Nu Skin Enterprises, Inc. (NUS) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2014 Nu Skin Enterprises Earnings Conference Call. My name is Tony, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Scott Pond, Director of Investor Relations.

Thanks, Tony, and thank you for joining us today. With me in the room today are Truman Hunt, President and Chief Executive Officer; Ritch Wood, Chief Financial Officer; Dan Chard, President of Global Sales and Operations; and Joe Chang, Chief Scientific Officer. Just a reminder, during the call, comments will be made that include forward-looking statements. These statements involve risks and uncertainties, and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks. Also during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe these non-GAAP financial numbers assist management and investors in evaluating and comparing period-to-period results in a more meaningful and consistent manner. The reconciliation for any non-GAAP financial numbers are provided on our Investor Relations website at ir.nuskin.com. And I'll now turn it over to Truman.

Thanks, Scott, and good morning, everyone. We appreciate you joining us on the call today. As you saw in our release this morning, fourth quarter revenue came in at about $610 million, which is at the top end of our guidance. And earnings per share for the quarter were $0.77, also at the top end of our guidance. I want to note that EPS was negatively impacted $0.06 by foreign currency translation, which was a below the line charge that was not baked into our guidance and also by another $0.08 by expenses recorded in conjunction with our recently completed credit facility, which charge was baked into our guidance. While 2014 started out with some challenges, we were pleased to conclude the year with stabilization in our global business. We delivered the results we expected in the fourth quarter and we believe that the steps we've taken to steady the business are having a good effect. We're seeing better sequential trends and increasing momentum moving into the new year. And now, we intend to capitalize on this momentum with initiatives planned to restore growth, particularly in the back half of 2015. Looking back at 2014, it's helpful to provide a little bit of context for the challenges that we faced. First, we began 2014 on the heels of our largest product introduction in our history. As you know, the second half of 2013, we launched our ageLOC TR90 weight management system that generated about $550 million in sales. This launch helped the company post a nearly 50% year-over-year growth rate in 2013. A 50% growth rate is hard to lap even in the best of circumstances, so these tough comps of 2013 to 2014 made for a challenging 2014, particularly since we didn't have any significant new product introductions during the course of the year. Second, our results were negatively impacted by a strong U.S. dollar. For the year, we lost over $100 million of revenue in foreign currency exchange when compared to the prior year, with $47 million of that in the fourth quarter alone. This is something we obviously don't control, but it's always painful when we're impacted so significantly in just a short period of time. And finally, and perhaps most significantly, the proactive steps we took in Mainland China in response to a regulatory review of our business there interrupted our momentum and it's taken us a few quarters to regain our footing. But we saw a nice uptick in active accounts in China in the fourth quarter, which is reflective of a healthy response to product promotions, and we also saw a slight uptick in sales leaders sequentially as well. Notably, we've also enjoyed good retention of our top sales leaders over the past year. We also received, late in the year, some new sales licenses, which is a good sign from a regulatory perspective. We remain focused on healthy long-term growth in China and believe that there is great potential for direct selling in this market. All in all, we think that China is poised to return to growth in 2015. We also continued to make progress in other regions. During the fourth quarter, the Americas held a regional convention and had a solid quarter as we introduced the new facial spa. This product had been off the market for a period of time, as you know, and was very well-received. And in fact, was the market's #1 selling product for the quarter. Latin America continues to perform very well on a local currency basis, and it continues to become a larger and more meaningful part of our overall revenue mix. In North Asia, Japan has steadied after a fairly soft year, while Korea had a nice uptick in sales leaders, which we believe will bode well for the future. Sales leaders in both Japan and South Korea are really anxious to receive the new ageLOC Me products. Previously, we'd felt that we would launch ageLOC Youth, the new Pharmanex product, in these markets first, but given the demand that we're seeing from sales leaders there and they're just very anxious to get their hands on this product, we're likely to reverse the launch order now to give these markets, which already tend to be a little bit skincare-centric, the new ageLOC Me skincare system in 2015. So as we look to 2015, we're focused on several growth drivers, particularly the rollout of important new products this year. For those of you who came to our Investor Day meeting in December, you were able to get a sneak peak of the ageLOC Me skincare system. This is an innovative anti-aging skincare system that enables consumers to personalize a skincare regimen based on their individual preferences and skincare needs. And this product is already generating great anticipation among our sales force and -- as well as among consumer test groups. So we'll launch ageLOC Me to our sales leaders later on this year, with follow-on introductions to larger audiences early next year. On the nutrition side, we plan to introduce the ageLOC Youth product, our most advanced anti-aging supplement that we've ever developed. We've spoken about this product for quite some time and believe that it will be a category-changer for us. This product will be rolled out starting in Q3 of this year. These 2 products play to our unique balance in our core business categories of skincare and nutrition, a balance that differentiates Nu Skin from other competitors, enabling us to provide consumers with a comprehensive product solution to fight aging. This year, we also plan to rollout a limited number of new essential oil products in both Greater China and the Americas, starting in the second quarter. These products fill an area of high growth among consumers in these key markets. And in China in particular, the essential oil offering will be paired with our top-selling ageLOC Galvanic Spa System to make these products even more compelling. And we also continue to make good progress with our balance sheet, which Ritch will discuss in more detail. We're seeing nice reductions in inventory and are back to generating strong free cash flow. We believe we'll continue to see the balance sheet strengthen further as we progress through the year. Overall, we're pleased with the direction we're heading and with what we're hearing from our teams on the ground in various markets. The first quarter presents our final difficult year-over-year comp. And in the second quarter, we expect to be about even. And moving into the back half, we expect to see strong revenue growth coinciding with our product launches. So essentially, we're one quarter away from returning the business to growth. Overall, we're happy to be looking at 2014 in the rearview mirror. But the scrubbing we have gone through the past year puts us in a good position to shine going forward. The business is on solid footing, and we continue to prepare for what we believe will be a return to growth in 2015. So with that, I'll turn this on over to Ritch.

Thank you, Truman, and good morning, everyone. We're really happy with the way the fourth quarter turned out, as Truman mentioned, at the top end of our guidance for both revenue and earnings per share, and that includes the fact that we had a $0.06 foreign currency expense that was not part of our guidance as we translated our U.S. -- our balance sheet items back into U.S. dollars. So we're now looking forward to moving on to 2015. Just highlighting a few things on the income statement. When we compare it to the prior year, note that each line item on our income statement is significantly impacted by our TR90 product launch in 2013. So it makes the comparison look not very accurate. Our operating margin for the fourth quarter was 15% compared to 17.9% in the same prior year period. Gross margin was 82.5% versus 84.4% in 2013. Selling expenses for the quarter were 42.1% of sales compared against 48.2% in the fourth quarter the prior year. And G&A expenses for the quarter as a percent of revenue were 25.4% compared to 18.3% the prior year. We incurred a loss of $16.1 million in the other income expense line compared to a gain of $3.4 million in the prior year. And this loss relates to primarily the prepayment fee associated with the refinancing of our debt and also the foreign currency expense that I just mentioned earlier. Our income tax rate for the fourth quarter was 38.1% compared to 34.8% in the prior year. And note that our 2014 tax rate was higher due to the nondeductible Venezuela currency expense that we took early in the year. During the quarter, we paid $20.4 million of dividends, purchased $20.7 million of our stock. That leaves our authorization at $348.8 million as of December 31. Cash provided by operations for the quarter was right about $90 million. And our inventory balance decreased during the quarter by $31 million to about $338 million, which is roughly where we began the year of 2014 in terms of inventory balance. And we anticipate inventory reductions of $15 million to $25 million per quarter throughout 2015. For the first time, we're now providing guidance for the first quarter of 2015. We are forecasting a continued strong dollar, with the exchange rate in a similar range as to where we see them today and actually where we guided them in December as well, which equates to a negative revenue impact of approximately $50 million in the first quarter. As you are aware, we see generally a 5% to 10% seasonal decline in revenue from the fourth quarter to the first quarter as a result of fourth quarter generally being our strongest quarter of the year, followed by a first quarter that includes Chinese New Year and a shorter month in February. So our guidance for the first quarter revenue is $530 million to $550 million. While we anticipate an operating margin of approximately 15% for the year, again, that's consistent with our prior guidance, the first quarter will be lower as we gear up for product launches later in the year. So we anticipate operating margin in the first quarter of approximately 13%. And that puts our earnings per share in the $0.70 to $0.74 range for the first quarter. And as Truman mentioned, Q1 really represents the last quarter of tough comparison with the prior year. So for the remainder of the year, we're holding our guidance consistent with that which we provided at our Investor Day, which is revenue of $2.5 billion to $2.56 billion, continuing to assume a negative 6% currency impact and earnings per share of $3.80 to $4. And then, specifically, we see revenue strengthening in Q2 and anticipate that sales may even be slightly positive on a constant currency basis in the second quarter. And then, again, with the product launches in the back half of the year, we anticipate recording strong growth then. So we really are one quarter away from a growth story. And so with that, we'll open up the call for questions.

[Operator Instructions] Your first question comes from the line of Mr. Tim Ramey of Pivotal Research Group.

It's great to hear you speaking confidently about '15 outlook. However, Ritch, nothing says confidence like share repurchase, at least to me. And while you did some, it might not have been as much as we would've thought at this point last quarter, when you were discussing the 3Q, having drawn down a lot of your revolver. Any thoughts on pace of share repurchase?

Tim, Truman. Let me just comment on that and then I want Ritch to comment on that as well. But obviously, as you know, share repurchases are subject to myriad factors. And I think it's safe to say that if you look at our track record over the course of the last 10 years, this management team has been in favor of using our balance sheet to benefit shareholders. I think we're now 14 years of straight upticks in our dividend policy. And when we have the opportunity to repurchase shares, we do. Now that our cash flow is really back to normal and consistent with what our track record has been, I'm confident that our Board will be supportive of being active in creating value with share repurchases. Ritch, do you want to comment on that?

Yes, it's just always sensitive to talk about all the factors that go into a stock repurchase. But know that we're committed to that, that we have available cash and we like the use of cash for share repurchases. So we bought about 1% of our shares back in the fourth quarter and we'll continue to use our cash to buy back shares going forward.

That's great. And just one more follow-up on -- Ritch, it looks like, if I'm -- the way I'm kind of modeling the 1Q, we're sort of getting negative operating leverage at the G&A line, is that a fair statement?

You're exactly right, Tim. We anticipate a really good year and we're spending to get out of the blocks and get the year going. We have a number of kickoff events in this first quarter, expos that will be held here in February. And so we haven't dialed that spending back. The G&A spending will be fairly consistent quarter-to-quarter on a dollar basis throughout the year, with a little bit higher fourth quarter, because we have our global convention then. But you're right, there's a little bit negative impact in the first quarter. But then, for the year, we still anticipate a 15% operating margin that'll be complemented with strong margins in Q3 and 4.

When we can hope for higher bonus accruals in the fourth quarter.

That's right.

Your next question comes from the line of Mr. Bill Schmitz of Deutsche Bank.

So sequentially, it looks like active distributors in Greater China were up 65% or something. I thought you'd be a little more excited about that. And I'm just wondering, how long do you think it takes to convert them to executives? And then, kind of what the backlog is in terms of applications to become executives? And then, is there any reason to believe that the historical trends, where there's a 2 or 3 quarter lag between a big uptick in actives and then a big uptick in executives, if that still holds? And I have a follow-up.

Yes. We're pleased with the uptick too, mostly because it showed that the market was responsive to product promotions in the quarter. And that, in fact, there are a lot of consumers out there who are anxious to buy our products. So we're very encouraged with the uptick in actives. As you know, Bill, the closer correlation to revenue is the sales leader count as opposed to the active count. Even though actives certainly bodes well for the future. So we're watching carefully the sales leader metrics, the people who are in the pipeline to become sales leaders and we've seen good movement there November to December, December to January. So it's just a little too early to declare victory on that front but things are looking good in terms of how the pipeline is filling and the 65% uptick in actives is obviously very encouraging.

So do you think we should see another sequential increase in both actives and executives in Greater China in the first quarter?

Just from a Q1 basis, generally, the numbers don't jump up. Q2 is a stronger quarter. So we'll kind of watch and see. But I would say, to Truman's point, we continue to see encouraging signs in both the actives and the executive numbers. And then, our sort of ammunition hits in Q2 and then forward as we have a leader launch of the ageLOC essential oils in China in June. And then, an LTO, small -- not a huge revenue LTO, but an LTO of the essential oils in September. So as those initiatives kick in, we should see the numbers continue to build as well.

And then, the 1 dynamic, Bill, that we may be talking about when we talk about Q1 results, is that Chinese New Year this year is actually right on top of month end in February. And so it's kind of a weird dynamic that we'll just -- we're doing our best to navigate around, but it's just kind of an idiosyncrasy for this month.

That makes sense. And then, Ritch, just when you give that inventory reduction targets, that $15 million to $25 million per quarter, does that include the inventory build for the essential oils launch and Me and Youth in the back half of the year?

Generally, we don't anticipate as large of LTOs as we've done in the past. So we anticipate sort of selling out of those LTOs as we build them. So first of all, it'll be a smaller number in terms of the inventory build and then we should move through that in the quarter, essentially, that we have the LTO. So while there may be some slight movement quarter-to-quarter, I think, consistently, throughout the year, we'd anticipate somewhere around a $75 million to $100 million decline in our overall inventory balance and they'll just kind of be split. Some quarters are a little stronger than the others, but generally, in that $15 million to $25 million range should hold fairly consistent.

Okay. Great. And then, just one last one. Have you taken a stab at what the total currency impact is going to be to EPS in 2015 based on the current spot rates we're using? And then, is there any share repurchase baked into the 2015 guide?

Yes. We haven't built share repurchase in. We don't necessarily build that in until we actually take the shares in, so I haven't built in any share repurchase into our numbers. In terms of the foreign currency impact, we're estimating about 6%, which would be about $150 million in top line revenue, and that would equate somewhere around $0.25 to $0.30 EPS.

Your next question comes from the line of Mr. Scott Van Winkle of Canaccord Genuity.

Following up on the China distributor question. What kind of promotion was done specifically in China? And is there anything different about maybe this group or this current growth in distributors that would be different than maybe go back to 2011 where we saw the numbers start to really accelerate as well back then?

The product promotions in Q4 were consumer-centric product promotions, typical to what we do from time to time. So I think the promotions were relatively consistent with our historical format of promotions. But as we -- as I mentioned earlier, Scott, the closer correlation to overall business growth is the sales leader number. And so we're very encouraged that the market responded with consumer-oriented promotions and we're starting to see the sales leader pipeline build. So yes, Ritch, anything to add to that?

No, I think that's fine.

All right. Fair enough. And then, in Hong Kong. Hong Kong, looking through the -- some concrete data that you have, Hong Kong looked a little weaker in Q4. It had been running pretty consistently quarter-to-quarter over the first 3, and then stepped down in Q4, is there anything specific in Hong Kong?

Just to mention, in Hong Kong, we had an LTO in both Q2 and Q3 that was fairly well-received, and nothing in Q4. And likewise in Taiwan. So those numbers were a bit softer. Our executive numbers were down in those 2 markets from Q3 to Q4, while the executive number in Mainland China actually went from about 17,100 to 18,100. So yes, a little bit softer in Hong Kong, Taiwan, not necessarily out of the ordinary. But I think primarily in relation to the LTO and how that rolled out. On a local-currency basis in Mainland China, we also had an LTO in Q2 and Q3, but the local currency sales in Mainland were also slightly ahead in Q4 and Q3. So we're actually able to offset, with the improvement in actives, the sales number. It was a good quarter for Mainland, particularly in the fourth quarter.

I think, it's fair to say, too, Scott, that the slowdown in China in 2014 had an echo effect in other markets in Hong Kong and Taiwan specifically inasmuch as they're part of the same region and often do things together, like sales events and whatnot. And I think that China also potentially negatively impacted the United States a bit, Canada a bit, and Southeast Asia a bit, as Chinese leaders in those markets were also a little bit -- their momentum was also interrupted by what we faced in China last year.

Okay. And then, as we look into the first quarter, is there anything -- obviously, we have the guidance, like, I guess, I struggle to kind of get down to that guidance, even recognizing the currency scenario. Is this -- is there really no LTO activity of any sort or promotion going on in Q1?

Yes, that is correct. No LTOs. Q2, very little LTO. And then, Q3 and Q4 will be all the product launches in the back half of this year. So we should see a positive impact from the fact that we're starting to build to that activity later in the year, so our sales force will start to be building to those events, but no special promotions scheduled here in the first part of the year.

And Ritch, and I certainly recognize that, historically, there's a falloff from revenue from Q4 into Q1, but a lot of that has to do with the fact that, typically, in the fourth quarter, you have either a global convention, you have certainly some event going on in the U.S., maybe a product launch. It would seem like Q4 kind of lacked that new product opportunity or new product launch scenario other than the regional event in the U.S., just like Q1 does. So I guess, I look at Q1 and I'm just -- I'm wondering, to me, it looks conservative, and I'm wondering, maybe you can give us some specifics about markets where there's a little more seasonality than others.

Well, if you go back really from '10, '11, '12, '13, every year, we drop somewhere around $40 million to $50 million from Q4 to Q1. So even though we have, sometimes, LTOs in Q4, we've also had LTOs in Q1, which have offset that, primarily. So I would say there's nothing really out of the ordinary that we're seeing in Q1 this year versus Q4. And the currency impact is a little bit steeper in Q1 than it was in Q4 because currency really moved towards the latter part of the year. And those factors, but really, nothing out of the ordinary that we would generally not see in a given -- in a normal year.

Your next question comes from the line of Mr. Frank Camma of Sidoti. Frank A. Camma - Sidoti & Company, Inc.: I was wondering, on China, are you fully back in the market with a number of company-sponsored meetings?

Good question. Well, we're not. We're still limited in the extent to which we can hold meetings and the size of the meetings we hold. But on a sequential basis, if we look at those numbers and the number of those people who are attending really since mid last year, the number has been trending up at a very nice clip. And so we still have a little bit of a throttle on the number of meetings that we hold, but we're having [indiscernible] Frank A. Camma - Sidoti & Company, Inc.: Good. Another question, kind of just drill down on China a little bit more, obviously, the overall number grew nicely. Is some of that a return of people that had previously dropped out? Or is that new people? I just wondered if you could comment about that.

Our sense is that it's primarily new people. There certainly are some -- a return of some customers, but if we were to segment the growth in actives, it would skew in favor of new people. Frank A. Camma - Sidoti & Company, Inc.: And the Americas, you had commented that the facial spa was doing well, is that primarily why the growth was pretty strong there on a sequential basis?

Yes. People are very excited to have the spa back. And there's also a lot of enthusiasm in the Americas for the upcoming product launches, and oils in particular. People are just very excited about the category and it's a high-growth category in the States. And so there's a lot of enthusiasm for the upcoming launches as well. Frank A. Camma - Sidoti & Company, Inc.: And final question, just on modeling. Just the cadence of the selling expense, should we -- since you're doing the launches in the third and fourth quarters, should we -- obviously, the selling expense typically goes up when you do these LTOs. In '13, they went as high as 49%. I mean, is that something you see as possible, in that high 40% range?

It will depend a little bit, Frank, on the size and the success of those LTOs, but I would model kind of 42.5% to 43% in the first half of the year, and kind of 43% to 43.5% in the back half of the year. And that would be consistent, based on the size of our revenue that we've guided to. Obviously, lower or higher will impact those numbers. But yes, somewhere between 50 to 100 basis points higher in the back half of the year than the first half.

Your next question comes from the line of Mr. Tim Ramey of Pivotal Research Group.

Just another drill down on modeling. Since tax rate was impacted, as you mentioned, by the nondeductibility of Venezuela in '14, should we see that drop back down into the 35-ish, 36-ish range?

That's right. It will be a more normal year this year, probably around 36% or just slightly higher than that.

Okay. And then, on the inventory reduction, I think last quarter you mentioned inventories would go down $20 million to $25 million a quarter. Today, you said $15 million to $25 million. Anything that is causing that slight change in attitude? And if I calculated inventories dropping by $100 million for the year, we'd still be fairly heavy in terms of days sales. I think, a little over 200 days sales at the end of the year. Can you comment on that?

Yes. The -- there's really no change in the feelings we have, $15 million to $25 million, or $20 million to $25 million. I think, in our Investor Day slides, we had $15 million to $25 million on our slides there. I think that's consistent with where we feel today. We'll still be a little bit high at the end of the year, primarily because of the Galvanic Spa, which is -- we're working through at a little bit slower pace. Although it will make progress throughout the year, and we don't really have an issue with obsolescence, because it has not got a shelf life on it, it's our top selling product. And in fact, the Galvanic Spa, the Body and the Face Space, were over $100 million in sales in the fourth quarter. So it continues to be our strongest product. It's just that we still have an inflow of those units coming in. So we won't make quite as much headway. But outside of that, most of the other products should be in check by the end of the year. And we should be in pretty good shape.

And obviously, that relates to -- we were sort of garbled there, that relates to a very nice improvement in working capital as well, I would think.

You're exactly right, yes.

Generally, we try and be around 2 turns or a little bit above that. So we'll be fairly close to that by the end of the year, assuming we can continue to make good headway.

Your next question comes from the line of Mr. Mark Astrachan of Stifel. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Can you discuss which channels, like online and retail, account for what percentage of sales in China at present or end of last quarter? And whether that breakdown has changed over the last 12 months?

Yes. In the fourth quarter, it was about 70% online and 30% through the stores. And that has moved a lot in favor of online as we focus more energy and attention there. We've also tried to do, when we do product promotions, we'll have a lot of those only available online, so it encourages people to learn to use the online systems. So yes, I think, there's continued good progress to become more and more efficient as we work in China. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: And sort of broadly on that, how does that change -- impact how you think about sales leaders, both in terms as a leading indicator of growth and how important they are? And to the extent there are also down lines that extend into China from other markets, how does that impact that?

I don't think that the shift we're seeing there, Mark, really relates to much of a change in sales leader dynamics. Although -- I mean, I would say that, in China, certainly social media and sales leaders' abilities to communicate with sales groups through online mechanisms and social media is probably more vibrant and dynamic there than it is anywhere else in the world. But in terms of the way that we interact with sales leaders and in terms of the way sales leaders really function themselves, I don't think that the shift in how people are accessing product is really all that impacted by the change in the channel. I mean, Dan Chard, who oversees sales and marketing is in the room. Dan, would you disagree with that or?

No. I'd say that's right, Truman. I think, we'll continue to see the role of sales leaders play a critical role and online is a way of integrating our overall model with the sales leaders, not a competitive channel to them. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Got it. Okay. And then, from an LTO standpoint, Ritch, what's baked into the numbers in the back half of the year for the new products?

$150 million.

Your next question comes from the line of Ms. Olivia Tong of Bank of America Merrill Lynch.

Apologies if I ask anything that was already asked, I came in late. But first, can you talk about what drove the sequential deceleration in Korea?

It was just really the LTO that we had in -- it was almost a limited sales offer, not an LTO, that we had in the second -- or in the third quarter of about $22 million. It was the Tru Face Essence Ultra product, and that was the primary difference between Q3 and Q4.

Got it. And then, on China, perhaps if you could just give a little bit more of an update on the progress in terms of have you been able to lift any of the restrictions on your meeting size or the frequency yet? And if not, do you have any visibility on the timing of when you could potentially lift those? And are they government rules? Or your own self-imposed rules that you put on your sales force?

Yes, these are rules imposed by each municipality. And so our management team works closely in each geographic region of China with local regulators to determine the frequency and the size of the meetings that we hold. And so it's not entirely self-imposed, it's somewhat government-imposed. But the dialogue with the regulators is very fluid and very constructive. And so we're just continually working with them to increase the frequency of the meetings. And as time goes by, the frequency is increasing. And there are always dynamics at play there. Like, for example, in Beijing in Q1, the government isn't anxious for us or other direct sellers to be having large meetings during the People's Congress that's going on in Beijing, so they'll scale back a little bit on meeting availability in that particular city. So it's just unique factors from city to city and a function of us working cooperatively with the government to demonstrate that we're responsive to their concerns and that we're acting responsibly.

Great. And then, just lastly, Chinese New Year is pretty late this year. So does that impact in any way the way that your distributors are going to sequence their sales this quarter?

Yes. It's not just that it's late this year, but it's so close to month end in February is probably the bigger issue. And so our China team is definitely on top of this and has been programming the business to hopefully enjoy really great strength from a sales perspective before Chinese New Year hits. As you know, Olivia, the country really kind of shuts down for that week. And so we've obviously known that, that's coming and the team there has programmed the business to be able to navigate that as effectively as possible.

Your next question comes from the line of Mr. Bill Schmitz of Deutsche Bank.

I just wanted to sort of drill deeper on this essential oils launch. I mean, is this like a stop cap? Or do you think this is going to be a new platform? Because I know there's a couple of competitors out there, like doTERRA, who went like from 0 sales in 1998 to -- or 2008 rather, to $1 billion now. So do you think this could be a pretty compelling platform? And do you think the sales force can sell it actually? Because I know, like a lot of your products are science-based, and this is much more sort of natural and homeopathic. Any color would be appreciated.

Good point. Yes, the category has grown rapidly over the course of the last couple of years. And it's not just a one company phenomenon. A lot of the companies that track market data are -- still don't see essential oils on their radar screen necessarily. But we do, we think it's a growing category. And for us, given our global geographic footprint, when we see a category like this emerge, we say to ourselves, “Why not take advantage of our global footprint? And take advantage of a growing category before some of the younger companies without the global footprint can really go into foreign markets.” So consequently, you'll see that the Americas launch this year and as well as the China launch. And it is a more of a naturalistic homeopathic category for sure than what our traditional approach is to product development. But what we think we can do to the category is apply science that others can't. And so we actually really feel like we can even apply ageLOC science and validate or demonstrate gene activity, whatever that gene activity may be, with some of these products that we're launching. So in China, our oil offering will actually be under the ageLOC brand and we'll be monitoring gene activity associated with the oils that we launch there. And that's one way we're going to differentiate ourselves in this marketplace is by absolutely applying science to what historically has been really a homeopathic category.

There are no further questions in the queue. Please proceed with any closing remarks.

Well, thank you, everyone, for joining us again today. We know on the East Coast, you've been pummeled by storm after storm. And the good news is the sun is shining in the West. Good weather is headed your direction, and we really feel, frankly, like the sun is shining on our business, too. We're happy to be in the new year, and really believe, as we mentioned during the call, that we're one quarter away from returning to growth, and we look forward to working with you and answering any further questions you have. Thanks for joining us.