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spk03: DNA is going to grow as a percentage. That's correct.
spk01: Yes. Bill, I would just add to agree with what Terrence is saying, but just to add real quickly, yeah, you've got it. I mean, you know, you've got a, we have an operating margin year to date in 2021 of a little over 8%. Obviously, the third quarter was even, was closer to 9. But as we sit here today and we think about 2022, From an operating margin standpoint, we certainly, even with some additional spending on behind the initiatives and so forth, we would expect that our operating margin for the year to improve over 2021. Great. Thank you both.
spk02: Yeah, absolutely. Good talking to you.
spk00: And just as a reminder, if you would like to ask a question, please press star 1 at this time. Again, that is star 1 for questions. We'll take our next question from Steven Martin with Slater.
spk04: Hi, guys. Great quarter.
spk02: Hey, Steve. How are you doing? Thank you. Thanks very much.
spk04: Good. You know, most of my questions have been asked and answered. You talked about inventory being up about $9 million. When you look out over the next couple of quarters, is that the new level of or should we expect it to continue to expand?
spk01: Well, what I'll tell you first is if expanding, that's not necessarily a bad thing because that means that we're continuing to experience growth. But just from an overall standpoint, Steve, you know, yeah, we're at 57 million or so. Could that bump up, you know, over the next two or three quarters? Yeah, but we don't see dramatic increases. A lot of that, 60% of that increases in raw materials. You know, we're trying to get ahead of that and some of the supply challenges from getting raw materials in the door. So, you know, that should level off the raw material side of it. But, you know, you may see a little more upward movement on it, but overall you also should see it start to settle out. Okay.
spk03: It's an important initiative, though, Steve. It is an important initiative. I mean, again, when you've got – You know, Japan growing 30-plus percent, China, you know, hovering around consistently 20 percent, Taiwan 400-plus percent. You know, you kind of just keep going around the world, Russia, Poland, et cetera, et cetera, et cetera. You know, we don't want to get caught flat-footed, so I think it's the right strategy for us. We feel really comfortable with it and, again, just trying to stay ahead of it.
spk04: Terrence, I wasn't criticizing or commenting on the 9 million. I was just really asking, is that sort of the new level going forward, or will it continue to be a use of cash?
spk03: Yeah, no, absolutely.
spk04: Okay. Along those lines, new products. You launched a whole bunch of new products, especially the beauty product recently. Can you talk about the performance of some of the new products?
spk03: Still doing very well. Lamara, our skincare product. was a tremendous hit. It launched first in Asia, and that's where I think we have kind of most visibility to the launch. Kind of just selling out and beyond their forecast in their first couple of months. So again, doing really quite good. Some of the other products that we've launched were some, I think we launched some collagen products, performed excellently in Europe, really continued to provide support. And, you know, I think, Steve, we've just kind of been launching these products that are, you know, they're packaged beautifully. We've got great marketing behind them. And they really do just speak to consumers. And so it's kind of just right product at the right time. And so, you know, something that historically, if you kind of go way back when within Nature Sunshine, that's something that we were always really good at when we were driving, you know, double-digit growth year after year. And so that's the focus of what we're trying to do now. Seems like those new products are doing quite well for us.
spk04: Good. G&A, you were talking about G&A before, and I'm going to exclude sort of the marketing and the various expenses related to growing the top line. When you isolate out the corporate component, how is that growing, not growing, flat, etc.? ? Because that's really where a lot of your leverage is going to come from going forward.
spk03: Yeah. Joe, you want to talk about that a little bit?
spk01: Yeah, what I would tell you is that overall, I think you're trying to separate variable, say, from fixed. And so my response to that would be, of course, on a year-to-year basis, you may see the fixed grow given payroll increases and those types of things. But We feel very good about the fixed overhead structure that we have now. I mean, there may be, given the growth that we're experiencing, I expect to experience in going forward, you know, we may add some additional folks and so forth, but we're already starting to leverage our fixed overhead, right, with the sales growth, and again, that's coming into play with the improvement in the operating margin, and we expect that to continue going forward. So there will be some additions, but nothing too dramatic.
spk03: And we're still pursuing our strategy. I want to present a sales basis of zero or negative overhead growth, so you should expect that going forward. Great.
spk04: One last one, and I know you don't like to – Well, no, actually I have one next to last one. Last year in the fourth quarter, you did some advanced extra spending, which you highlighted, and it helped drive the business, obviously, in 2021. When you look out to the fourth quarter, is there anything unusual that we should expect? And I guess that leads into my last question, which is, recognizing that you're not, you don't want to give guidance, and Linda had asked you some questions about the fourth quarter. Should, you know, should the fourth quarter look like the third? Should, you know, should the... I don't know how to ask it without asking it. I think I've been trying for years.
spk01: Yeah, well, and... You're right. We don't give formal guidance. But directionally, what I would tell you, Steve, is that we obviously spend it incremental dollars in this quarter, the third quarter, you know, say versus the year ago quarter. And you can see that in the SG&A line. So as compared to the current quarter, the quarter just ended. I don't know that I would anticipate anything incremental as a percent, okay? Or certainly it would be pretty modest. So directionally, what I would say is, you know, from an EBITDA margin or operating margin standpoint, I would think more in terms of the quarter just ended, say, versus the fourth quarter of the prior year. Does that help?
spk04: Yep, that helps. Given that we're now almost halfway through the fourth quarter and you've seen additional market closings, COVID-related, et cetera, how does the fourth quarter look from a market closing standpoint versus the third quarter?
spk01: Market closings, I mean, obviously the, you know, if your reference is in regards to pandemic-related challenges and so forth, I mean, we haven't seen any dramatic shifts one way or another. I mean, you can see maybe there's a market or two in Central America that all of a sudden we'll see some more restrictions or whatnot. Terrence touched on some of the challenges we've had in Korea. But still, that market is a very good market for us. But yeah, well, not halfway, but partway through this fourth quarter, we're not seeing anything due to the pandemic that's causing us major concerns or that would result in a major shift in what we would expect to realize in Q4, say, versus how the third quarter played out.
spk03: I think we're also seeing maybe less dramatic responses from Western countries versus Eastern. So in Korea, for example, if they get any type of outbreak or sign, there's a very strong reaction to that and very immediate. So it kind of varies by market, but I think Joe is exactly right. I don't know if we expect to see anything more or less going forward.
spk04: Well, it sounds to me like the market that is still affected the most is Korea. Is that a fair conclusion?
spk01: Well, it's fair if you think in terms of just the size of the market scale, right? I mean, we wouldn't say that we haven't felt some significant pressures in certain markets. And like I said a moment ago, in Central America, for example, But just based on scale, yeah, the one that's been most impacted or for us most challenging in 2021, say, versus 2020 has been, or 2019, if you went back pre-pandemic, is clearly Korea. Yep.
spk04: Well, and would you say that it is the, and maybe that's what you were saying, would you say it is the one that has, from a top line standpoint, been the biggest diminution to what it would have been without the pandemic? If that's the right question.
spk02: I would agree with that.
spk01: Yeah, I think directionally that's fair. I mean, it's not to say that we're seeing erosion in Korea this year, right? I mean, we'd love to see more growth, but overall, We haven't seen much growth, but we also haven't seen a lot of erosion either. So it's an ongoing situation, but obviously overall for Asia we're pretty placed. All right.
spk04: I guess if I might, you've had some major shifts in your shareholder base this last quarter or some that we suspect and some that we're not sure of. Anything you would care to comment on about Red Mountain or any of the others?
spk02: No, I don't have any commentary on our shareholders right now, Steve.
spk04: Okay. I will let you go, and looking forward to the next quarter.
spk02: That's great. Thanks so much. Great talking to you. Thanks. Thanks for the questions.
spk00: At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Moorhead for closing remarks. Okay.
spk03: Well, thank you. And, again, we'd like to thank everyone for listening to today's call. And we look forward to speaking to you again when we report our fourth quarter and full year results in December. for 2021 in March. So again, thank you for joining us and take care. I look forward to talking to you soon. Bye now.
spk00: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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