Good day, ladies and gentlemen, and welcome to the Nu Skin Enterprises Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded. I would like to introduce your host for today's conference, Scott Pond, Head of Investor Relations. Mr. Pond, you may begin.

Thank you, Takeah, and thanks, everyone, for joining us. On the call with me today are Truman Hunt, President and Chief Executive Officer; Ritch Wood, Chief Financial Officer; Ryan Napierski, President of Global Sales and Operations; and Joe Chang, Chief Scientific Officer. 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. Please refer to the Investor Relations page of our corporate website at ir.nuskin.com for any required reconciliation for non-GAAP financial numbers. With that, I'll turn it over to Truman.

Good afternoon, everyone. Thanks for joining us on the call today. As our release indicated, we posted a strong quarter, generating third quarter results above guidance. Revenue was just above the $604 million mark, which was a 6% improvement over the prior-year quarter. Currency was in our favor a bit in Q3, giving us a slight benefit. And earnings per share also exceeded guidance at $0.98 due to sales exceeding guidance as well as a tax benefit from closing operations in Venezuela, which Ritch will explain in a moment. This strong third quarter is allowing us to bump revenue guidance a bit for the remainder of the year, or for the year 2016. So overall, we're pleased with the direction of the business. Throughout 2016, we've generated good growth in our core business when you sift through the introductory product volume. In the third quarter, we saw growth almost everywhere with the exception being South Asia/Pacific, which had a tough year-over-year comp with the LTO of ageLOC Youth in the third quarter of 2015, which generated about $47 million of revenue last year. As we previously indicated, we accelerated the launch of ageLOC Me in Korea from Q4 of this year to Q3, which helped to boost our revenue in this key market during the quarter. We're seeing good activity in the business as a result of two key initiatives. The first is the global rollout of ageLOC Youth and ageLOC Me. These new products are receiving good responses in the marketplace, which is reflected in growth in our consumer base as well as in our sales leader numbers. In the third quarter, sales leaders grew 3%, led primarily by the Greater China region, where sales leaders were up 22%. Our quarterly active number also rose modestly, again led by…

Thank you, Truman and good afternoon, everyone. Our third quarter performance, as Truman mentioned, came in ahead of guidance and above the prior year. We benefited during the quarter from solid limited time offer sales of approximately $55 million, and most of that in South Korea. Earnings also came in very strong and also benefited $0.09 from a tax benefit from closing operations in Venezuela. The closing of Venezuela resulted in a $6.4 million tax benefit, offset by a $1.7 million write-off charge in the other income expense line item. Operating margin for the quarter, third quarter, was 13.6% compared to 7.4% in the same prior year period. Gross margin was 79.2% versus 73.3% in the third quarter of 2015. Both operating and gross margins were negatively impacted in the prior year by an inventory write down. Selling expenses for the third quarter were 42.3% of sales compared to 42.1% in the prior year. General and administrative expenses were 23.3% of revenue in the third quarter compared to 23.8% in the prior year period. We incurred a loss of $5.7 million in the other income expense line item of the income statement. This loss is primarily interest expense. The increase in interest expense from prior quarters relates to the addition of the convertible debt related to the Ping An transaction. Our income tax rate for the third quarter was 25.8% compared to 42.1% in the prior year period. The lower rate in the current period is due to the tax benefit that we talked about earlier from closing operations in Venezuela. During the quarter, we paid $19.9 million of dividend and repurchased $17.4 million of our stock during the quarter. This leaves about $405 million in our share repurchase authorization as of the end of the quarter. Our plan is…

Thank you. And our first question comes from Faiza Alwy with Deutsche Bank. Your line is now open.

Yes, hi.

Hi, Faiza.

So I just had a quick question, first of all, on the trend of the executive distributors. So it was up big in China and it was up big last quarter also. So can you just talk about where you expect that trend to go from here as we look ahead to 4Q and into 2017? And then just similarly, if you could address some of the declines in North Asia and Americas and where you expect that trend to go?

Thank you, Faiza. I'll answer that. This is Ritch. We were really encouraged, frankly, with the trends that we're seeing in Greater China. As you remember, we had a big uptick in the second quarter following some of our LTO activity there in Greater China. So the fact that we're able to maintain those new sales leaders that came in was very positive. So hopefully we'll be able to kind of maintain again in Greater China as we go into the fourth quarter with fairly solid initiatives in the first quarter next year as we launch ageLOC Me. The rest of the regions have some interesting comparables. So for example, in Southeast Asia on a year-over-year basis, we had the LTO in the previous year, which really pushed our executive number. So that's a little bit of a weird comparison. The Americas was impacted in its year-over-year comparison, primarily with some Latin America activity, so closing Venezuela and so forth that made that comparable look bad. So I think it's probably best, as you look at the trends, with the executive and active base, to really look on a sequential basis in those markets, particularly Southeast Asia and the Americas. And then finally, maybe just to comment on Korea, where we saw a nice uptick in sequential sales leaders that have not seen that same uptick in the active base. So we're looking, really, to deploy this consumer strategy in the fourth quarter with ageLOC Me that should build our active base in Korea, specifically. So hopefully, that kind of covers the globe in terms of some of the comparables. Again, I think the most important thing is to look at the numbers on a sequential basis with the changes on a year-over-year basis that make them look a little bit odd.

Okay. So just to follow up then on Greater China, on a sequential basis, we saw just a slight decline in the sales leaders; so are you comfortable sort of with that sort of 31 level going forward? Or do you think it should accelerate from here?

Yeah. We're actually very encouraged with the fact that we were able to hold that pretty consistent after I think a 45% or something increase from Q1 to Q2. So I think our focus right now is to maintain that sort of a level as we come into Q4 and then get ready for another push as we launch ageLOC Me in the beginning of next year.

Okay. And then would you mind just talking a little bit about the air purifier product? Is that – I think you said it's going to launch in Q4. Sort of any – and if you could just elaborate on that a little bit more?

Yeah. This is a product that was designed specifically for the China market. It's a fairly high ticket item. It's about $1,000 to service an average size apartment in China, where as you know, air quality is a big issue. We have started to sell it to leaders in China just this month and anticipate that in the fourth quarter, we'll move about 15,000 units or about $15 million in sales in the quarter from this product, which is not insignificant and which, as I mentioned, in my comments, is another reason why we're pushing Me to Q1. It's just to enable them to focus on one product launch at a time.

Okay. Great. Thank you.

Thanks, Faiza.

Thank you. And our next question comes from the line of Tim Ramey with Pivotal Research Group. Your line is now open.

Hi. Thanks so much for the question. Ritch, as I was trying to deduce (18:41) earlier, and I think you got me there, but $6.4 million tax benefit offset by a $1.7 million cost in other, that doesn't quite get me to an $0.89 (18:57) – maybe it's something we should handle offline, but is there any other component to that one-time item?

No. We can discuss that offline if it's helpful, but one of those items is obviously the $6.4 million is kind of an after-tax impact, so it has a different EPS impact than the expense, obviously, that's a pre-tax issue, so together they come out to a $0.09 impact for the quarter.

Got it. Okay. And I was curious about the relatively low use of share repurchase in the 3Q. I kind of thought you would be off to the races earlier. Is there any reason, in particular, why most of the share repurchase is loaded into the fourth quarter?

Well, just that as you'll recall, Tim, that in the third quarter, the resolution of the SEC matter came to a head (20:00) right at the end of the quarter, so we were only actually in the market a couple of days.

Got it. Okay. And then I think I had like $0.5 million in there for that. Is that something you just plugged into SG&A somewhere and we're not really calling it out?

Yeah, that's right. We actually – that was expensed in the second quarter.

Okay.

It was an estimable range at that point in time.

Got it. Okay. Thanks so much. That helps.

Thanks, Tim.

Thanks, Tim.

Thank you. And our next question comes from Olivia Tong with Bank of America. Your line is now open.

Great. Thank you. Can you talk about how much the launch of ageLOC Youth in South Korea contributed to the quarter? And when did you decide to roll out that? Because I think last quarter you said that it wouldn't hit until Q4, so it's obviously a little bit earlier. So that's the first question.

Yeah. I think in total it was about $55 million – I'm sorry about $50 million in – I think $49 million in Korea in the third quarter. We made a decision to move that up after our first quarter and as we're coming into the second quarter noticing that the trend was softer in South Korea than we had hoped. You'll remember that when we launched the ageLOC Me in the fourth quarter, that didn't generate the level of excitement growth that we had hoped for, so we determined at that point in time to advance the LTO of the ageLOC Me into Q3.

Got it. Okay. So when you guys said that – when you guys had the press release, it said that you expect results to be towards the top end or above the range that was inclusive of that pull forward in – for Korea?

Yeah. That's right. We had the LTO already in July, so we had a pretty good idea of where that was coming in at.

Got it. Thanks. Now, then the follow-up question to that is you obviously beat your expectations on sales but it doesn't look like you got any operating leverage off of that, so why wouldn't you have gotten some more margin expansion off of that better sales number?

We beat our revenue by about $25 million, and our beat on the earnings line was about $0.05. So actually it was a decent improvement and normal, I would say, in terms of what our expectation would have been.

Okay. And then the tax benefit that you got from Venezuela, what's sort of your expectation for a tax rate for the full year at this point, an ongoing tax rate going into next year?

The tax rate in the fourth quarter will come back to around 35.5%. And then I'd anticipate going forward in 2017 be somewhere around 35% to 36% as well, very consistent with our normal quarters, I would say.

Got it. Okay. And then would – the move of the launch of Me in China to January, I get that you want to get around the – build some momentum around the New Year, but historically don't your distributors typically take a break during the New Year holiday? And I'm just kind of curious because from what we've seen, it looks like you've already started to run some promotions for it. So just trying to understand how that – when you kind of made the decision to push back the launch of Me a little bit into fiscal 2017?

Well, that's just a recent decision actually, Olivia. I mean there's kind of always been the possibility that we might promote ageLOC Me in the month of December in Greater China, but in talking with the team even just over the course of the last week, we've decided to hold that off, and just all things considered in the market. And there are no ageLOC Me promotions going on in China right now. The promotions that we're running are outside of China. So China just had the LTO of ageLOC Me earlier in the year, and we just feel like, all things considered, we want to learn what we can from these fourth quarter promotions that are very consumer focused and then take another swing at the China market in January. Chinese New Year this year is right at the end of January and 1st of February, so we plan to go out after the New Year for the rest of the world with a second week and third week push in China ahead of Chinese New Year.

Got it. And then just lastly on the recent skin care consumption tax changes, any update there in terms of the impact that it could potentially have on you guys?

We continue to look at it, but at this point in time I really don't have an update on what that's going to do.

Got it. Thanks, guys.

You bet. Thank you.

Thank you. And our next question comes from the line of Frank Camma with Sidoti. Your line is now open. Frank Camma - Sidoti & Company, LLC: Good afternoon, guys.

Hi, Frank. Frank Camma - Sidoti & Company, LLC: Hi. Truman, question on ageLOC Me, your comment about the pricing. Totally understand that in a market like the U.S., but like in the past you've had issues with your distributors wanting maybe even more premium pricing in Asia. So can you talk about that dynamic as it relates to this product?

Yeah. Well, so South Korea, Frank, is probably one of the more sophisticated skin care markets in the world. And it really actually has kind of become the epicenter of skin care and color cosmetics in Asia. And there you'll recall that we initiated ageLOC Me sales at an initial price of about US$600 to buy the product, the device, one month of cartridges. And we also asked for a commitment, a subscription commitment in connection with the purchase. And this is a sophisticated market. And the product launch went okay. But it was below the expectations of our management team there. And as we have evaluated the market and the product launch in that market in particular and talked with our sales leaders, they love the fact that it secures a customer who essentially has to reorder on a monthly basis. But they're finding a bigger hurdle than we would have anticipated with the initial purchase. And so we just want to test in the fourth quarter here some more aggressive pricing and see if it makes a difference. So in South Korea, for example, our fourth quarter ageLOC Me promotion, we'll offer it a consumer willing to sign up for a subscription for $300 instead of $600. And then after they have been a product subscriber for six months, we'll give them a loyalty credit that will enable them to purchase about $150 of Nu Skin products. And so a much more aggressive approach to securing more customers and really maximizing the lifetime value of an ageLOC Me consumer. It's more of a razor and razor blade approach. And we just think it's worth a shot here as we try to maximize the value of the product. Otherwise, the feedback on the product is very positive. Everyone loves the product, what it's doing for them. They love the convenience of the system. And we've really felt over the course of the last 12 months since we started introducing the product, it's just a matter of dialing in the right economic formula. Frank Camma - Sidoti & Company, LLC: Okay. Great. And my only other question is on ageLOC Youth. What do you see in there as far as people also buying, or their willingness to also buy, the monthly subs (28:10) supplement, in addition too? Do you see any cannibalization? Just kind of curious (28:15) on that?

Yeah. Thanks, Frank. I'll ask – or I'll answer that question. So ageLOC Youth for the quarter was really strong, about $80 million total. Obviously that included about $50 million from Korea. And it really hasn't fully launched everywhere in the world yet. So we're encouraged with what we're seeing. We saw our LifePak sales hold pretty consistent as well and not be cannibalized too much by the rollout of Youth, so we're encouraged with that. And it's just really now as the product starts to roll out that we'll see the subscription customer base and what that looks like, but... Frank Camma - Sidoti & Company, LLC: Okay.

...all things to date look positive for Youth and we like the direction it's going. Frank Camma - Sidoti & Company, LLC: Great. Thanks, guys.

Thank you.

Thank you. And our next question comes from Beth Kite with Citi. Your line is now open.

Wonderful. Hello. Thank you. I'd just like to go back to China, if we could. And, just in addition to talking about the rep growth that you're seeing there, if you could talk to us about, post the Me quarter in June, here in the September quarter, what, maybe, other products are working? Have you made other, sort of, execution oriented changes in the marketplace about how you're interacting with your reps? Were there other promotional activities going on? Just to, sort of, understand, maybe, some other elements of the China business.

There really haven't been any dramatic changes in the way that we're interfacing with sales leaders or with consumers in the market. The Galvanic Spa has been and continues to be a product of primary focus in the marketplace and from time to time we will run Galvanic promotions that always generate a big response. But we're also – probably the one dynamic that we have definitely noticed just relates to our earlier comments on the retentive benefits of the ageLOC Me skin care system as we're seeing cartridge sales trend very nicely on a month-to-month basis. And we're really happy to see a growing customer base on what is essentially a subscription-oriented type product.

Excellent. That actually leads me into one of my other questions, which was are there any statistics you're able to share with us for the Me cartridge repurchase (30:49) rates either globally or in certain other countries that have had it longer?

Maybe I can speak to that, Beth. Thanks for that question. We are very, very encouraged. I think the longest – the market that's had it the longest is Korea. And we continue to see this as very stable user base that has started back in December when we first sold the product and has continued. We feel like the initiative that we did to get people on a subscription of the product there with a slightly reduced price at that time was beneficial. And we've seen a good acquisition of customers from that. So that's really leading us down this path of adjusting and promoting the product with a subscription associated to it. So a little early still on a lot of the markets because the product is just rolling out, even in China. We just had that initial sale of units. And so we're seeing now the customers customize the product and start to order the customized cartridges, but just a little bit early to have too much data yet.

Okay. Excellent. And just one last geographical question. Here in the U.S., I believe sort of late summer-ish you launched the Beauty Box for women, which was similar to a product you had in EMEA. And then there was a men's version that came out kind of late September, early October. Can you just talk to us about each of those and sort of have they had the response here domestically that you had seen in EMEA that you were hoping to see?

Yeah. The Beauty Box is really a kind of a derivative of increasing levels of interest in pushing the business through social media. And what the U.S. team did was essentially take the five or six products that are most prominent in social media environments around the world and put them together in a kit that they called the Beauty Box. They're all relatively low to moderate price point products. And so the Beauty Box is very affordable. And for those who are pushing the business through social media, it's been a really nice product in North America and in Latin America, where I don't believe that any of our markets yet have packaged these products on a similar basis. But in North America and Latin America, both the gender neutral, as well as the male Beauty Box are getting a really nice response.

Okay. Perfect. And last one. I assume it might be in December, but is the plan at the Investor Day to talk to us about the local currency sales growth you're expecting for next year?

Exactly. Yeah. We're really looking forward to talking more about Me and what we're learning through our various tests around the world. And I think we'll go into more detail on the retention benefits that we're seeing in Me. And we'll also, of course, talk about our launch plans for the Lumispa (33:45) product in 2017, which we're very excited about.

Great. Thank you all so much.

Thank you, Beth.

Thanks, Beth.

Thank you for joining us on the call today, everyone. As usual, we'll be available for additional questions. And I just want to also take this opportunity to invite you all to attend our December 7 Investor Day presentation in New York City. We're looking forward to talking about our exciting product launch plans for 2017 and of course, we'll be available to answer more detailed questions there. Thanks so much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a great day.