Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine Financial Results for the Fourth Quarter and Full Year Ended December 31, 2020. Joining us today are Nature's Sunshine CEO, Terrence Moorehead; CFO, Joseph Baty, and the General Counsel, Nate Brower. Following their remarks, we'll open the call for questions. Before we go further, I would like to turn the call over to Mr. Brower, as he reads the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Nate, please go ahead.

Thank you. Good afternoon, and thanks to all of you for joining our conference call to discuss our fourth quarter and full year 2020 financial results. I'd like to remind everyone that this call is available for replay via telephonic dial-in through March 24, and via live webcast that will be posted on the Investor Relations portion of our website at www.naturessunshine.com.

Thank you, Nate. Good afternoon, everyone, and thank you for joining today's call. I hope you're all well and staying safe and well during the ongoing challenges of the pandemic. 2020 was certainly a challenging year, marked by unprecedented change from COVID-19, but our management teams around the world were able to rise to the challenge as our fourth quarter results closed out the year strong, was hoping and what we believe to be a transformational period for our company. During the fourth quarter, we saw net sales reach at highest level in the company's 48-year history, as performance eclipsed the record that we felt last quarter. In addition we drove absolute growth across all four of our operating business units for the second straight quarter, and we generated record breaking net sales growth and bottom line improvements for the full year. All this was made possible by our unwavering commitments to our vision, it drives us to share the healing power of Nature with everyone. Throughout 2020, our management team drove an incredible results to transform our business and bring our business to life. While our practitioners and retailers showed incredible stamina and determination to deliver the highest quality natural products to our customers. That combination and that partnership helps made 2020 a tremendous success. Throughout the second-half of the year, we benefited from improved field fundamentals and the strength of our recently revamped business model. In the fourth quarter, net sales increased 11% to $101.7 million, reflecting strong sales practices, growth in new customer acquisition and continued positive response to our new branding and product launches.

Thank you, Terrence, and good afternoon, everyone. So, let's just jump into this. Net sales in the fourth quarter increased 11% to a company record of $101.7 million, compared to $91.7 million in the year ago quarter. This increase was primarily driven by new product development, and continued execution on our business transformation plans and growth and new customer acquisition within key markets. As Terrence mentioned, we achieved absolute growth across all four operating business units, excluding the benefit of overall favorable foreign exchange rates, net sales increased 9% in the fourth quarter of 2020. On an absolute basis, net sales in Asia increased 2% to $36.9 million, compared to $36.1 million in the year ago quarter. But on a local currency basis, this represented a 3% decrease. The decrease was primarily attributable to a net sales decline in South Korea during the fourth quarter as a result of stricter lockdown restrictions, as well as a decrease in net sales across our other Asian markets. The decrease was partially offset by a 24% increase in sales in China and a 30% increase in sales in Japan due to the lift of lockdown restrictions and increased market penetration within these regions. Net sales in Europe increased 35% year-over-year in local currency to $23.6 million, compared to $17.2 million in the year ago quarter. The increase reflects the continued success of new product launches and stronger field fundamentals throughout Central and Eastern Europe. North American net sales increased 6% on a local currency basis to $34.7 million, compared to $32.9 million in the year ago quarter. With the various strategic and e-commerce enhancements we have implemented to our transformation initiatives, we continue to capitalize on strong demand resurgence within U.S. market and driving future growth and new customer acquisitions during the fourth…

Thank you. . We'll now take our first question from Steven Martin with Slater. Please go ahead.

Yes. Hi, guys. Regulations on the revenue increase, I guess we're all surprised the cost increase was so great. I was asking about costs, where do you see going forward, because it was all the G&A line. So what do you expect in 2021?

I'll let Joe to, I guess, attend that. Obviously, we expect to see continued expansion in our margins and overall profitability. But Joe, you want give a little bit more color on that.

Sure. Hey, Steve, how are you doing?

Good.

I'll tell you, directionally, yes, we expect because I noted in my comments that we may have some incremental costs associated with certain of our initiatives, and spending a bit ahead of growth, if you will. Having said that, looking at 2021 overall, as we - well, we don't get guidance per say, I would just say that we clearly expect our overall margins to be north of where they are in 2020. If that helps to answer your question.

It does. And once Korea strengthens itself out, what do you - can you give us, I mean, you're getting better with this. Can you give us a range of what your expectation is for top-line growth in 2021?

Well, again, I won't necessarily give you specific direction, but as we've seen in our other markets, when the COVID-19 restrictions are eased in Tennessee, the unleashing of our potential in Korea, we've got such strong field fundamentals and such a strong kind of operating machine there that is built on relationships. And you ship this finely tuned and finally oiled machine, I mean you throw something like COVID into the mix and it just really slows them down. So as you saw. So, I think our expectation is that we would return to kind of normal growth rates and almost the sort of growth rates that we would have seen there, historical performance in that market. But again, that will be determined by when that market can open up, as well as our ability to build out some more digital capabilities on the ground there. And we are working on that Steve. But it'll take a little bit of time for us to put that infrastructure in place. So obviously, before I came on board, there wasn't much there. We focused on it as a core component of our strategy and are building up the capabilities right now. But it'll take a little bit of time. But that's a great market for us. And my expectation would be that they'll step back.

What's the status of that market now? Is it still closed up?

They actually have some additional restrictions put in place and largely on meetings and just how people can get together. And again, as you know, that sets a large part of the South Korean business and the dynamic that they have in place there. They are working with some again, some - they've just launched a new business app that's designed to take some of the meeting dynamic and the training that they do and build that into a digital platform. But that is brand new, since half the assembly line just launched this quarter. So definitely, I don't want to make any predictions on the impact that that's going to have. But clearly, the more tools and the more contact you have, the more helpful it is.

Okay. I do applaud the Board's decision to pay a special dividend and buy back shares, as you know I've been looking for that for a long time. With $90 million in cash, I think that's great use of cash and I hope you're reasonably aggressive about how to use the buyback. One other question on debt. You took out that Bank of America loan, obviously in April, and you took some more of it out. Given your cash position is the reason why you're keeping it out?

I mean, we have an equivalent line, we have a couple of lines of credit, Steve. And given that today - at the end of the day, we're trying to give - maintain our banking relationship and the money is very, very cheap. So, given that we pay back the PPP loan, we turn around and build a little bit against our equivalent line, which obviously in any given day, we feel so compelled, we can obviously pay it back.

Okay. And CapEx thought for this year?

Well, for 2020, there are still consistently 20,019 somewhere in that 5 million or 6 million range. Again, directionally, I would say that, because of the number of initiatives that we have, that it's certainly possible the CapEx for 2021 could be 1x, 2x times what it was in 2020.

Got it. And are you guys having any supply - there are lot of shipping supply disruptions as a result of you are doing most of your most of your manufacturing? Are you guys experiencing any of that?

For the most part, no, we're not. Let's not to say that we haven't had experience a hiccup or two. And sometimes those have been domestic strike, trying to get product out of Westport facility and on the water to one of our markets. I mean, we've had hiccup or two, but for the most part, we've been relatively unscathed by disruptions both on the distribution side and on the supply side.

Got you. All right. I will go and I'll talk to you next week sometime, Joe.

All right. Thank you, Steve.

Thank you. Will hear next from John Hollander with CAG Advisors.

Thank you for taking my call. First question to you on the metric that you use to manage your business, through Q2 of 2020, your earnings releases improved the numbers of distributors and managers. Those numbers have been removed for Q3, and again, in this earnings. Can you give me an update what metrics investors should be looking at to help me analyze your business?

Well, first off in regards to the removing some of the distributor information that we've had in prior years, it's not required data. And frankly, based on the introduction of our new business model back in September, we consider some of that data just less relevant. And there's much more of a focus on differentiating between what your customers are versus who the distributors and leaders are. So, as Terrence touched on his comment, I would recommend that you listen to some of the data points that he called out in his comments, but they give you a pretty good roadmap as to some of the things, the metrics, if you will, that we look at and trying to measure the results, and how we're doing on a go forward basis. When we're all said and done, I mean obviously we're looking for growth, we're looking to build on the customer base. We're looking to build on our distributor base. We've seen some successful math, especially with programs as Terrence touched on like Subscribe and Thrive and the significant amount increase, we've seen in customer activation, and so forth.

Okay. Can you give any data points as to what percent of your sales are coming from the digital side, I guess, digitally originated?

Those numbers are still somewhat presented sales from digital. I'd say that percentage is still relatively low in the 10% range. However, having said that, most of our distributors now aren't doing business with us digitally. So, the volume of digital transactions overall is very high. The amount coming from consumers is still relatively low. And again, we just launched our new platform and our new website, September 1, 2020. So we're relatively new into the journey.

Okay. So I assume you guys don't have any metrics such as customer acquisition costs, or like on value or other quarters or anything that from .

Yes. Not yet, we don't. Again, we just started our test doing some of that type of work the database marketing work in the November timeframe. And we'll be rolling out some additional initiatives going forward. So that's all kind of part of the digital campaign or force of Nature campaign. And then it's the other things that I talked about that we're doing rolling forward. But again, that's still kind of new territory for us, new ground for us, but it's tremendous opportunity. One of the interesting things, John, just to build on that, one of the interesting things about kind of our business and our platform, is not only will we be leveraging those tools, but we've also kind of made sure that all of our distributors have the exact same tools and the exact same capabilities that we have as well. So each one of our distributors, all of our practitioners, all of our retailers, everyone in our business here, especially here in North America, and Latin America, they will have the exact same kind of tools, a fully functional website, sharing tools, kind of everything, email marketing tools, in order to help them create a whole digital business of their own. So there's kind of a multiplier effects that that we hope to get going forward out of our digital toolkit.

Okay. That's helpful and thank you for that. Can you give me a quick sense of how you think about working capital?

Do you have any color on that?

So we think about working capital, as far as going forward, what I'd say is, obviously, if you are breaking particular components of this as we discussed earlier, you know, we are doing a lot. We had a decent year growth wise in 2020. We do believe it will continue to grow going forward. We'd like to see that growth increase. That certainly drives maybe a little bit of an uptick on inventory. Cash receivable for us are primarily credit card related. So they convert to cash pretty quickly. And then on the current liability side, obviously, some degree the inventories will be financed with cash paid along and so forth and so on. So it's a little bit of a long-winded answer to your question, John that we don't see any major pressures on using cash for using cash as a result of working capital going forward. There'll always be some things that just from a timing perspective that will come into play but we don't consider working capital - our growth and working capital is a major use of cash for us going forward.

So obviously, we're already near the end of Q1. I was hoping on the discussion we just had about Korea, about the other geographies in Q4. Can you make any comments on how things are trending for Q1, because we've seen some reopening worldwide post-COVID?

At this time, no, we're not going to provide any comments in regarding Q1. Obviously, we've already provided a little bit of that. As far as how we believe 2021 shake out, we clearly believe that we're going to experience growth, clearly believe and expect, that we're going to see improvement in our profitability, and so forth and so on. I mean, our next earnings release is early May. And we'll obviously talk much more at length about first quarter played out, and then maybe we'll be in a better position to talk a little further about the rest of 2021.

Okay. And as one final question. On the cash flow statement, I've noticed the line item for non-cash lease expense. Can you please comment on that?

I'm sorry, could you repeat that question?

Yes. It is consciously , I have noted some line items for non-cash lease expense.

Okay. If your question is specific to adjusted EBITDA the other non-cash - the non-cash items for us are primarily depreciation and stock-based compensation. And there's a table at the earnings release that breaks…

The amortization of the brand expense and that probably standard change accounting?

So we'll be - the other consideration maybe we're referencing is, obviously there was a new accounting standard for the employees couple of years ago, where you have to put all the leases on the books. You have to evaluate present day the lease liabilities for your various office leases, where offices whatever you may have, you put those on the books, and then there is some amortization associated with that liability. But it's an asset and it's a liability. I don't really look at that as an adjustment to EBITDA. It's a gross up to your core to do for accounting purposes.

Okay. That's helpful. I thought it might have been leases with staff, which is why.

Yes. That's one of those accountants' kind of wild things.

No problem. Well, thank you for your time. Very good quarter. That's the end of my questions.

Well, thank you for your questions.

Thanks, John. Thanks for the questions.

Thank you. And at this time, this concludes our question-and-answer session. And with that, I would like to turn the call back over to Mr. Moorehead for closing remarks.

Okay. Well, thank you very much. I just want to take a moment to thank everybody for participating and listening in today's call. We look forward to speaking with you again, when we report our first quarter '21 results in May. Until then, stay well and look forward to speaking with you all soon. Take care. Bye now.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may now disconnect your lines at this time. Thank you for your participation.