Nature's Sunshine Products, Inc. (NATR) Q4 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the Nature’s Sunshine Products Fourth Quarter and Full Year 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now turn the conference over to your host, Richard Strulson, General Counsel and Chief Compliance Officer at Nature’s Sunshine Products. Please go ahead, sir.

Thank you. Good afternoon everyone and thanks for joining our conference call to discuss our fourth quarter and full year 2014 financial results. This call is available for replay and a live webcast that we posted on our website at www.naturessunshine.com in the Investor’s section. With us today are Greg Probert, Chairman and CEO; and Steve Bunker, Executive Vice President, CFO and Treasurer. Additionally Wynne Roberts, COO of Synergy Worldwide and Paul Noack, President of China and New Markets will be available for questions during the question and answer portion of this call. The press release which was issued this afternoon at approximately 4:00 p.m. Eastern Time and the information on this call contains 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 terminologies 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 the 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.

Thanks, Rich. And good afternoon, everyone. 2014 was a year of significant achievement for Nature Sunshine as evidence by the fulfillment of several key milestones, namely, our progress towards entry into China through our joint venture with Fosun Pharma that returned the growth in our markets of NSP North America, Synergy Europe and Synergy Japan. The renewal of our long standing partnership with our General Dealer Santorin to manage operations in Russia, Central and Eastern Europe. The introduction of various new successful products, including Angie's List and Equolibrium. [ph] The addition of several world renowned and award wining scientist and doctors to our medical and scientific advisory board to so face our R&D efforts. The building of our new multi million dollar R&D lab. The huge center for research and innovation and hiring of Paul Noack as President of China and new markets. All of the veteran building businesses in China is focus on building a China management team as we prepare to enter this very important market later this year. Having presently served as Managing Director of Asia Pacific region for Herbalife, Paul was recently recruited our Managing Director of China among other key experienced direct selling and consumer product executives. Today we're excite to update you on our ongoing efforts to transform Nature Sunshine into a multi-brand, multi-channel organization to address mega trend health problems through science based innovation and to drive distributor adoption leadership and engagement across the globe. So first let me begin with some key sales highlights for the year. 2014 net sales of $366 million were down 0.5% on a local currency basis, as broader decline in NSP Russia, Central and Eastern Europe outpaced our continued strength in Synergy and NSP North America. Excluding the declines in NSP Russia, Central and Eastern Europe, year-over-year overall revenue growth would have been 3.5% on a local currency basis. Turning to the Synergy worldwide business unit, we continue to see sustained momentum in Synergy following the last year’s Global Summit. Synergy’s fourth quarter sales represented 35.6% of total company sales and growth of 13.0% year-over-year in local currency. Strength was seen in our key market at South Korea, Japan and Europe. South Korea and Japan continue to grow, while Europe posted strong fourth quarter net sale partially offset by declines in North America. In local currency we saw continued growth in South Korea in the quarter, although at 4.3% a slower space than in recent quarters. While the market continues to benefit from strong engagement distributor leadership, as well as strong product positioning supported by the Slim Smart weight management product launch in the fourth quarter of 2013. The pace of new customer and distributor acquisition slowed during the quarter compared to prior quarters. This was due to a change in the usage rules of a local social network service which our distributors use effectively to generate new customers and attract new distributors. Going forward, local management and distributor leaders are working together to transition to alternative distributor and customer attraction methods in order to rebuild the pace of growth. In Japan, growth of nearly 53% in year-over-year net sales in local currency further reinforce the positive results of the well executed merger NSP Japan and Synergy Japan at the beginning of 2014. The return to growth has been supported by a combination of new products, new and reinvigorated distributor leadership and augment new business methods supported by top distributors form Korea. In addition, we have been very pleased with our growth we have maintained in large percentage of our NSP customers and distributors to the transition, which demonstrates the value of our products and business opportunity in the market. Also I want to touch on the rest of Asia, Indonesia and Taiwan in particular which demonstrate impressive growth of 120% and 98% in local currencies respectively in a quarter driven primarily by new distributor leadership, as well as by the reengagement of existing leaders in the regions. Finally, return to growth in the third quarter, Synergy Europe delivered robust year-over-year growth of 23.3% in local currencies in the fourth quarter. Growth was seen in all key markets in the region and can be easily be supported by the investments made in sales, and marketing resources in the second half of 2013. In addition, sales have boosted our new introductions, the Slim Smart [indiscernible] and our E9 Energy Drink, both of which were launched at a European Summit in Barcelona at the end of September. We look forward to building upon this positive momentum in the quarters to come. Turning now to NSP Americas. Fourth quarter net sales of $44.2 million represented 51.0% of total company sales and decreased by 4.4 year-over-year in local currency. The decline was mainly due to consolidation of NSP Japan and Synergy Japan in the beginning of 2014, coupled with a transition of the UK to an export market in April 2014. The NSP America segment no longer has any business in Japan and Europe. However, we are pleased to report that the decline in net sales were partially offset by a second consecutive quarter of growth in NSP US and NSP Canada, both of which posted net sales growth and local currency of 2.6% and 9.6% respectively. Our fourth quarter performance in the US reflect a continuation of our progress made over the past several quarters to restore growth in the business. We saw continue adoption of IN.FORM which is folks of the weight management and building a daily habit of health, retail sales tools, as well as positive impacts from the re-branding and upgrading of our sober immune product line in September. Our strongest single skew in the immune product category. To comment on IN.FORM further, through the end of the fourth quarter we have certified 735 IN.FORM coaches and saw a 52% increase in weight management product sales in the quarter. As we have seen with a continued adoption of these programs, we have also been able to streamline our distributors to refocus their efforts on business building using our business opportunity with their high inspired incentive program. Overall we're pleased with the traction of our new program and program incentives in the US and are following the same strategies for NSP Canadian market. That said, it will take some time to see overall momentum continue to develop in these markets for long-term sustainable growth. In Latin America, net sales declined 13.2% year-over-year in local currencies to $8.5 million, as we faced continued headwinds due to changing regulations for product registration. To address this, we are taking steps to transition to the IN.FORM business method and at the same time ensure that our resources are inline with this initiative. Regarding NSP Russia, Central and Eastern Europe. Net sales at $10.6 million, represented 12.3% in the total company sales and decreased 37.4% over the prior quarter. The escalated shipment political unrest in conflict throughout the fourth quarter together was a substantial for the de valuation in Russian ruble, Ukraine hryvnia have significantly impact our fourth quarter performance resulting considerable net sales declines in both Ukraine and Russia and to a lesser extent other markets across the region. With regard to the currency devaluation, our product pricing in the region is pegged to the US dollar and therefore products become more expensive on a local currency declines and value. Throughout this period of instability, we have been focusing our efforts on the retention and engagement of our distributors and customers in the region and continue to show support through additional price and business building promotions. To date, conditions – with conditions changing constantly we have not been able to offset the decline. As we have witnessed in the recent months the situation is highly unpredictable and we must caution that sales will continue to adversely impacted due to currency devaluation, as well continuing political unrest in Ukraine and Russia and [indiscernible] Russia, as such we do not expect net sale declines to reverse in the near future. That said, we remain fully engage which it further enabled and supported by a strong presence on the ground through our local business partner. Turning now to China and new markets. We are continuing our progress with our multi brand, multi channel go-to-market strategy in China. Fourth quarter net sales revenue for the segment, which currently only includes our export business increased 22.0% year-over-year to $1.0 million and represent approximately 1.1% of total company sales. The increase in net sales was primarily due to the transition of NSP UK to an export market in 2014. In past years the export business was included in NSP Americas business segment. During the fourth quarter we also converted Peru to an export market. Currently there are no manager or distributors in the China and new market segment. Our new President of China and new markets Paul Noack is working hard to build a China management team, which includes a new managing director of China and other key experienced direct selling and consumer product executives. We anticipate deploying the first stage of our operating plan in China in late 2015 being with a launch of our ecommerce channel in which we plan to launch Nature Sunshine branded products online through a cross-border trade. In 2016, we will launch our retail and direct selling channels upon successful approval of our direct selling license in the region which we were demonstrating working towards obtaining. We are pleased with the progress made to date and are very excited to enter China later this year. Our Medical and scientific advisory board, as I highlighted earlier, we are very excited to welcome four professionals to our 2014 to our medical and scientific advisory board which now totals 6 individuals. With our first medical and scientific advisory board meeting during quarter, at Lehi our headquarters it was highly beneficial. These key individuals are first of all our global organization of R&D efforts and educating and training our distributors, adjusting with product development, investing in extensive research and clinical studies and speaking at various company events. In addition, we are please to announce of the Hue [ph] center for research and innovation, our new multi million dollar R&D center and medical clinic at our corporate headquarters in Lehi will be opening this month. The Hue center will be the cornerstone of our science strategy to create science space, innovative products and will serve as home based for our team world renowned and award winning scientist and doctors for doing research and product development. Lastly, our Oracle ERP implementation continues to progress according to plan with an expected launch date in early 2016. In addition to deploying capital and further our science base innovation and unify our global infrastructure, we continued our track record of returning excess capital to shareholders. Today, our Board of Directors approved a $0.10 per share a regular quarterly cash dividend. Our regular and special dividends in combination with our share repurchase program underscores the confidence our board and management team have in our strategy and our ability to continue to execute for retuning capital to shareholders. With that, I'll turn the call over to Steve, to review our fourth quarter financials.

Thanks, Greg, and good afternoon everyone. Net sales in the quarter were $86.7 million, down 7.1% from $93.3 million in the same quarter last year. On a local currency basis, net sales decreased 8.9% year-over-year. As Greg mentioned earlier, net sales revenue growth within Synergy for the fourth quarter of 2014 was offset by declines within NSP Russia, Central and Eastern Europe, excluding these declines, net sales for the remaining business segments would have increased by 2.4% year-over-year in local currency. Cost of sales was $23.5 million, down slightly from 23.6% in the year-ago period. Cost of sales increased as a percentage of net sales in the fourth quarter of 2014 by 1.8% to 27.1% as compared to the same period in the prior year. The increase is due to product promotions, the devaluation of the foreign currencies relative to the US dollar and increased importation fees related to higher transfer prices within some of our foreign markets. Gross margin fell 176 basis points to 72.9% compared to 74.7% in the year ago period, primarily as a result of the decline in revenue and the increased cost of sales percentage during the fourth quarter. Volume incentives accounted for 36.6% of net sales in the fourth quarter down by less than 1% compared to 36.8% of net sales in the same period last year. As a reminder, volume incentives are significant part of our network marketing program and are designed to provide incentive to reach higher product sales levels. Volume incentive varies slightly on a percentage basis by product due to pricing policies and commission plans in place and by the sales mix in our various markets. Selling, general and administrative expenses were $30.6 million, down $2.4 million or 7.2% compared to 33.0% in the same period a year ago. Selling, general and administrative expenses as percent of net sales was relatively flat with the prior period. The decrease in SG&A was primarily related to a decrease in variable cost in NSP Russia, Central and Eastern Europe, as well as reduced expenses associated with the combination of NSP Japan with Synergy Japan and the transition of NSP United Kingdom to an export market. The reduction in SG&A expenses was partially offset by $1.1 million in start-up cost for the China joint venture. Operating income decreased 64.4% to $0.8 million or 1% of net sales from $2.3 million or 2.5 on net sales in the prior period. The decrease was primarily due to net sales of revenue decline in addition to an increase in cost of sales as a percentage of net sales as previously noted. Adjusted EBITDA as defined in our earnings press release is net income from continuing operations before taxes, depreciation; amortization of other income, adjusted to exclude share-based compensation expense decreased 38.7% to $2.6 million in the fourth quarter as compared to $4.3 million in the fourth quarter of 2013. The effective income tax rate for the fourth quarter of 2014 was 26.1% compared to 30% in the fourth quarter of 2013. The current quarter's effective tax rate was lower than the U.S. federal statutory tax rate of 35% which was primarily attributable to valuation allowance adjustments relating to deferred tax assets. The effective income tax rate for 2014 was a benefit of 3.9% compared to a provision of 31% in 2013. The current years effective tax rate was lower than the US federal statutory tax rate of 35% which is primarily attributable to foreign tax credits arising from inter company dividends paid by foreign subsidiaries to the US Corporation throughout the year that are expected to be realizable in future periods. Net income from continuing operations for the quarter was $0.9 million, $4.05 per diluted share as compared to $1.8 million or $0.11 per diluted share in the year ago period. Negatively impacting our net income was our decision to seize operations in Venezuela in November 2014 due to the difficulties and uncertainties related to import controls, difficultly associated with repatriating cash and high inflation. As a result we incurred a loss from discontinued operations of $5 million or $0.25 per diluted common share in the fourth quarter of 2014. Moving to the balance sheet, cash and cash equivalents as of December31, 2014 were $58.7 million, down from $77.2 million at December 31, 2013. The lower cash balance primarily reflects cash outflows of $35.2 million to pay dividends, $7.5 million to repurchase shares of common stock and $20.1 million to reinvest in our Oracle ERP implementation. These outflows were partially offset by issuance of 2.9 million shares of common stock to Fosun Pharma representing aggregate net proceeds of $44.8 million in a private placement transaction. Inventory levels at December 31 were down 3.5% from December 31, 2013 and we have approximately $121 million in current assets. As Greg highlighted earlier, our Boar of Directors approved the regular quarterly cash dividend of $0.10 per share payable on March 23 to shareholders of record as of the close of business on March 12. In December 2014 we completed share repurchases under our previously announced 10 million share repurchase program. We repurchased approximately 319 shares of common stock for approximately $4.7 million in the fourth quarter. Our new 20 million share repurchase program went into effect on January 1 2015, in order to enhance our ability to repurchase shares we established 10(b)5-1 plan which allows us to repurchase shares at times when we otherwise might be prevented from doing so under insider trading lots or because of self imposed trading blackout periods. I'd now like to turn the call back over to Greg for some closing remarks.

Thank you, Steve. In summary, despite the headwinds we experienced and will continue experience in our NSP Russia, Central and Eastern Europe segment we were pleased with the significant progress made throughout the year. 2014 marked a return to growth in a number of key markets, including NSP North America, and Synergy Europe, as well as continued strong momentum in Synergy South Korea and Synergy Japan. We remain optimistic on our future growth potential in China and we are encouraged by improving our distributor engagement and adoption of our products and programs in many of our key markets. With that I'll turn the call over to the operator, for any questions.

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Brian Hollenden from Sidoti.

Good afternoon, guys. And thanks for taking my call. Can you talk a little bit more about the 2015 China launch, what are the stages it’s hiring and breakeven and around that if you can talk it all about the revenue forecast or just high level expectation that would be helpful?

Surely. This is Paul. I think its way too early to talk about revenue forecast. We can certainly talk about the fact that we're putting a well class team together. We are preparing for launches in three key distribution channels, ecommerce, retail and in direct sales. And all systems are good at this point. We need to get a little further down the line before we can give any sort of projections.

Okay. Fair enough. And then is that the order you mentioned ecommerce by the end of 2015, retail would that be early 2016 and the license for direct selling later in the year?

That’s the order we currently have scheduled, getting a license in China direct selling is not a perfect science. So we have to go through the process.

Okay. Turning over to Ukraine or Russia, can you elaborate more on your options to keep your distributor base engaged?

Hi. Its Wynne here. First, I think one of the things that we have going for us in Russia and Central, Eastern Europe is that we have a very strong local partner and we have other 200 distribution points throughout the region. So one of things that we've been able to do very effectively I think throughout the unrest is to maintain product availability and product accessibility for a lot of distributors in the region. The other thing that we've – that’s always important to do is to maintain visibility throughout the region, not only with a leadership, but with those various distribution points and distributors. And I think we held our annual convention and birthday party at end of September with four and half hours in distributors in Moscow. And throughout the fourth quarter our President of Russia, our Vice President of sales in Russia and our third party partner Santorin were all very active investing every part of the market, CIAT [ph] Moscow, the outer line regions, as well as Belarus. And so that visibility I think has been very, very important, as well as obviously the other forms of communication. And then the third piece has being, we've been very active in running both product and business recruitment promotions through the period in a selected discounted way as far as the product is concerned. The challenge is been throughout the period, there has been no stability. And I think the engagements and the visibility is been critical, but without the stability it’s very tough for those actions to gain any real traction and create the stability that we crave.

I appreciate the color. Can we talk a little bit more about potential future revenue impacts within that division, you expect to see additional decreases, but would they be decelerating those decreases?

It’s really tough to say at this stage. I think the best way can illustrate that is, as the currencies devalue, we see strong impact. We had though we've seen some level of stability by the time we got to late October, early November for the previous few months and then we saw significant further depreciation and devaluation of the currencies, the ruble, hryvnia [ph] primarily. And so I think until we see stability in the currencies it will be very tough to see stability in sales at this stage.

Okay. Thank you. And then I just have one more question and I'll jump back into the queue. Can you talk a little bit about the $5 million cost to exit in Venezuela, I think that compares to about the 600 to 700, to 800,000 estimate that you gave last quarter. I was just wondering if something, you know, came up there, just what happened in the Venezuela exit?

Yes. Good question Brian. This is Steve. With respect to the cost to exit to Venezuela, there was approximately 6 to 800,000 of cost in writing off some remaining assets and paying severance. The one item that – the additional balance between that 6 to 800,000 and the $5 million was due to writing off the translation gains and losses that had accumulated in the other comprehensive income, since we began doing business in Venezuela. And so that $4.3 million essentially of that write-off was a non-cash write-off in addition to the cash write-offs that we talked about in the last quarter.

All right. Thank you very much.

Thank you. Our next question comes from Nelson Obus from Wynnefield.

Yeah, hi well I got since very just a part less than my question, which is helpful. I know this we spent $20 million on the IT systems again this year. Are we in a last standing now and maybe you could quickly give us a sense of what will that allow us to do that we don’t have available now?

Okay, well certainly the ERP systems that will be the Oracle ERP implementation is set to go forward in early 2016. We began the implementation in the later half of 2013 and so we’re well down that path. But there is a $35 million to $40 million ERP project and therefore we still have spending that will take place as we move forward this year.

So we spent how much so far out of the $40 million we spent $20 million in 2014 right?

We spent $20 million and $14 million and about $3.5 million in 2013.

Okay so we still have spread between, while this year we might spend $15 million to $20 million right? So when you used the word implement I don’t think you not to use implement maybe you meant began the program I mean you initiated the installation. But you’re going to do it full change over in 2016?

Yes, we won’t put the ERP implementation in place until 2016, but we began the process to configure the system as little as writing the interfaces with other systems and certainly that implementation process will commence with and over that we put in place in early 2016.

Well, I’m sure I forgot more about.

This system is a new then.

I’m sure you forgot more about these systems and I know, but I hope you’re going to go redundant for a little while. Any system that cause that much by well I think may not be true, but I assume you’re going to run parallel systems make sure everything goes well?

We’ll make sure everything goes well.

And can you just give us a like a quick nickel tour about what that will enable you to do, which you can’t do now?

Sure, I think from a financial perspective Nelson, right now we have just got financial systems all connected from around the world into – here it will give us a single financial platform worldwide. So give as much greater visibility into our financial systems and it give us much faster access to information I suppose to traitor. In addition to that I think our manufacturing space it will give us much greater clarity into the, which products are profitable, and which products aren’t and we’ll be able to drill down much faster and give us much more time real-time visibility to our inventory in various places around the world. So we would be able to better write down our inventory, which as you know is relatively high. And in the sales space and how it prescribe sales I think one of the keys to any organization is understanding way your hot spots where your success is happening, and why that happening. So you can focus in drill down and try to replicate good practices around the world. And I think the systems will enable us to have much better visibility into where we’re seeing our successes at much faster basis and enable us to be more effective in targeting the areas for strong growth and strong investment.

That’s good okay, that’s great that makes it clear for someone myself. The one I wanted to ask had to do with. When you’re able to calculate how much Forex cost lot of companies are running it to this headwind. And will you able to calculate how much Forex impacted the quarter and the EBITDA number is that something you haven’t done right some companies try to do it?

Yeah, the Forex exchange impact was probably somewhere in the 1.6 to 1.8 range.

I’m going to mispronounce this, but I did see a chart of the Ukrainian currency, which has a lot of confidence and not a lot of value would know something I couldn’t believe like you said on this call how it’s fallen through the ground I mean is it consumable with this business just won’t be viable at some level of currency graphs?

Well, the hryvnia has gone I mean the two major currencies Nelson in those markets the ruble the hryvnia has moved from then to 13 it’s moved from 8.2 to 8.3 to the dollar and yesterday it was 38.

Yeah that was the chart I saw. And how you pronounce it hryvnia, okay...

I don’t know if it’s right, but it’s a little bit easier than phonetically.

It starts with an H, yeah.

Yeah exactly and so much and not 38 was a fall from 27 or 28 just a few days ago. So it’s very, very volatile right now. I suspect that, because of renewed fighting since the ceasefire right. I’d be talking to see bad news there and move to currency, the ruble itself has moved from low 30 maybe last year to it’s set around your range between 58 and 62. So the hryvnia is almost five times the value to rubles being cut in half. So it certainly makes doing business in those regions very challenging at this stage.

Yeah well what I mean.

I think one of the most important things and I suspected though having said that we don’t have we have very little fixed cost in the region. Our cost is with our third-party partner and our contract with them is variable to revenue. So as we see the sales decline and we’ve obviously seen profitability decline, we’ve been able to hold some profitability in the region and that’s been a very, whilst not reducing any services in the region. So I think that as well for should stability return here.

That is there clearly been reaccepted to the model of a years. Just a couple of real quick things I mean look assuming we have continued improvement in US and Canada I think I’m reading this right. We should see I know you don’t make projections I’m just saying assuming we’ve started a trajectory I think this how there been a bit assuming we started a trajectory in US and Canada of positive we have lot of the metrics including hopefully distributors and marketers and revenues. And then EBITDA I would in those countries it would be right to call I think it’s implied that we should see positives in metrics across the Board and as the America going forward, because of the elimination of the UK and essentially really is North America now right. I mean is that a true statement?

So its North America is certainly the bulk, and you can see that in UK and obviously we have Latin America and there’s a mix.

Oh, that’s right, Latin America is in there too okay.

Next then Latin America and great comment of that on the.

Okay, you’re right, I’ll see my problem okay no problem. And the last question just to get back real quick to China. Well that could you just be a little more granular about what the – when I was talking about numbers here. But what are the operational benchmarks since we did say that you mentioned it that there would be a launching in 2016. Just in 2016 latency of just from the granular perspective what is the operational benchmarks you’re looking for concretely as we go through 2015?

Well I think the first thing is we got to hire a team of people to do the business number one. Number two we got to set operational functions up, we can launch anytime on spot on which is the quickest one to market. The retail obviously we have to negotiate deals of the retailers as we have to get products license into country, that’s early next year, and direct selling [indiscernible] giving a direct foreign license.

Yeah ,okay.

Which you have to apply locally you have to go through Nascom in Beijing it takes time and the Chinese get it where somewhere and pay sometimes.

So let’s take the very first thing hiring putting together a team just to be multi-faceted, where we’re in that?

We’re very far along as far as giving a top level look like team probably 70% to be there.

And if it’s a team that will attack all three of the verticals or is it mostly focused on ecommerce at this point?

They will attack all three distribution channels and cost development.

Okay so I mean we could trying to be a little more of caution in 2015 and then kind of reverse going forward correct?

Yes.

Okay.

All right thanks.

[Operator Instructions] Our next question comes from Greg Hillman from First Wilshire.

Yeah, good afternoon it’s Hillman. Yeah for continuing along China I know this some multi-level you have any ecommerce platform that they are just moving product through Hong Kong, but they have a lot of sales in Hong Kong and I guess that product is just seem to Mainland China. Is that model legal and is that a viable model for Nature’s?

There are three trade zones in China I don’t know what Hong Kong business you’re talking about there are three trade zones in China into that we can send products from other countries.

Okay and I think you mentioned the cost for China first quarter was $1.6 million?

$1.1 million.

But I’m sorry $1.1 million sorry about that what you think the cost will be next year in appropriate is that a good run rate on a quarterly basis or do you think it will go up?

And certainly this is Steve, Greg. And we don’t give a lot of guidance, but there is 1.1 in the fourth quarter we’re 70% there on the team and so there will be some additional cost to register product and that’s where we are going forward.

Okay and then maybe Wynne, could you talk about the progress in Angie's List [ph] and Equolibrium equal? A - Wynne Roberts You’re right. And yeah, equilibrium and I think Angie's List continues to be a very strong recruiting product for us we talked about it and in several quarter since launch in the fourth quarter of 2013 and it’s been a – because of the impacted as very quickly on consuming the product, it’s being very good and become a stapled recruiting product for us. So that’s been very, very well received. Equolibrium I think launched very well and it’s been a great addition to our prostate helpline. I think since the launch of equolibrium I think one of the things that’s really been the focus of in the US has been the launch of the IN.FORM program. When we talk about that in Q1 last year and the IN.FORM program really is much more focused on general health of weight management. And so as we seen the success and trajectory of the IN.FORM program build through 2014. We seen continued growth in the weight management segment of our product line as well. So I think it’s a well anxiousness as equolibrium are important parts of the range, as IN.FORM is getting traction, but CNA [ph] have bigger impact on our weight management and cleanse products.

Looks great. You did a great job growing sales in NSP North America. And just in terms your overall effort, wants your distributors to improve, basically recruiting and retention of the people once they become distributors. How is that going in terms of – because if you increase your traction I guess that would help a lot or do you have anything any changes along those lines that you could speak of?

Are you talking about in the US or in general.

Yeah ,I said in the US.

So I think the, we’ve been total lot last year about the IN.FORM program and the IN.FORM program recalls a 13 week program where consumers were invited not only to walk through a each week modules that help them to understand better how their bodies work and how their response to good nutrition. So that’s part of the learning they get in the program. But through that program they’re introduced to a variety of Nature Sunshine products that had addressed different categories. So they’re introduced to the immune category, they’re introduced to gesture category, they’re introduced to the weight management category. And what we’re seeing is that those products that are the focus of IN.FORM and are in addition to the retailers our business as well,. we’re seeing continuous growth in those spaces. In the fourth quarter we launched, we re-launched our silver product line. We improved the formula to 20 products for million. So we re-branded the packaging and the labels on the products and we introduced two new sizes and we saw a significant response in the fields of others as well. So I think as we go forward with IN.FORM as we build that daily consumption and as we keep introducing the different parts of our products through the IN.FORM grown through our retail channels. We’re seeing that consumption and retention improve.

Okay. And then finally Greg, could you just talk about what do you think the most important catalyst will be over the next two years to grow sales and profitability for the company. In terms of given all the statements of the company?

I think there’s sort of three things we look at, one is maintaining, accelerating the growth we've been able to achieve in NSP North America, so obviously the US is over 40% of our worldwide business. So that – turning that market around was very strategic for us and it generates over 50% of our operating cash flow. So to continue to see that, that division grow and I think the niches we put in from product initiatives like anxiousness to program initiatives like IN.FORM or promotional initiatives like I Inspire are all having a strong effect on that business and I think equally important is. We now segmented the business amongst our different type of distributors, retailers and practitioners and IN.FORM and what we’re seeing is we’ve got one pocket of the business growing and we’re seeing growth across all of our segments in US. So we’re very optimistic that we can maintain and hopefully accelerate that growth. So that’s the single biggest areas, because of the single biggest piece of our business. I think second is synergy, we have several countries that are growing tremendously that point out in Indonesia is one, Taiwan, Japan are all growing, Korea although slowdown continues to grow. And I think for the first time in a while we’re seeing growth and synergy across our European region. So I think just maintaining that growth in Europe and in Asia for Synergy and building upon that would be a second key focus. And I think the third one is China. Although it’s a investment for the next two years and I think everyone realizes how big China is for direct selling, how big China is for the VMS category, it’s a second largest VMS market in the world and that is growing direct selling markets. So although it is a drag on earnings for a couple of years, it obviously creates a huge opportunity for us to significantly grow the business and we are very, very focused on executing against the plan. We build as Paul mentioned a topnotch management team that comes from direct selling And it’s very, very experienced at driving direct sales in China. So we have the team that’s done it before. And so I think no one in China is using a multi-brand, multi-channel approach like we are. So I think that provides upside in the ones doing it with a major joint venture partner like we have with lots of partners. And I’d say all those are really the three major revenue areas of focus.

Okay. Thanks, Greg.

Thank you.

At this time we have no further questions. This does conclude today's teleconference. You may disconnect lines at this time. Thank you for participation.