Greetings, and welcome to the Nature's Sunshine Products Third Quarter 2019 Conference Call. This conference is being recorded. I'd now like to turn the conference over to your host, Mr. Nate Brower, General Counsel of Nature's Sunshine Products. Thank you, Mr. Brower. You now have the floor.

Good afternoon. Thanks to all of you for joining our conference call to discuss our third quarter 2019 financial results. This call is available for replay in a live webcast that will be posted on our website at naturessunshine.com in the Investors section. The information on this call may contain forward-looking statements. These statements are often characterized by terminology such as believe, hope, may, anticipate, expect, will and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by the forward-looking statements.

Thank you, Nate, and good afternoon, everyone, and thank you for joining us for today's call. I'm pleased to be with you today to discuss our third quarter results and some of the progress that we've made transforming our business. With me today is our Chief Financial Officer, Joe Baty, who will walk you through our financials in greater detail, but I'm going to kick things off today with a brief overview of the business. Now as you know, earlier this year, we launched a new global strategy designed to strengthen our business by improving our consumer appeal and dramatically improving profitability. We're only about seven months into the process, but so far, I'm very pleased with our progress through the third quarter. Already, we're seeing significant improvement to our margins, which were up 300 basis points versus Q3 prior year, excluding nonrecurring items, while net income was up 60% versus Q3 prior year. Our efforts to restructure the business, including the new leadership structure we launched in July and a leaner, more efficient organization, has helped drive profitability while strengthening our ability to focus and more effectively execute our strategies. Our new operating business units, or as we call them, OBUS, are more focused on addressing local consumer needs, improving market effectiveness and building the capabilities needed to drive results. During the third quarter, we made significant progress against each of our five global strategies, and I'd like to briefly discuss our progress on each one of those. Our first strategy that we call brand power is about creating a more aspirational brand that excites, inspires and transforms the way people think and feel about our company. During the third quarter, we completed Phase 1 of our global rebranding initiative, which includes the introduction of new logos, fonts, packaging, messaging and brand imagery. We're finalizing our Phase 2 launch plans, but as we move forward, we anticipate updating all of our consumer and sales-facing assets with our exciting new branding that repositions our company to celebrate our leadership and heritage in the herbal supplements industry.

Thank you, Terrence, and good afternoon, everyone. Net sales in the third quarter of 2019 were $88.5 million compared to $88.8 million in the same quarter last year. On a local currency basis, net sales increased 1.1% year-over-year or relatively flat as reported. Unfavorable foreign currency exchange rate fluctuations impacted net sales by $1.3 million compared to the prior year. Asia net sales declined 1% year-over-year to $33.7 million during the third quarter, but increased 1.8% in local currencies. On a local currency basis, the growth was driven by a 14.3% increase in Japan and a 16% increase in China, partially offset by an 11.3% decline in South Korea. Net sales in Europe increased 12% year-over-year to $14.6 million or 13.7% growth in local currencies. As Terrence noted, the net sales increase reflects continued growth in Central and Eastern Europe, including strong performance in Russia.

And we’ll take our first question today from Steven Martin with Slater.

Hi guys. Hello.

Hi Steve.

You’ve done a great job of getting the business fixed and poised for growth, would you venture a guess as to when we're going to start to see some top line growth? And along with that, how do you expect in magnitude, the launch of the CBD product to look in your first year?

I'll start with CBD. There's a – obviously, a lot of excitement around CBD in the market in general, but also given our practitioner-based business and the skill level that they have and the attention to detail that they put behind kind of product and therapeutic-driven products, there's a tremendous amount of excitement with them. Having said that, I wouldn't venture to say kind of where we'll land on that. But I will say that a significant portion of our distributors and practitioners are already kind of playing in this segment and are eager to take on our product. With respect to top line growth, the – as you can hear, as I went through our five strategies, every single one of them is designed to start building a platform to make our company more attractive, more relevant, more powerful and to really get back to our core capabilities of being a leader when it comes to herbal supplements and botanicals. And so again, I don't want to get into the timing of when we expect things to really start to click, but we're seeing tremendous growth in Russia, Poland, Central and Eastern Europe. We expect that strength to continue. Our business in Asia – despite the ding in Q3, our business in Korea is strong. And we continue to be very optimistic about China. So I think we feel very good about Asia. And then, of course, North America is the big nut that we are hammering away on, and our new Executive Vice President of North America, Eddie Silcock, who just joined us about six months ago, he's working very closely with the executive committee and his team in North America to lay the foundation to get that business back on track and really start to create an…

All right. If you don't – Yes, it does. If you don't mind, on the financial side, you really have done a great job repositioning the company, stabilizing, getting it ready for growth. You've got $50 million of cash. You've got healthy EBITDA, and your stock price is reasonably cheap. At what point would you – the Board consider using some of that cash to take either – pay a dividend or buy back some stock? At a minimum amount of stock to consider offsetting some of the option creep and buying back the option shares?

Sure. Sure. That's a good and reasonable question, probably one better suited for the Board of Directors. And obviously, those things are at their discretion. Right now, the management team is focused on driving growth and trying to invest in growth. We have some significant investments that we'd like to make in digital, we have significant investments that we need to make in our brand and branding. So I don't want to preempt the board on those things. But again, we feel very good about our financial position. And Joe and the finance team and the operating committee have done a – the executive committee have done a great job of putting us in a position where now we can have some real options.

All right. Thank you very much.

Is that fair?

Yes, it is.

Thank you.

Thank you. Our next question will be from Jurriaan Hofman with Robeco.

Hi, good afternoon, gentlemen. Thanks for taking my question.

Hi, Jurriaan.

Could you give a little bit more color just on what happened in South Korea and also on the Chinese market? In China, you seem to be faring somewhat…

Yes. In South Korea, they were – last year, at this time, I believe, we had a major event, and so there was a spike in Q3 performance that we were going up against this year that will land in, I believe, Q4. So we've got an event in Q4. So it's just – I think it's a timing issue from that standpoint. With respect to China, we continue to, I guess, kind of just focus on the fundamentals. We've got some very strong, very experienced leaders there who are adapting, I think, quite well to the changing environment on ground. And not the least of that is not only maintaining fundamentals in and around the recruiting, training and motivating of new distributors, but also in terms of consumer acquisition, we're seeing some, I think, good activity in that area. And so again, that's, I think, one of the things that's holding us afloat in China right now and allowing us to continue to enjoy some double-digit growth there. I don't know if I missed anything, Joe, on that one. If you want to add any commentary.

No, I think Terrence did a nice job answering that. I think just back to the South Korea question to Terrence's point, just recommend that you look at that on a year-over-year basis, then you'll see that maybe on a Q3-over-Q3, it's a little more about the timing. And in addition to that, from time to time, you have certain tactical go-to-market strategies you're trying to implement with certain of your distributors, and that will come into play on the timing of when those things happen as well. But overall, we feel very confident on our Korea business moving forward.

Yes. Fundamentals there are actually quite strong. And I feel good about the team there, what they're doing. This new initiative to change the experience through our kind of just totally redesigning our branches and the technology there are going to pay dividends for us going forward. It really is a – it's a transformative experience for both the distributors as well as consumers on the ground there. So we're really feeling good about Korea.

Okay. Great to hear. Thanks very much.

Thank you.

That will conclude today's question-and-answer session. I will now turn the conference over to Terrence Moorehead, CEO, for any additional or closing remarks.

Okay. Just want to take a moment again to thank everybody, for joining the call. Thank you for your ongoing support, and we look forward to updating you on our continued progress as we move forward with our global strategy. Thanks again, and have a great day.

Thank you, everyone.

That does conclude today's conference call. Thank you for your participation. You may now disconnect.