Q4 2024 Nature's Sunshine Products Inc Earnings Call

Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Natures Sunshine financial results for the fourth quarter and full year ended December 31, 2024.

Good afternoon, everyone and thank you for participating in today's conference call to discuss Nature's Sunshine financial results for the fourth quarter and full year ended December to 1020 before joining yesterday, our nature's Sunshine CEO, Terrence Moorehead, CFO, Shane Jones and General Counsel.

Operator: Joining us today are Natures Sunshine CEO, Terrence Moorhead, CFO Shane Jones, and General Counsel Nate Brower. Following their remarks, we'll open the call for analyst questions.

Nate Brower: Nate Brower.

Speaker Change: Following their remarks, we'll open the call for analyst questions. Before we go further I would like to turn the call over to Mr. Brower actually reach the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward looking statements. Please go ahead.

Nate Brower: Before we go further, I would like to turn the call over to Mr. Brower as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.

Nate Brower: Nate, please go ahead. Good afternoon and thanks for joining our conference call to discuss our fourth quarter and full year 2024 financial results.

Speaker Change: Yeah, good afternoon, and thanks for joining our conference call to discuss our fourth quarter and full year 2024 financial results.

Nate Brower: I'd like to remind everyone that this call is available for replay via telephonic dial-ins through March 25th and via a live webcast that will be posted on the Investor Relations portion of our website at ir.naturesunshine.com The information on this call contains forward-looking statements. These statements are often characterized by terminology such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance. and the actual results may be materially different from the results implied by forward-looking statements.

Speaker Change: I'd like to remind everyone that this call is available for replay via telephonic dial ins through March 25th and via a live webcast that will be posted on the investor relations portion of our website at I R. Dunn nature Sunshine Dotcom.

Speaker Change: The information on this call contains forward looking statements. These statements are often characterized by terminology such as believe hope may anticipate expect will and other similar expressions.

Speaker Change: Forward looking statements are not guarantees of future performance.

Speaker Change: And the actual results may be materially different from the results implied by forward looking statements.

Nate Brower: Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K under the captioned risk factors and other reports filed with the Securities and Exchange Commission.

Factors that could cause results to differ materially from those implied herein include.

Speaker Change: But are not limited to those factors disclosed in the company's annual report on Form 10-K under the risks are.

Speaker Change: Under the caption risk factors and other reports filed with the Securities and Exchange Commission.

Nate Brower: The information on this call speaks only as of today's date. and the company disclaims any duty to update the information provided herein.

Speaker Change: The information on this call speaks only as of today's date.

Speaker Change: And the company disclaims any duty to update the information provided herein.

Terrence Moorhead: Now I'd like to turn the call over to the CEO of Natures Sunshine, Terrence Moorhead. Terrence? Thank you, Nate, and good afternoon, everyone.

Speaker Change: Now I'd like to turn the call over to the CEO of Nature's Sunshine Terrence Moorehead, Terence. Thank you Nate and good afternoon, everyone I want to thank you for joining today's call to discuss our fourth quarter and full year results.

Terrence Moorhead: I want to thank you for joining today's call to discuss our fourth quarter and full year results. Today I'll provide some context for our fourth quarter performance and offer insights into how the business is progressing in the current environment.

Speaker Change: I'll provide some context for our fourth quarter performance and offer insights into how the business is progressing in the current environment from their Shane will take you through our financials in more detail.

Terrence Moorhead: From there, Shane will take you through our financials in more detail. Let me begin by saying that we're very pleased to report our fourth quarter results, which saw reported revenue of $118 million or $120 million on a constant currency basis, reflecting strong performance with a 10% increase versus prior year.

Speaker Change: Let me begin by saying that we're very pleased to report our fourth quarter results, which saw reported revenue of $118 million or $120 million on a constant currency basis.

Speaker Change: Reflecting strong performance with a 10% increase versus prior year.

Terrence Moorhead: adjusted EBITDA for the quarter. came in at $10 million, up 6% year over year.

Speaker Change: Adjusted EBITDA for the quarter.

Speaker Change: Came in at $10 million up 6% year over year.

Terrence Moorhead: In terms of revenues, at $120 million, the fourth quarter represents the largest single quarter in the company's 52-year history. These results demonstrate the strength and potential of our strategies and we're encouraged by the progress we've made.

Speaker Change: In terms of revenues at $120 million the fourth quarter represents the largest single quarter in the company's 52 year history.

Speaker Change: These results demonstrate the strength and potential of our strategies and we're encouraged by the progress we've made.

Terrence Moorhead: Looking back, you may remember that in the first half of 2024, we made several strategic changes to the business to improve our competitiveness and build a foundation for long-term profitable growth. The first change focused on rebalancing our consumer proposition in several key Asia-Pacific markets to place greater emphasis on consumer-friendly product packs that offered easy and accessible health solutions to drive customer growth and support repeat purchase. Since implementing the strategy, we've seen a steady increase in customer order growth, and in the fourth quarter, we saw strong revenue growth as our marketing programs combined with strong field incentives to deliver a 21% increase in sales versus prior year on a local currency basis.

Speaker Change: Looking back you may remember that in the first half of 2024, we made several strategic changes to the business to improve our competitiveness and build the foundation for long term profitable growth.

Speaker Change: The first change focus on rebalancing, our consumer proposition in several key Asia Pacific markets to place greater emphasis on consumer friendly product packs that offered easy and accessible health solutions to drive customer growth and support repeat purchases.

Speaker Change: Since implementing this strategy, we've seen a steady increase in the in customer order growth and in the fourth quarter. We saw strong revenue growth as our marketing programs combined with strong field incentives to deliver a 21% increase in sales versus prior year on a local currency basis.

Terrence Moorhead: The strong performance was driven by Taiwan, Japan, and Korea, which continued to deliver exceptional results. China also showed encouraging signs, delivering positive sales growth in the quarter, driven by a bump in average order size and more stable customer ordering. The team has demonstrated an ability to respond to external headwinds, but there is still more work required to actually stabilize the market. To help navigate the challenging macroeconomic environment, we're refining our value proposition and leveraging our digital live streaming model to enhance customer engagement. Overall, we're very pleased with the progress we've made in Asia-Pacific, as we continue to outpace industry growth, gain market share, and drive customers.

Speaker Change: The strong performance was driven by Taiwan, Japan, and Korea, which continue to deliver exceptional results.

Speaker Change: China also showed encouraging signs delivering positive sales growth in the quarter driven by a bump in average order size and more stable customer ordering.

Speaker Change: The team has demonstrated an ability to respond to external headwinds, but there's still more work required to actually stabilize the market.

Speaker Change: To help navigate the challenging macroeconomic environment, we're refining our value proposition and leveraging our digital watch streaming model to enhance customer engagement.

Speaker Change: Overall, we're very pleased with the progress we've made in Asia Pacific as we continue to outpace industry growth gain market share and drive customer growth.

Terrence Moorhead: The second change we made focused on strengthening our digital capabilities in North America by upgrading our digital platform, enhancing site functionality, and improving mobile-first performance. These changes led to improved site load speeds, conversion rates, stability, and an enhanced customer experience. We also continue to be encouraged by our Subscribe and Thrive Autoship Program that represents about 26% of sales and continues to expand. Overall, digital sales were up 17% in the fourth quarter and increased 22% for the full year, which is more than double the supplement industry's digital growth rate. So we continue to gain share in this segment and are on track with our strategy.

Speaker Change: The second change we made focus on strengthening our digital capabilities in North America by upgrading our digital platform enhancing site functionality and improving mobile first performance.

Speaker Change: These changes led to improved site load speeds conversion rates stability and an enhanced customer experience.

Speaker Change: We also continue to be encouraged by our subscribing thrive auto ship program that represents about 26% of sales and continues to expand.

Overall digital sales were up 17% in the fourth quarter and increased 22% for the full year, which is more than double the supplement industry as digital growth rate. So we continue to gain share in this segment and are on track with our strategy.

Terrence Moorhead: Overall, North America saw a slight decrease in sales in the fourth quarter, with relatively flat sales for the full year.

Speaker Change: Overall, North America saw a slight decrease in sales in the fourth quarter with relatively flat sales for the full year as.

Terrence Moorhead: As we move into 2025, we have an exciting opportunity to leverage and extend our digital capabilities to our incredible team of nutritional health practitioners, specialty retailers, and affiliates by giving them the digital tools that they need to compete in an increasingly dynamic marketplace. As such, in the back half of 2025, we'll introduce an exciting new digital toolkit that will help our distributors attract and retain more customers over time. The new toolkit will offer a comprehensive range of sales and marketing tools that will allow distributors to manage customer accounts while deploying email marketing, social media, and CRM campaigns to drive sales, with full attribution to the user's account.

Speaker Change: As we move into 2025, we have an exciting opportunity to leverage and extend our digital capabilities to our incredible team of nutritional health practitioners, especially with specialty retailers and affiliates by giving them the digital tools that they need to compete in an increasingly dynamic marketplace as such in the bag.

Speaker Change: Half of 2025 will introduce an exciting new digital tool kit that will help our distributors attract and retain more customers over time.

Speaker Change: The new tool kit will offer a comprehensive comprehensive range of sales and marketing tools that will allow distributors to manage customer accounts, while deploying email marketing social media and CRM campaigns to drive sales with full attribution to the unit to the user's account.

Terrence Moorhead: Powered by AI decision-making, the new tools are designed to extend our digital reach and improve the effectiveness of our nutritional health practitioners, specialty retailers and affiliates. Of course, building momentum will take time, as distributors need to learn the tools, adopt new behaviors, and regularly follow up with customers. but we continue to believe there's significant untapped potential in the market.

Powered by AI decision, making the new tools are designed to extend our digital reach and improve the effectiveness of our nutritional health practitioners specialty retailers and affiliates.

Speaker Change: Of course building momentum will take time as distributors need to learn the tools adopt new behaviors and regularly follow up with customers, but we continue to believe there is significant untapped potential in the market.

Terrence Moorhead: In Europe, we saw strong performance with Q4 sales increasing almost 8% in local currency, driven by Central Europe, where we continue to benefit from the strength of our power line products, solid field fundamentals, and effective field activation initiatives. Eastern Europe also showed solid results, though we continue to monitor this region carefully given the current dynamics. Nevertheless, the strategies our team are deploying are working and we expect the positive momentum to continue. In general, we continue to see signs that emerging external headwinds will negatively impact the market. To push back against the headwinds, we've taken several steps, including extending contracts with suppliers, building inventory and safety stock reserves, realigning supplier relationships where possible.

Speaker Change: In Europe, we saw strong performance with Q4 sales, increasing almost 8% in local currency driven by Central Europe, where we continued to benefit from the strength of our power line products solid field fundamentals and effective field activation initiatives.

Speaker Change: Eastern Europe also showed solid results, though we continue to monitor this region carefully given the current dynamics Nevertheless, the strategies our team.

Speaker Change: Our deploying are working and we expect the positive momentum to continue.

Speaker Change: In general we continue to see signs that emerging external headwinds will negatively impact the market.

To push back against the headwinds, we've taken several steps, including extending contracts with suppliers building inventory and safety stock reserves realigning supplier relationships where possible.

Terrence Moorhead: examining pricing, shoring up workforce staffing, automating certain workflows to reduce overhead, and repatriating production to improve efficiency. While these changes are important, there is still a significant amount of uncertainty in the current environment.

Speaker Change: Examining pricing shoring up workforce staffing automating certain workflows to reduce overhead and repatriating production to improve efficiency.

Speaker Change: While these changes are important there is still a significant amount of uncertainty in the current environment.

Terrence Moorhead: In closing... We're very pleased with our fourth quarter results and the progress we've made in 2024. Our fourth quarter performance reflects the strength of our strategy and the effectiveness of our regional and local management teams around the globe. While we recognize the challenges the current environment presents, we're excited about the opportunities in front of us and are committed to delivering sustainable growth and long-term value for our shareholders. In the near term, our outlook remains guarded as we face significant uncertainty related to the geopolitical and macroeconomic environment, cost dynamics, and consumer spending. Importantly, our approach is to position the company for long-term success, and we'll continue to remain vigilant and flexible as we move through the year, continuing to drive operational improvements and capitalize on emerging opportunities.

Speaker Change: In closing.

Speaker Change: We're very pleased with our first fourth quarter results and the progress we've made in 2020 for our fourth quarter performance reflects the strength of our strategy and the effectiveness of our regional and local management teams around the globe.

Speaker Change: While we recognize the challenges the current environment presents we're excited about the opportunities in front of us and are committed to delivering sustainable growth and long term value for our shareholders in.

Speaker Change: In the near term outlook remains guarded as we face significant uncertainty related to the geopolitical and macroeconomic environment cost dynamics in consumer spending.

Speaker Change: Importantly, our approach is to position the company for long term success, and we will continue to remain vigilant and flexible as we move through the year continuing to drive operational improvements and capitalize on emerging opportunities with that I'd like to turn the call over to our Chief Financial Officer Shane Jones.

Shane Jones: With that, I'd like to turn the call over to our Chief Financial Officer, Shane Jones. Shane? Thank you, Terrence. Moving on to our results. Net sales in the fourth quarter were $118.2 million, compared to $108.9 million in the year-ago quarter, a 9% increase versus the prior year, or a 10% increase excluding the impact of foreign exchange rates. As Terrence discussed, this was driven by very good performance across Asia-Pacific and Europe. Consolidated net sales for the full year finished at $454.4 million compared to $445.3 million in the previous year, representing 2% growth or 4% growth, excluding the $7.7 million headwind from foreign exchange rates.

Speaker Change: Shane.

Shane Jones: Thank you Terence moving on to our results.

Shane Jones: Net sales in the fourth quarter were $118 $2 million compared to $108 $9 million in a year ago quarter, a 9% increase versus the prior year or a 10% increase excluding the impact of foreign exchange rates has.

Shane Jones: As Terrence discussed this was driven by very good performance across Asia Pacific and Europe.

Shane Jones: Consolidated net sales for the full year finished at $454 $4 million compared to $445 $3 million in the previous year, representing 2% growth for 4% growth, excluding the $7 7 million dollar headwind from foreign exchange rates.

Shane Jones: Looking at sales by market in Q4.

Shane Jones: Looking at sales by market in Q4, I'll start with APAC.

Shane Jones: I'll start with AIPAC. In Asia-Pacific, we reported growth of 18% to $56.3 million, or up 21% when excluding the impact of foreign exchange. This was driven by very strong growth in Taiwan, Japan, and Korea, where sales on a local currency basis grew 29 percent, 27 percent, and 21 percent, respectively, in Q4. The strategies we've implemented this year, including changes to our product merchandising and field incentives, are working as intended, yielding significant growth in both customers and transactions. Full year 2024 sales in Asia Pacific were $207.8 million, representing growth of 3% or 8% excluding the impact of foreign exchange.

Shane Jones: In Asia Pacific, we reported growth of 18% to $56 $3 million or up 21% when excluding the impact of foreign exchange. This was driven by very strong growth in Taiwan, Japan, and Korea, where sales on a local currency basis grew 29% 20 <unk>.

Shane Jones: 7% and 21% respectively.

Shane Jones: Q4 <unk>.

Shane Jones: The strategies, we have implemented this year, including changes to our product merchandising and field incentives are working as intended yielding significant growth in both customers and transactions.

Shane Jones: Full year 2024 sales in Asia Pacific were $207 $8 million.

Shane Jones: Representing growth of 3% or 8%, excluding the impact of foreign exchange.

Shane Jones: Sales in Europe during Q4 increased 8% both on a reported basis and on a local currency basis. Excellent field execution combined with strong adoption of our Powerline products and continued expansion in the Baltics region drove robust growth in Central Europe where sales increased 17%. Net sales in Europe for the full year 2024 increased 5% or 3% on a local currency basis to $84.8 million. Looking at our North America business, our fourth quarter sales declined by 2% versus last year, but showed a modest sequential improvement from Q3. The year-over-year decline was driven by weaker-than-expected customer activation in our core North America business.

Shane Jones: Sales in Europe during Q4 increased 8% both on a reported basis and on a local currency basis.

Shane Jones: Excellent field execution combined with strong adoption of our power line products and continued expansion in the Baltics region drove robust growth and central Europe, where sales increased 17%.

Shane Jones: Net sales in Europe for the full year, 2024 increased 5% or 3% on a local currency basis to $84 $8 million.

Shane Jones: Looking at our North America business, our fourth quarter sales declined by 2% versus last year, but showed a modest sequential improvement from Q3.

Shane Jones: Year over year decline was driven by weaker than expected customer activation in our core North America business. The decline in the core was partially offset by a 17% year over year increase in digital sales.

Shane Jones: The decline in the core was partially offset by a 17% year-over-year increase in digital sales, reflecting the positive impact of our digital strategy. For the full year 2024, North America sales declined 1% compared to a year ago.

Shane Jones: Reflecting the positive impact of our digital strategies.

Shane Jones: For the full year 2020 for North America sales declined 1% compared to a year ago.

Shane Jones: The changes are still a work in progress, but we are encouraged and remain confident in our ability to drive improvement going forward. Gross margin in the fourth quarter increased six basis points to 72.0% compared to a year ago. The achievement of our cost savings initiatives is being offset by continued headwinds from inflation and foreign exchange. As we move through the year, we expect improvement as a result of continued cost savings and some abatement in the inflation and foreign exchange headwinds. However, as approximately 18% of our raw materials are sourced from China, those benefits could be largely offset by the impact of tariffs.

Shane Jones: The changes are still work in progress, but we are encouraged and remain confident in our ability to drive improvement going forward.

Shane Jones: Gross margin in the fourth quarter increased six basis points to 72.0% compare to a year ago.

Shane Jones: The achievement of our cost savings initiatives is being offset by continued headwinds from inflation and foreign exchange.

Shane Jones: As we move through the year, we expect improvement as a result of continued cost savings and some abatement in the inflation and foreign exchange headwinds.

Shane Jones: However, as approximately 18% of Iran materials are sourced in China, those benefits could be largely offset by the impact of tariffs.

Shane Jones: Volume incentives as a percentage of net sales were 31.1% compared to 30.1% in the year ago quarter. The increase was primarily due to changes in market and channel mix. selling, general, and administrative expenses during the fourth quarter were $43.7 million compared to $39.9 million in the year-ago quarters. The rise was due to an increase in variable costs along with one-time costs related to our initiatives in Asia. As a percentage of net sales, SG&A expenses increased to 37.0% in the fourth quarter compared to 36.6% a year ago. Operating income decreased to $4.6 million or 3.8% of net sales compared to $5.7 million or 5.2% of net sales in the year ago quarter.

Shane Jones: Volume incentives as a percentage of net sales was 31, 1% compared to 31% in the year ago quarter.

Shane Jones: The increase was primarily due to changes in market and channel mix.

Shane Jones: Selling general and administrative expenses during the fourth quarter were $43 $7 million compared to $39 $9 million and a year ago quarters.

Shane Jones: The rise was due to an increase in variable costs, along with onetime cost related to our initiatives in Asia.

Shane Jones: As a percentage of net sales SG&A expenses increased to 37.0% in the fourth quarter compared to 36, 6% a year ago.

Operating income decreased to $4 6 million or three 8% of net sales compared to $5 7 million or five 2% of net sales in the year ago quarter.

Shane Jones: Gap net loss attributable to common shareholders for the fourth quarter was $0.3 million, or a loss of $0.02 per diluted common share, compared to net income of $9 million, or $0.46 per diluted share in the year-ago quarter. The lower net income was primarily driven by a one-time increase in SG&A, as well as unfavorable foreign currency movement and changes in the timing of tax adjustments. Adjusted EBITDA, as defined in our earnings release, increased 6% to $10.3 million, compared to $9.7 million in the year-ago quarter. For the full year 2024, adjusted EBITDA was up slightly to $40.5 million.

Shane Jones: GAAP net loss attributable to common shareholders for the fourth quarter with zero point $3 million or a loss of two cents per diluted common share compared to net income of $9 million or <unk> 46, 46 cents per diluted share in the year ago quarter.

Shane Jones: The lower net income was primarily driven by a one time increase in SG&A as well as unfavorable foreign currency movement and changes in the timing of tax adjustments.

Shane Jones: Adjusted EBITDA as defined in our earnings release increased 6% to $10 $3 million compared to $9 7 million in the year ago quarter.

Shane Jones: For the full year 2024, adjusted EBITDA was up slightly to $45 million.

Shane Jones: Our balance sheet remains clean with cash and cash equivalents of $84.7 million and zero debt. Inventory was $59.4 million at the end of the fourth quarter, which is $7.5 million less than we ended 2020. Net cash provided by operating activities was $25.3 million compared to $41.2 million in the prior year period. We repurchased 540,000 shares for approximately $9 million during the year-ended December 31st, 2024, with $8.8 million remaining on our $30 million share repurchase program. Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.

Shane Jones: Our balance sheet remains clean with cash and cash equivalents of $84 $7 million and zero debt.

Shane Jones: Inventory was $59 $4 million at the end of the fourth quarter, which is $7 $5 million less than we ended 2023.

Shane Jones: Net cash provided by operating activities was $25 $3 million compared to $41 2 million in the prior year period.

Shane Jones: We repurchased 540000 shares for approximately $9 million during the year ended December 31, 2024, with $8 $8 million remaining on our $30 million share repurchase program.

Shane Jones: Looking beyond share repurchases are healthy capital allocation structure positions us well to continue our digital transformation and the other strategic initiatives.

Shane Jones: now turning to our 2025 outlook. We expect full year 2025 net sales to range between $445 million and $470 million.

Shane Jones: Now turning to our 2025 outlook.

Shane Jones: We expect full year 2025, net sales to range between $445 million and $470 million inclusive of an estimated $5 million headwind to growth due to foreign exchange.

Shane Jones: inclusive of an estimated five million dollar headwind to growth due to foreign exchange implying year-over-year growth net of foreign exchange between negative one percent and five This more measured pace of anticipated sales growth is a product of the macroeconomic uncertainty that we see in the market today. We are taking a conservative stance as we assess the impact of tariffs on raw material costs and the U.S. economy as a whole.

Implying year over year growth net of foreign exchange between negative, 1% and 5%.

Shane Jones: This more measured pace of anticipated sales growth.

Shane Jones: To the macroeconomic uncertainty that we see in the market today we.

Shane Jones: We are taking a conservative stance as we assess the impact of tariffs and raw material costs in the U S economy as a whole.

Shane Jones: We will also continue to monitor progress with China's economic recovery and developments in Eastern Europe given the prolonged war.

Shane Jones: We will also continue to monitor progress with China's economic recovery and developments in eastern Europe, given the prolonged war.

Shane Jones: For adjusted EBITDA, we expect a range between $38 million and $44 million. This assumes gross margin will be modestly higher in 2025 and that quarterly SG&A will be slightly more than $40 million. Overall, we remain optimistic about the business and believe that our strategic initiatives and cost-out measures provide a strong foundation to help us to navigate current uncertainty while positioning us for significant future growth and continued profitability.

Shane Jones: For adjusted EBITDA, we expect to range between $38 million and $44 million.

Shane Jones: This assumes gross margin will be modestly higher in 2025, and then quarterly SG&A will be slightly more than $40 million.

Shane Jones: Overall, we remain optimistic about the business and believe that our strategic initiatives and cost out measures provide a strong foundation to help us to navigate current uncertainty while positioning us for significant future growth and continued profitability.

Shane Jones: Now I will turn the time back to the office. Thank you.

Speaker Change: Now I will turn the time back to the operator.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 1 on your telephone keypad. And should you wish to cancel your request, please press star followed by the 2.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad and should you wish to cancel your request. Please press star followed by the team.

Operator: If you are using a speakerphone, please leave the handset before pressing any keys. One moment please for your first question.

Speaker Change: If you're using a speaker phone please lift the handset before pressing any Keith one moment. Please for your first question.

Susan Anderson: Your first question comes in the line of Susan Anderson for Canaccord. Please go ahead. Hi, good evening. Thanks for taking my question. Nice job on the quarter. I wanted to maybe touch on Asia. It looks like it did see a nice pickup in growth. Maybe if you could talk about the successes there that's helping to drive that accelerated growth. And then how are you thinking about this region as we look forward? I know you mentioned some macro pressures in your commentary. Is that more related to North America or do you think that's also going to be an impact globally?

Speaker Change: Your first question comes from the line of Susan Anderson for Canaccord. Please go ahead.

Susan Anderson: Hi, Good evening, Thanks for taking my question nice job on the quarter.

Susan Anderson: I Wonder maybe touch on Asia. It looks like you did see a nice pickup in growth maybe if you could talk about the successes there that's helping to drive that accelerated growth and then how are you thinking about this region as we look forward I know you mentioned some.

Susan Anderson: Macro pressures in your commentary is that more related to North America or do you think that's also going to be an impact globally.

Terrence Moorhead: Yeah, no.

Susan Anderson: Yeah, no in terms of Asia Pacific, we really have.

Terrence Moorhead: In terms of Asia Pacific, we really have great momentum there. I think the strategies that we put in place, as both I mentioned, as Shane mentioned, appear to be working doing exactly what we wanted them to do. And the idea there was to hit the right price points with the right bundle of products that the consumers can understand that will help us attract more new customers. And then they're, again, at price points and a level of daily usage that people will keep coming back to buy them. And so I think the combination of the merchandising along with the introduction of subscribe and thrive in those markets really helps build this new customer acquisition followed by repeat purchases.

Susan Anderson: Great momentum there I think the strategies that we put in place as.

Susan Anderson: That's both I mentioned as Shayne mentioned appear.

Susan Anderson: Appear to be working doing exactly what we wanted them to do and the idea there was to hit.

Susan Anderson: Hit the right price points with the right bundle of products that.

Susan Anderson: The consumers can understand that will help us attract more new customers and then.

Susan Anderson: There are again at price points and in the level of daily usage that people will keep coming back to buy them and so I think the combination of.

Susan Anderson: The merchandising along with the introduction of subscribing thrive in those markets really helps build this new customer acquisition, followed by repeat purchases. So that combination seems to be working and then we paired that up with some some field incentives in the in the back half of the year just two <unk>.

Terrence Moorhead: So that combination seems to be working. And then we paired that up with some field incentives in the back half of the year just to motivate the field organization to really become active and drive sales through the business. So I think that combination really worked going forward. Our anticipation is that we'll continue to have strong growth. I don't think we'll continue to have 20-plus percent growth necessarily. That certainly wasn't what we were looking for. But I think we're expecting good, robust growth driven by field fundamentals and a marketing proposition that makes sense to people. And in terms of the kind of macroeconomic challenges that we face, I think those are largely focused on China, which is still a relatively small portion of the portfolio, but also the foreign exchange impact, which has been somewhat considerable going forward.

Susan Anderson: Motivate the field organization to to really become active and drive sales through the business. So I think that combination really work going forward.

Susan Anderson: Our anticipation is that we'll continue to have strong growth I don't think we will continue to have 2020 plus percent growth necessarily.

Susan Anderson: It really wasn't what we were looking for but I think what we expecting good robust growth.

Susan Anderson: Driven by field fundamentals and our marketing proposition that makes sense to people and in terms of the kind of macroeconomic challenges that we face.

Susan Anderson: They're largely focused on on China, which is still a relatively small portion of the portfolio, but also the foreign exchange impact, which has been somewhat considerable going forward and that will have an impact on on consumers around the world, but we do expect to consumers in North America, and you mentioned that.

Shane Jones: And that will have an impact on consumers around the world. But we do expect consumers in North America, and you mentioned that, to be impacted by some economic pressures as well. You can start to see just a fair amount of uncertainty with consumers today. Did I leave anything out, Shane?

Susan Anderson: <unk> to be impacted by some some north of some some economic pressures as well you can start to see.

Just a fair amount of uncertainty with with consumers today did I leave anything I was saying I don't think so yeah.

Shane Jones: No, I don't think so. Okay, great.

Susan Anderson: Okay great.

Terrence Moorhead: And then maybe if you could talk about, I guess, where you're at with the upgrade of the digital business in North America, is that, I guess, 100% complete now? Not only the e-commerce business, but I guess the distributor part of the digital business as well? I know you talked about rolling out some new tools for distributors. I guess, when should we think about those being in place? And maybe if you could give some more color there on kind of the tools that that will add for them?

Susan Anderson: Then maybe if you could talk about I guess, where you're at with the upgrade of the digital business in North America is that I guess, 100% complete now.

Susan Anderson: E Commerce business, but I guess the distributor part of the digital business as well I know you talked about rolling out some new tools for distributors I guess when should we think about those being in place and maybe if you could give some more color there on kind of the tools.

Susan Anderson: Hello. Thanks.

Terrence Moorhead: Yes, so from a digital platform standpoint, I think we're largely set. There'll be a series of things that we need to do to just refine our approach. Just like any digital business, you're constantly kind of fine-tuning and refining your approach and making sure that you're being as efficient and as effective as possible. So that's an ongoing challenge for us, just like any other digital business. So we'll obviously put attention to detail there. In terms of the new toolkit that we've talked about, to date we've had some sharing tools for our distributors, and we've had replicated websites for them so they can send out links and people can click through and they'll get credit for their sales.

Susan Anderson: Yeah. So from a from a digital platform standpoint, I think we're largely set there'll be a series of things that we need to do to just refine our approach just like any digital business, you're constantly kind of fine tuning and refining your approach and make sure that you are making sure that you're being as efficient and as effective as possible. So that's an ongoing.

Susan Anderson: <unk> for us.

Susan Anderson: Just like any any other digital business so.

We'll obviously put attention to detail there in terms of the new tool kit that we've talked about you know to date, we've had some sharing tools for our for our distributors and we've had a.

Susan Anderson: Replicated websites for them. So they can send out links and people can click through and Theres still get credit for their sales, but now we're talking about something really completely different where they will have at their disposal a full complement of tools, well, where they'll be able to send out E mails social media posts.

Terrence Moorhead: But now we're talking about something really completely different, where they will have at their disposal a full complement of tools where they'll be able to send out e-mails, social media posts, manage CRM follow-up campaigns with their customers, and there's AI kind of backing to this so that they can get recommendations on who to contact this week and what to follow up on. It's a whole kind of mobile-based system that they'll have at their disposal. So we'll probably be launching that, like I mentioned, in the back half of the year. I would anticipate late third quarter, maybe early fourth quarter.

Susan Anderson: Manage CRM follow up campaigns with with their customers and and it's all there's there's AI kind of backing to this so so that they can get recommendations on who to contact this week and what the follow up on in.

Susan Anderson: It's a whole it's a whole kind of mobile based system that they will have at their disposal. So we will probably be launching that like I mentioned in the back half of the year I would anticipate late third quarter, maybe it may be early fourth quarter.

Terrence Moorhead: But it's going to be a fairly significant rollout, and we'll pace ourselves with it so that we make certain that as we're turning this tool over to our distributors, they know how to use it, it gets fully integrated into their day-to-day processes. And again, the intent here is to allow them to manage their businesses more effectively and to give them greater outreach in the marketplace. Okay, great. That sounds exciting.

Susan Anderson: But it's going to be a fairly significant rollout and we'll we'll pace ourselves with it so that we make certain debt.

Susan Anderson: As we are turning this tool over to our distributors.

Susan Anderson: They know how to use it.

Susan Anderson: It gets fully integrated into their day to day processes and again the intent here is to allow them to manage their businesses more effectively and to give them greater outreach in the marketplace.

Speaker Change: Okay, great that sounds like maybe if I could add one more than Q I guess just on the tariff impact you mentioned that there probably would be I guess, depending on what the tariffs end up being.

Terrence Moorhead: Maybe if I could add one more than two, I guess just on the tariff impact, you mentioned that there probably would be, I guess, depending on what the tariffs end up being, but potentially a raw material cost. Maybe if you could quantify what that could be and are these raw materials coming from China or other countries? Yes, and we have taken some preventative measures to try and minimize the impact of any tariff activity. I mentioned that we have some extended contracts in place. We've also kind of tried to build our inventory and safety stock reserves, but, you know, you can't cover up everything.

Speaker Change: Particularly of raw material costs, maybe if you can quantify what that could be and.

Speaker Change: Are these raw materials coming from China or other countries.

Speaker Change: Yes, and we have taken some some preventative measures to try and minimize the impact of any tariff activity I mentioned that we have some extended contracts in place. We've also kind of tried to build our inventory and safety stock reserves.

Speaker Change: But you can't cover off everything and maybe I'll, let Shane speak too.

Shane Jones: And maybe I'll let Shane speak to kind of where we think the tariff impact might land. So we have modeled out, obviously, the moving target and that this is literally changing by the hour. But we have modeled out the tariffs that have been, you know, talked about and proposed at this point in time and what that impact would be on our business. If all of those were enacted and were on, were present for the entire year, we would expect a two to three million dollar impact to our gross margin. But obviously, you know, that could change at a moving target.

Kind of where we think the tariff impact might land.

Speaker Change: So we have modeled out obviously is a moving target and that this is literally changing by the hour.

Speaker Change: But we have modeled out the tariffs that have been talked about the proposed at this point in time of what that impact would be on our business. If all of those were enacted and we're on.

Speaker Change: Our present for the entire year, we would expect that $2 million to $3 million impact to our gross margin.

Speaker Change: But obviously.

Speaker Change: That could change its a moving target.

Susan Anderson: Historically also, when there are tariffs, we have seen exceptions for products in the health space and supplement space. This time, we just don't know. As Shane mentioned, it's changing day to day, sometimes morning to evening. Okay, great. Thanks for the color there. Good luck for this year. Thank you.

Speaker Change: Historically historically also when there were tariffs we have.

Shane Jones: Seen exceptions for products in the health space and supplement space, but this time, we just don't know ish as Shayne mentioned, it's changing day to day.

Speaker Change: Sometimes morning to evening.

Speaker Change: Okay, great. Thanks for the color there and good luck for this year.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of Linda Bolton Weiser from D. A Davidson. Please go ahead.

Linda Bolton: And your next question comes on the line of Linda Bolton Weiser from D.A. Davidson. Please go ahead. Hey Linda. Yes, hi. So just on the tariffs, just to follow up, are you saying that $2 million to $3 million would be just... I mean, does that impact include retaliatory tariffs, or does it not include retaliatory tariffs? It does include the retaliatory tariffs that have been discussed at this point in time. So those I believe are right now proposed to go into effect in April, if those happen in April, then yes, those are included. And if they go through the whole year?

Speaker Change: Thank you Linda.

Speaker Change: Yes, hi.

Speaker Change:

Speaker Change: So.

Speaker Change: Just on the tariffs just a follow up.

Speaker Change: You sold the two to 3 million would be Jos.

Speaker Change: I mean, they didn't checking code retaliatory tariffs or does it not include retaliatory tariffs.

Speaker Change: It does include the retaliatory tariffs that have been discussed at this point in time.

Speaker Change: So those I believe are right now proposed to go into effect in April.

Speaker Change: If those happen in April then yes. This is those are included.

Speaker Change: And if they go through the whole year, if they go through the whole year right.

Shane Jones: If they go through the whole year. Right, so I'm more talking about, um... Because you make a lot of product in the U.S. for other parts of the world. Am I remembering that correctly? So about 60% of what we produce, we produce in the United States, and yes. 80% of what we produce is in the United States, I thought it was... Linda, were you asking what we produce or what we purchase? Because what we produce, 80% is in the United States. What we purchase, 60% is in the United States. Right. So, um... I guess what I'm concerned about is that your products made in the U.S.

Speaker Change: Right, so I'm more talking about.

Speaker Change: Because you make a lot of product in the U S or other parts of the world am I remembering that correctly.

Speaker Change: Yes, so about 60% of what we produce we produced in the United States and yes.

Speaker Change: So I guess I'm.

Speaker Change: About 80% of what we produced in the United States I thought it was.

Speaker Change: Okay.

Speaker Change: I'm, sorry, sorry, sorry, I misunderstood Linda were you asking what we produce or what we purchase.

Speaker Change: Because what we what we produced 80% is in the United States, What we purchased 60% United States just to clarify.

Speaker Change: Right so.

Speaker Change: I guess, what I'm concerned about is that your products made in the U S that you're shipping to other markets.

Shane Jones: that you're shipping to other markets. that you'll have tariffs imposed on that as retaliatory measures by, like, Canada. Just as an example, I don't know if you ship from the U.S. into Canada. I don't know how much business you do in Canada, but that's the retaliatory tariffs I'm asking. Okay, yes, so those retaliatory tariffs, we are not included in that 2.3 million dollars. Okay, but I mean, I would think they could be fairly significant if all the countries around the world are going to do retaliatory DARA. It's really impossible to say what that looks like.

Speaker Change: That you'll be you'll have tariffs imposed on that as retaliatory measured by like Canada. Just as an example, I don't know if you ship from the U S into Canada I don't know how much business you do in Canada, but is that like that's the retaliatory tariffs I'm asking about.

Speaker Change: Okay, Yes, so just those retaliatory tariffs we are not included in that $2 $3 million.

Speaker Change: Yes.

Speaker Change: Okay, but I mean, I would think they could be fairly significant if all the countries around the world are gonna do retaliatory tariffs.

Speaker Change: It's really impossible to say what that looks like.

Speaker Change: <unk>.

Shane Jones: So, we haven't been able to estimate that at this point in time. And based on what we know, I mean, sales in Canada are relatively small, sales in Mexico relatively small. Yeah, yeah. The biggest impact would be Asia. Yes. And we don't know of any at this point in time. most of the products in. China are produced there, so that's not an issue. Okay. And then for the Korea and what's the other big market in Asia that you have? Taiwan. Taiwan, Japan, and Korea. So where is that production for those markets? It is 80% in the United States.

Speaker Change: So we haven't been able to to estimate that at this point in time based on what we know and sales in Canada are relatively small sales in Mexico relatively.

Speaker Change: But the biggest impact would be Asia, yes, and we don't know of any at this point in time.

What that would look like.

Speaker Change: Most of the products in.

Speaker Change: Kinda are produced there right. So that's not an issue.

Speaker Change: Okay and then.

Speaker Change: For the Korea.

Speaker Change: And what's the other big market in Asia that you have Taiwan, Japan, Taiwan, I'll tell you why.

Speaker Change: Taiwan, Japan, and Korea, so where is that true.

Speaker Change: Production for those markets.

Speaker Change: It is 80% in the United States.

Shane Jones: But at this point in time, there is no discussion of retaliatory tariffs for them. Yeah, okay. Right. Okay, gotcha.

Speaker Change: But at this point in time, there is no discussion of retaliatory tariffs for them.

James: Yeah James.

Speaker Change: Alright.

Speaker Change: Okay Gotcha, and then moving on to just the sales performance in Asia. It was really really good.

Linda Bolton: And then moving on to just the sales performance in Asia, it was, you know, really, really good. And it looks to me like the difference, the swing factor that made it so much better than third quarter was China and Korea. So China was down over 20% or something like that in the third quarter and you said it was up in the fourth quarter um Yeah, how much was it up? It was really, the real impact was Taiwan was a big part of that, very, very strong growth there. Japan and Korea, all three. But then, yes, you're correct, China, instead of declining, it was actually up slightly.

Speaker Change: And it looks to me like the difference the swing factor that made it so much better than third quarter was China and Korea.

Speaker Change: So China was down over 20% or something like that in the third quarter and you said it was up in the fourth quarter.

Speaker Change: Yeah, how much was it that's correct.

Speaker Change: It was it was really the bill impact with Taiwan was.

Speaker Change: Big part of that.

Speaker Change: Very very strong growth, there, Japan and Korea all three.

Speaker Change: But then yes, you are correct the China instead of declining and it was actually up slightly in Q4.

Speaker Change: Right right.

Terrence Moorhead: Right, um, but I think it's a smaller version. Right, right, right. But like Japan was also strong in the third quarter. It's not like a difference. It's not changing. Japan was strong in the third quarter and in the fourth quarter, right? Right. Okay. Correct. Fair enough. Yes. So I'm having more like... But they really, but I got to tell you, you know, they really took off. Both Taiwan and Japan really took off in the fourth quarter. Taiwan up 29%. I think Japan was up 27%. 27% and Korea 21%. Yeah. So really, really like a nice just acceleration.

Speaker Change: It's a smaller market.

Speaker Change: Oh, right right right, but like Japan was also strong in the third quarter, it's not like a difference not changing it's Japan was strong in the third quarter in the fourth quarter right.

Speaker Change: Alright, Okay, correct fair enough, yeah, so, but they really but I can tell you. They really took off both both Taiwan and Japan really took off in the in.

Speaker Change: In the fourth quarter.

Speaker Change: Taiwan up 29% I think Japan was up 27 27 in credo anymore, Yeah, So really really nice just acceleration.

Terrence Moorhead: But it was great having China be, you know, kind of up two points. That was certainly nice. Right, so Korea was flat in the third quarter and now it was up 21%. So Korea is like, that's the change like right It's a big part of the change. If you're looking sequentially from Q3 to Q4, you're correct. Korea is a big part. So then, is that sustainable in Korea? Because Korea's been kind of sluggish for a while. I mean, is that quite sustainable, do you think? I think growth is sustainable, but not at 21%. You'll remember, Linda, we've been working on the fundamentals there, our field fundamentals, and really putting in place that new merchandising kind of concept for...

Speaker Change: But it was great having trying to be you know kind of up two points.

Speaker Change: Certainly nice.

Speaker Change: Right So curry.

Speaker Change: In the third quarter and now it was up 21%. So Korea is like that's the change like right.

Speaker Change: It's a big part of the change if youre looking sequentially from Q3 to Q4, you're correct. There is a big part of that.

Speaker Change: So then is that sustainable in Korea, South Korea, it's been kind of sluggish for a while I mean does that is that quite sustainable do you think.

I think growth is sustainable, but not at 21% right.

Speaker Change: You'll remember Linda.

Speaker Change: Been working on the fundamentals there are field fundamentals and really putting in place the new merchandising concepts.

Speaker Change: Four it took it took a good four quarters really to start building that momentum and so and now we're starting to see it but again, we don't we don't expect to see that type of growth in Korea on an ongoing basis, but we do we do expect positive momentum to continue.

Terrence Moorhead: it took a good four quarters, really, to start building that momentum, and now we're starting to see it, but again, we don't expect to see that type of growth in Korea on an ongoing basis, but we do expect positive momentum to continue. Okay, yeah, no, that's really good to see because it's I know you've been working on Korea. So that's really, really good.

Speaker Change: Okay, Yeah, no that's really good to see because I know you've been working on Korea. So that's really really good.

Terrence Moorhead: Um, so Can I just ask you, can I ask you about Russia, because I know you used to have a really big business there, and then kind of some of it shifted to other countries around there with the war going on. If the war ends, like in 2025, do you think some of that business actually in Russia will come back to you, or is it kind of gone forever? No, you know, it's hard to say, and we haven't built anything into our plans. We still have infrastructure there to do business. We certainly have the capability to drive sales in the marketplace.

Speaker Change: So.

Speaker Change: Can I just ask can I ask you about Russia, because I know you used to have a really big business. There and then kind of some of it shifted to other countries around there with the war going on if the war.

Speaker Change: Like in 2025, do you think some of that business actually Russia will come back to you or is it kind of gone forever.

Speaker Change: Yes.

Speaker Change: No it's hard to say and we haven't built anything into our plans.

Speaker Change: We still have.

Speaker Change: Infrastructure, there to do business, we certainly have.

Speaker Change: The capability to drive sales in the marketplace a lot of it depends on what happens with.

Terrence Moorhead: A lot of it depends on what happens with the currency and consumers' ability to spend. But I think overall we're well-positioned and well-situated in Central and Eastern Europe. and we'd be eager to see some stability in the region.

Speaker Change: The currency and consumers' ability to spend.

Speaker Change: But I think we're overall, we're well positioned and well situated in central and Eastern Europe.

Speaker Change: And we'll be eager to see some stability in the region.

Terrence Moorhead: So your Eastern Europe business is which countries now? Central and Eastern Europe would include Poland, the Baltic States, Slovenia, Slovakia, Ukraine is in there, Russia is in there. Belarus.

Speaker Change: So your eastern Europe business is.

Speaker Change: Which countries now.

Speaker Change: It's so central Eastern Europe would include Poland, The Baltic States Sylvania, Slovakia of Ukraine is in there.

Speaker Change: Russia is in there.

Speaker Change: Belarus, Okay.

Terrence Moorhead: Okay. OK. and then, um...

Speaker Change: Okay.

Speaker Change: And then.

Terrence Moorhead: Let's see, I just wanted to see if you would... And again, right now, Linda, just to be specific, the real growth is being driven by Poland, the Baltic States, Slovenia, Slovakia. I mean, that's where we're seeing, you know, double-digit growth, 17-plus percent growth, and really driving market penetration.

Speaker Change: Well, let's see I, just wanted to see and again right now right now I Wonder just just to be specific the real growth is being driven by Poland and the Baltic States Lavinia, Slovakia, I mean, that's where we're seeing double digit growth, 17% growth and really driving market penetration.

Shane Jones: right yes yep that's great um and then I just was curious if you could tell us the percentage of revenue in North America and for the total company that is digital in the fourth quarter or for the year, whichever. So in North America it's about 25%? It's about 25%. do the math, it's about $30 million for the year. And then again, you've got, you know, our business in China that's 100% digital live-streaming. So that's just how they go to market there. And then we have kind of various hybrid digital activation throughout the world with people ordering digitally, but not the same type of DTC business that we would have in North America.

Speaker Change: Right, Yeah, Yep, that's great.

Speaker Change: And then I just was curious if you could tell us the percentage of revenue in North America and for the total company that is digital.

Speaker Change: And in the fourth quarter or for the year whichever.

Speaker Change: So it's North America, it's about 25% 25%.

Speaker Change: Yes, I do the math, it's about $30 million, so yeah, yeah mhm.

Speaker Change: And then again, you've got our business in China, it's 100%.

Speaker Change: Digital live streaming so that's just how they go to market. There and then we have kind of various hybrid digital activation.

Speaker Change: Throughout the throughout the world with people ordering digitally but not the same type of DTC.

Speaker Change: Business that we would have in North America as you remember Linda North America was kind of a pilot for us to really drive a pure digital.

Terrence Moorhead: As you remember, Linda, North America was kind of the pilot for us to really drive a pure digital kind of business. And then again, you do have China, I would say, is very digital as well with 100% of the sales coming through digital live-streaming. Hopefully that's helpful. Yes, yes, it is very helpful.

Speaker Change: Kind of business and then and then again you do have China I would say is is very digital as well with 100% of the sales coming through digital live streaming.

Speaker Change: So hopefully that's helpful.

Speaker Change: Yes, yes. It is very helpful and then.

Linda Bolton: And then... I think that was all my questions actually. Thank you very much. I appreciate it. Yeah, great. Good hearing from you.

Speaker Change: I think that was all my questions actually thank you very much I appreciate it.

Speaker Change: Yeah, Greg good hearing from you.

Speaker Change: Thank you at this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Moorehead for closing remarks.

Operator: At this time, this concludes our question and answer session.

Terrence Moorhead: I would now like to turn the call back over to Mr. Moorehead for closing remarks. Okay, well thank you. I want to thank everybody for listening to today's call and we look forward to speaking with you again when we report our first quarter 2025 results. And again, thanks for joining us and goodbye. Thank you.

Mr. Moorehead: Okay, well. Thank you I want to thank everybody for listening to today's call and we look forward to speaking with you again, when we report our first quarter 2025 results.

Speaker Change: And again, thanks for joining us and goodbye.

Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Operator: Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: [music].