Nature's Sunshine Products, Inc. (NATR) Q3 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Nature's Sunshine Products Third Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Richard Strulson, General Counsel and Chief Compliance Officer for Nature's Sunshine Products. Thank you, Mr. Strulson, you may begin.

Thanks. Good afternoon, everyone, and thanks to all of you for joining our conference call to discuss our third quarter 2014 financial results. This call is available for replay in a live webcast that we posted on our website at www.naturessunshine.com in the Investors section. With us today are Greg Probert, Chairman and CEO; Wynne Roberts, President and COO; and Steve Bunker, Executive Vice President, CFO and Treasurer. The press release, which was issued this afternoon in approximately 4:00 p.m. Eastern Time, and the information on this call contain certain forward-looking statements, which are based on a number of assumptions that are subject to change and involve known and unknown risks, uncertainties or other factors which may not be under the company's control. 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, performance or achievement of the company may be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include but are not limited to those factors disclosed in the company's Annual Report on Form 10-K under the caption Risk Factors and other reports filed with the Securities and Exchange Commission. The press release and the information on this call speak only as of today's date, and the company disclaims any duty to update the information provided herein and therein. I will now turn the call over to Greg Probert, Chairman and CEO of Nature's Sunshine Products. Greg?

Thanks, Rich. And good afternoon, everyone. Thank you for joining us today. The second half of 2014 is off to a strong start highlighted by another record-setting quarter at Synergy and a return to growth within NSP United States and Canada. Our transformation to a multibrand multichannel organization continues to take form. As you'll hear, our science-based product and sales strategies continue to gain traction and drive strong distributor adoption, leadership and engagement across the globe. Touching on a few financial highlights for the quarter. Net sales were up 3.2% on a local currency basis as continued strength in Synergy allowed us to absorb broader declines in NSP Russia, Central and Eastern Europe. Once again, Synergy delivered a record-setting quarter, posting its fifth consecutive quarter of record sales. South Korea and Japan continue to lead the way, delivering year-over-year growth of 60% and 33% in local currency, respectively. Strong distributor leadership in these key markets, combined with sustained momentum since last year's global summit and the launch of the SLMsmart weight management program continue to be strong producers [ph] of growth. Importantly, we had a strong quarter in Synergy Europe, delivering our first quarter of year-over-year growth in over a year. Performance in the market benefited from the September launch of SLMsmart and a strong prelaunch campaign. We look forward to building upon this positive momentum to deliver more balanced regional growth across our synergy business. Turning to our NSP lines of business. I am pleased to report that the third quarter marked a return to growth for NSP North America. NSP United States and Canada posted net sales growth in local currencies for the first time since the second quarter of 2013 and the first quarter of 2012, respectively. Growth in the U.S. was supported by progress in key initiatives, including IN.FORM, our retail productivity tools as well as a rebranding and upgrading of our Silver immune product line in September. Performance in our largest market also benefited from a successful leadership conference held in Salt Lake city in August which Wynne will elaborate on shortly. Overall, we're pleased with the traction of our new products and program initiatives in the U.S. and are cautiously optimistic about our continued growth in this market. Outside of North America, our NSP business in Latin America continues to grow, driven by strong product and program adoption. Latin America showed continued growth, primarily driven by Mexico and Venezuela. However, sales in the latter were supported by price increases implemented to offset the hyperinflationary environment. Going forward, we must be cautious about growth in this region due to the challenge -- changing and challenging regulatory environment around product registration. In addition, we announced in our press release that we will exit the Venezuelan market during the fourth quarter. During the third quarter, we incurred charges totaling $4.1 million for NSP Venezuela, of which $1.2 million was due to devaluation of the Venezuelan bolivar and $2.9 million was due to the impairment of NSP Venezuela's fixed assets related to our decision to exit the market. Steve will provide additional details, including the impact to EPS in his commentary. Turning now to NSP Russia, Central and Eastern Europe. As anticipated, heightened political tensions throughout the quarter significantly impacted our third quarter performance, resulting in substantial net sales declines in the affected regions. Despite the net sales declines, we remain very supportive and engaged with our distributors in the region and continue to support their leadership activity with additional price and business building promotions and training to help achieve sales stability. Throughout this period of instability, we maintained our focus on the retention engagement of our regional leaders. Happily, at our most recent leadership conference in September, attendance and engagement amongst leaders was very high. As we build towards stabilization, we expect our dedicated field leadership coupled with our strong intermediate partnership with our local partner will provide a solid foundation to reignite growth. Turning now to NSP China. We are moving ahead with our multibrand, multichannel, go-to-market strategy in China. During the quarter, we announced several key hires, including the appointment of Paul Noack as our new President of China and New Markets, and 2 new general managers of NSP and Synergy-branded products. Paul and the new general managers all have prior leadership experience in the Chinese consumer products market. We are pleased with the progress made to date in the regulatory approvals process as well as securing office space, refining the business plan and beginning the direct selling license and product registration processes. We're very excited to enter China as quickly as possible with our partner Fosun Pharma. Turning to profitability. Operating income for the quarter was impacted by several onetime items, including the $2.9 million impairment charge incurred in connection with NSP Venezuela's fixed assets related to our decision to exit the market, expenses associated with the establishment of our China joint venture and certain restructuring and other charges. Normalizing for these charges and expenses, our operating income margin would have been 7.7%. We are pleased to deliver improved levels of operating profitability while advancing important investments in R&D, product development, distributor training and sales incentive programs, which we believe will solidify our foundation for future growth. Along these lines, work continues on our new $2 million research and development center and medical clinic at our corporate headquarters in Lehi and is expected to be completed by year-end. This facility will serve as home base for our team of world-renowned and award-winning scientists and doctors doing research and product development. We're also thrilled to welcome 4 professionals during the quarter to our medical and scientific advisory board. These individuals each bring unique expertise and background to Nature's Sunshine, with professions ranging from board-certified urologist to chief scientific resource officer to medical doctors specializing in innovative and product development from medicinal and plant foods to a professor of pharmacology. These key individuals will further support our global organization in educating and training distributors, assisting with product development, conducting extensive research and clinical studies and speaking at various company events. We're pleased to add their expertise to our Medical and Scientific Advisory Board, which now totals 7 individuals, and look forward to their many contributions. In addition to deploying capital to further our science-based innovation, we continue our track record of returning excess capital to shareholders. During the quarter, we paid a special cash dividend of $1.50 per share following the closing of the private placement and joint venture with Fosun Pharma. And today, our Board of Directors approved a $0.10 per share regular quarterly cash dividend. In addition, the board has authorized a share repurchase program of up to $20 million over 2 years. This new authorization is in addition to our previous $10 million share repurchase program that we expect to be completed by year end. The authorization of the share repurchase program, in combination with our regular and special dividend, underscores the confidence of our board and management team have in our strategy and our ability to continue to invest in our business and drive long-term profitability while returning capital to shareholders. With that, I'll turn the call over to Wynne to comment further on our operations.

Thank you, Greg. And good afternoon, everybody. We're very pleased with our third quarter net sales growth of 3.2% year-over-year on a local currency basis despite the continued declines of our NSP Russia, Central and Eastern European business, which negatively impacts our net sales growth. Excluding these declines in Russia, Central and Eastern Europe, year-over-year growth would've been 6.7% overall. Once again, leading net sales growth during the quarter was Synergy WorldWide, which achieved its fifth consecutive quarter of record-setting sales, led by strength in South Korea and Japan and a return to growth in Europe. Synergy's performance more than offset the declines experienced across our NSP businesses. Net sales in NSP Americas, Asia Pacific, Europe were $48.4 million or 51% of total company sales. In local currencies, segment net sales decreased by 1.6% from the same quarter a year ago. The decline was primarily driven by combining our NSP Japan business with our Synergy Japan business in the first quarter of this year as well as the transition of our NSP U.K. business to an export market -- wholesale model on April 1 of this year. For the third quarter of 2013, we had recorded revenue of $2 million for the NSP Japan and NSP U.K. markets. NSP U.S., which remains our largest market at 39% of total company sales, recorded a net sales increase of 0.7%, marking its first quarter of growth since the second quarter of 2013. We continue to see our new sales programs gaining traction, with increased adoption of the IN.FORM business method, which is focused on weight management and the building of a daily habit of health. In addition, our retail productivity tools help support sales for those distributors who have stores. Our annual leaders conference, held in Salt Lake City in August, featured key training by distributor leaders already enjoying success with these programs as well as refresher training on our attractive business opportunity. In addition, in September, we relaunched our Silver immune product line just in time for the winter season. Reformulated for even greater efficacy and improved packaging and branding, it also helped to boost sales in the latter part of the quarter. Sales of our situational anxiety product, AnxiousLess, and our prostate health product, Equolibrium, continue to perform well, with penetration levels into our managed base continuing to grow at 65% and 37%, respectively. We remain encouraged by the continued improvement in adoption rates of these programs by our distributors and customers alike. Further, the launch of our IN.FORM weight management program in March of this year continues to gain traction and prove itself a powerful business building tool, attracting both new customers and distributors. Through the end of the third quarter, we've certified over 692 coaches and have 280 IN.FORM groups running around the country. The early results enjoyed by distribution and customers from product benefits and business building have been very encouraging. As Greg mentioned, we have also seen Canada return to growth in the quarter at 5% ahead of prior year in local currency. We are following the same strategy as in the U.S., launching the Canadian AnxiousLess formula in the quarter and preparing for the launch of IN.FORM in October. While we're extremely pleased with the positive progress achieved in both the U.S. and Canada, I would note that many of our distributors are still in the learning phase of these new programs. As such, it will still take some time to see overall momentum develop in these markets and for the impact to be fully reflected in our financial performance. Turning to NSP Russia and Central Eastern Europe, net sales were $11.8 million or 12% of total company sales. Segment net sales decreased 19.4% over the prior year quarter and have continued to decline as ongoing political tensions disrupt the distributor activity in the region. While Ukraine continues to be the most heavily affected by the escalation of political unrest, other markets in the region are also affected, including Russia and Belarus. In conjunction with the political unrest, the weakness of the Ukrainian hryvnia and the Russian ruble have contributed to lower revenues as our products in the region are priced in U.S. dollars and therefore become more expensive as the local currencies decline in value against the dollar. That said, we remain strongly supportive and engaged with our distributors in the region and continue to support their leadership activity with additional price and product promotions and business-building promotions and training to help achieve sales stability and a future return to growth. Despite political uncertainty, we are pleased that we have been able to maintain service levels to our distributor leaders across these markets through our strong presence on the ground with our local partner and our focus on distributor retention and engagement. As a result of these efforts, we were pleased to see continuing engagements of our distributors in our business as evidenced by the 4,500 people attending our annual birthday convention in Moscow at the end of September. While the attendance was understandably lower than last year, it was an impressive, high-energy event and provides grounds for cautious optimism that the business can recover once stability returns to the region. Turning to this Synergy WorldWide business unit. As mentioned, the third quarter marked its fifth consecutive record-setting sales quarter, with total net sales of $34.7 million, representing 37% of total company sales and a growth of 24.1% year-over-year in local currencies. Net sales growth was driven by strength in South Korea, Japan and Europe, primarily due to reengaged leadership, strong execution and momentum stemming from Synergy's global summit and the launch of SLMsmart weight management program in Asia Pacific. Synergy Asia Pacific recorded net sales growth of 49% year-over-year, driven by South Korea and Japan as mentioned before. In South Korea, momentum continued to accelerate as our 30-day detox system combined with the adoption of the SLMsmart weight management program launched last September. As a result, Synergy's weight management product category has grown to 7.4% of net sales, up from 5.6% last quarter. In Japan, growth in year-over-year net sales further reinforced the positive results of the merger of our NSP and Synergy Japan businesses at the start of the year. In addition to the merger of the NSP and Synergy Japan businesses, growth has -- in the region has also been supported by a combination of new and reinvigorated distributor leadership as well as the introduction into the Japan market of new business method supported by the top leaders in Korea. Turning to Synergy Europe. We were very pleased to see a return to growth in Europe, with a third quarter net sales increase of 2.2% year-over-year in local currency. Growth was primarily driven by uplifts across a broad number of markets, including Finland, the United Kingdom, Ireland and our newest European market of Italy, which opened at the end of last year. This growth in Europe was supported by investments made in additional sales resource in the latter part of last year, coupled with strong momentum and promotional activity during the third quarter, building towards our European summit in Barcelona at the end of September, which attracted over 1,200 members from across the region. The summit also marked the launch of our SLMsmart weight management product line in Europe as well as our e9 energy drink and the extensions to our ProArgi-9 heart health line. The initial uptake of the launches has been strong, and we are optimistic of continued momentum building to restore growth in the region. Synergy sales in North America continued to perform below expectations with the decline in net sales of 11.1% over the prior quarter. The SLMsmart product launch a little over a year ago, coupled with a focus on distributor recruitment, motivation and new product training, are expected to gradually return the North American market to growth over time. Finally, with regard to our global Oracle ERP project, we have taken the decision to delay our targeted go-live date by 6 months to allow adequate time for systems design, testing and staff training. We will now go live with this system globally on January 1, 2016, with an incremental project investment of $3.6 million. Once implemented, this system will provide a unified global infrastructure which will provide timely access to critical information for business analysis and enable us to reach our goal of becoming the easiest company with which to build a business. In summary, we were pleased with our third quarter, which marked a return to growth for a number of key markets, including NSP North America, Synergy Europe, continued growth in Mexico as well as continued strong momentum in Synergy South Korea and Japan. Despite the adverse impact of the ongoing crisis in Ukraine, we were still able to achieve modest revenue growth overall in the quarter as well as encouraging rates of distributor engagement adoption of our products and programs. We look forward to updating you on our progress next quarter, and I'd now would like to turn the call over to Steve to review our financials.

Thanks, Wynne. And good afternoon, everyone. Net sales in the quarter were $94.9 million, up 2.6% from $92.5 million in the same quarter last year. On a local currency basis, net sales increased 3.2% year-over-year. Cost of sales was $23.3 million, down 1.4% from $23.7 million in the year ago period. The decrease in cost of sales was primarily due to changes in product mix between markets, lower raw material cost as well as lower in-market distribution cost, partially offset by the impact of product discounting. Increasing cost of sales for the quarter resulted in a 100-basis points increase in gross margin of 75.4% versus 74.4% in the year ago period. As we've explained previously, volume incentives are a significant part of our network marketing program and are designed to provide incentive to reach higher product sales levels. Volume incentives vary slightly on a percentage basis by product due to pricing policies and commissioned plans in place and by the sales mix in our various markets. Volume incentives accounted for 37.4% of net sales in the third quarter, up 4.5% compared to the same period last year. The increase was primarily due to net sales increases in markets such as South Korea and Japan that pay a higher sales commission in our Synergy WorldWide segment. Selling, general and administrative expenses were $33.5 million or 35.3% of net sales, which increased 18.8% from $28.2 million or 30.4% of net sales in the same period a year ago. The increase in selling, general and administrative expenses was primarily related to an impairment charge of $2.9 million for our Venezuelan fixed assets, $0.8 million of onetime restructuring cost in certain markets, $0.6 million of increased health insurance and other benefit costs and $0.4 million in startup cost for the China joint venture. Excluding the combined $4.7 million in the aforementioned nonreoccurring costs, SG&A would have only increased 2.2% from the prior year quarter and represented 30.3% of net sales. We have decided to exit the Venezuelan market due to the difficulties and uncertainties related to import controls, difficulties associated with repatriating cash and high inflation. As a result, we expect to incur additional exit cost of $0.6 million to $0.8 million in the fourth quarter of 2014. For the third quarter of 2014, our Venezuelan subsidiaries net sales revenue represented approximately 1.5% of consolidated net sales. Operating income decreased 60.9% to $2.6 million or 2.7% of net sales from $6.7 million or 7.3% of net sales in the prior year period. Excluding the aforementioned Venezuela fixed assets impairment charge of $2.9 million, pro forma operating income would have been $5.6 million compared with $6.7 million in the same quarter a year ago, a decrease of 17%. Adjusted EBITDA as defined in our earnings press release to exclude share-based compensation expense and Venezuela-related impairment charges, decreased 9.6% to $7.7 million from $8.5 million in the third quarter of 2013. The effective income tax rate for the third quarter of 2014 was 26.5% compared to 24.7% in the third quarter of 2013. The current quarter's effective tax rate was below the U.S. federal statutory tax rate of 35%, which was primarily attributable to a decrease in tax liabilities associated with uncertain tax positions. Net income for the quarter was $1 million or $0.06 per diluted share as compared to $4.9 million or $0.29 per diluted share. In the year ago period, excluding the Venezuela fixed assets impairment -- the Venezuela fixed assets impairment charge of $2.9 million and Venezuela foreign exchange losses of $1.2 million, our pro forma net income would have been $5.2 million or $0.29 per diluted common share. Moving to the balance sheet. Cash and cash equivalents as of September 30, 2014, were $70.5 million, down from $77.2 million at December 31, 2013. The lower cash balance reflects approximately $19.9 million in capital expenditures; $33.4 million of dividends, of which $28.5 million consisted of the special cash dividend in connection with the $46.2 million of proceeds from the Fosun Pharma investment; and the pay down of existing liabilities. It is important to note that our joint venture with Fosun Pharma for entry into China was fully funded at the $20 million level. Most notably during the quarter, we paid down approximately $12.3 million of our debt obligations, bringing our outstanding balance under our revolving credit agreement to 0. We now have $25 million available on a revolving line of credit. During the quarter, we also repatriated $11.3 million of foreign cash through intercompany dividends. Inventory at September 30 was down 1.2% from December 31, 2013, levels, and we have approximately $140 million in current assets. And as Greg highlighted earlier, given our strong balance sheet and consistent operating cash flow, our Board of Directors approved a regular quarterly cash dividend of $0.10 per share, payable on December 1 to shareholders of record as of the close of business on November 20. This was in addition to the previously mentioned special dividend of $1.50 per share following the closing of the private placement and joint venture with Fosun Pharma. During the 3 months ended September 30, we purchased approximately 177,000 shares of common stock for approximately $2.7 million under our $10 million share repurchase program. And as of September 30, 2014, we have approximately $4.7 million remaining available for repurchases. In order to enhance our ability to repurchase shares, we established a 10b5-1 trading plan which allows us to repurchase shares at times when it otherwise might be prevented -- at times when we might otherwise be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. As Greg mentioned, following the completion of our original $10 million share repurchase program, our Board of Directors authorized us to implement an additional share repurchase program of up to $20 million over 2 years. In closing, we are proud of this significant operational and strategic progress made throughout the third quarter. Our ongoing capital capacity will enable us to continue to make investments in sales, marketing, science, product development initiatives and overall operations as well as to pursue strategic opportunities as they may arise. And as always, we continue to remain focused on maximizing the company's return on invested capital. I now -- -- I would now like to turn the call back over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Brian Hollenden from Sidoti.

So is there any additional cost to exit Venezuela in the fourth quarter or going forward? Can you kind of quantify the future cost?

Yes. I think the cost to exit Venezuela in the fourth quarter are estimated to be between $600,000 and $800,000. And they should be incurred in the fourth quarter.

And then are there any plans to exit any other region that you can talk about or?

Not of this stage. No -- excuse me, Bryan. This is Wynne. The -- one of the things we did talk about I think on the call, we are pursuing the conversion of our Peru market to an export market in the same way that we did in the U.K. earlier this year. But apart from that, no.

Okay. And then turning to the balance sheet. I noticed that PP&E for the quarter ended at about $45 million, up about 40-some percent from year end. Can you just give us a little more color what that's related to? I mean, how much of that is related to the Fosun JV?

Yes, Brian. We've spent -- in the first 9 months of the year, about $19.9 million in capital expenditures, and about a little over $15 million is related to our ERP project with the remaining expenditures due to manufacturing and capital maintenance kind of items and those type of things. We have -- we have funded the joint venture in China. But there have been no capital expenditures recorded related to that -- to the joint venture at this point.

Okay, great. And then if I could just ask one more question and I'll jump back into the queue. Turning to Synergy. Sales up 27-plus percent, and distributors were up about 11%. Just wondering if you can quantify that. I mean, that difference, did that come from pricing? Or does that come from increased productivity? Can you just kind of walk through that gain?

Sure. I think -- we've talked about this on prior calls as well, Brian. I think one of the issues that you'll see -- it's a mix of the business between different markets. So one of the things that we've seen this year is a strong growth, as you know, in Japan and Korea. And as those businesses grow and the cost of our products in those markets and the average sales price in those markets offset slowing businesses in Southeast Asia -- smaller businesses in Southeast Asia. Likewise, as Europe returns to growth, same thing as the North Asia markets of Japan and Korea. So it's really down to mix. So we're seeing strong growth in those -- in North Asia and emerging growth in Europe. And that's what affects that disparity.

Our next question comes from the line of Gregg Hillman from first Wilshire.

Could you talk about the rebranding of the Silver Shield? And what kind of additional promotional marketing efforts do you have behind the product now?

Yes. So Silver is our largest SKU in the U.S. market. It's positioned as in immune product and has been a staple of our distributors businesses for a number of years. In September -- and the product -- there were 2 SKUs available. There's a 4-ounce liquid and a single SKU of a gel. So in the third quarter, what we did was we revamped the product. First of all, we improved the formulation from 18 parts per million to 20 parts per million to improve the strength of the formulation and the efficacy. And then we also introduced 2 new sizes. We introduced the 6-ounce bottle at a promotional price and then a 16-ounce bottle at a normal price per serving. So those are 2 things. We introduced 2 new SKUs, one with a promotional quantity in it. Then finally, what we did was reformulation, resizing and then we relabeled the product and upgraded the labeling on the products to communicate the improved efficacy. And those things were -- those 3 things combined were launched for the liquid products in the middle of September and had a positive impact on sales in the latter part of September. And then we have 2 new SKUs, a reformulated gel product and a new gel product scheduled for launch in later November.

Okay. Can you just talk about the progress you're making in trying to grow the distributor base for Synergy and NSP in North America, whether you'll be able to really either through the products or other areas really to get the base growing again?

So I think the -- let's talk about the NSP business first because that's our largest business unit and it's the one we've talked about the new initiatives. So in NSP, there's one key initiative that we'd see as having a significant impact on reenergizing the business, and there's been a significant contributor to our returning to growth in the third quarter -- in the -- yes, in the third quarter, and that is our IN.FORM program. So our IN.FORM program is a business method that is a 13-week program that the distributors can run group sessions, typically of 10 to 15 people, where the entry point of the program is weight management. But it also includes all our other products as well. So it's a build for people that attend program to educate them on how to embark on and sustain a daily habit of health. That program was developed in 2013. It was soft launched in late 2013, fully launched in our convention in March of 2014 in the U.S. and has continued to gain traction ever since. In addition to that, we have been seeing good success with the launch of our retail -- with the use of our retail productivity tools that enabled distributors that have retail stores to improve foothold [ph] and improve sales values. So I think -- and then the third element of the U.S. return -- the NSP U.S. return to growth has been the fact that we have adopted a product strategy which is kind of 2-pronged, which is -- the first is in the categories where we have great strength to really leverage our newly created science and research capability to really strive for innovative products in that space in those categories where we have strength. And good examples of those are our AnxiousLess and Equolibrium launches earlier this year. In addition to that, the second prong of the strategy is to refresh and rebrand and extend our existing strong lines. And the Silver product line that I just referred to a few minutes ago is an example of that. So I think it's really 3-pronged. And then the additional piece is reengaged sales leadership, the corporate leadership, working with the distributors to support their growth. And frankly, it's a business that's had a long legacy of underperforming, as you probably know, and has taken us some time to develop these programs and implement them in the field. But we are cautiously optimistic that we're now starting to see the early signs of a return to growth.

And then, Wynne, finally, for Synergy Americas, you have to grow that again. Do you think that's going to happen? Or what's happening there to grow that, Synergy Americas?

So with Synergy, our primary focus, frankly, is in Asia and Europe. We clearly have -- there are a number of things you need in a network marketing business to be able to succeed. And I think the Asian market, the direct selling in general, is more vibrant than the North American market. And so we're leveraging that, and we're seeing the good returns on that in Asia. In Europe, likewise, the same. We invested last year, and we starting to see those returns. We're seeing a slower turn in the U.S. The U.S. is actually the smallest part of the Synergy business. And we are continuing to pursue the SLMsmart weight management programs along with our ProArgi-9 programs, and we have a couple of programs in the works to reengage the distributor leadership in the North American market. But I think it's a little too early to talk about those at this stage. So we expect for the next little while our growth to come from Asia and Europe while we continue to work to rebuild the U.S.

Okay. I guess there's more competition for ProArgi-9 in the U.S. for other things like they're advertised on late-night TV and over the Internet and stuff like that, I think.

I think that's part of it. But as you know, it's not only the product. It's also the engagement of our distributor leaders across the region. It has to be very engaging, and several of our leaders in the U.S. have very robust businesses overseas. And frankly, they'd be more focused on growing those businesses than they have in reigniting the North American market in the short term. So it's a combination effect.

There are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.