Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine's Financial Results for the Second Quarter Ended June 30, 2021. Joining us today are Nature's Sunshine's CEO, Terrence Moorehead; CFO, Joseph Baty and Executive Vice President and General Counsel, Nathan Brower. Following their remarks, we'll open the call for your questions. Before we go further, I'd 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. Nathan, please go ahead.

Thank you, Emma. Good afternoon, and thanks to all of you for joining our conference call to discuss our second quarter 2021 financial results. I'd like to remind everyone that this call is available for replay via telephonic dial-in through August 19th, and via live webcast that will be posted on the investor relations portion of our website at www.naturessunshine.com. The information on this call may contain certain forward-looking statements. 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 may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially from those implied herein 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 information on this call speaks only as of today's date, and the Company disclaims any duty to update the information provided herein. Now, I would like to turn the call over to the CEO of Nature's Sunshine, Terrence Moorehead. Terrence?

Thank you, Nate, and good afternoon, everyone, and thank you for being with us on today's call to discuss our second quarter results. I'm excited to be here with you today to announce our fourth consecutive quarter of record-breaking results. Our historic performance comes as we continue to make progress on our journey to transform our business. Our reported consolidated second quarter net sales came in at $109 million, up 25% or 21% compared to the prior year in local currency. Each of our four operating business units reported strong growth for the quarter, led by Latin America and Europe, which were up 39% and 34%, respectively, in local currency. We also delivered record-breaking results for the bottom line as adjusted EBITDA increased 38% to $13.4 million. Despite being in the early stages of our business transformation, our strong execution and ongoing fine-tuning of our strategies are having an extremely positive impact on our business. I'm proud to say that each of our five global growth strategies, brand power, field energy, digital-first, Manufacturing Inc., and the right stuff, are all building momentum. I'll discuss our strategies in more detail later, but I want to pause because I'd like to recognize and thank each of our associates for their continued focus and dedication throughout the pandemic. Their resilience and determination have allowed us to deliver four consecutive record quarters, and I can't thank them enough. Additionally, our award-winning customer service team, which was recently recognized as Customer Service Team of The Year by the American Business Awards, deserves special recognition as they've been a critical point of contact with all of our customers and distributors throughout this journey. And while I'm on the topic, I want to take a moment to recognize our distributors who, throughout the pandemic have continued to…

Thank you, Terence, and good afternoon, everyone. Jumping right into it. Net sales in the second quarter increased 25% to a company record of $109 million compared to $87.3 million in the year ago quarter. This is the fourth consecutive quarter of record net sales. As Terrence mentioned, this increase was primarily driven from execution of our business transformation plans, and growth across all our operating business units. Excluding foreign exchange rates, net sales increased 21% in the second quarter of 2021. On an absolute basis, net sales in Asia increased 33% to $43.5 million compared to $32.8 million in the year-ago quarter. This represented a 26% increase on a local-currency basis. The increase was primarily attributable to strong growth in Korea, Japan, China and Taiwan due to execution of field fundamentals, customer growth and improved digital tools. Net sales in Europe increased 39% on an absolute basis to $21.5 million compared to $15.5 million in the year ago quarter. This represented a 34% increase on a local-currency basis. The increase reflects the success of new product launches, stronger field fundamentals and customer growth throughout Central and Eastern Europe. North America net sales increased 8% to $37.4 million compared to $34.5 million in the year ago quarter. This increase is attributed to our business rebranding and rebuilding efforts, success with growth initiatives and the overall increase in demand for nutritional supplements within the U.S. Net sales in Latin America and other increased 44% to $6.6 million compared to $4.6 million in the prior year period. This represented a 39% increase on a local currency basis. The increase was primarily due to the continued success of our transformation initiatives in Latin America, changes in our business model and the increased market demand for our products. Gross margin improved 30 basis points…

Thank you, Sir. We will take our first question now from Matt Dame from Titan Capital Management. Please go ahead.

Thank you. I was hoping to get a little bit more color on what is going on in Korea. Currently, what is the situation once the shutdowns if it starting to open up at all? And what you're seeing around that changing environment currently?

Sure. Thanks. Hi Matt, good to hear from you. Yes, the business there, they're starting to kind of figure out how to work around things using digital a little bit more, as I had mentioned. The shutdown situation really has affected large meetings. They're still able to have some smaller meetings and kind of personal meetings. So what they're doing kind of largely is utilizing this digital technology when they do want to get people together, so whether it's webcast, Zoom, et cetera. And then we're still able to deliver products. So again, we kind of are seeing things stabilizing it from our standpoint, despite the market challenges. But it's fluid over there. Does that answer your question?

It is helpful, Terrence. I would like a little bit more color. Is it safe to assume that Korea is still running well below last year than a year ago levels before, everything, I guess, not a year ago, but a couple of years ago level before everything shut down then? Or are sales going closer to normal now at this point?

Like I said, in the quarter, they had 11% growth for the second quarter. I wouldn't call that the new trend line for them, but I do think they've got some stability, and they're just fighting day-to-day. So...

Okay. That's helpful.

Some questions over there, but I don't think we're seeing what we were. I don't think we're not expecting what we saw, say, in the back half of last year, where they were really just flat out struggling.

Yes. That's helpful. Also wanted to ask about the skin care line that you touched on. Frankly, I wasn't familiar with that. What more can you tell us about the skin care line? Where have you introduced the opportunity? Just add a little bit more around that, too, that would be great.

Sure. La Mara is a probiotic based line of detox line, there's a kind of an anti-pollution element to it. It's largely facial skin care, all-natural luxury positioning. And it's a new segment for, I think, that piece of the business, generating a tremendous amount of excitement launched in South Korea first, Okay? So they're the first to get it, and then it will go to Japan, eventually, it will come to the U.S. as well. But it's a beautiful line of products that includes a full range of facial skincare products. Cleanser, toner, moisturizer, but they're all kind of specialty very different from anything that we've had before and also what's out in the market. And we're supporting that with some really strong – a very strong complement of marketing collateral for the teams they use in their marketplace.

Great. Thank you. I appreciate that.

Yes. Thank you. Thanks for the call.

Thank you. We'll now go to our next question from Steven Martin from Slater. Please go ahead.

Hi guys.

Hey Steve.

Hey, congratulations on just a phenomenal quarter.

Thank you. Thank you.

I don't know what to ask. You put up great numbers. You grew sales, you leveraged expenses, you bought back stock, you paid a special dividend, and you answered my question about the S3.

We did it all.

And the previous caller asked the question about Korea. So I know you guys don't like to or haven't been prepared to guide. Can you give us some color, maybe a range on how you think the back half is going to look versus last year's back half or versus 2019?

Do you want to speak to that, Joe?

Thanks, Steve. How are you and thank you for your comments? We always enjoy hearing from you. Obviously, I address that to some degree in my script. And no, you're right, as of yet, we do not give formal guidance. I would say, again, if you go back and reread my comments, we do believe there will be growth in the second half of 2021, as compared to the second half of 2020, but it's a much tougher comp. As we talk about the four consecutive quarters of record growth, obviously, two of those were in 2020, the back half of 2020, so it's a much tougher comp, we expect growth. But as we sit here today, we don't anticipate the same level of growth that we experienced in the first half of 2021. And I leave it at that.

Let me ask growth. When you refer to growth, there's top line growth and then there's operating profit or EBITDA growth, which growth are we talking about now?

Well, first off, I'm talking about top line growth. Net sales. From a bottom line standpoint, obviously, we're very pleased with the growth that we've seen in EBITDA. Again, if you want to look at it over second half over a second half standpoint, I would say we're certainly targeting growth in EBITDA as well for the second half of 2021 versus the second half of 2020.

Okay. And what about, if I ask one more, what about EBITDA margin or operating margin? Because your margin improvement this last quarter was great. What do you expect for the back half? Margin improvement as well?

If your question is in regards to improvement versus the first half or the second half of 2020, then that is what we're targeting, yes. But please keep in mind that, as I called out in my comments that we do, and as Terrence referenced in his comments, we have a number of growth initiatives. The personalization initiative, for example, will be launched in the back half of 2021. And there are other initiatives that we've talked about previously that we continue to support and grow. I mean, could we spend a little bit more in the back half of 2021 than we did in 2020 for those types of initiatives, and the short answer is yes. But when all said and done, we clearly expect a pretty solid EBITDA margin in the back half of 2021.

Okay. Where do you stand? And I ask this periodically. If you look at your cost structure in Utah, where do you stand on that in terms of rationalization or your ability to leverage out in Utah?

I believe that we've put in a pretty serious effort initiative plan to reduce our overhead costs, and to drive out some pretty significant expenses, SG&A and otherwise a few years ago. And obviously, if you look at our EBITDA growth and so forth over the last two, three years, you can clearly see the benefit of that. I would say, overall, that plan is 90-plus percent complete. The key for us moving forward as far as driving incremental EBITDA growth or operating income growth is going to come down to the success of our new business model. Some of these initiatives that Terrence has been talking about the last few quarters and top line sales growth. Top line sales growth clearly drives an incremental contribution margin, which is north of our overall fully reported operating margin. So the combination of growth and the success of some of these initiatives we talk about truly lend themselves to an even more enhanced operating and EBITDA margin going forward long-term.

All right. I greatly appreciate it, and I'll let you guys go because there's not much else to ask.

That's great.

Thanks Steve.

Thanks Steve. Good talking to you.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Moorehead for closing remarks.

Okay. So, thank you everybody for listening to today's call. We look forward to speaking with you again, when we report our third quarter 2021 results in November. But until then, everybody take care, stay safe, and we'll see you soon. Bye now. Thanks for joining us.

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