Good afternoon, everyone and thank you for participating in today’s Conference Call to discuss Nature’s Sunshine’s Financial Results for the Fourth Quarter and Full year ended December 31, 2022. Joining us today are Nature’s Sunshine CEO, Terrence Moorehead; CFO, Shane Jones and General Counsel, Nate Brower. Following their remarks, we will open the call for your 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 for joining our conference call to discuss our fourth quarter and full year 2022 financial results. I’d like to remind everyone that this call is available for replay via telephonic dial-in through March 29 and by way of live webcast that will be posted in the Investor Relations portion of our website at ir.naturessunshine.com. The information on this call contains 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'd like to turn the call over to the CEO of Nature’s Sunshine, Terrence Moorehead. Terrence?

Thank you, Nate, and good afternoon, everyone. I want to thank you for joining today’s call to discuss our fourth quarter and full year results. On the call with me is our new Chief Financial Officer, Shane Jones and I'd like to take a moment to officially welcome Shane to Nature's Sunshine and say what a pleasure it is to have him as part of our management team. Shane joined the company in December and brings over 25 years of experience, having previously served as the Chief Financial Officer at well-known companies such as West Marine, 1-800 CONTACTS and Backcountry.com. In his role as CFO, Shane will be working closely with our management team to improve performance and drive sustainable, profitable growth across the business. He's already added significant value, as we continue to take steps to mitigate external cost pressures, drive efficiency and build financial resilience into the business. Today, I'll provide some context to our fourth quarter and full year 2022 results and give some details on how we believe the business continues to develop. Shane will then take you through the specifics of our financials in more detail. Turning to the fourth quarter, we continue to recalibrate and adjust to the changing macroeconomic environment and shifts in consumer behavior, but saw several encouraging signs in the quarter. First Asia-Pacific continued to deliver strong results and as we've done a good job diversifying our portfolio in the region. We've contemporized the business and built strong field fundamentals that continue to create new opportunities for incremental growth. Second, our business in Central and Eastern Europe continued to show signs of stabilizing, as we rewired operating practices to address the new reality on the ground and expanded our footprint to include a few new markets that helped partially offset the…

Thank you, Terrence. It's great to be here today. Jumping right into our results, net sales in the fourth quarter we're $102.7 million compared to $117.9 million in the year ago quarter. This 13% decline was largely driven by reduced sales in China, Europe and North America. As Terrence mentioned, excluding the impact from foreign exchange rates, consolidated net sales decreased 6% in the fourth quarter versus last year. Gross margin in the fourth quarter was 72.2% compared to 74.0% a year ago. The decline was primarily driven by foreign exchange headwinds, increases in material production, transportation and distribution costs, as well as changes in market mix. These headwinds were partially offset by a one-time $0.7 million add back related to the partial reversal of the reserves taken earlier in 2022 for the Russia and Ukraine conflict. Volume incentives in the fourth quarter declined 9% to $31.1 million compared to $34.4 million in the year ago quarter. As a percentage of net sales, volume incentives were 30.3% compared to 29.1% in the year ago quarter. The increase in volume incentives as a percentage of net sales is primarily due to changes in market mix. Selling, general and administrative expenses during the fourth quarter declined 15% to $38.8 million compared to $45.4 million in a year ago quarter. This reduction was driven by lower service fees in China, variable costs related to lower sales and lower compensation costs. These reductions were slightly offset by a one-time impairment of fixed assets of $1.1 million. As a percentage of net sales, SG&A expenses were 37.8% for the fourth quarter of 2022 compared to 38.5% in a year ago quarter. Reflective of the gross margin pressures, operating income was $4.2 million or 4.1% of net sales compared to $7.5 million or 6.4% of net…

[Operator instructions] Our first question will come from Linda Bolton Weiser with D.A. Davidson. Please proceed.

So I guess, I'll just start with, it's good to hear your outlook for sales being up a little bit modestly in 2023, was that low to mid-single digit growth in local currency or on a reported basis for the year?

Do you want to comment on that, Shane?

That would be in local currency.

Okay, got you. So as I think you said the FX impact, it's kind of still there pretty negatively in first quarter, and then it might, -- it sort of would get less and negative or better as the year progressed. Is that the way to think about that?

That that's correct. Yeah.

Okay. And then, again, I don't want to get you into making detailed projections, but when you get past the hard comparison and the less negative FX, do you think second quarter revenue can actually be up on a reported basis, or is that a little unclear at this point?

I would expect that it would be up. If you recall, most of the big hits that we took last year began in Q2. So we'll have the comp will get easier in Q2 and which will allow us to have a positive comp in Q2.

Yeah, I think we've built some of the strategies too, to build momentum throughout the year, just in general.

Okay. Well that's good to hear. So again, I'm just wondering, so for your outlook, I guess you really didn't give profit or EBITDA or anything, is there something that holds you back on that giving guidance through the year on that front given that you will have sales growth for the year?

No, I think we're just, again, at this point, it's still early in the year. I think we feel good about the momentum, that we have in the business. I think we have our expense base under control. We've got costs under control, but we got to want to get the top line moving and kind of see where the business is going from there and then we'll -- and we'll take it from there.

Okay. Sounds good. And then on inventory, I didn't glance at your balance sheet yet, but what was the inventory at the end of the year? Was it actually down sequentially?

No, it was flat sequentially to Q3,

So do you expect to have like kind of more reduction in inventory in 2023?

Absolutely. We will be working that down. Obviously, we'll have some growth that will add to some of that, but we will more than offset that growth with just right-sizing our -- the amount of inventory that we have because we have more than we likely should have had at the end of the year.

Okay. And then just in terms of your businesses, good to hear that China is maybe showing some glimmers there. That's good. Can you just talk about -- can you talk about -- is there any more color you can give us about China just in terms of the pace of recovery or what you're actually seeing there?

Yeah, as I mentioned, we're starting to see some momentum come back into the business. There's still a fair amount of uncertainty on the ground there. Consumer behavior has not simply returned to kind of where it was prior to the zero COVID policy. So, as I mentioned we're hopeful that the trend line continues, but, I'm going to say it's still a bit early to tell, but again, I think we feel good that we're getting positive momentum there.

Okay. And then can you talk a little bit more about Eastern Europe? Just what's going on there in terms of like, is the sales being booked from Russia and Ukraine actually zero at this point, or is there still a little bit, and then what are those new markets you referred to, sort of?

Yeah, so, what we're seeing is we're able to get inventory reliably into the markets. We're able to get into the hands of the people that kind of where we want it to go. And then we're able to get kind of repatriate the dollars kind of once the inventory's on the ground there and it's sold in. So when I talk about, us getting some stability, we really are seeing that kind of type of stability where the business is moving forward, people are selling. And that would include both in Russia and in Ukraine albeit obviously Ukraine is at a depressed level. The performance that we're seeing in Turkey and the Baltic states, at this point in time is providing, again, it's some partial -- it's partially filling the gap that we would've seen from Ukraine. So I think we feel really good about that. I think the team on the ground has done an outstanding job rewiring, everything from kind of how we get the product on the ground to how we deliver it to people, to how we get payments. So it's been a lot of work. So I think we've -- again, we've reached this stability, this level of stability of all things kind of staying equal and all things holding steady. We feel pretty good about that. And then we've got the dollars coming in from Turkey and the Baltic states. Still new markets for us, but it's enough that it's actually I'd say meaningful to relative to what we were losing in the Ukraine. Hope that's helpful.

Yes. Thank you. And then I guess just finally, I'd like to ask about North America because I guess, you're still having some declines there, and I just kind of wonder about maybe the consumer pressures still facing some inflationary pressures and things like that, and yet you're kind of talking about taking price. Maybe you could just give us a little more color about how you're managing that business there in North America?

Yeah, that's, that's an important one, especially when it comes to taking some price there and what we're going -- what we're specifically looking at is, on some of our -- some of our specialty products, especially the botanicals where, we really kind of own some of these therapeutic areas, there is an opportunity for us to take price on some of those products. So we're going to do that. We'll be kind of looking at all of our products and all of the pricing again, just to sharpen our pencil and make certain that we're hitting relevant price points, kind of just some of the prices are -- they just -- we just landed on them and I think there's a better price point that people would be willing to pay. They wouldn't even notice the change, but it would make a -- it would make a difference to us. We are still experiencing and dealing with an inflationary market where consumers are making different choices than they were versus the marketplace in 2021. So, that does have some implications in terms of what we can do, our marketing and promotion strategies. But we do believe there's opportunity for us to take price. We're still able to drive customer growth. We are seeing good customer growth there. Again, but what's happening is as we're bringing in new customers, we're just seeing that the average orders are different than they were just 12 months ago. So we're going to keep hammering away at this. We do have other initiatives kind of in the mix to, as I had mentioned, across our digital platform. And then as well looking towards our nutritional health practitioners to try and expand the number of people that we're bringing in there. That's an important initiative for us in 2023 and going forward. There are several hundred thousand health practitioners out in the marketplace that we're not tapping into right now, that would ideal kind of distributors for our product. And so we're going to be much more aggressive at trying to capture them in 2023 and beyond.

And if I could just add on a little bit there, on the price increases in North America especially, we've been very thoughtful, very careful about the way we're doing that, and frankly, are really measuring our elasticity of demand when we're doing it. So we can learn from that as well.

Okay. Okay. I'll leave it there if anybody else has questions. Thank you very much.

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, thank you. Hey, I'd like to thank everybody for listening to today's call, and we look forward to speaking with you when we report our first quarter, 2023 results in May of 2023. Thanks again for joining us, and take care.

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