Nature's Sunshine Products, Inc.

Good afternoon everyone and thank you for participating in today's conference call to discuss Nature Sunshine's financial results for the second quarter ended June 30th 2021. Joining us today are Nature Sunshine CEO Terence Moorhead, CFO Joseph Batty and Executive Vice President and General Counsel Nathan Brower. Following their remarks we'll open the call for your questions. Before we go further, I'd like to turn the call over to Mr. Brower as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Nathan, please go ahead.

Thank you, Emma. Good afternoon, and thanks to all of you for joining our conference call to discuss our second quarter 2021 financial results. I'd like to remind everyone that this call is available for replay via telephonic dial-in through August 19th and via live webcast that will be posted on the investor relations portion of our website at www.naturesunshine.com. The information on this call may contain certain forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K under the caption, Risk Factors, and other reports filed with the Securities and Exchange Commission. The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now, I would like to turn the call over to the CEO of Nature Sunshine, Terrence Moorhead. Terrence? Thank you, Nate.

And good afternoon, everyone, and thank you for being with us on today's call to discuss Our second quarter results. I'm excited to be here with you today to announce our fourth consecutive quarter of record-breaking results. Our historic performance comes as we continue to make progress on our journey to transform our business. Our reported consolidated second quarter net sales came in at $109 million, up 25% or 21% compared to the prior year in local currency. Each of our four operating business units reported strong growth for the quarter, led by Latin America and Europe, which were up 39% and 34%, respectively, in local currency. We also delivered record-breaking results for the bottom line, as adjusted EBITDA increased 38% to $13.4 million. Despite being in the early stages of our business transformations, strong execution and ongoing fine-tuning of our strategies are having an extremely positive impact on our business I'm proud to say that each of our five global growth strategies brand power field energy digital first manufacturing Inc and the right stuff are all building momentum I'll discuss our strategies in more detail later but I want to pause because I'd like to recognize and thank our each of our associates for their continued focus and dedication throughout the pandemic. Their resilience and determination have allowed us to deliver four consecutive record quarters, and I can't thank them enough. Additionally, our award-winning customer service team, which was recently recognized as Customer Service Team of the Year by the American Business Awards, deserves special recognition as they've been a critical point of contact with all of our customers and distributors throughout this journey. And while I'm on the topic, I want to take a moment to recognize our distributors who throughout the pandemic have continued to step up and find new creative ways to deliver record-breaking results while working shoulder to shoulder with us to transform the business. Their efforts and willingness to collaborate have resulted in a record number of new customers helping us make the healing power of nature accessible to more and more people across the globe. Now I'd like to share a few key highlights from each of our OBUs. Starting with North America, we're reporting a 7% increase in local currency net sales for the second quarter, which is a direct result of the launch of the new business model and the positive impact that our global strategies are having on the business. Sales in NSPUS were up 7%, while Canada grew 14% in local currency. The strong performance comes as we continue to make incremental improvements to our new business model to help build momentum and drive customer activation. Also, as mentioned earlier, our distributors have done a great job partnering with us to attract new customers. In the second quarter, we saw 30% customer growth with a significant increase in the number of customers joining our Subscribe and Thrive auto-ship program. Over 35% of our orders now include a Subscribe and Thrive product in North America. We will continue to aggressively expand our Subscribe and Thrive program as we believe it will be a significant driver of long-term growth. Additionally, Our digital marketing initiatives have outperformed expectations and are proving to be an excellent way to attract new customers. Overall, we're ahead of where we thought we'd be at this time, and we're pleased with our progress and look forward to going into the next phase of our new business model. Moving to Asia, we saw sales for the quarter grow 26% in local currency, driven by 12% growth in South Korea, 38% growth in Japan, and 15% growth in China on a local currency basis. South Korea's growth was driven by an increase in auto ship participation, new field incentives, and the successful launch of La Mara, our new skincare line. Additionally, the recent introduction of a new app for distributors in South Korea is helping sellers stay connected with new business building tools, and digital training modules. While South Korea's COVID restrictions remain challenging, our results in the second quarter suggest the business is stabilizing and that we're adapting to the situation. Japan continues its strong performance, delivering a sixth consecutive quarter of growth. The 38% sales increase was driven by strong execution of field fundamentals and steady customer growth. Japan's auto-ship program had a tremendous 24% increase in subscriptions, with many of the new subscribers being millennials. We look forward to even further growth in the second half of the year as we roll out a revamped subscription program in the market. Now looking at China, we continue to deliver solid growth as the business evolves with an improved digital toolkit. During the quarter, we leveraged popular digital programs like TikTok, to drive customer growth by 14%. We will continue to work to expand our digital reach and drive engagement and attract new customers. Finally, in Taiwan, we continue to penetrate the market with a sales increase of 277% on a local currency basis. The growth is attributable to an aggressive focus on field fundamentals and friendly competition between distributors vying for top-tier positioning. Overall, we look forward to driving continued growth across the region. In Europe, we delivered 34% sales growth on a local currency basis. The growth was led by our markets in Central and Eastern Europe, where we built a strong foundation and a proven track record of delivering results. Sales in Russia were up 44% in local currency. This was driven by strong customer growth, up 30%, and digital activation of existing and new customers through improved social media and influencer marketing. In Poland, we once again saw tremendous growth with sales increasing 49% in local currency. This was driven by strong field fundamentals, virtual sales events, and the launch of a new collagen beauty supplement that is selling well above forecast. Looking at Western Europe, sales were relatively flat, down 1% compared to the prior year in local currency. Moving forward, we believe our plan to relaunch the business later this year will create significant growth potential over time. The relaunch will incorporate some of the key elements from our new business model that we launched last year in North America and will focus on rebranding, updating the website, and creating a stronger digital platform. We look forward to sharing more about our progress in Europe in future quarters. Finally, in Latin America, second quarter sales increased 39% in local currency, marking our fourth consecutive quarter of growth in the region. The business has responded tremendously well to our transformation initiatives, and results continue to improve as COVID restrictions taper off. Each market in the region grew double digits compared to the prior year, driven by increased customer activation, improved digital access, and several new product launches. We're pleased with the progress that we've made in Latin America and continue to believe in the medium to long-term potential of these markets. The strong performance across our OBUs demonstrates how our global strategies are improving our ability to attract new customers while improving sales and profitability. Everyone at Nature's Sunshine is dedicated to keeping this momentum going. Moving on, I'd like to share some thoughts about the progress we're making on our five global growth strategies. However, before I do that, I want to give you a quick update on our supply chain, as I know it's an important topic that's on many people's minds. While the challenges presented by the global supply chain crisis are significant, we appear to be managing the situation effectively. So far, We've been able to get ahead of the major issues and minimize the impact to our business and financials. To ensure we stay ahead of the situation, we've committed to investing more aggressively in inventory to help protect our forecasted sales growth, and we're closely working with our OBUs to stay aligned on inventory health. These are certainly challenging times, but fortunately, As a 49-year-old company, we have great long-term relationships with our suppliers and lots of experience as well. We've done a great job so far, and I have confidence that we'll continue to effectively manage our supply chain moving forward. Now I'd like to move on to discuss our progress on our five global growth strategies, and let's start with brand power and our award-winning rebranding. The updates to our packaging and marketing collateral are receiving a strong reception from customers and distributors alike, and I'm pleased to say that the majority of the Nature Sunshine rebranding will be complete for all markets by the end of 2021. Later this year, we'll also be launching a rebranding initiative for our Synergy business that will refresh and reposition the Synergy business for accelerated growth. The end-to-end rebranding will focus on all aspects of the business, and is designed to strengthen our ability to attract and retain new customers. Another important part of our brand power strategy is our force of nature campaign. The campaign has proven to be an effective customer growth driver and is doing an excellent job supporting our digital marketing campaign that I'll discuss a bit later. In summary, we believe our brand power initiatives will continue to drive customer growth. On field energy, the new business model continues to gain momentum in North America and Latin America, and we continue to fine-tune the initiatives and make adjustments to improve effectiveness. As we continue to gather data to understand which initiatives in the model are most effective, we look forward to expanding those initiatives to other markets. One of the new initiatives that is proving its importance and delivering sustainable benefits is Subscribe and Thrive, our new auto-ship program. The number of orders made through Subscribe and Thrive continues to grow, and we believe that there are still meaningful opportunities to increase engagement. As mentioned earlier, the program now represents a significant portion of our orders in North America, creating a substantial recurring revenue stream. Another important initiative that's part of our business model is our affiliate program, which continues to drive growth and is something we're working to more aggressively promote. Our affiliate program consists of enthusiasts that use our products and then share and recommend them to friends, family, and acquaintances through their social media networks. While our health practitioners and retailers continue to be the driving force behind our business, we're pleased by the number of people that have signed up as affiliates and are sharing their newly found passion for our products. Moving to digital first, We continue to make enhancements to our award-winning website to improve the user experience and expand functionality. The new website has improved the shopping experience for our existing customers and is attracting new customers as well. Additionally, we're seeing excellent results from our DTC digital marketing initiatives and will be accelerating our investment in the back half of 2021. One of the most exciting elements of our Digital First strategy is the pending launch of our new personalization initiative that's designed to transform the customer experience. Through personalization, distributors will be able to offer customized solutions with personalized pill packs for their customers based on each customer's individual needs or goals. The pill packs will be conveniently packaged into morning, afternoon, or evening packs and will automatically be shipped to the customer's home each month. Over time, the program will also allow customers to build their own personalized nutrition plans by answering a simple questionnaire. This will give us access to an entirely new group of customers who want to have the best products and program in the market, but also want to choose how they access our brand based on their personal preferences. Over time, we believe personalization will help us build more meaningful relationships with customers and make nature's sunshine a more integral part of their daily lives. We're extremely excited about the new personalization program and we look forward to the launch later this year. Turning to Manufacturing, Inc., our manufacturing and quality teams continue to deliver products with the highest levels of quality and purity available on the market. Moving forward, we plan to upgrade our small batch manufacturing capabilities with new, state-of-the-art, high-speed equipment. The upgrades are expected to help improve productivity, increasing output while reducing costs. Our unique small batch capabilities have been perfected over the last 49 years and are one of the many reasons why Nature's Sunshine products are superior to what's commonly available on the market today. As a result, also remember, small batch processing allows us to more effectively control product and manufacturing integrity while also allowing us to select and work with rare ingredients, of the highest quality, including wild crafted herbs and botanicals that deliver the most potent micronutrients. Unlike other mass marketed and bulk produced products, Nature's Sunshine crafts each product with precision and artisanal attention to detail, delivering the most potent supplements available on the market for results you can feel. Finally, We continue to make progress on building a high-performance organization through our Write Stuff initiatives. In the second quarter, we continued to deliver improved profitability. Operating profit increased 44% to $9.5 million, while operating margins improved 114 basis points. Similarly, adjusted EBITDA increased 38% to deliver a historic $13.4 million for the quarter, and EBITDA margins increased 118 basis points. While we've made excellent progress realigning the business for profitability and growth, we remain committed to delivering continued improvements in the future. As we execute our five global strategies and leverage our strong financial operating foundation, we expect our business will continue to deliver strong results. Additionally, We have a capital allocation plan in place that's designed to complement our operating strategy by effectively putting our capital to work. We're on a journey to transform nature's sunshine, and despite being early in the process, I hope you'll agree that we've made tremendous progress and are building momentum for the business. With that, I'd like to turn the call over to Joe, who will walk you through our second quarter 2021 financial results in more detail. Joe?