Q1 2021 NU Skin Enterprises Inc Earnings Call
And for your patients again todays conference is scheduled to begin shortly.
And it's continued to standby. Thank you for your patience.
Yeah.
[music].
Good day, and thank you for standing by and welcome to the Q1 2021 Nu skin Enterprises earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your Speaker today Scott Pond. Please go ahead.
Thanks, Peter and good afternoon, everyone.
Today on the call with me are Ritch Wood, Chief Executive Officer.
And it appears ski president and CEO elect and Mark Lyons Chief Financial Officer.
On today's call comments will be made that include some forward looking statements. These statements involve risks and uncertainties and actual results may differ materially from those discussed or anticipated.
Please refer to today's earnings release, and our SEC filings for a complete discussion of these risks and also during the call certain financial numbers may be discussed that differ from comparable numbers obtained and our financial statements.
We believe these non-GAAP financial numbers assist and comparing period to period results and a more consistent manner.
Please refer to our investor page at IR Dot Nu skin dot com or any required reconciliation of non-GAAP numbers and with that I'll turn the time over to ritch.
Thank you Scott and good afternoon, everyone. We really appreciate that you joined us today.
And so pleased with our progress and becoming a customer obsessed socially enabled business that has generated record results and this first quarter.
Our strategy has positioned us well for success and mid powerful macro trends and associated shifts and consumer behaviors.
I want to recognize our amazing and talented sales leaders and dedicated and loyal employees, who are responsible for the great results we're reporting today.
We made critical enhancements to our business as we implemented our strategy over the past few years for example, we refined the cadence of our product launches.
And we increased our focus on attracting and retaining customers.
And we aligned our sales compensation structure to enable social commerce.
And we invested and manufacturing company to secure our supply chain. These and other strategic enhancements helped us drive, 31% revenue growth and 153% earnings per share growth and the first quarter.
As a result, we're reporting the best first quarter and Nu Skin's history for both revenue and earnings per share and we are raising our guidance for the year.
As Ryan and I continue to work closely together on developing and leading the execution of this strategy the transition of leadership responsibilities is progressing well.
And I am so confident that the business is in great hands. This is the right team to build on the existing foundation and drive continued growth and success and the future.
I would like to highlight progress on a few of our key initiatives.
First we continue to build upon our 37 year history of developing world class beauty and wellness products that help people look and feel their best.
For example, as people look for ways to enjoy a spa like experience at home, our beauty devices, including age lock Luma Spa and boost continued to grow and popularity.
In fact euro monitor recently named new skin, the world's number one beauty device systems brand for the fourth consecutive year.
As consumers become increasingly mindful of what goes into the products. They use we extended our product philosophy with neutral essentials bio adaptive that feature clean formulas and sustainable packaging.
And I'm really excited about the potential of our robust product pipeline, which we will share more details about later in this call.
Next even as the world moves towards a new normal or social commerce strategy is here to stay we recognize the trend of consumers moving to digital platforms long before COVID-19, which accelerated this transition.
Our triple digit growth and the West is a result of our brand affiliates embracing our social commerce model.
We're reaching a larger and younger demographic and the business continues to gain momentum with 34% customer growth and 22%.
Sales leader growth and the first quarter.
I'm encouraged also by our improving geographic balance, which Ryan will speak to and more detail in a moment.
And would like to highlight the growth and our manufacturing segment, which achieved record results and reported 69% revenue growth.
We continue to lean into our sustainability efforts with ongoing initiatives to reduce the environmental impact of our business operations provide more eco friendly packaging and strengthen our commitment to responsible sourcing, including our investments and controlled environment agriculture.
Given our first quarter performance, increasing sales lead our interest and our planned new product introductions and strong customer and sales leader growth, we are raising our 2021 guidance.
The midpoint of our adjusted guidance points to growth of about 10% for revenue and 15% for earnings per share.
We are confident and our strategy and we're optimistic about our future and with that introduction I will turn the call over to Ryan.
Thanks, Rich good afternoon everybody.
And partnering with rich over the past few years as we've refined our vision to become the world's leading innovative beauty and wellness company powered by our dynamic affiliate opportunity platform. This vision and builds on our foundational product philosophy and the strength of our person to person business model infusing digital social and mobile.
These that are shaping us into a leading social commerce company, our ultimate aspiration is to become the world's leading beauty and wellness platform.
We are witnessing seismic global shifts and consumer behaviors from digital social and mobile connections to the expansion of the gig economy. Our world is changing rapidly traditional advertising retail and E. Commerce are being disrupted by Influencer marketing and social commerce like never before a trend that.
Has accelerated significantly over the last year.
These trends combined with our strategic investments over the past years to build greater digital capabilities have positioned us well to realize today's opportunities and accelerate our own pace of change.
This strategy has resulted in strong customer and sales leader growth and record first quarter results and both revenue and EPS.
Before I go into more detail about the quarter I want to run through the three key components of our strategy to grow our innovative products, our unique affiliate channel and our powerful platform.
First regarding innovative products, we've refined our cadence of bringing innovative beauty and wellness products to market, we play and the fastest growing product categories and beauty and wellness, including beauty devices. This category is nearly $7 billion is projected to grow more than 20% annually between now and 2030.
As Ritch mentioned this was the fourth consecutive year Euro monitor is ranked Nu skin is the worlds number one beauty device systems brand. This further validates our scientific rigor as a unique strength and competitive advantage in the beauty industry our.
Our next step to expand our dominant position will be to add connectivity to our devices as part of our empower me personalization strategy that we introduced to all of you at Investor Day.
The way people engage with beauty and wellness has changed as shopping behaviors and personalized product experiences have become increasingly digital for us. This shift has resulted in more than 90% of our revenue coming from online transactions with approximately half of our revenue coming from recurring customer subscription and low.
<unk> programs.
I am excited about the recent product launches of age locked boost and neutral Central's pyoderma, <unk>, which generated more than $35 million for the quarter in a limited number of markets.
We will continue to strengthen our industry, leading position with our robust product pipeline and 2021 and beyond.
Later this year, we will introduce two new products through our proven global launch process, leveraging our robust R&D capabilities and both beauty and wellness.
<unk> will introduce a unique beauty from with the and product line, beginning with beauty focused college and plus with our proprietary formula aimed at disrupting the burgeoning $50 billion beauty supplement market. This product is clinically proven to help improve skin health and complement other nu skin products, including <unk>.
Loomis spot beauty system.
Second we will introduce our next major farm and ex innovation <unk> Mehta of metabolic Bollock health supplement a recent study of U S. Adult indicated that 88% are metabolically unhealthy and this product helps us address this acute wellness dilemma and.
Additionally, we plan to begin introducing connected devices and early 2022 and beyond connected devices will further personalize and enhance the customer experience, while providing additional insight into consumers' needs.
These powerful beauty device systems, and innovative products combined with our global subscription and loyalty programs create a unique opportunity for us to increase customer acquisition and lifetime value as we continue to meet the needs of beauty and wellness customers.
Next our flexible power are flexible and powerful affiliate channel is evolving to support our social commerce business in essence were taking the best of our face to face person to person model, including our passionate sales force personal touch trusted product recommendations and a connected community and we're evolving it into a did.
<unk> first affiliate marketing engine, that's powered by our socially enabled global sales force in many ways are historically unique style of Influencer and affiliate marketing is now the approach that many companies and brands around the world are trying to replicate.
This approach has always been at the core of our business and is now being amplified by our social commerce strategy.
Our first quarter results throughout the west and parts of the parts of the east are further evidenced that social commerce is and emerging model that will transform the beauty and wellness industry.
Third our powerful affiliate opportunity platform connects consumers with people are sorry people, who are seeking innovative beauty and wellness products with brand affiliates, who help them navigate their personal journey and it all happens within a digital ecosystem that enables our affiliates to attract connect transact and service consumers and nearly 50.
And markets.
And our opportunity platform affiliates and leaders can effectively serve their customers personal leads by accessing hundreds of beauty and wellness products, we continue to introduce new digital and social tools to make running a powerful and personalized social commerce business more simple and effective these tools include Vera or person.
<unk> product recommendation tool that is currently being rolled out around the globe my site or personal products storefronts available and most of our markets. We shop, China's personal storefront model to be introduced and the second half of this year and digital training tools to expand the reach and capability of our brand affiliates.
So when combined our flexible velocity sales compensation program and our global footprint of nearly 50 markets are best in class manufacturing capabilities and our significant digital transformation all come together with an unmatched products to empower our affiliates to build their own socially enabled beauty.
And wellness businesses.
Across new skin, we're focused on driving consumer growth and loyalty and creating entrepreneurial opportunities for brand affiliates as we expand social commerce around the globe to further enable this growth I'm really excited to welcome Connie Tang as executive Vice President and Chief Global growth and customer experience officer.
I've known Connie for years and the industry colleague. She is an amazing business leader with a long track record of successfully guide and global organizations.
She will lead our global markets and customer experience office as we further expand social commerce and I look forward to introducing you to Connie and future calls.
Turning now to our global markets, we continue to take steps to improve our geographic revenue balance this will create more sustainable growth moving forward and make us less susceptible to individual market fluctuations and geopolitical issues bigger.
Beginning with the Americas specific our accelerated performance continues to be driven by the expanding adoption of social Commerce. This region posted first quarter constant currency revenue growth of 97% with growth and every market. This region is now roughly the size of our mainland China business and on pace to become our larger.
Business unit custom.
Customers and sales leaders, both grew significantly demonstrating sustainable growth across all key metrics as they prepare to launch beauty focused college, and plus and age lock boost and the second half.
Europe Middle East and Africa also posted significant constant currency revenue growth of 98% year over year as leaders embraced social commerce throughout the region, the U K, Germany, France, and Poland led the way as we partnered with sales leaders for the launch of neutral Central's bio adaptive and an effective product promote.
<unk>.
EMEA achieved the highest growth and customers and sales leaders of any region, providing momentum as we move into Q2 and beyond.
Mainland China grew 1% and local currency this quarter with customers up 16%, we continue to invest and new social commerce technologies, and this market, including our own we shop initiative in partnership with Tencent, which begins to rollout and the second half of this year. This will further reduce our dependency on in person.
And meetings, which we believe will better enable our sales leaders to adopt social commerce within China zone robust digital ecosystem.
Hong Kong, and Taiwan reported a 3% constant currency decline with Taiwan's growth being offset by continued macro challenges and Hong Kong.
South Korea remained even with the prior year's quarter with sales led by our TNF TR 90 weight management system and the introduction of age locked boost cut.
Customers declined 12% due to promotional activities last year, while sales leaders grew by 7% and the quarter South Korea is focused now on adopting social commerce throughout the market.
Southeast Asia is constant currency revenue declined 5% impacted by lingering effects of COVID-19 and certain markets, but we anticipate increased social commerce adoption across the region, which will generate renewed growth and time.
I'd also like to highlight Japan to 11% growth in local currency during the quarter, our business, they're starting to catch a gear as new and younger consumers discover our beauty and wellness products, including our recent age locked boost and neutral central's bio depth and launches we've raised guidance for the year based upon the optimism, we're seeing and our aggregate.
Global business.
So let me wrap up by saying that our future looks brighter today than it ever has and we are fully leaning into our mission to empower people to improve lives and our vision to become the world's leading innovative beauty and wellness competent company. That's powered by our dynamic affiliate opportunity platform, our strategy investments and commitment to <unk>.
Operational excellence are aligned to this goal and will drive even greater value for our customers affiliates employees and shareholders throughout the remainder of 2021 and beyond and with that I'll turn the time over to Mark to go over financial results for the quarter and update guidance Mark.
Thanks, Brian and thanks to all of you for joining our call today.
I'll provide some additional color regarding our financial results give Q2 guidance and update our full year 2021 outlook.
Details can also be found in our earnings release and the supplemental information on our Investor Relations website.
First quarter revenue and earnings per share came in above the top end of our prior guidance.
Q1 revenue increased 31% to $677 million.
With a positive foreign currency impact of five 7%.
Earnings per share for the quarter increased 153% to 91.
Gross margin for the quarter improved sequentially 80 basis points to 74, 8% due to product mix and easing of airfreight charges versus the past few quarters.
Gross margin was 75, 7% in the prior year quarter.
Nu skin and Q1 gross margins were 77, 8% against 78, 1% and the prior year.
Our gross margin continues to be impacted by growth and our west markets and our manufacturing segment.
However, this growth benefits us by lowering our overall tax rate.
Speaking of our manufacturing segment, our primary purpose of those acquisitions was to secure our supply chain.
One of the most significant challenges of COVID-19 has been widespread supply chain disruptions.
The agility and flexibility of our supply chain has allowed us to maintain our product launch schedule and for the most part keep our key products and stock.
Selling expense as a percentage of revenue was 44% compared to 39, 8% in the prior year.
For the new skin business, it was 43, 4% compared to 42%.
As a reminder, selling expenses fluctuate quarter to quarter and often increase during strong revenue growth as more of our sales leaders qualified for incentives.
General and administrative expense as a percentage of revenue was 25, 1% compared to 28, 9% year over year.
We continue to leverage our infrastructure to support revenue growth and improve operating margin accelerating earnings growth.
And I'm very pleased with our operating margin for the quarter, which improved to nine 3% compared to seven 1% in the prior year quarter.
This is another strong step towards our stated goal of 13% operating margin.
The other income expense line reflects a $1 $6 million gain compared to a $6 $2 million of expense and the prior year.
The improvement was driven by foreign currency reduced interest expense and investment income.
Consistent with expectations and first quarter historical trends cash from operations was an outflow of $18 9 million.
We paid $19 3 million and dividends and continued our focus on generating shareholder value by repurchasing $54 million of our stock.
With $275 4 million remaining in authorization.
Over the past five quarters, we have repurchased more than 6 million shares.
Our tax rate for the quarter was 26, 5% benefited by increased profit in the west as I mentioned earlier.
Due to our strong first quarter results strengthening trends and robust 2020, one planned product introductions.
We are increasing the top end of our annual revenue guidance by approximately $60 million and our earnings per share by <unk> 20.
Our 2021 annual revenue guidance is now $2 8 billion to $2 eight 7 billion.
And with earnings per share of $4 <unk>.
Two $4 30.
This guidance assumes a positive foreign currency impact of 3% to 4% and a tax rate of 26% to 32%.
Our second quarter revenue guidance is $682 $705 million, assuming a positive foreign currency impact of approximately 5%.
Q2 earnings per share guidance is <unk> 97.
Two $1 seven and.
And assumes a tax rate of 27% to 30%.
With that we will now open up the call for your questions.
As a reminder to ask a question you will need to press star one on your telephone and again that Istar and then the number one on your telephone keypad.
Please standby, while we compile the Q&A roster.
And your first question comes from the line of Faiza Ali.
From Deutsche Bank. Your line is open.
Yes, hi, good afternoon, everyone.
Alright, great.
Hi, So I guess my first question is just.
If you could shed some more light around sort of what led to the revenue beat versus your outlook I'm curious if it was low.
Western markets or if you did better and some of the eastern markets or if that was.
A product that did better than anticipated. So just more perspective around that would be helpful.
Yes, I think I would comment first guys and thanks for that question that our overall business performed very very well, we love the balance we're seeing around the world and our overall revenue profile, but the western markets are leading the growth today above the eastern markets. So yes.
And real good balance, but I would say the western markets outperform per share.
Okay. Okay.
No.
As we look out to the year.
Has anything changed with respect to your outlook by market specifically.
China and the eastern markets and I know Ryan you mentioned.
Digital initiatives.
And are coming into play and later this year.
Could you give more perspective on that sort of have you started and any particular market.
Are you in that process and again of that.
If you're if you're changing our outlook with respect to those eastern markets at all.
Yes, no I think I think and only adding to rich's comment around the west. We also just continue to see really good traction with our beauty device systems, and social commerce, which is really exciting.
And to see those devices moving as well through social commerce on the outlet side, Yes, we continue to see really really strong growth and the west and the east continues to recover for different reasons out of COVID-19 and in different states, but overall seeing seeing a positive trend and returning to growth and those areas is.
Well.
Okay understood and you mentioned beauty devices and <unk>.
Curious sort of it was helpful to hear you say the beauty devices are expected to growth at a 20% per year.
Can you give us some you know there is a view that one of the reasons why devices.
Done so well throughout COVID-19 is because of <unk>.
<unk> mobility, and more sort of at home treatment and I am curious sort of what your view is on that.
And mobility increases.
Do you expect do you expect sort of a step back and these device sales and then sort of growth also for new level or do you do you do you think consumers have enjoyed the at home devices, and we should expect sort of that pattern to continue.
It's a great question, Faiza, particularly because devices make up nearly 30% of our revenue and are really a key growth driver.
As we've come into this year, we continue to see a lot of strength and those devices not necessarily impacted by that.
And that sort of new normal that we're starting to see around the world with devices and Fortunately, we have a real strong pipeline and we just launched boost will be connecting these devices and making them.
More interactive I think with customers going forward so.
We see that trend continuing to play a very very strong Ryan maybe you could add to that yeah, just adding to that because I think your question around at home treatments definitely there is a continued momentum towards at home treatments, but I don't I don't we don't see that going away in fact, we really see consumers.
Moving more and more towards device treatments that are more flexible and and.
Consumer friendly and so for US we see this really just an ongoing trend I think for us the real big benefit again goes back to a social commerce and device device systems I should say the device plus the consumables moving through social commerce, which is really a great place to explain.
And the benefits of these at home device systems, and so that's maybe something just to add to it.
Great. Thank you so much really appreciate it Ed.
You bet. Thank you Faiza.
And your next question comes from the line of Dog Lane, We'd Langley Research. Your line is open.
Hello, Hi, and good afternoon everybody.
Ryan I think you mentioned that the new products to $35 million and the quarter.
Could you help me understand which markets they are available and now and when you expect to have them fully available globally.
Sure Doug Yes, yes.
Yes, so the $35 million was really spread throughout many different markets and different cadence and so maybe I'll kind of point to outliers and more than the ones that aren't there. So so with the exception of boost.
And in mainland China, and the U S. Most markets now have boost available neutral essentials again and in most markets is now available as well. So so it's kind of those two big markets and that product that we're looking at.
Well those are big markets and boost.
And is a big part of the new products and.
Is that a second half event or do you think it moves into 2022.
Q2 part partly in Q2 for China, and then second half for the U S. Yes, so you're right those are pretty pretty big markets for that product.
And then you'll also be new sub.
Supplement products that you talked about Greg and it would be start being widely available in the second half of this year or are you going to do them sort of like you did boost and mute essentials, yes. Good question and exact exactly Doug. So those those two products are will be part of the meta and the beauty focused college and plus we'll both be part of our.
Global preview model that we that we used for boost and and neutral central So it will be second half previews predominantly Q4, and then rolling out or launching throughout early 2022.
Got it got it and I'm also I'm starting to hear folks talking about having returning to live events.
Move.
Scheduling live events later on and this year.
No we continue to see the reach of our of our digital or <unk>.
Online events is literally multiples higher than beyond site events, and so were predominantly through 2021 still digi.
Digital first and wood and.
Anticipate in 2022, some some level of local events, but not at the global level.
Okay.
Alright, Thanks, Brian.
Keith.
Again, if you would like to ask a question that is power one on your telephone keypad.
And your next question comes from the line of Steph Wissink with Jefferies. Your line is open.
Thank you good afternoon, everyone. Ryan. This is a question for you on the BD from within the college and supplement.
Business. If you can talk a little bit about how you are going to leverage your social selling platform somewhat of a less demonstrable products I'm, just curious what tools and <unk>.
Because youre going to provide for your affiliate community to really talk about.
I emphasize and drive discovery of that product.
Yes. This is a really interesting product step for us as you know, we're really a balanced company and in terms of inside out and being able to look to apply our nutraceutical based approach to a beauty product is really and opportunity for us what we believe to disrupt this this $50 billion beauty supply.
<unk> market and.
And so we're very interested and we think it's going to be a great.
Initial product line, we actually are receiving very good feedback from our from our field around the the interest the social interest on college and related products and so while you are right its not as demonstrable and I think people can take pictures of themselves drinking it.
The topic is very relevant to millennial and Gen Z consumers this beauty supplement.
Market and so there's a lot of social from our social listening perspective, there's a lot of traffic on that or voice social voice on that so we're really interested and we think this will be a great social product and I think by the way and the format that we're doing we're doing both ready to drink and powders depending on the markets.
And price points, but it will be priced and a really good place for the target market as well.
That's great that's actually really helpful and you heard it.
Hug and a second question I had for you which is around your analytics social listening you mentioned that your.
And your product pipeline and innovation seems to be not only more robust spent more on trend.
Can you talk a little bit about what you're learning from them more digitally directed business social listening and strategies and then leveraging your own manufacturing and how you can come to market.
Ex that are hitting the zeitgeist of consumer interest.
And maybe in the past it would have been more of a multi year to three year.
Planned pipeline.
Yes.
And that's a great question, our global product team with Steve Hatchet and and Dr.
Dr. Joe Chang have really revamped the way, we've come to market with or discovered.
New innovations and the market and you're exactly right leveraging the strength of our manufacturers together with social listening data that we're getting out of our out of our digital ecosystem, our digital platforms and some of our digital or social listening tools, we're able to more real time gather voice of the customer and even voice of social market.
Two identify trends really at their as they're starting to surface and I think going back to Rich's force side of acquiring these manufacturers being able to pivot quickly and go to market much faster with innovations that come through that social listening pipeline is I think is a real competitive advantage to two or.
And to our business footprint now with manufacturing as well.
That's great last one for me is just a real quick question on attach rates I know, it's very early with.
But that product has a really compelling consumables element as well and wondering if you can talk about what youre seeing and early days in terms of consumables attach relative to maybe some of your previous devices.
Yes. Thank you one of Steph you know that one of the key differentiators for US. This competitive advantage is being able to sell sort of a razor razor blade model, where we get someone who loves our device and they will continue to purchase the consumables going forward boost as Phil.
Real early and we've just recently and launched as you know so now we are seeing follow on purchases.
Free good we have great margins and those <unk>.
Consumable products that are very sticky and we're seeing and really great results. Ryan would you like to add anything to that only that what's interesting about these beauty device systems as they do we found that they do take time from an adoption I mean, loomis spas really and like full stride right now two years after the launch and so I think.
Three years after I guess, but we're really expect boost will continue to grow and we are looking to rich's point. The systems side of this we're really finding value I mentioned, the college and plus the associated.
And at benefits.
Related to our devices as well its kind of and interesting pairing strategy, where we can really deepen that lifetime value relationship with consumers by expanding those systems, even beyond just the direct consumables of each device.
Makes sense. Thank you very much very helpful.
Thanks.
And your next question comes from the line of Mark Astrachan with Stifel. Your line is open.
Thanks and afternoon everyone.
I guess I wanted to ask about how to think about the sustainability of this exceptionally strong growth in Americas and EMEA.
And maybe.
If you could just take a step back and kind of talk about the key things you think are really driving it beyond social selling and.
Products and kind of the repeat purchase rates and whatnot and maybe if you're willing to give some sort of guidance about the sales progression, obviously, partly because the comparisons get a bit more difficult to as well as we go through the year.
That's a great question, Marc Hi, I appreciate that.
I would first comment by one of the things we as well we're very cautious of as we came into the beginning of this year.
Could we lap those high rates and the west and we were very very encouraged with our first quarter numbers you can see that the sales leaders.
Our customer numbers continue to be very very strong we have strong product launches coming throughout the rest of the year. So we feel like we're very well set up.
To continue to see strong growth in these markets that have really enormous potential and the U S being the largest direct selling market. One that we haven't fully tapped our potential and EMEA are likewise, a lot of potential so very encouraging results coming here into the first quarter. The key will be continuing to see that customer base expand.
And we like the way social Commerce continues to gain more and more traction and our sales leaders to become more and more effective at that but we see very strong and promising trends going forward and just building on that mark.
I would start at the real macro level of social Commerce is a macro trend really as we continue to forecast out I mean, China is by far the largest social commerce businesses from it from an industry perspective, when youre emerging e-commerce, and Influencer marketing together and so to Rich's point the run.
Way of social Commerce, disrupting E Commerce and retail is very very long I think we're just at the very beginning of that of that trend and then if we go at the micro level within our own business, we've really only tapped into portions of that in the Americas and the west still still a portion of those markets.
And so the further adoption with the and the markets that are already leading out is great and then we kind of see this continued evolution and unfortunate with a global sales force people and that and see what's going on and in Argentina, or and the U K and all of a sudden it pops up and Australia or in the Philippines and that.
What's kind of the pattern that we're seeing as we migrate the social commerce model. So I would almost look at social Commerce is a business model. The way we're looking at it as a business model that will that within Nu skin will continue to migrate around the globe, but at the macro level will be continue to be the more and more and more than norm of the <unk>.
Commerce moves away from just try a static paid advertising e-commerce model that fueled the last 20 years of global growth, it's really going to move more towards social commerce, and we think we're just.
Appropriate and positioned to play there I'll just add one comment one of the things that gives me confidence and in Americas and EMEA is what they are buying so they are transacting socially which is fantastic and thats driving a lot of the growth, but what they're really buying as devices and devices and consumables. So the top force selling products and the Americas are all devices.
Three of the top force selling products and EMEA. Our devices. These are products that tend to be a little bit more sticky and encourage follow on purchases with the consumables and so that gives me confidence and the momentum that we're seeing there.
Got it.
And the dog apparently that's alright.
It does.
Apparently.
So and.
And working from home right it's wonderful.
So mark I guess.
As we think about trying to lap the growth would it be your expectation that you can continue to grow off of the base and the back half of the year and then just and.
Another follow up on just China, I'm surprised I mean, it's grown now a couple of quarters in a row boost I think was for sale and.
And the market I think you said and the second quarter I guess I'm surprised it hasn't accelerated more is that partly a reflection of just.
The changing dynamics and the market and less group meetings, where I suppose no group meetings and how do you think about the ability for that to get back to kind of the growth you have seen historically there.
Yeah, I think on the two sides of your question and one was the lapsing growth and the West I mean, there's no question that the comps are tough.
And as in most businesses, but I think the underlying kpis and our and our upcoming product launches with this adoption and social commerce, we're feeling optimistic per the guidance and the raise on the China side, Yes. It is interesting because there is no question that.
And that there is enormous potential in China with the population as I said with social commerce being such a large.
Model, there and the digital ecosystem, that's there that we ecosystem. So we see a strategic fit there for us it's really about how do we continue to evolve our traditional direct sales.
Model that was unique and China into this more social commerce and a local China version of that because it is a different business.
And that and that's what's taking more time, but.
As we continue to apply the strategy and the direction, we're heading and the investments that we're applying with Tencent and others were optimistic that that market will continue to move and the right direction.
Got it alright, thank you.
Thank you Mark.
Again, if you would still like to ask a question that is star one on your telephone keypad.
And your next question comes from the line of Dog Wang with Lane research.
Yes. Thank you for taking the follow up question.
Yes, I was just thinking about your answer to the in person events and.
And.
And I understand the move the social commerce, but in person events and so important for recognition.
Motivation training and.
I think that would be helpful. As you could give me some sort of color on what how the role of the sales sales leader has changed and what is the sales leadership role in this new social Commerce model.
Yes.
And Doug we were having a discussion around this yesterday at the company and you are right.
The role of the traditional sales leader is evolving and while some of those those jobs to be done so to speak of a sales leader in terms of training and motivating our sales force remain the same it is kind of the how to.
The changes and doing that and we're on a digital zoom base digital first type of approach works, but I think the bigger evolution or that we're seeing is the reach.
The role that sales leaders increasingly play and building awareness and and then driving kind of the awareness through the funnel to the company where the company is really facilitating the transactions as we set up over 90% of revenue now flows directly through company.
Our digital based transactions of the company and so that change and technically that's why we changed the name from distributors to affiliates.
Because theyre more of their job is more focused on really attracting consumers and.
And and potential entrepreneurs and less upon distributing the products physically there where the company now does that transaction Ali. So so that's the main shift but there is no no question and our minds that the the person to person aspect of our business is still a strength, we're really just amplifying that through the <unk>.
And the and the capability of social to expand and and.
And drive awareness at a much greater level.
And it's a big change and I know that you've been doing this purposely over the last several years. So why look at your customer number $1 5 million would you say that that represents 90% plus of your total sales and the quarter.
And while our sales Doug and it's a good question our sales all throw flow through customers some of whom.
And are doing the business as only purchasing for our customers. Some who are sharing products with others. Some who are continuing to motivate a down line, but every product runs through a customer who is using that product and some sore and the base of customers has grown dramatically, we really shifted our focus.
Say four five years ago to go after customers and our customer base is about 400 450000.
Active is higher than it was four years ago, and we see that continuing to grow I mean, our focus is to continue to drive that number substantially higher with not just the active customers that are buying once in a quarter, but that are buying twice three times that are following up so.
And we think we have that opportunity with social commerce, because the reach is so much larger and.
And we have an opportunity to touch a lot more customers with products that they really really low so.
We see this continuing to grow as we go forward I think the foundation and set to really expand from where we're at right now.
No.
And again, you've got to purposefully and probably are ahead of most of your peers and pursuing it.
And I'm, just trying to get a feel for how far down the road RMB because the customer numbers. You mentioned do not include consumers, who purchase products directly from members with your sales force, which is the old model right the distributor and.
And Thats, how the east operating the old days is that down to a tiny fraction of your business or just just.
Roughly how much growth.
And your business operates under sort of the legacy model for many years ago and how much is operating under this new social Commerce model.
As I say, we're still in the early innings of that transition and Theres still a lot of transactions that happened between our sales leader and their own customers not coming to the company where that.
<unk> to shift slowly, but we're in the early goings of this shift and trying to make I would say commerce for our sales leaders more and more simple and Mark quick.
More responsive better customer experience and as we do that with our digital tools and experiences we will see that shift continue to move.
Alright, Thanks, Thats good color I appreciate it.
Thank you Doug and thanks to every one of you for your attention and for your questions. I appreciate and we're really happy to follow up if anybody has further questions where as you can tell really really bullish and optimistic on our story right now on the trends we're seeing on the way the business is rolling out and we think we really have a good.
Good year and 2021, so thank you again for joining us and we'll talk to you soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
[music].
[music].
[music].