nature's sunshine from the competition.
Turning to field energy. This is the area, where we've experienced the greatest challenges due to bad debt.
Around the globe all of our markets have been force to adapt and builds new flexible capabilities to augment our field fundamentals.
And the introduction of new updated sales tools has been a key but we've also had to rely more heavily on new digital tools to keep our teams connected and productive remote work environments.
The increased number of zoom calls and Webinars and video conferences and has helped us reach a broader group of distributors, including those that might have normally fall through the cracks as.
As a result, we're working more closely with our distributors to find new ways to drive customer growth and improve activation.
But lots of on the business model was designed to support these efforts and more.
And we continue to make excellent progress.
And our two key launch key launch markets North America and <unk>.
And the Raptor.
It's still early days, but we have been but we're seeing success in both there'll be use and believes that we're laying a strong foundation for the future.
One of the areas, where we're seeing increased participation is and the number of customers signing up for subscribers and remember some swaps and strides with our new auto ship program and it's the most cost effective way to purchase our products.
Subscriber products customers receive our best prices, a complementary one year premium memberships and offers them exclusive savings on all of their purchases.
And they get free shipping.
After just a few months subscribed and price already represents about 25% of our house and borders and we continue to see steady growth and the number of people joining the program each month.
The program not only helps people save time and money. It also helps contribute to their health since our products become more effective when used over time.
And their business model also introduced the new affiliate program, which continues to gain momentum and the fourth quarter share.
Since the launch of the program in September we have seen a 300% increase and the number of people joining the program.
And the new affiliates continue to join the company each month and are sharing our products with friends and acquaintances do their social media networks. This has also introduced our brand to an entirely new group of consumers and supported by Influencer recommendations.
Amidst all of this our incredible distributors continue to lead the way as we continue to transform the business.
And as you've heard me say before I believe we have some of the most skilled and dedicated and talented practitioners and retailers and the industry.
Their passion for herbs net for products and sharing the healing power of nature and makes them a valuable partner and the transformation of our business and we're committed to their success.
And our industry, leading breech program offers our distributors, what we refer to as a passport to success and.
It reflects our unwavering commitment to ensuring that each and every one of our distributors has the time and support needed to adapt to the new system.
Build confidence and create a plan to drive growth and their business.
Moving on to our digital first initiatives fourth quarter launch of our new website yesterday, and a new era for natures Sunshine.
The new digital platform has played a key role and the relaunch of our business over the past two quarters by introducing customers and distributors to a more powerful online tool kit.
Debt.
More effectively helps them and search for and share our products.
Ongoing enhancements to the platform, we are focused on improving and strengthening the user experience as we continue to strengthen subscribed and Brian functionality, Google search parameters, and our website content and areas like product ratings customer reviews and sourcing transparency.
We're also building our database marketing capabilities and developing strategic partnerships with several top tier database marketing platforms.
This will allow us to more effectively and effectively target and serve customers, while enhancing the level of engagement and future marketing campaigns.
And we look forward to continuing with the comprehensive rollout of our digital transformation and 2021.
Turning to manufacturing Inc.
And study by the Nutrition business Journal showed that 85 percentage of Americans say that they trust independent third party certification organizations when evaluating brands.
Net natures Sunshine, we take tremendous pride and the vast number of products certifications that we have.
Our industry, leading list the certification and accreditation truly distinguishes our company from the competition.
And the fourth quarter of 2020, we continue to increase our lead over the competition by gaining our ISO 9001 recertification for quality processes.
During our and it's still 107 025 certification for testing excellence.
And receiving and a one TCA rating, which is the highest rating available from TCA, which is similar to pharmaceutical grade certifications and.
Again, we take pride and a rigorous quality controls meticulous testing and precise manufacturing standards.
And that we keep these processes largely and house distinguishes us from the more than 85 percentage of competitors, who outsource their products to lesser credit and third party manufacturers that last the science quality testing controls and manufacturing capabilities that natures Sunshine.
And has developed over the past 49 years.
Going forward, how excellent and product quality reliability and testing will form the foundation for our increased commitment to safe day and ability and transparency.
<unk> already made the move to 100% recyclable bottles and have implemented a supplier code of conduct agreement with all of our suppliers to ensure that they are in compliance with our with all of our sustainability goals and objectives.
We're also working to enhance and expand our ESG efforts and we'll share additional updates on that and the future.
And as a company committed to sharing the heat and power of nature. We are proud to take vis a vis I'll take on this challenge and to lead the industry and this area.
Lastly, on our right stuff initiatives, we continue to benefit from our revamped and organizational structure as evidenced by the teams to improve the ability to drive transformational change throughout the pandemic.
2020 represented the largest transformation in the company's history.
And it was and it has impacted every single area of the business.
Without the increased level of focus and attention to detail and collaboration.
And would not have been able to deliver the historic year of growth while significantly increasing profit.
And for the full year again operating profit increased 33%, while operating margins increased 110 basis points.
Covid related increases and cost of goods sold.
And one time restructuring charges incremental incentives for providing growth and several strategic investments designed to build momentum and drive future growth, where we invest ahead of sales as we talked about last quarter.
In the future, we expect to see continued improvements to profitability as our streamlined organization and operational efficiencies are designed to improve productivity across the business.
We continue to be pleased with the progress we've made on our five global growth strategies and are proud of our financial success in 2020.
Despite the economic and operating challenges posed by the pandemic, our improved productivity and effectiveness and strengthen the financial health of the company and created significant long term growth potential.
As we announced earlier today, our record breaking financial performance has put us in a position to return a meaningful amount of capital to our shareholders through a special dividend and the amount of $1 per share.
As well as a $15 billion share buyback authorization.
And while those will walk you through the details of these shortly I want to walk you through our capital allocation strategy, which prioritizes three areas as we move forward.
Our first priority.
Maintaining our financial strength and stability.
Honestly, we want to make certain that we have sufficient cash reserves on hand to meet our financial obligations.
From there our next priority is to invest and incremental growth and the foremost organic opportunities and we will take our business to the next level or strategic M&A transactions.
And our visibility is poor and accelerate market penetration.
And finally, our third priority is to allocate funds to future dividends or share repurchase from programs.
And with the rise.
Overall, however at this point.
Our main focus is on supporting and driving growth.
With that I'd like to turn the call over to Joe who will walk you through our fourth quarter and full year financial results and our strategic priorities for 2021 and more detail Joe.
Thank you Terrence and good afternoon, everyone.
So, let's just jump into this.
Net sales and in the fourth quarter increased 11% comp.
A company record of $101 7 million.
Compared to $91 7 million and the year ago quarter.
This increase was primarily driven by new product development and <unk>.
Execution on our business transformation plans and growth and new customer acquisition within key markets.
Parents mentioned, we achieved absolute growth across all four operating business units.
Excluding the benefit of overall favorable foreign exchange rates.
Net sales increased 9% and the fourth quarter of 2020.
On an absolute basis, net sales and Asia increased 2% to $36 nine and compared to $36, one man and the year ago quarter.
But on a local currency basis. This represented a 3% decrease.
The decrease was primarily attributable to a net sales decline and South Korea during the fourth quarter as a result of stricter lockdown restrictions as well as a decrease in net sales across our other Asia markets.
The decrease was partially offset by a 24% increase in sales and China, and a 30% increase and sales in Japan.
And the list of Lockdown restrictions and increased market penetration within these regions.
Net sales and Europe increased 35% year over year, and local currency to $23 6 million compared to $17 2 million and year ago quarter.
The increase reflects the continued success and new product launches and stronger field fundamentals throughout central and Eastern Europe.
North American net sales increased 6% and a local currency basis to $34 7 million.
Impaired to $32 9 million and the year ago quarter.
With the various strategic and e-commerce enhancements, we have implemented through our transformation initiatives.
Continued to capitalize on strong demand resurgence within the U S market and driving future growth and new customer acquisitions during the fourth quarter.
Net sales in Latin America, another increased 21% and local currency to $6 6 million.
Compared to $5 6 million and the year ago quarter with the increase primarily due to new product launches and the continued success of our transformation initiatives and this market.
And particularly with the revamped steel fundamentals and digital resources for distributors and as Terrence mentioned.
Gross margin remained flat at 74% compared to the year ago quarter.
Volume incentives as a percentage of net sales were also consistent at 34, 1% for the respective fourth quarters.
Selling general and administrative expenses were $38 4 million compared to $32 7 million and the year ago quarter.
The increase was primarily attributable to variable costs associated with sales growth Inc.
Mental stock based compensation and bonus related and restructuring expenses.
Well as incremental support for future growth initiatives.
As a percentage of net sales.
G&A expenses were 37, 8%.
<unk> to 35, 7% and the year ago quarter.
Excluding the impact of almost 7 million of restructuring expenses and the fourth quarter of this year SG&A expenses were 37, 1% of net sales compared to 35, 7% and year ago quarter.
Operating income and the fourth quarter was $2 two man.
Two 2% and net sales compared to operating income of $3 9 million or four 3% and net sales and a year ago quarter.
Excluding the restructuring and related expenses, we generated $2 9 million of operating income or $2, 9% of net sales for the current quarter.
Compared to $3 $9 million and four three percentage sales and the year ago quarter.
The reduction in margin is primarily related to incremental stock and bonus compensation of $2 million and marketing investment associated with our tranche.
With our transformation.
Yes.
Initiatives.
Adjusted EBITDA as defined in our press release as net income from continuing operations before income taxes depreciation and.
Amortization and other income or loss.
And to exclude share based compensation and certain noted adjustments was seven 5 million and in the fourth quarter as compared to $7 6 million and the year ago quarter.
And the lack of adjusted EBITDA growth from increased sales is primarily attributable to the aforementioned timing of certain expenses, including incremental bonus amounts and investments made in support of the company's long term growth as Terence as noted previously.
Net income attributable to common shareholders for the quarter was $5 9 million or <unk> 29 per diluted share.
Per to $1 million or <unk>, <unk> per diluted share and year ago quarter.
Turning to liquidity.
Net cash and cash equivalents and December 31, <unk> of $92 1 million and.
Outstanding debt of $3 7 million for.
For the full year 2020, we generated $37 $7 million of cash from operations and <unk>.
<unk> to $8 five man and Tom.
2019.
Adjusted EBITDA for 2020 increased $5 million, including and and almost full point margin increase.
As we look back at 2020 into the fiscal year ahead.
We're proud of our stronger financial Foundation.
Our significantly improved financial health and enables us to invest and our business and positions us to return a portion of our cash to shareholders.
And as Terrence mentioned.
Today, our board of directors declared a special cash dividend of $1 per share.
On April nine to shareholders shareholders of record as of March 29.
In addition, our board authorized the repurchase of up to $15 million of the company's common shares.
Repurchases may be made from time to time as market conditions warrant and our subject to regulatory considerations.
Future capital allocation strategy, including initiatives will be balanced with our aim to continue investing ahead of sales growth.
This includes strategic investments to support our customer acquisition and activation, where we have already made progress.
Similar to the results we are reporting today, our investments and the next phases of our business transformation may and.
Priest, our costs over the next several quarters.
However, we expect the long term benefit of these investments will sustain our growth drive long term operational improvements and result in increased operating and adjusted EBITDA margins. We believe the initiatives. We have put in place. This year have only just begun to fully optimize our platform.
And we look forward to further enhancing and expanding our transformation in 2021.
Now I will turn it back to the operator for Q&A.
Operator.
Thank you if you'd like to ask a question. Please state from a pricing started one on your telephone keypad.
And we're using a speakerphone. Please make sure that your function is turned out to lay your signal to reach our equipment.
And again that is star one if you'd like to ask a question.
Pause for just a moment to allow everyone in August and maintenance.
And one thing and that is star one if you'd like to ask a quick question.
[noise]. Please press star one if you'd like to ask a question.
[noise] correct.
Couple of questions. Thank you, we'll now take our first question from Steven Martin with Slater. Please go ahead.
Yes, hi, guys.
Thanks, Steve.
Congratulations on the revenue increase from I guess.
Surprising.
The cost increase was so great.
And to the call.
And we.
And what do you see going forward.
If it was all the G&A.
So what can we expect in 2021.
Yes.
And the Joseph a.
Obviously, we expect to see continued expansion.
And our margins and.
And overall profitability, but Joe do you want to give a little bit more color on that sure Yeah, Hey, Steve how are you doing.
Yes.
Let me tell you directionally.
Yes, we expect.
As I noted in my comments, and we May add some incremental costs associated with certain of our initiatives and spending a bit ahead of growth. If you will having said that looking at 2021 overall and as we.
Yeah.
Well, we don't give guidance per se and would you say that.
And we clearly expect overall margins to be north of where they are in 2020.
And if that helps answer your question.
It does it does.
And.
Once Korea straighten itself out.
Can you give us and you're getting better.
Give us a green.
And what your expectation is for top line growth into 2020 one.
Well again and welcome.
And I will give you specific direction, but.
As we've seen and our other market when the COVID-19 restrictions are eased.
And you kind of see debt.
And leasing of our potential.
Korea, we've got such strong field fundamentals and such a strong and kind of operating machine there.
And that is built on relationships and and you kind of shifted finely tuned and finely oiled machine and then you throw something like COVID-19 into the mix and and it just really slowed them down so as you saw.
So I would I think our expectation is that we would return to kind of normal growth rates and.
And almost historical growth rates that we would have seen their historical performance and that market.
But again that will be determined by <unk>.
When that market can open up.
As well as our ability to.
Build outs and some more digital capabilities on the ground there and we are working on debt to EBIT.
A little bit of time for us to put that infrastructure and in place. So obviously before I came onboard their debt.
Wasn't much there we focused on it.
As a core component of our strategy and and are building out the capabilities right now, but it'll take a little bit of time.
That's a great market for us and.
And my expectation would be that they will step back.
Well.
Status and that market now.
Closed.
And I could have some additional restrictions put in place and largely on meetings and.
How people can get together and.
Net debt.
Such a large part of the Korean South Korea business and the dynamic that they've had in place there.
They are working with some again some day just launched a new business App.
And designed to take some of the the meeting diner.
Dynamic and the training that they do and have built that into our.
So a digital platform, but that is brand new its hot off the assembly line.
And just launched this quarter so.
That's why I don't want to make any predictions on the impact that that's going to have but clearly.
More tools and the more contact you have and more helpful. It is.
Okay.
And I do applaud.
<unk>.
Decision to pay a special dividend and buyback shares and see more likely.
What do you hear that from a long time.
And with $90 million of cash I, congratulate and Sebastian and I hope youre reasonably aggressive about.
Here's the buybacks.
One other question.
Yeah.
We took out that bank of America.
Yeah.
Okay.
More of it.
Okay.
And why we're keeping it out.
We.
Yes.
And we have an equipment line and they are a couple of lines of credit.
Steve and.
What gives you the day.
Well.
And then.
At the end of the day were.
And I'm trying to give and maintain a banking relationship and the money is very very cheap.
And so given that we paid back the PPP loan.
And we turned around and bought a little bit against all our equipment line.
And I would say on any given day we.
And we feel so compelled we can obviously you pay it back.
Okay.
Capex thoughts for this year.
Well.
2020, they're relatively consistent with 2019 somewhere in that five or $6 million range again, Directionally I would say that because of the number of initiatives and we have that.
And it's certainly.
And certainly possible that capex for 2021 could be.
I wanted to ask two X times, what it was and.
2020.
Got it.
Well there are a lot of shipping.
Okay.
As a result.
And most of their hopes and goals.
And how are you.
Net income any of that.
For the most part no we're not that's not to say that we haven't experienced it.
And that copper too.
And sometimes those have been domestic things strike I'm trying to get product out of the west Port.
Facility and on the water to one of our markets.
And we've had a hiccup or two but for the most part.
And we've been we've.
And then relatively unscathed by.
Disruptions, both on the distribution side and on the supply side.
Gotcha, Alright, I will go and I'll talk to you next time.
Yeah.
Alright, thanks, Steve Thanks for the call.
Thanks for the question.
Thank you once again Thats star one if you would like to ask a question.
We hear next from John Hollander with CMT advisors.
Hi, guys. Thank you for taking my call.
Quick question for you and the metrics.
Manage accordingly.
And who.
2000 and quality your earnings.
<unk> numbers and distributors and managers.
Those numbers have been removed.
And again and this operating group.
And.
And what metrics investors should be looking out for help and utilize your business.
Well first off let me in regards to the.
Removing some of the distributor information than we've had in prior years. It is now required data and frankly based on me and the implement the introduction of our new business model back in September we consider some of that data.
Less relevant and so.
And there's much more of a focus on differentiating between rumor.
And our customers are versus say the distributors and leaders are so as tenants touched on his comment and I would work.
And if.
And you listen to some of the data points that he called out in his comments and they give you a pretty good roadmap as to some of the things.
The metrics if you will that we look at it and trying to measure the measure the results and how we're doing on a go forward basis.
And then and then obviously, we're looking for growth we're looking to build on the customer base. We're looking to build on our distributor base. We're seeing some success from that especially with programs as Terence just unlike subscribe and thrive and the significant amount of increase we've seen and and.
Customer activation and so forth.
Okay.
And we get any data points as to what percent of your sales.
Coming from digital.
I guess are digitally originated.
Those numbers are still demand per se.
Net of sales coming from digital.
What percentage of John is still.
Relatively low and the.
10% range, However, having said that.
Most of our distributors that are doing business with us digitally so.
Volume of digital transactions.
And overall is very high.
The amount coming from consumers and it's still that's still relatively low and.
And again, we just launched our new <unk> platform and our new website September one and 2020, so we're relatively new into the journey.
Okay, and so that I assume you guys have.
Mexico per customer acquisition cost.
Value calls or average.
Yes.
And for consumers.
Yes, not yet we don't again, we just started our.
And all of our test doing some of that type of work that day to day marketing.
Work and.
And of the November timeframe, and we'll be rolling out some additional initiatives going forward. So that's all kind of part of the digital campaign and our force of nature campaign and many of the other things that I talked about and we're doing going forward.
But again.
Phil and of new New territory for us new ground for us, but its tremendous opportunity.
Okay.
One of the interesting things John just to build on that though and one of the interesting things about kind of our business and our platform is not only will we be leveraging those tools, but we've also kind of made sure that all of our distributors has the exact same tools and the exact same capabilities that we have as well so each one of our distributors all of our.
All of our.
Practitioners all of our retailers and everyone in our business in Europe, especially here in North America, and Latin America. They will have the exact same.
Kind of pool that fully functional websites sharing tools.
And kind of everything email marketing tools in order to help them create a whole digital business up their own. So there's kind of a multiplier effect that we hope to get going forward out of our digital toolkit.
Okay. That's helpful and thank you for that.
Can you give me a quick clip with how you think about working capital.
Pretty much coming from that.
Do we think about working capital as far as.
Going forward.
And I'd say is I would say.
Can you break and particular components.
The C. As we discussed earlier, we are doing a lot.
A decent year growth wise in 2020, we do believe it will continue to grow going forward.
I can see that growth increase.
That certainly drive maybe a little bit of an uptick on inventory.
Accounts receivable for us are primarily credit card related so the convert cash pretty quickly.
And then on.
And the current liability side.
And obviously to some degree the inventories will be financed with cash payable and so forth and so on so it's a little bit of a long winded answer to your question, John but we don't see any major.
Pressures or.
And using cash for using cash as a result of our working capital going forward, we will always be some things just from a timing perspective that will come into play but we.
We don't consider working capitals.
Our growth and working capital as a major use of cash for us going forward.
Okay. So obviously, we're already near me and.
Hi.
Q1.
And I was hoping.
And we've had.
Korea.
Sure.
Geography.
Sure.
Can you give any comments on how things are trending.
Q1 income.
And why.
At this time, no, we're not going to providing comments and regarding Q1.
Obviously, we've already provided a little bit of thought.
And as far as how we believe 2021 shake out we call.
I believe that we're gonna experienced growth fully believe and expect that we're going to see improvement and our profitability and so forth and so on.
Next earnings releases early May and we'll obviously talk much more at length about our first quarter played out and then maybe it will be and a little better position to talk a little further about.
And the rest of 2021.
Okay and just.
One final question on the cash flow.
I've noticed a line item for non cash.
Cash receipts.
Expense can you just comment on that.
I'm, sorry could you repeat that question.
And your cash flow statement are greater per line item from non cash.
Okay.
Yeah.
And if your question specific to adjusted EBITDA. The other non cash non cash items for us are primarily depreciation and stock based compensation.
And there is a table.
No.
Yes.
Earnings from <unk>.
Uh huh.
Great.
And warm integration expense.
Part of the standard change.
And that would be.
Uh huh.
<unk>.
We have a consideration maybe you were referencing is obviously there was a new accounting standard put in place a couple of years ago, where you have to put all the leases on the boats right and you have to evaluate and present day and the lease liabilities for your various office leases warehouse leases whatever you may have.
If it goes on the books and then there is some amortization associated with that liability but.
And then.
And it's an asset and that's a liability I don't really look at that as.
As an adjustment to EBITDA.
It's a gross up that you're required to do for accounting purposes.
Okay, that's helpful and I thought it might be moving forward.
And with Star, which is what which is <unk>.
And that's one of those accounts gone wild things.
Okay.
No problem. Thank you for your time very good quarter debt.
And then likewise.
Well thanks for your questions. Thank you Tom and thanks for the question.
Thank you and at this time. This concludes our question and answer session and with that and I'd like to turn the call back over to Mr. Moorehead for closing remarks.
Okay, well. Thank you very much I just want to take a moment to thank everybody for participating and listening and today's call and we look forward to speaking with you again, when we report our first quarter 'twenty one.
In May and until then stay well and look forward to speaking with you all soon take care Bye now.
Thank you ladies and gentlemen, this does conclude today's conference you may now disconnect. Your lines at this time. Thank you for your participation.
Yes.
Okay.
Okay.
And.
Yes.
Uh huh.
[music].