Nu Skin Enterprises, Inc. (NUS) Q3 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Q3 2019 Nu Skin Enterprises Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Scott Pond, Vice President of Investor Relations. Please go ahead.

Thank you, Laurie and good afternoon, everyone. On the call with me today are Ritch Wood, Chief Executive Officer; Ryan Napierski, President; Mark Lawrence, Chief Financial Officer; and Dr. Joe Chang, Chief Scientific Officer. On today's call, comments will be made that include some 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 statement. We believe these non-GAAP financial numbers assist in comparing period-to-period results in a more consistent manner. Please refer to our Investor page at ir.nuskin.com for any required reconciliation of non-GAAP numbers. Now I'd like to turn the time to Ritch.

Good afternoon everyone. Thank you, Scott and thank you all for joining us today. As we announced in our release, third quarter revenue was $589.9 million with earnings per share of $0.79. Despite a lower revenue base, earnings per share came in at the high-end of our guidance range as we benefit from a focus on operational efficiencies. Our quarterly revenue continued to be impacted by limited sales meetings in Mainland, China. Let me begin in fact by providing an update on our business in Mainland, China and how we see things progressing there. First, we continue to see tremendous long-term growth potential with high demand for both our products and our opportunity. In our nearly 20 years of operating in China, we have steadily build a strong foundation and invested in the future of this important market. Our long-term expectation and commitment to the market have not changed during this past year. Even though meeting restrictions have extended beyond what we initially anticipated. We expected meeting approvals to increase during the third quarter, although this did not happen, primarily because of the celebration surrounding the 70th anniversary of the founding of the People's Republic of China. Through September, slightly less than 60% of our sales leaders lived in provinces where meetings were being approved, and these meetings restrictions continued through October. Fortunately, we’re experiencing slightly improved meeting approvals in November, and we anticipate continued improvements into December. We’re seeing sequential stabilization of our sales leaders and business in Mainland China. However, we anticipate it may take a few quarters to see a rebound in our sales leader numbers. We are pleased that our customer initiatives have been well received and have driven good customer growth. We anticipate a strong launch of our new beauty device product to drive sales leader growth in the second half of 2020. In October, we hosted our Global LIVE! Event in Salt Lake City designed to align and motivate our sales force and introduce our future product roadmap. These new products include our new and improved Galvanic Spa, and accompanying consumable products which are launching in many of our markets this quarter. We look forward to several product launches in 2020, including a newly reformulated Tru Face Essence Ultra and new Galvanic Gel, as well as our first two products to leverage our controlled environment agriculture Groviv initiative. We also announced our next major product launch an innovative daily-use beauty device that we anticipate will be a strong driver for our business in the second half of 2020. We're excited to add this product to our top ranked beauty device systems brand. We’re pleased with the successful event and the excitement we see throughout our sales force. Our manufacturing segment recorded 18% growth in the quarter and we continue to see great potential for revenue growth and cost efficiencies in this segment. I’ll now turn the call over to Ryan who will give some additional detail around our strategy and plan.

Thanks, Ritch and good afternoon, everyone. Despite the headwinds, that Ritch discussed, we remain focused on transforming our business to become the world's leading opportunity platform by empowering our sales leaders to expand their customer base through engaging technology platforms, enabling products and empowering programs to drive long-term sustainable growth. This transformation is vital to the long-term viability of our business as we seek to expand the appeal of our opportunity to a broader array of socially enabled entrepreneurs in the opportunity economy. Let me provide a brief update on each pillar of our strategy. The pillar -- the platform pillar is centered around enabling our sales leaders to build their businesses digitally, we accomplished a significant milestone during this quarter as we formally migrated our technology stack to the Cloud, which provides us with a more flexible and scalable foundation and gives us access to a broader array of services that will enable us to enhance the use of data, artificial intelligence and other critical digital capabilities. We can now begin to focus our technology investment on customer facing digital touch points to help our sales leaders more effectively reach customers and build a digital business. Regarding our product strategy, our focus in 2019 was on strengthening our leading beauty device systems brand by improving and extending the Galvanic and LumiSpa franchises. We launched LumiSpa Accent earlier in the year and are currently rolling out the newly improved Galvanic Spa and reformulated Nutriol scalp and hair system, which we believe will extend the life of these important product lines. For 2020, our focus will be on introducing our next new innovative divide system which will further strengthen our position as the world's number one at home beauty device systems brand. The highlight of our product introductions at LIVE! was a brief glimpse of a new innovative daily use beauty device system that helps restore brightness and bounce to the skin. We are in the process of deploying our Nu Skin launch process. The same process utilized for our LumiSpa release to align our markets and sales leaders around the global preview of this product scheduled for the latter half of 2020. Our beauty device systems brand is our most powerful business driver. Finally, we're now one year into the global rollout of Velocity, our sales compensation program and continue to optimize it based on local market conditions and needs. As discussed previously, Velocity places increased emphasis on customer acquisitions and sales leader productivity by providing a flexible framework to appeal to a broader demographic of entrepreneurs who leverage their social presence to build the business. While these changes have increased customer acquisition and improved sales leader productivity and quality overall, our report sales leader numbers have been impacted through the transition period. Nevertheless, we believe that Velocity plays a vital role in better positioning Nu Skin to compete more effectively in the emerging opportunity and sharing economies. Next, let me provide a bit of color on each of our market segments. In mainland China, as Ritch noted, we didn't see the increase we had anticipated and meeting approvals during the quarter. These meetings play a vital role in introducing flagship products as well as training and developing our sales, our future sales leaders. During this period, we increased the customer acquisition retention initiatives, including a new customer referral program that is gaining traction. Additionally, we will continue -- we will introduce the new Galvanic Spa and Nutriol in the fourth quarter. This will be the first time Nutriol has been available in Mainland, China. I was in China last week to attend the prestigious Nu Skin-sponsored Oriental Beauty Valley Symposium, which reaffirmed my belief in the long-term growth prospects of this vast consumer marketplace. We will continue to invest to build a long-term sustainable business there. In other parts of the world, the Americas Pacific segment was down 7% in constant currency and was largely impacted by the hyperinflationary environment in Argentina. We’re accelerating our focus on the U.S., another key market where we recently announced our discover the best U.S. initiative to be launched in January. This campaign is patterned after successful campaigns we launched last year in Mexico and Colombia to align and motivate our sales force through training, incentives and events, which helped generate double-digit growth in both markets this year. In South Korea, we continue to see signs of stabilization and good potential in this important market. They also continue to be a leader in applying new digital technologies to leverage social platforms like grow to grow the business there. Southeast Asia was down 10% as we were up against the tough comparable due to last year's regional convention. Recent changes to direct selling regulations in Vietnam also contributed to the decline. Nevertheless, we remain optimistic about the region's growth prospects as high potential markets like Indonesia, which reported up 18% year-over-year continue to perform well. In Japan, we are encouraged by three consecutive quarters now at constant currency growth, driven by enhanced sales leader training and development events and our beauty device systems. Taiwan performed well during the quarter however Hong Kong was down double-digits, as the ongoing social incidents have disrupted business and the economy. Finally, EMEA was down during the quarter largely due to slowing in our U.K. market. However, we are seeing healthy growth in high potential markets like Germany and Austria, where social sharing is taking root. Going forward, we will focus on aligning our sales leaders around our product initiatives, Galvanic Spa and Nutriol in Q4 and first half 2020 and our next beauty device systems innovation in the second half. So in summary, despite the challenges we faced in 2019, we remain confident in the direction of our strategy as we learn and adapt to environmental factors and believe we have the right team and initiatives in place to grow our business going forward. With that, I'll turn the time over to Mark.

Thanks, Ryan. I will take a few minutes to walk you through our financial results for the third quarter and give an update on our Q4 and 2019 guidance. As a reminder, you can find additional financial information in our release and on the Investor Section of our website. Third quarter revenue came in at $589.9 million, compared to $675.3 million in the prior-year. The prior-year quarter included a significant distributor event in Southeast Asia and a large LumiSpa promotion in Greater China, which did not repeat this year. Our quarterly revenue results were negatively impacted 2% or approximately $12 million by unfavorable foreign currency fluctuations. Third quarter earnings per share were $0.79 compared to $0.94 in the prior-year quarter. Gross margin for the quarter was 76.2% compared to 76.7% in the prior-year quarter, primarily as a result of our manufacturing segment, making up a larger percentage of revenue. Nu Skin’s gross margin was steady at 78.6% compared to 78.7% in the prior-year, and sequentially overall gross margin improved 90 basis points. Selling expense as a percent of revenue was 39.3% compared to 40.2% in the prior-year, similar to gross margin selling expense was impacted by our manufacturing segment. Selling expense for the Nu Skin business was 41.5% compared to 41.8% in the prior-year. General and administrative expense as a percent of revenue was 25.1% compared to 24.5% in the prior-year. We anticipate our fourth quarter G&A spend will increase sequentially as we recently hosted our Global LIVE! sales event with a spend of approximately $10 million. I am encouraged by the results of our expense management and cost control efforts as evidenced by year-over-year G&A spend reduction of $18 million for the quarter and steady operating margin of 11.8% on reduced revenue. The other income expense line reflects a $5 million expense compared to a $7 million expense in the prior-year. During the quarter, we paid $20.6 million in dividends, reduced our outstanding debt by $42 million and did not repurchase any stock. Our tax rate for the quarter was 32.1% compared to 27.9% in the prior-year. Our rate in the prior-year benefited from the utilization of foreign tax credits and our decision to permanently reinvest in China. Our revenue guidance for the fourth quarter is $570 million to $590 million and includes an approximate 2% foreign currency headwind. We project Q4 earnings per share of $0.68 to $0.75 which assumes an estimated tax rate of 31% to 35%. We anticipate providing 2020 guidance when we report our fourth quarter results. For the full-year, we anticipate annual revenues in the $2.41 billion to $2.43 billion range with earnings per share of $3.07 to $3.14. This guidance reflects an approximate 4% negative foreign currency impact for the year. With that operator, we will now open up the call for questions.

[Operator Instructions] We have a question from the line of Olivia Tong from Bank of America. Please ask your question.

Great, thanks. Good afternoon. First, just on China, if you could give a bit more color on what you're doing in the market right now, relative to that, how does your meeting count compare and other metrics that you can share to shine some light and how you're filling up the funnel again, and then I'm just trying to understand some of the numbers and what leads to such a divergence between sales leaders and customers. Sales leaders still declining on a year-over-year basis at a pace similar to last quarter, but the customer count shot up pretty dramatically. So do you consider one to be a forward indicator while the others lagging, and why I think you mentioned in your prepared remarks, it takes a few quarters to get the sales leaders to turn around and love a little bit more explanation as to why that would be the case and then I have follow-up. Thanks.

Great, thank you, Olivia. I appreciate that question very much. Yes in China, the meeting progress throughout the year has really been something that just hasn't changed much at all in Q2, we anticipated things would get a little bit better. But the provinces that did not allow meeting stayed very consistent. And even in provinces where meetings were getting approved, they were getting approved at a lesser rate and certainly before the pre-ban time that it started to improve. We're encouraged by that because it's our primary opportunity to build the sales force. In the meantime, we've done a number of initiatives to drive the customer base, and continue keeping the customer group active. So maybe Ryan, why don't you give a little bit more detail?

Yes, I think from a couple of quarters ago, we began talking about some customer related initiatives there, that we're really focused around customer acquisition and retention that were being executed in China, we've continued to apply those programs and they continue to build traction in the marketplace. So that's really driving the customer growth that you're seeing there as well as during a time when sales leaders are not able to focus as much there, they tend to focus directly on growing that that customer acquisition activity. So that's really driving the difference. I think regarding leading and lagging indicators, we do see typically that that our pipeline generally flows from customers to prospective sales leaders of sales leaders and so we're encouraged by the increase in customers but as Ritch mentioned previously, we need to see those the meetings continue to expand in order to train and educate those up and coming sales leaders. So, encouraging, but we need to continue to focus and buying around getting these meetings up and going as we're able.

Let me just add one more thing, Olivia to that. And that is, as we look at our sales leader number on a sequential basis, we dropped just slightly about 500, so 2.5%, 3% sequentially in our sales leader number, which is the key for us really going forward. Now that we've got the customer base improving, we really need to see that sales leader base improve and the key to that will be continuing to hold more and more meetings.

Got it. So your expectation that the sales leaders are still a little bit challenging in couple of quarters, is that just a function of, we have had two quarters now, another two quarters and then we're going to start getting the comps will start to normalize a bit?

Yes, I think as we look at it in a sequential basis we will see Q4 be consistent, we would anticipate that things would be fairly consistent there, Q1 is always difficult because of Chinese New Year and typically, we see a seasonal decline in sales leaders in the first quarter. But then as we begin to move towards the back half of the year and a real strong product launch with our new product, we would anticipate to see that sales leader number start to build into the back half of next year.

Got it, got it. It helps, that's helpful. And then I know it’s a quarter early, but as we go into 2020, usually the year after a big distributor event like LIVE!, you tend to see a nice sales acceleration, you got a lot of new product out there. So can you talk a little bit about the new products and the timing of the rollouts. And how we -- should we expect that sales build as the year progresses or is there a lot of activity early on, and perhaps you start the year-off running pretty nicely?

Yes, we do like our opportunity to grow the business. So if we go back to 2017, when we held the last LIVE! event, that was also the time that we launched the LumiSpa and it drove really good results in 2018. So we have several product launches in the first half of the year that Ryan can speak to here. And then our big product launch will be the new beauty device in the back half of the year. Ryan, do you want to add some detail?

Yes, I think Olivia though the key products that we will be rolling out here and they began in Q4 are around as I mentioned, the revision to the Galvanic Spa and the Nutriol product lines, the Nutriol is really a restage in a -- a restage product reformulated. We’re really excited about that, it’s new in China which we’re encouraged about as well. So that will happen really through Q1. We have a product, one of our top 10 sellers in Tru Face Essence Ultra, that's coming out as well that will be reformulated that we're encouraged about in Q1 and Q2 depending on the markets. We also have new Galvanic Spa gels coming out in Q2. So first half, we have quite a bit of product ammunition there, a lot of it is are re-stages. So again, we're extending the life of those product lines. The incremental growth that we're expecting to see comes from this new device that Ritch is describing and I think that's a really important one to focus on given Nu Skin and how we typically launch products, new products into market new innovations to market similar to the way we launched the LumiSpa product. So back half of 2020 and into the early 2021 that will that we're really focused on.

Great, thank you very much.

Thanks Olivia.

Thanks Olivia.

Your next question comes from the line of Steph Wissink from Jefferies. Your line is now open.

Thanks. Good afternoon, everyone. I have a couple of clarification questions and then Ritch, one question for you. But the two clarification that I just want to understand a couple of the comments that you made, you made the note that provinces are approving meetings, but not approving as much. And I'm just wondering if that's in reference to the number of meetings being approved, or the size of those meetings being approved?

Yes, it really is both. The number and size of those meetings. And we anticipate we're actually seeing some improvements. So if I were to give an estimate, for example, for November, it's about 75% of the provinces where we're actually getting approvals. So still stumped some restrictions on size and number of meetings, but generally that's made a nice step forward here into November.

Okay, second clarification is you mentioned beauty device systems are the largest part of the beauty business. I'm just wondering if you can help us scale that as a percentage of your sales mix or percentage of total revenue, to help us understand how that business is scaling up and then with respect to the 2020 launch, if you would expect that to be incremental, or is that going to be personally cannibalistic to one of your existing offerings?

Yes, that's a great question. We're really proud of this beauty device system brand, which Euromonitor actually announced that we were the number one at home beauty device system brand this year that was actually for 2017 and 2018. The brand is made up of three key products right now, our LumiSpa which was the most recent launch, the ageLOC Me and then the Galvanic Spa, which includes both a body and a face device. This will be a device that complements those we've been somewhat discrete on what we've explained, because we will align our sales force around that as we come out with more detail in next year. While we anticipate that it will be the primary driver of our business in the second half of the year, which sometimes cannibalizes a little bit, the other products that are being used to introduce customers to the business, it really has a different purpose. And so we think it can be really additive to the rest of that device platform. Ryan, you want to add?

Yes, and we would just confirm, you had asked the percentage of the beauty business, I mean, it's roughly 30% of our global revenue, if I'm not mistaken. And so it is, it's a big driver for us. And regarding that product specifically, as Ritch mentioned, it's a very complimentary positioning to these other devices that are much more like a treatment driven devices. These are again brightens and balances are really, really well positioned for Millennial, Gen Z, Gen X consumers that are looking for that uptake on their skin on a daily basis. So this will be a really interesting and uniquely positioned device that we don't see out there in the marketplace.

Okay, great. Just one final one is the follow-up to Olivia's earlier question. So the ability to hold scaled meetings in China remains restricted into 2020. Would you elect to defer some of the product launches you have planned for China? Or are the customer direct initiatives supportive enough to really come behind those new product releases, and you would continue to roll-out your product program in that market?

Yes, I think our restages would fit well, whether we're having more meetings or not. They're very customer focused products, but also ones that our sales force generally knows. So there are upgrades to those products that wouldn't require a lot of new training, for example on the product, I think they'll fit well regardless. And then I would anticipate by the end of next year, we'll be able to hold meetings and be able to train well on the new product launch and really use that as the driver to grow our sales force in the back half of the year.

And maybe just to add to that as well, Steph, we do continue to focus on digital mediums to train and educate our sales force there, we recognize the importance of these meetings and the need as well for the digital capability. So we continue to invest in that, we’ll continue to focus there as well as a contingency moving forward.

Thank you, very helpful.

Thank you, Steph.

Your next question comes from the line of Mark Astrachan from Stifel. Please ask your question.

Yes, thanks and good afternoon, everyone. Two questions. I guess the first one is a bit of a clarification on the commentary about sales leaders versus customers in China. If I'm not mistaken, you look when you talk about customers being the focus retention of customers if we go back to earnings transcripts, a few calls ago, so I guess I'm trying to figure out the correlation between what's going on in China in customers versus sales leaders to know the focuses on sales leaders, customer retention is nice, but it's not a driver of the business. I guess maybe if you could just clarify that could be helpful, please.

Yes, thanks, Mark. It's always a balance for us in order to grow the business, we really have to grow both sales leaders and customers. In China, it's been a little unique because of the limitation on meetings. We shifted our focus really around a number of promotions and customer initiatives, retention initiatives on customers. And so it's driven that number and generally, we see a lot higher base of customers to sales leaders than we typically have seen in China. We think as we start to hold meetings and there's a focus back on driving customer leaders, that the two will come back into balance somewhat. But I think it's important to say that it's hard to grow the business. If you're only growing one side or the other, there's customer side or sales leader side, as we saw this last quarter, good uptick in customers, which helps to stabilize things. But we need the sales force to now bounce back in order to grow the overall business.

Okay, I think I get that. And then secondly on the rest of the business, so if you take a look at your China results and compare it to some of your public direct selling multi-level peers. Your results are basically in line with everybody else's obviously we all get that. But if you look at the rest of your business, I think that's actually really where you missed our numbers and probably the consensus. So excluding Japan, what is going on in the rest of the world, is it the lack of down line ability to grow in China? I mean, is there just some product issues going on? Is there recruitment issues going on? Maybe if you could touch on some details there that would be helpful?

Let Ryan and I take a shot at that as well. Thanks, Mark for that question. Last year in the quarter, we reported 20% growth in the third quarter. So we had a tough comparison coming in. Secondly, we've had some softness throughout the beginning of the year, some of that may be impacted by the events in China and sort of that feeling throughout some of the world where we have Chinese, larger Chinese groups. But at the end of the day, as we look back as a management team, there are areas that we could have done better, our product launch strategy, which was really focused on extending lines at a time when the business softens up was not enough ammunition to drive that sales leader force. And so we saw some softness there at a time where we were transitioning as well, with our compensation plan. I think those two things we look back and we would have done it differently, we would have accelerated some product launches. We do feel good that what we have in the pipeline now can return those businesses to growth. We like we're seeing, for example, in Japan, certainly, but what we're seeing some good sequential trends in our sales leader number, for example in Korea, which improved nicely, sequentially, Southeast Asia improved sequentially. So we're seeing those businesses come back and would anticipate better results as we go into the quarter and especially into next year.

Yes, Mark, the only thing I would add to Ritch’s comments are around Velocity and our compensation plans move. I mentioned that in my comments. But this has really been the first full-year of transition into the new model. And while the model we believe it positions us quite uniquely to transition and play a better role in the opportunity economy. It is a new way of building in certain respects to our traditional business. And so while our sales force learns how to and acclimate it to that model, we're seeing some of that transition. And I mentioned that focus of focusing on productivity versus quantity, so to speak at the sales leader level that does require acclamation. And so we're starting to see, like I mentioned we see good progress in many of our markets around the world. Germany is doing really well, Indonesia is doing really well, Japan's doing really well, Korea is starting to pick-up, Latin America is doing well with it outside of Argentina. So but it does take time for that to acclimate. And so that's probably to Ritch’s point of steps, yes, products, I think and then the other one is just transition timing into this. We're just glad to be at kind of the tail end of that transition period now so.

Okay, thanks. And just lastly, if you think about kind of all of it holistically, how do you drive more people into the business at this point, I mean, beyond the blocking and tackling like one of your competitors have talked about potentially increasing promotions to try to drive incremental consumers to the business. Is that something you think about especially ex-China, as you talked about some of the things that you could do better?

Our promotions are always helpful in terms of driving a short-term blip. But for us, the key has always been major product initiatives, and the cadence of the timing and how we launched those. So we can certainly use promotions in the interim to keep the interest there. But for us, and you go back historically, and you followed us Mark for a long period of time, so you'll certainly understand, but our key drivers to our business has always been significant product launches and this year, we didn't have a significant product launch. They were restages that we were doing to extend the life of some of these key lines that we felt like had more potential than what we’re getting. But next year we'll add as what we think is as big and strong of a product launches we've had and that's this MC Boost product. That has a very wide demographic of people, it has a good product, pricing and positioning. So it should apply to a large demographic. And that will be our key driver going forward. We generally start that process about nine months before we launched the product where we're starting to train will have qualification events in Q2, allowing early people to purchase possibly in Q3, and then a significant launch in Q4. So it will be our key driver for 2020.

Okay, thank you.

Your next question comes from the line of Doug Lane from Lane research. Please ask your questions.

All right, thanks. Good afternoon, everybody. Looking at the sales line which is obviously the focus here. Just top line growth in the third quarter, you miss the low-end of your range by maybe a point or so. But if you look at the fourth quarter, at the previous guidance, the fourth quarter we're looking to be down something in the mid-single digits. And now you're expecting it to be down in the mid-teens. So that's, that's the real delta here. And I just wonder, where is that 10 percentage point reduction coming from? Is that China or how much of that's China versus the rest of the world because I'm in the same boat, your China number wasn't that far off what I was looking for, some of these other markets that seem to be coming up a bit short?

Yes, certainly the biggest impact in Q4 is the fact that we didn't see an uptick in sales leaders in Q3 in China, which forced us to bring our China number down specifically for Q4. Again, we see that business stabilizing at this point in time and we anticipate that will stabilize and begin to grow from there. The rest of the markets likewise were somewhat soft in Q3. So we also adjusted those markets given that we were little bit softer and expected in Q3, we factor that into the guidance in Q4.

And I don't want to get too specific on to it, but would you say it's 50:50 China, non-China, mostly China, mostly non-China, just some sort of characterization there?

I’d say it’s at least 75%, China.

Okay, fair enough.

The other drivers you might consider the situation we're still facing in Hong Kong. And that that should, we don't believe that situation is going to get significantly better. So you may see some sequential decline there. And then Argentina, which was a really high growth market for us, continues to struggle with the currency situation and that market is also projected to be down sequentially.

Okay. And just we haven't talked much about EMEA, I know it's not huge for you, but it did show a pretty good sequential deceleration and I wondered if we could just call out a couple things that are going on in those markets that we should know about?

Yes, we had some disruptions, particularly in our U.K. market in the second and third quarters that really offset, we lost some sales leaders there. And really primarily our social selling efforts in that market slowed down significantly. So our customer numbers come down, we saw sales leader number come down. At the same time several other areas in Europe have actually showed pretty good. The challenge was U.K. was our largest market. So we see that starting to stabilizes well, we have strong generally strong initiatives in the fourth quarter that should help to bring energy back into the market. It's our largest sort of impact on a market size as we do Christmas and Black Friday promotions and will continue those this year and work to offset but you're exactly right. That was a disappointing region for the third quarter. And we anticipate that stabilizing here in the fourth quarter and then establishing growth next year.

Okay, thank you.

Thanks Doug.

Your next question comes from the line of Beth Kite from Citi. Please ask your question.

Wonderful, thank you. Hello, everyone. I wonder, if I can, just keep on that prior line of questioning from the two folks before and just thinking about the third quarter to the fourth quarter, the absolute dollar sales reporting in the third and now the guides to fourth, appreciating what you said about China. But can you help us to understand how much Galvanic Spa restage? I think it was limited. But how much that benefited the fourth -- pardon me benefited the third quarter. And then is it effectively in all regions ex-China in the fourth quarter, and China's 1Q with the hair launch? Or if you could just help around that whole theme, please first on Galvanic Spa?

Yes, first of all, with the Galvanic Spa, we only did limited launches in the third quarter and actually that's what will continue into the fourth quarter with the full launch of that product into next year. So really, we didn't see much of a bump at all in Q3 and because it's a restage, we don't anticipate a lot of incremental revenue from that product in the fourth quarter, it will help to stabilize. And I think our sales force was excited about it. The Nutriol product can be helpful, and I think particularly in China, where it's a new product, but the bulk of that will really be in the first quarter. So I don't anticipate a lot of Galvanic Spa bump in either Q3 or Q4 of this year.

Got it, perfect. Pardon me, go ahead.

Sorry about that Beth to speak over you. But I should just mention that in Q2, we actually ran several promotions on the Galvanic Spa to clear out all the inventory of the old product, so we didn't have any transition write-offs. And we actually saw a strong number $10 million to $15 million, probably net increase in Q2 from the Galvanic Spa and then just limited sales primarily in the month of September, with the new Galvanic. And so it wasn't a super strong quarter for Galvanic, because it was mostly so just in one month.

Perfect. And then Ryan if I could just maybe go to you on the commentary that you had around the technology deployment in the Cloud launch, what does that mean kind of 2019 and into 2020 in terms of technology that you plan now to be able to deploy to the reps owning to that element now being complete?

Yes, no, great, great question, Beth. So yes 2019 really was our year of going to the cloud. So really taking all of our infrastructure and then lifting it all into the cloud. So we did complete that in the third quarter, and which really enables us to shift a greater percentage of our technology spend towards customer-facing, sales leader facing technologies. So enhancing our web presence or e-commerce experience, digital tools, that that sort of thing. One example of that if I don't, I'm trying to remember Beth, if you made it out to LIVE! or not, but you may have seen an app that was developed for that, that really has, it's a really good ecosystem foundation that will enable us to build a more effective app strategy and deployment on. And so really, it's just shifting that percentage of resources. Of course there's still, of course there's still a lot of infrastructure work we will continue to do. But the bulk of that lift and shift was done. Now we're focusing on optimizing in the cloud to accelerate the performance of our infrastructure systems and shift into customer-facing technology in 2020.

Got it. And will that favor anyone market or set of markets initially or sort of just spread around the world kind of line?

Yes, so one of the real advantages I mentioned was the scale of our technology. So historically, on an on-premise systems approach, you have to really deploy technology solutions market by market or incident by incident. What the cloud does enable us to do is more rapidly deploy technologies or what will allow us to do is more rapidly deploy technologies across markets more quickly than what we were able to do in the on-prem work. And so, for technology solutions customer-facing, we anticipate being able to deploy more quickly. Of course, you have translation and business rule modifications, but it's not a separate instance builds, which is a positive, which will be an accelerator to technology deployment.

And I would just add one thing, Beth, and that is, we can't under, I think estimate the importance of technology as we go forward. As we look at our strategy, we believe moving to the cloud and our digital strategy for our sales leaders and really helping them be more effective with their businesses is fundamental to our future success. So this has been a major initiative. We've got a really talented team that's worked on it. We've had to make substantial shifts and how we're doing technology here. But we really are excited about our ability now to leverage tools that can make our sales force much more effective as we go forward. So it's really a key portion of our strategy and I appreciate the question on it.

Perfect, thank you. And if I could ask just two more that I think are rather brief. One to Mark perhaps or to anyone, I guess, but just seeing no buyback activity this quarter and I would say a pretty good or decent cash amount on your balance sheet with the report today. Where is your thinking as we end this year and into 2020 again on that sort of timeline for either buybacks or debt pay down or more reinvesting in the business?

Yes, that's a great question. Thanks Beth. As you know, we have a strong history of buying back our stock and returning cash to our shareholders. We can't comment on when we are in or not in the market. But we continue to focus on kind of the four priorities for excess cash, invest to grow our business, which you saw a little bit of that in this quarter, we paid an additional $10 million in capital for the land for our China factory. So our capital spend this quarter was $23 million against kind of a normal run rate of about $13 million. We paid our $21 million in dividends, we continue to think that's really important to return that cash to the shareholders. And then we paid down our revolver to zero, $42 million of debt pay down. So I think going forward, we're in a prime position to resume our share buybacks when we can.

Wonderful and if I could ask just one more last one, Brazil and India, is there any update on entering either of those markets?

Yes, no, we knew this would come, Beth. We debated whether to put it script or not. Yes, no India, India and Brazil are both on our horizons. A lot of work going on in India right now. Really trying to understand the go-to-market strategy there and how we leverage the strengths of Nu Skin in that market that's really a need of what we have and but doing it correctly. There have been many direct sellers that have had difficulties over the years and years of trying to learn it there. We’re studying a lot. We're also looking at the new emerging opportunity economy in India that's very vibrant. So we'll be talking more about that, I think in the coming quarters and maybe investor day as well, but that's definitely an active area of focus for us. Brazil continues to be in the pipeline, but would say that's beyond India due to complexities of the market and operating complexities, financial complexities there, that's still out beyond. But we'll talk more about I think shortly.

Wonderful, thank you all so much.

Thank you, Beth and thank you all. I think that’s all the questions we have, I just want to reiterate that we remain very optimistic about our business. I've served now as a CFO or CEO for the last 17 years. And I can tell you that our company has been successful in managing through a number of challenging business cycles from time to time. I really feel like we have the right people in place around the world, our strategy is sound. We've seen things leveling, we believe we're at a base that we can really grow upon from and we have confidence in our future. So we look forward to good days ahead and believe we have a lot of opportunity to both build the business but also create shareholder value. And we really appreciate your time today. Thank you very much.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.