Nature's Sunshine Products, Inc. (NATR) Q3 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the Nature’s Sunshine Products Third Quarter 2015 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’d now like to turn the conference over to your host Richard Strulson, General Counsel for Nature’s Sunshine Product. Thank you. You may now begin.

Thank you. Good afternoon, everyone. And thanks to all of you for joining our conference call to discuss our third quarter 2015 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. The press release which was issued this afternoon at approximately 4:00 pm 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 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’ll now turn the call over to Greg Probert, Chairman and CEO of Nature’s Sunshine Products.

Thanks, Rich. Good afternoon everyone and thank you for your participation in today’s call. Joining me today is Steve Bunker, our Executive Vice President, CFO and Treasurer. I look forward to sharing with you details on our third quarter performance in addition to updates on our sales and profit improvement initiatives and go-to-market strategy in China. Third quarter sales of $79.6 million were down 8.8% on a local currency basis. This decrease was primarily driven by a $5.4 million sales decline in our NSP Russia, Central and Eastern Europe business. Excluding NSP Russia, Central and Eastern Europe, sales for the remaining business segment decreased by 3.5% year-over-year in local currency, primarily due to lower sales in Synergy North America and Synergy Korea. While our results were softer on the whole, we were very encouraged by continued growth in NSP United States and NSP Canada, our largest and fourth largest markets, both forcing their fifth consecutive quarters of year-over-year local currency sales growth. Further, as we discussed previously, we are on track to realize approximately $10 million of annualized operating income improvement by the end of the year through reductions of SG&A expenses, streamlining of operations and the implementation of price increases in certain markets. We remain intently focused on improving our profitability while concurrently investing in our strategic growth initiatives including our launch into China. Now turning to our segment results, NSP Americas third quarter sales of $44.5 million increased by 0.7% year-over-year in local currency and represented 6% of total Company sales. NSP U.S. and NSP Canada, both achieved their fifth consecutive quarters of year-over-year growth of 1.8% and 2.3% in local currencies respectively. Their third quarter also marked the first quarter of year-over-year growth over a prior year growth quarter. Equally important, we saw growth for both existing members and new member signups in the U.S. for the first time in over two years. Progress with our IN.FORM business model which focuses on both weight management and building a daily habit of health has continued to fuel this growth. Through the end of the third quarter, we have certified 1,234 IN.FORM coaches, an increase of over 28% from the second quarter of 2015, with 456 groups currently up and running. Further bolstering growth during the quarter has been ongoing traction with our key retail account management tools as well as new product launches. Our R&D efforts continue to bear fruit with new U.S. products driving distributor activity and incremental revenue. Following our National Convention in April, our two new product launches Berberine IR, for glucose metabolism support and patent pending CardioxLDL for cholesterol metabolism support have been performing very well. Another meaningful contributor to growth has been the re-launch of our updated and extended line of authentic essential oils, resulting in year-over-year growth of approximately 70% across this line. Moving to Latin America, sales declined 3.6% year-over-year in local currency. We continue to face headwinds in this region due to lots of key products as a result of the changing product registration regulation. To address this, we’re taking steps to transition our market to adopt the IN.FORM business model which will help transition from herbal remedies which must meet stringent regulatory requirements to functional food products. During the quarter, we expanded IN.FORM to seven additional cities within Colombia and launched a pilot IN.FORM program in Ecuador. Despite the challenges of product registration, Mexico has experienced quarter-over-quarter growth for the second sequential quarter after three declining quarters. In Mexico, we continued to promote IN.FORM at regional meetings and ongoing certifications. We’ll continue to aggressively roll out IN.FORM in the U.S., Canada, Mexico, Colombia and other key Latin America market to drive incremental growth. Turning to Synergy, third quarter sales of $27.8 million decreased by 8.9% year-over-year in local currency and represent 35% of total company sales. The decline was primarily driven by continued softness in North America and Korea and to a lesser extent in Europe which was partially offset by improvements in Japan and Indonesia. We’re taking steps with Synergy to streamline our focus for multiple product strategies for a more cohesive sales method including a unified product offering. We’ll take some time to register products, educate the existing leaders and distributors and attract new leaders. But we’re confident that developing a more unified approach in all of our Synergy regions will help stabilize this business and ultimately drive long-term growth. ProArgi-9 Plus continues to be a top selling product in all major Synergy markets. Our recent clinical research on ProArgi-9 Plus has shown specific benefits associated with our unique formula which allowed us to file for a provisional patent. We believe these unique benefits will provide a competitive advantage for our top selling product. Turning to Synergy Japan, sales grew by 18.5% year-over-year in local currency. Sales continue to be supported by new product launches as well as the continued implementation of the sales system adopted from our Korean distributor. Indonesia also achieved strong sales growth during the quarter, increasing 15.3% year-over-year in local currency, driven by new distributor leadership including a reengagement of existing leaders in the region and implementation of a modified sales system has been successful in South Korea. In Europe, sales decreased by 3.9% year-over-year in local currency, primarily due to decline in the Scandinavia, in a dramatic region. Growth we had experienced in the prior four consecutive quarters was primarily related to September 2014 launch of Slim Smart, our Synergy weight management program which drove sales momentum through new customer acquisitions and price increases. To reignite growth in Europe, we’re intently focused on launching new sales and marketing initiatives that proven successful in Asia. Further, we launched our Elite Honors Club at the recent Rome summit which was attended by over 1,100 people. Lastly, we launched two new products, SLMsmart Chocolate and Body Prime! our European summit in Rome in September. Coming to South Korea, net sales decreased by 15.2% year-over-year in local currency. However, in Q3, we were able to return the market to growth with a sales increase of 7.3% over Q2. We worked hard to stabilize this business through the introduction of home health parties, a new customer acquisition method. We further reinforced our distributors on the importance of face-to-face recruiting as well as expanding our social media strategy to now include Facebook and Instagram. Net sales in Synergy North America remained under pressure with the decline of 25.4% year-over-year, primarily as a result of reduced distributor recruiting. To address this, we have implemented various growth initiatives in North America to more effectively support distributor recruiting, training and motivation. In addition, we are rightsizing SG&A to maintain profitability. Turning now to NSP Russia, Central and Eastern Europe, net sales of $6.3 million represented 8% of total Company sales and decreased 46.2% over the prior year. The decline in this segment caused by geopolitical and macroeconomic factors, comprised nearly two-thirds of our consolidated net sales decline for the quarter. The ongoing political unrest and conflicts has led to a significant reduction in a number of independent managers, distributors and customers buying and distributing our products. In addition, the further devaluation of the Russian ruble and the Ukrainian and hryvnia has resulted in a sharp increase in the local cost per product as our product to pricing in the region is paid to the U.S. dollar. Despite these headwinds, we worked very hard to protect our business in a very important direct selling region. For example, we have not lost significantly here throughout the harsh economic conditions. In fact, we recently attracted a new major leader that brought with her a significant book of business and over a 150 new distributors. Throughout this period of instability, we’ve been working to retain support and engage our distributors and customers in the region through commercial activities, pricing, events, product kits and training. We recently hosted over 4,000 attendees at our National Convention Anaheim, a turn out we are highly pleased with concerning the economic turmoil in this region. While we still do not expect conditions to improve in the near term, sales have more or less stabilized in the region over the last three quarters. Our strategy to stay the course has not changed. Without a brick and mortar presence in the region, we rely on our strong relationship with our local partner and believe we are very well-positioned to reignite growth once the situation is steady. Turning now to China and New Markets, third quarter net sales for the segment which currently only includes our wholesale business, decreased 14.1% year-over-year to $1 million and represent approximately 1% of total company sales. The decrease in net sales was primarily due to transition of NSP Peru which was a direct selling market in the third quarter 2014 to a wholesale market in 2015. Currently there are no managers or distributors in the China and New Markets segment. In China, our focus has been on building a strong foundation with the support of our joint venture partner Fosun Pharma, to effectively launch our direct selling business in the third quarter of 2016. Notable achievements during the quarter include the finalization of our product packaging and design, continuation of the process for the general food importation and blue cap registration for select direct selling products. We also established our Chinese headquarters with the opening of our office in Shanghai. Due to a change in the Chinese regulatory environment, we have been definitely deferred our entry into the retail channel and will focus our efforts on the launch of the direct selling business. We have been diligently working towards obtaining our direct selling license. During the quarter, we prepared key application documents for Beijing Commission. We view our expansion to China as a highly strategic Greenfield opportunity and expect it will be a key driver of growth for our business in the coming years. We feel very confident in our highly experienced management team under the leadership of Paul Noack, our President of China and New Markets and the support of our partner Fosun Pharma. Before I conclude, I want to focus on our capital allocation priorities. We are going to continue to make investments in the business where we see the greatest growth potential, such as in China, Europe and Asia Pacific. And we’re continuing to invest in our Oracle ERP implementation project which remains on track to go live in January 2017. We remain committed to our shareholders and the long term growth prospects of the business as evidenced by our ongoing share repurchases and return on excess cash in the form of quarterly dividends. We completed share repurchases in the amount of $6.1 million during the nine-month ended September 30, 2015 and today our Board approved a $0.10 per share regular quarterly cash dividend. To conclude, while we continue to face challenges in several of our key markets, we’re diligently working to reignite growth in our business. We’ve successfully streamlined our operations and by year-end, expect to realize approximately $10 million of annualized operating income improvement. Going forward, we’ll remain focused on realigning our activities on profitable future growth opportunities as well as new programs and product development efforts to improve engagement of global base of distributors and customers. With that, I’ll turn the call over to Steve to review our third quarter financials.

Thanks Greg, and good afternoon everyone. Net sales in the quarter were $79.6 million, down 14.8% from $93.4 million in the same quarter last year. On a local currency basis, net sales decreased 8.8% year-over-year. The decrease was primarily driven by $5.4 million decline in net sales revenues in the NSP Russia, Central and Eastern Europe segment, coupled with $5.6 million unfavorable impact from foreign currency exchange rate fluctuations. Excluding the net sales revenue declines in NSP Russia, Central and Eastern Europe, net sales for the reaming business segments decreased by 3.6% year-over-year in local currency. Cost of sales were $20.6 million, down from $22.7 million in the year ago period. Cost of sales increased as a percentage of net sales for the third quarter of 2015 by 1.6% to 25.9% as compared to the same period in the prior year. The year-over-year increase was due to the strengthening of the U.S. dollar against the local currencies in many of our foreign markets, which has made our products manufactured in the U.S. more expensive in those markets and was partially offset by a favorable change in inventory reserves. Gross margin fell 160 basis points to 74.1% compared to 75.7% in the year ago period, primarily as a result of the decline in revenue and the increased cost of sales percentage during the third quarter. Volume incentives accounted for 36% of net sales in the third quarter, a decrease from 37.4% of net sales in the same period last year. The decrease was primarily due to reduced sales in NSP Russia, Central and Eastern Europe which pay higher sales commission rates than our global average. Volume incentives are significant part of our network marketing program and are designed to incentivize higher product sales. Volume incentives vary 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 $27.1 million, down $3.1 million or 10.2% compared to $30.2 million in the same period a year ago. Selling, general and administrative expenses as a percent of net sales were 34.1% in the third quarter, up 1.8% as compared to 32.3% in the prior year quarter. The increase in SG&A as a percentage of net sales was primarily due to the decline in net sales and our investment in China. SG&A in the quarter included increased investment in China of $1.8 million and a restructuring charge of $0.3 million related to our plan to streamline operations. These expenses were offset by the reduced impact from favorable exchange rate changes due to the strengthening of the U.S. dollar; management service costs in the NSP Russia, Central and Eastern Europe segment from lower net sales; and reduction in U.S. healthcare and other benefit costs. Operating income decreased 43.4% to $3.1 million or 3.9% of net sales from $5.5 million or 5.9% of net sales in the prior year period. The decrease was primarily due to the net the sales revenue decline during the quarter as well as our continued investment in China. In addition, operating income was impacted by the devaluation of foreign currencies relative to the U.S. dollar, which increased our cost of sales as a percentage of net sales. Adjusted EBITDA, as defined in our earnings press release as net income from continuing operations before taxes, depreciation, amortization and other income adjusted to exclude share-based compensation expense, decreased 26.6% to $5.5 million in the third quarter as compared to $7.7 million in the third quarter of 2014. The effective income tax rate for the third quarter of 2015 was 44.4% compared to 7.4% in the third quarter of 2014. The current quarter’s effective tax rate was higher than the U.S. federal statutory tax rate of 35% due to current year foreign losses including our investment and the resulting losses in China that presently do not provide a future tax benefit partially offset by adjustments to the evaluation allowance on U.S. foreign tax credits. Further, the favorable difference between the effective tax rate for the prior year quarter and the U.S. federal statutory tax rate was primarily related to a decrease in tax liabilities associated with uncertain tax positions. Net income from continuing operations for the quarter was $1.6 million or $0.08 per diluted share as compared to $5.1 million or $0.29 per diluted share in the year ago period. I’d like to highlight that our diluted EPS for the quarter was significantly impacted by various factors including a $0.10 per share impact from our investment in China which excludes tax benefits expected to be realized in future quarters, resulting in the higher than normal tax rate. A $0.04 per share impact from foreign currency translation expenses and a $0.03 impact per share from the net sales decline in our Russia, Central and Eastern Europe segment. The diluted EPS of $0.29 for the prior year quarter was favorably impacted by $0.08 per share from the lower than normal tax rate and by $0.01 per as a result of lower weighted average diluted common shares outstanding due to the timing of the Fosun transaction in late August 2014. Through the streamlining of our operations and focus on profitable markets, reduction of SG&A expenses and price increases in certain markets, we expect to realize $10 million in annualized operating income improvement. Since the onset of our plan, we have eliminated approximately 100 positions worldwide through, both severance and attrition. While we regret any hardships this may cause our employees, we believe these are necessary actions to enhance our operating efficiencies and drive long-term profitability. In the near term, some of these savings will be partially offset by our continued investment in China. Turning to the balance sheet, cash and cash equivalents as of September 30, 2015 were $43.9 million, down from $58.7 million at December 31, 2014. The lower cash balance, primarily reflects cash outflows during the nine months ended September 30, 2015 of $5.6 million to pay dividends, $6.1 million to repurchase shares of common stock and $17.5 million of capital expenditures including $13.1 million to reinvest in our Oracle ERP implementation. These cash outflows were partially offset by net income of $10.3 million and proceeds from the exercise of stock options of $3.8 million. Inventory levels at September 30th were down 2.6% from December 31, 2014 levels and we have approximately $105 million in current assets. And as Greg noted earlier, our Board of Directors approved a regular quarterly cash dividend of $0.10 per share payable on November 30, 2015 to shareholders of record as of the close of business on November 18, 2015. During the three months ended September 30, 2015, we repurchased a 1,62 ,000 shares of common stock under our $20 million share repurchase program for approximately $2 million. And through the first nine months of 2015, we repurchased 458,000 shares for total of $6.1 million. The remaining balance available for repurchase under the program as of September 30th was $13.9 million. Our balance sheet remains healthy and provides us with sufficient liquidity and capital to continue to executing on our key growth initiatives while simultaneously returning cash and building value for our shareholders. With that I will turn the call over to the operator for questions. Operator?

Thank you. At this time we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Gregg Hillman from First Wilshire Securities Management.

First of all, that loss from the discontinued operations, that 800,000, what was that; was that Peru or what was that?

The loss from continuing -- from discontinued operations was related to our exit of Brazil about five years ago. We had some favorable reserves that we’re able to release.

And on -- Greg, in terms of momentum for IN.FORM, comparing it to -- I don’t know like [Indiscernible] or how long it seems like you are gaining some momentum there. Do you think you are at inflection point there, you will grow very rapidly or what’s your take on that?

Yes, Greg. I think we are getting to an inflection point. We have been very successful at converting a lot of our existing practitioner base to doing IN.FORM in addition to their traditional methodology. It’s still fairly low when we penetrate it. So, I think what we see is an opportunity through Q4 this year and going to next year to actually convert a lot more people into IN.FORM. We’re seeing the people that are converting are growing substantially double-digits over the traditional business. I think we’re getting those testimonials, we’re getting the success stories. And I think it’s starting to sort of permeate our distributor base and create a positive buzz. And I expect to see an acceleration of the number of distributors that convert to IN.FORM, as well as I think we’ll start to see the -- a new generation of distributors attract to the Company. So, I think the combination of the conversion of existing distributor base in addition to attracting new distributors will accelerate IN.FORM growth next year.

And Greg, I think you said that you brought IN.FORM out of Mexico, is that a recent phenomena and is there something else like IN.FORM in Mexico right now that’s down there or you’re more unique in terms -- in the Mexico for IN.FORM?

I think there’s obviously weight loss companies down in Mexico, both in direct selling space and in the retail space. I think the difference with IN.FORM is that it’s not just the weight loss, it’s weight loss but also creating a daily habit of health around various bio -- improving various biomarkers. So, I think it has the weight loss components of a lot of our competitors but I think it’s a much more comprehensive and long lasting program in terms of teaching nutrition, teaching daily health, total supplementation, not just protein or weight loss. So, I consider it the most comprehensive program on the market.

Is this just [indiscernible] still online just in terms of getting into China say as a drug seller, you mentioned you are going to deemphasize retail at this point and concentrate on just the retail channel -- the wholesale and the drugs channel. Is that correct.

That’s correct.

And is there any impediment -- how many drug seller licenses are there in China right now for foreign companies?

I don’t know the figure off the top of my head.

And is there any impediments; what are the final hurdles that you have to get over to get that license?

I would say that we’re moving on schedule with respect to the direct selling license. We’re following all the procedures that need to be followed. We’re running our submission and checking all of our boxes. I wouldn’t say that there are any impediments. We’re running on schedule.

Okay. And then -- but you are selling into China right now on a wholesale basis, is that correct or is there any China sales currently being made?

We have set up our ecommerce site and business.

Is that going forward with sales or is that just still in the pilot phase?

It’s early days, I think our ecommerce brand is very much linked to our direct selling strategy as I think we’ve explained in prior quarters that as we bring on -- as we launch the direct selling and bring on our leaders, the ecommerce gives them an opportunity to use ecommerce as a back office, as a fulfillment device, as it plays for customers who purchase products. And so we don’t expect significant revenue out of that channel until we launch our direct selling business in Q3 of next year.

Thank you. [Operator Instructions] Our next question comes from Nelson Obus from Wynnefield Capital.

Steve, just a question, in just EBITDA, is the loss of China added back or not?

No. The loss in China is -- it’s not added back.

I asked what was a pretty dumb question on the last call about how much China cost us. And I was reminded Steve that you’ve put money into the joint venture that there is sort of an accrual or whatever you want to say, a reserve or however we want to put it. So now that we are actually pulling the loss, [ph] what happens, am I seeing a change here or not just in terms…

Nelson, good question. What we did is -- we own 80% of the joint venture; our partner Fosun owns 20%.Last August we funded RP to the joint venture which was $16 million; they funded their 20% which was $4 million. So, at that point, it was an investment in the joint venture and cash on the balance sheet, no accruals or no expenses. And so now on a quarterly order, each month as we incur expenses in hiring people, in office space, in professional fees and preparing through the product registration, the submission of the direct selling license, we incur expenses that get expensed. And so in the third quarter, we spent $1.8 million that was expensed.

Frankly you are taking the $16 million and flowing it through the P&L if there is a loss or will it increase the gain [ph] is that fair?

Yes it’s an SG&A expense and capital.

So would you like capitalizing your capital expenditure? So it really -- it shouldn’t affect our cash flow statement right?

Well, it does impact the cash flow statement in that at the loss -- at this point it’s a cost to get into China, cost to get into the market but once we have our direct selling license, we would be able to start to realize the revenues which will exceed the expenses.

You haven’t sent them -- you didn’t send them $16 million which is…

The cash is on our balance sheet until we spend it.

I got it, okay. Just one bigger question here and I’m -- it has to do with Synergy. So, there’s been a really interesting up and down preposition; it was a number of years ago was very steady and it had a debt that went way up. And now it seems to be for us the little bit of [indiscernible] some of this has to with the peculiarities of success in individual countries but is there any underlying theme here in terms of I guess I was a little surprised as to how fast it came down but I know we’re trying to get it where altitude. Is this a country-by-country thing or is it some of the universal themes that account for this up and down picture, a lot more volatility than the other parts of the business, particularly North America?

I think it’s a combination of both of those factors. MLM obviously goes up and down on a country-by-country, region-by-region basis, which is not unusual in this industry. I think in particular in the Synergy case, in Asia, we have work of distributors that developing I think a fairly unified business system and product portfolio. And as I said in my comments that system was developed in Korea, moved to Japan, moved to Indonesia, and moved throughout several other countries in Asia. Our go forward plan is to take that methodology, that daily method of operation and roll that through the rest of Asia and roll it through Europe, starting basically Q1 of next year. So, I think as we come up with a more homogenous business system and product portfolio across our region that you will see want to return to grow across all the regions and more importantly probably -- and more stability in the individual country of performance.

And good metrics in terms of distributor account in North America. Are you trying to reconstruct what the variables that allow us to stabilize, grow in terms of distribution network?

Yes, in terms of the U.S., NSP U.S., there is a couple of factors that work, one is in our traditional practitioner business we’ve been able to through tools and new product releases such as our silver launch a year ago or essential oil launch a quarter ago, we made to reinvigorate that installed based. Our retail base, which as we’ve stated before is about 40% of our U.S. sales. We’re using very traditional retail methods there such as key account management, point-of-purchase displays, planogramming, and because of that I think that sector is growing. And then probably the largest impact is the lunch of IN.FORM and the adoption of IN.FORM. And as I sad that segment is growing by double digits which is the question of getting further penetration of the existing base with IN.FORM and attracting the next generation of distributors in the IN.FORM business model.

Is there any -- when you look at the demographics of the IN.FORM based distribution, is there any different there that -- is it bringing a different kind of person, I am just curious?

I think it’s different in terms of demographics and also psychographics. We’re attracting a younger group of distributors which is one of the reasons, we came up with IN.FORM and launch it. So, we think that’s the way of bringing the next generation of distributors which we haven’t been able to do in the U.S. business for a while. And you saw for the first time in several years, we actually enlarged our member base in Q3, both in terms of existing members and new members signing up, so those are customers. So that’s I think a very good metric and indication that it is working. And I think you have to -- from a psychographic, I think we’re bringing in people that are less oriented towards the practitioner business and over time will be I think more I’d call health enthusiast. And that allows us I think to cast a wider net and bring more people in to a system that is very well-defined, is easy to learn and easy to do duplicate.

Thank you. Our next question is a follow-up from Gregg Hillman.

Greg, could you just talk about couple of products in particular, I guess AnxiousLess and then also the [indiscernible] patent that you did the press release on. Why was that important or what was that about and how much better are you [indiscernible] out there right now?

So AnxiousLess continues to be a top seller for us. It’s obviously a very differentiated product, as you know. We have a patent pending on that as well and we’re able to show that. This is really the future of research in this Company and the reason why we invested in the Hughes Center for Research and Innovation was to take sort of standardized product [indiscernible] in the case of AnxiousLess, look for unique combinations and in that case we’re able to make a proprietary blend of products and do a clinical show that it made our product 56% more bioavailable. I think the same holds true with the ProArgi-9 that it’s not the L-arginine in it which you could buy almost every store but it’s a combination of the L-arginine with the other ingredients that we are able to show in our clinical one increased NO output more immediately than L-arginine and also inhibited the mechanism that creates oxidized LDL which is one of the key biomarkers in cardiovascular disease. So, we feel very comfortable. And because of that and we created a new use that we’re able to file a patent pending on that product. And I think it differentiates us in the market. No one I am aware of can show that they have a blend of a L-arginine and other ingredients that increases NO as fast as ours, nor locks the mechanism that create oxidized LDL which is one of the key biomarkers as I said for cardiovascular disease. So we think this is obviously our biggest seller in Synergy and we believe this represents a significant differentiation in the market against our competitors.

I think then the other people research doing a great job and coming up with new products sort of [indiscernible] realize on the revenue line, but it sounds like you’re putting kind of a franchise in cardio. But also I believe it is you are trying to expand the product offering to go after metabolic disease rather than just weight loss, you’re going after a wider swap if you will with IN.FORM?

Yes.

Is that branded or is it different product or is it that just part of the original IN.FORM?

We were actually working on launching the next generation of that which we’ll do next year and that will have additional products and will have some additional science as well as we’ll do some new branding on that as well. So, we think -- we’ve launched it and we’ve got good penetration. And I think next year we’re looking to take it to a whole new level in the U.S. and then roll it out throughout and the Americas.

And then I just wanted to ask you about technology and Facebook marking, I know there is two other companies, one is educational development course that sells [indiscernible] both through at multi-level but we Facebook [indiscernible] and the things exploding and also Tupperware is doing people kind of review the parties remotely which is helping to increase sales. So, I was wondering is there any course tool that you could do like social media tools that you could do to enhance sales or where do you think…

Great question, Gregg. I think we’re looking at that in all aspects of the business. So, when we launch in China, I think we will have the most sophisticated mobile app a very -- everybody in that market including not only internet on desktops but on all mobile devices. And I think that -- as you know that’s a very tech savvy country. And we think that’s again a differentiator for our launch in China that we will have a very robust ecommerce and mobile technology. We’re doing the same thing in synergy, both from a distributor standpoint in recruiting customers and distributors, but also using technology to give them tools to better manage their down lines and their customers and be more proactive. So, it’s both; it’s the customer and distributor acquisition tool as well as a business tools to manage your existing portfolio of business. So that’s going to be rolled out end of next year in synergy that will be part of our, China launch in Q3 and then we’ll have some mobile apps in the IN.FORM 1.1 launch that we’re going to do next year in the U.S.

Thank you. At this time, there is no further question. I’ll turn the call back over to Greg Probert for closing comments.

Thanks again for your support and for participating in today’s call. I want to thank our distributors and employees worldwide for everything they do, everyday to make Nature’s Sunshine such a great company. Have a great day. Thank you.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.