Scott Pond - Nu Skin Enterprises, Inc. Truman Hunt - Nu Skin Enterprises, Inc. Ritch N. Wood - Nu Skin Enterprises, Inc. Ryan S. Napierski - Nu Skin Enterprises, Inc..

Frank Camma - Sidoti & Co. LLC Timothy S. Ramey - Pivotal Research Group LLC Bill Schmitz - Deutsche Bank Securities, Inc. Olivia Tong - Bank of America Merrill Lynch Beth N. Kite - Citigroup Global Markets, Inc. Mark Astrachan - Stifel, Nicolaus & Co., Inc..

Good day, ladies and gentlemen, and thank you for your patience. You've joined the Nu Skin Enterprises Q4 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference may be recorded. I would now like to turn the call over to your host, the Head of Investor Relations, Mr. Scott Pond.

Sir, you may begin..

Good afternoon, and thanks, everyone, for joining us. Today, on the call with me 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.

Just a reminder, during the call, comments will be made that include forward-looking statements. These statements involve risks and uncertainties, and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks.

Also, during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe that these non-GAAP financial numbers assist in 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 of non-GAAP numbers. I'll now turn it over to Truman..

Thank you, Scott. Good afternoon, everyone. We appreciate you joining us. As our release indicates, we posted quarterly revenue of $531 million compared to $572 million in the prior-year quarter.

Currency was 1% negative to the year-over-year revenue comp and more importantly, the fourth quarter of 2015 included $50 million of limited time offer volume against no significant product launches or LTO volume in the fourth quarter of 2016.

So apples-to-apples, revenue would have been up slightly in Q4, although still a bit softer than what we had hoped. Revenue was also negatively impacted by a promotion in China of ageLOC Me cartridges that generated more demand than we had supply.

So we ended up deferring about $7 million of revenue into the first quarter primarily because of this issue. Our earnings per share were $0.69 and included a tax charge of $0.10 which came up in December and – which Ritch will speak to in a moment. This compares to $0.62 in the prior-year quarter.

For the year, constant currency revenue was essentially flat with the prior year, continuing the trend improvement that we've seen over the course of the last couple of years.

We had hoped to do a little bit better, but we feel good about the continued trend improvement and our earnings per share for the year were $2.55 compared to $2.25 in the prior year. So while Q4 ended up a bit soft in a few markets, there are still good things happening throughout the business.

We have many reasons to be optimistic that 2017 will see continued improvement with a return to revenue growth and with accelerated improvement in earnings growth, given revenue improvement as well as the impact of the substantial share repurchase completed in the fourth quarter.

We really see no reason to come off our forecast for growth that we presented at our Investor Day in December. As previously announced at our Investor Day, our management transition is continuing to take shape. In the coming few weeks, we anticipate naming a new CFO.

And at that time, I will assume the position of Vice Chairman of the Board of Directors, Ritch will assume the position of Chief Executive Officer and Ryan Napierski will assume the office of President. I've worked closely with both Ritch and Ryan for many years and I'm confident that under their guidance Nu Skin will thrive.

So given this management transition, I'm going to have Ritch and Ryan cover more detail on the financial results for the quarter as well as on our plans for 2017. So with that, I'll pass the baton to Ritch and Ryan..

Thank you, Truman, and good afternoon, everybody. I'm really excited for 2017. Let me first start by just talking quickly about the financial details from the fourth quarter.

As Truman mentioned, our revenue comparisons against the prior-year quarter were impacted by about $50 million of limited time offer product sales in the fourth quarter of 2015 compared to virtually no product launch sales in the current year. So primarily these product sales came in the Americas, South Korea and Japan in the prior year.

So the year-over-year comparisons are skewed a bit by these sales. The operating margin for the fourth quarter improved to 11.4% compared to 10.8% in the same prior-year period. Gross margin was 79.6% versus 78.8% in the fourth quarter of 2015. Selling expenses for the fourth quarter were 42.0% compared to 41.5% in the prior year.

General and administrative expenses were 26.2% of revenue in the quarter compared to 26.5% in the prior-year period. We incurred a gain of $1.4 million in the other income expense line item of the income statement. That compares against a loss of $3.3 million in the prior year.

This gain is due primarily to foreign currency translation from our yen-denominated debt, offset by interest expense. Our income tax rate for the fourth quarter was 38.5% compared to 38.7% in the prior-year period.

Our rate in the fourth quarter of 2016 was impacted by the enactment of a new tax regulation, 987, in December and this new regulation required us to revalue the foreign currency impact on certain deferred tax assets and liabilities on the balance sheet and negatively impacted our earnings for this one-time adjustment by approximately $0.10 per share.

Our tax rate benefited during the quarter from permanently reinvested earnings in China and some other smaller benefits. During the quarter, we paid $18.9 million of dividends and repurchased $205 million of our stock, leaving $200 million remaining in our share repurchase authorization.

We repurchased approximately 3.3 million shares during the quarter, which will be nicely accretive to shareholders in the future. Also today, we announced that we will increase the dividend for the 16th consecutive year and this will be reflected in the next dividend payment.

Our guidance for the first quarter includes revenue of $480 million to $500 million, with earnings per share of $0.47 to $0.51. The revenue is expected to be negatively impacted 1% to 2% by foreign currency. So with this guidance, we anticipate revenue growth in a constant currency basis of somewhere between 3% and 8% for the first quarter.

And we hold our 2017 annual guidance consistent with that provided at the Investor Day. As a reminder, that's revenue of $2.26 billion to $2.3 billion and earnings per share of $3.10 to $3.25. So now, let me talk about our plans in 2017. I really feel like we have the right products and the right opportunity to be successful.

So I'm excited to work with Ryan and the rest of our management team to execute the priorities that we set forth for this year. We're confident that we can deliver on our strategic initiatives and we will generate growth in the business. We highlighted five strategic initiatives during our Investor Day.

First, we're working to maximize market penetration of Youth and Me. We're at a critical point in the business cycle with these products and our success will be measured by our ability to acquire new customers. We continue to receive positive customer feedback on these products.

We'll continue to focus on positioning and supporting both of these products during 2017, taking through (08:31) lower barriers to trial and maximize the lifetime value of our customers. Second, we're looking forward to launching LumiSpa in the fall. We've had tremendous success in the past with in-home skin treatment devices.

Galvanic Spa, for example, remains our top selling product. The device platform is expanding as ageLOC Me becomes fully available here in the first quarter. And our plan is to introduce LumiSpa in the fall, which will be adding a cleansing and treatment system to our unique device platform.

I believe that this product will get a very nice response from customers and sales leaders as we preview it globally in the fourth quarter. Third, we're expanding our social selling platforms and beginning to deploy our social selling tools. Much of our growth in EMEA during the year, especially in the fourth quarter, was driven by social selling.

We're broadening our social selling support and training, and as discussed previously, we'll begin to pilot our customized technology platform with the intention of empowering our sales leaders to more effectively introduce customers to our products and business.

Fourth, in October of this year, we will be hosting a globally broadcast convention entitled Nu Skin Live. This will originate from Salt Lake City, Utah. This will be an exciting event that will empower our leaders to achieve success which can then be recognized on this global stage.

This event will mark the global preview and introduction of LumiSpa, together with a new brand refresh that will impact the way we look and feel. We believe Nu Skin Live will act as an additional catalyst for energy and growth in our business, and we invite you all to participate in this global event.

And finally, our fifth priority is to sustain growth in China. I'll turn the time over to Ryan for a few minutes to address and provide color on this market as well as a few additional items..

Thanks, Ritch. Good afternoon, everybody. We believe that Mainland China continues to hold tremendous potential for our business. Direct selling is thriving there and will likely surpass the U.S. as the world's largest direct selling market this year.

We're encouraged by Mainland China's return to local currency growth of approximately 15% in 2016, which position us well going into 2017. Last week, I had the opportunity to be in China with our management team and several of our top sales leaders. I came away from these meetings with continued optimism for the future.

They're energized about the future and focused on the full launch of ageLOC Me coming up in March. We believe that this product and the upcoming launch of LumiSpa will be important growth drivers for our business in the coming year. As Ritch stated, in this phase of our product launch cycle, we remain focused on building our loyal consumer base.

In the fourth quarter, we generated about $100 million in sales from ageLOC Me and Youth together. While we began the market rollout of ageLOC Me only a year ago, we're already seeing higher rates of retention and improvements in lifetime value of customers purchasing this product.

We believe these early indicators bode well for both customers and sales leader growth as we continue to optimize the positioning of this revolutionary product. ageLOC Me is still in the early stages of introduction in China and in South Asia, and our plan is to make the product fully available in these markets by the end of this first quarter.

Overall, we believe both ageLOC Me and Youth have tremendous potential. I'd also like to briefly talk about the status of our sales leaders in the fourth quarter. Sales leader growth is primarily influenced by our annual business cycles as well as our product launch process.

The decline in sales leaders was primarily due to timing and comparisons in our product launch process. In the Americas, Southeast Asia, as well as North Asia, we were up against strong comparisons to the prior year due to LTOs. In China, we deferred the launch of AgeLOC Me in Q1 in order to bolster our business base for 2017.

Sales leader growth in EMEA was positive. For 2017, we anticipate improvements as we continue to drive AgeLOC Me and Youth as we prepare for our next product launch cycle with LumiSpa. I also want to quickly comment on the impact of social media on our business. It really is impressive to see how impactful social selling can be in our model.

The early social selling success that started in the UK. about two years ago is now beginning to blossom in other markets.

We're seeing pockets of social media savvy sales leaders successfully leveraging many of our long-time, highly-demonstrable products within their own social networks, sharing their enthusiasm for everything from our AP-24 Whitening Toothpaste to our Contouring Lip Gloss.

We believe that social selling will be a key accelerator to our business in the coming years. I join Truman and Ritch in expressing my confidence in the future of this great company. We have the strategy in place, and I believe that we're poised to catch a new gear as we look to renew growth in 2017 and an even brighter future.

We'll now open up the call for questions..

Thank you, sir. Our first question comes from the line of Frank Camma of Sidoti. Your line is open..

Good afternoon, guys..

Hi, Frank..

Hey. Question on the sales leader growth, particularly in China.

When you have the deferred revenue from the ageLOC Me cartridges, does that count in their sales? How does that – how do you pick that up since you didn't have the ability to ship it? I'm just wondering, does that affect your accounts at all at the end of a quarter?.

We actually account the volume, Frank, and so they get commissioned on that. The product was treated as a back order that's been shipped out, and those were shipped out in January..

Okay. So that wouldn't have negatively affected your accounts or anything. I was just trying to figure that out..

Okay..

And the other thing is, are you seeing any difference in sort of like a – I mean, obviously, it looks like you're having better than expected response in China, since you're short on that supply, but what are you seeing in more developed markets like the U.S.

where there's perhaps more competition or something like that?.

Hey, Frank. This is Ryan. Regarding the ageLOC Me in developed, other developed markets of the U.S., Korea, et cetera, as we announced at out Investor Day, we continue to work on the pricing offer of ageLOC Me. We're seeing improvements there in the market and increased customer adoption. We'll continue to drive it as we move forward..

And can you talk a little bit more, like last time you had talked about the really strong reorder rate. I was wondering if you could just give us a little color on that, like what you're seeing now that you have some experience with that..

Yeah, Frank, we continue to see really positive indicators with that. When we stocked out obviously of the cartridges in December in China, part of that was because we then took the cartridges off and they're not available until March when we actually launch.

So there was a push right up until that point in time in China and then there's been no cartridge sales obviously in January and February. But the rest of the markets continue to show good signs. And the more units that are placed out there, the more customers we find coming on and being loyal consumers on that product.

So, yeah, we continue to be very encouraged about the retention and repeat purchasing of those who are buying the devices..

Okay. My final question is just housekeeping on the $0.10 that you called out. So it's basically a 39% effective rate, which is obviously higher than your normal. So what – I mean, even using 35%, how do you get the $0.10? I mean, 35% is about what you were expecting, is that correct? I'm just trying to....

Yeah, that's right. We had some benefits, Frank, that came through for a couple items. One was some revenue that was permanently or some earnings that were permanently reinvested in China with a couple other minor things. So our rate without the $0.10 would have been around 29.5%..

Oh, okay. Thank you..

You bet..

Thank you. Our next question comes from Tim Ramey of Pivotal Research.

Your question, please?.

So much. On the first quarter guidance, it seems like revenue guidance is sort of as expected, but to get to the EPS number you're talking about, margins would have to be somewhat compressed, or we don't know what the tax rate is that you're expecting for 2017. Maybe you could address those two things first.

The tax rate and is there a margin impact from higher selling expense or something like that in the first quarter?.

Yeah. Good question. Thanks for that, Tim. The tax rate is expected to be where it historically has been, around 35% to 35.5%. The difference really is just the lower revenue number with essentially mostly fixed overhead number, so it brings our operating margin closer to the 9% for first quarter.

And then as we see the revenue increase throughout the year, the margins will improve and stay in line with what we guided to at our Investor Day. So it really is just a function of the revenue being lower in the first quarter..

And is that primarily we're going to see that at the G&A line? Is that where we should expect to see that?.

That's right. The G&A will be higher..

Right..

That's right..

Okay. All right. And just one off-the-wall. You closed your SEC investigation when you filed the 3Q 10-Q, but this Probes Reporter seems to indicate there is still an ongoing SEC investigation.

Can you speak to that? Are you aware of anything that we should know about in terms of ongoing activity or is that actually closed?.

We are not aware, Tim, of what the Probes Reporter is reporting and have nothing to update the market on at all with respect to SEC investigations..

So it's fair to say that whatever was there is closed?.

Yes..

Okay. And then just one more on cash availability.

You have a fairly meaningful current maturities, but if we were looking at the cash balance, what would you kind of estimate availability and it could be used for share repurchase? I mean, is there sort of an extra $100 million in that number right now or how should we think about the needs of the cash account?.

Yeah, I think generally we try and keep around a minimum balance I would say of around $250 million. It's impacted somewhat by the timing of being able to bring cash back from offshore, but we have a line of credit that we can use as a buffer if in fact we felt like we wanted to use additional cash for share repurchase.

So I'd say a minimum balance would be around $250 million..

Okay. Thanks so much..

Thanks, Tim..

Thank you. Our next question comes from Bill Schmitz of Deutsche Bank. Your line is open..

Hey, guys. Good afternoon..

Hey, Bill..

Yeah..

Hey. Can you just talk about the North Asia business, because it was way below our expectations, and I was wondering if it came in a lot below your expectations too? I know there was obviously some LTOs particularly (21:00) in the base period.

And then I guess more importantly, it seems like the last couple weeks of December have been much worse than expectations the last two or three years.

Is something going on with the business in that respect? And how would you explain that perceived softness relative to kind of the expect (21:15) you guys had at the Analyst Day?.

Let me take the latter part of that question first, and then, Ryan, if you wouldn't mind commenting on North Asia specifically. Yeah, the way the fourth quarter played out, October was a little bit soft, and November was really solid. And we just felt like going into December we had the firepower we needed to get to what we guided to.

And as our promotions kicked in, in the month, particularly in Korea and Japan, which is North Asia, as well as in the Americas, we just got lesser pop out of those than what we'd anticipated. Is there something to that seasonally inasmuch as we've seen that in the last couple of years? I don't really think that, Ritch.

Do you think so?.

No. I haven't. It certainly isn't a consistent pattern. It was really, like you said, associated with those couple markets..

Ryan, do you want to comment on North Asia?.

Yeah. You bet. Hi, Bill. Regarding North Asia, as you'll recall, in Q3, we had a significant LTO in the market with our Youth product there, which drove sales leader creation quite well in that market. Moving into Q4, the key is to get those leaders to stick, and that's really where we saw some softening there.

For us, Japan continues to be a challenging market. We're not seeing the results of that market that we hope. But I think the impact that you're talking about is mainly more related to Korea and retaining sales leaders' posts post product launch in Q3..

Okay. No, that's super helpful. And then on the social selling front, is the business sort of pivoting much more to personal care products? So is that by design with the social selling where the average selling price is lower, but the velocity is higher or do you think that just sort of disquiets the UK.

market and it will vary market by market as you kind of roll out more of the digitally-enabled social selling stuff?.

I want to comment on this one just quickly, Bill, because I'm really enthusiastic about what we're seeing in social media environments around the world. It does skew right now a little bit to the personal care category, although that's not entirely the case because Tegreen, our dietary supplement, happens to be a big social media seller in the UK.

But we really like what's happening and even in the U.S., we're seeing pockets of social selling erupting in ways that are really, really impressive.

And today, or at least so far in most of the other markets, it's a little bit off the radar screen because it hasn't been big enough to impact our overall results in some of our larger markets, but it's going to be. And I think in the course of 2017, you're going to see social media-driven results coming out of several markets, the U.S. being one.

I think Latin America is going to see it, and I think Southeast Asian markets are going to see it as well.

Ryan, what do you have to say about social media?.

Yeah, I totally agree, and I think the one thing to keep in mind with social media is the high demonstrability of these products, Bill. A lot of these products are very much what you can see or what we call selfie-worthy products. And so that tends to skew towards the beauty and personal care space more than nutrition.

However, we are seeing products like our Tegreen product that are catching a gear as well. And so the interesting thing with social is that the purchase, the average purchase price per customer is lower.

And so to Truman's point, throughout the year in 2017, as this continues to build and improving our customer base, average spend per customer will be something that we really focus on so ensuring that we're building lifetime value with these customers as that grows..

Okay. That's great. And let me just sneak in one more.

Do you think you bottomed in terms of sales leaders in China?.

Yeah, I'll address that as well. I think our sales leader activity, again, having just spent a week with a few of our – really our top leaders over there, the optimism in the market is very strong. China is such a big business and it's such a unique business, it requires a lot of training and over-communication in that market.

We're seeing the sales leaders, our top sales leaders really in much more favorable position to move. And so I don't know that one would ever say bottoming out as you can predict that, but I think we're in a good position, and I think we have a solid base to build from there really moving into Q1 as we look at this ageLOC Me launch..

Okay. Great. Thank you, guys..

Thank you. Our next question comes from Olivia Tong of Bank of America.

Your question, please?.

Thanks.

First, just want to clarify, for the $7 million of sales that shipped in Q1, you booked the selling expense in Q4, but the revenue will be booked in Q1, correct?.

No. That's not quite right..

Okay..

When you defer the revenue, you also defer the expense..

Okay. So the expense will match up with the revenue in Q1..

That's correct..

Okay. Got it. Thank you for that clarification..

You bet..

And then, I know you have the LTO benefiting the comp period in terms of sales, but relative to your expectations, where was the sort of $20 million to $30 million shortfall relative to your expectations at Analyst Day?.

Well, I think, first of all, the $7 million in China didn't help, so that leaves us maybe $10 million to $12 million short of where we talked about at the Analyst Day.

And it goes back to, I think, Truman's comments that the promotional activity that we had anticipated to drive some additional revenue in the U.S., Japan, and Korea, primarily, just didn't catch the gear we thought it would each in the $3 million to $4 million range, and that made up the difference in the shortfall that we sustained in the quarter..

Okay. Got it. And then, I know every other year you have a global convention. It seems like more is happening is within markets.

So when you think about this year, would you expect sort of the same kind of big pickup versus years past or do you think it's more sort of – it's less of a hockey stick in Q4 relative to years past?.

Maybe I'll stay away from the forecasting exactly. Ritch can answer that one. But regarding the live event coming in October, as you mentioned, we do this every two years. We're really taking a unique approach to this event, which I'm personally excited about.

As we mentioned, this will be a globally broadcast event, and so we're pushing for high attendance here, but we're really pushing the reach of this event, and we're looking at various promotional activities that will be tied into that and our LumiSpa as well, which I think will enable us with our live event to actually be more accretive in terms of building value for sales leaders and for our customers than previous conventions have been alone as far as Q4..

Yeah. And then, as far as the guidance goes, Q4 should be a good quarter because of the launch of LumiSpa. So the real measure of whether we're getting traction with the live event will definitely be do we see an increase both coming into and coming out of this event in our sales leaders and our customer base.

That'll be the real measurement that will be meaningful. In terms of revenue, we'll have about 0.5 million LumiSpa units that will be produced and available for sale in the fourth quarter. Those will be allocated around the world. Price on that product is somewhere around $125.

So generally speaking, there will be $60 million, $70 million of volume from the device itself that we would anticipate. And the better of a job we do at bringing in new customers, the more that revenue can be incremental to our base business. So that'll be the focus in Q4..

Got it.

And then just lastly, can you give a little bit of color into what drove the gross margin expansion this quarter?.

We've had some improving benefit throughout the year last year as we continued to – we sort of worked our way through old inventory that needed to be cleared out that really was towards the end of 2015. And then we were just able to improve as we went throughout the year and hopefully we can hold in that range.

When revenue comes down a little bit, we do have some amortization that flows through cost of sales, some sort of fixed costs, they're not real big, but a little bit of a lower revenue number can put a little pressure on that gross margin.

But generally for this year, we would anticipate it being fairly similar to 2016 in total, so in the 79% to 80% range and varying a little bit by the revenue number in each quarter..

Got it. Thank you..

Yeah..

Thank you. Our next question comes from Beth Kite of Citi. Your question please..

Terrific. Thank you. Hey Rich, Ryan and Truman. I have a couple of questions to start off on the first quarter, namely in China, and sort of how that's impacting the $480 million to $500 million guide for the top line. That felt a little light to me when I first looked at it and I'm wondering if that's in part related to now maybe a March event.

I think on the last call, it was a January event, at ICR you talked about it maybe being a February event.

So could you talk to us if that is in fact sort of driving sort of the full quarter number to feel a little lighter? And related, when you spoke of the range for local currency sales growth of 3% to 8%, kind of what would happen if you were to be at 3%? What would happen for you to be at 8%? If we may start there, that'd be great. Thanks..

Yeah. Great questions. So the event, the actual launch in China will – the product will essentially be made available. Where we get the pops in revenue is generally from an LTO. So since this is launching right at the end of March, we don't have built into our numbers a big spike from the actual launch of ageLOC Me.

It is a little bit later than we had initially hoped because it's taking us that sort of time to build up the cartridges and be ready for the actual launch, so we pushed that back to the latter part of March. Generally, the numbers are coming in mostly where we would have anticipated though and so not a big swing.

Again, we don't have any real product LTOs in the quarter to drive spikes, which is a pretty apples-to-apples comparison with what it was the prior year, we were at $470 million in the prior year and then we do anticipate a 1% to 2% currency impact in this first quarter..

Okay.

And related to those cartridges, is there any risk that the supply won't be available to go in March or have you kind of resolved maybe what would have driven the out of stock in December?.

Yeah. We should be in good shape to be well supplied. That's why we pushed it back actually to the end of March so that we can be well supplied and ready to go, and should be able to keep up with demand now..

Okay. Terrific.

By chance, do you have a data point similar to what was offered at the Investor Day for the number of buyers of the cartridge set, I think the Investor Day offered roughly 100,000 sets were being sold in the month of October?.

Yeah. That continued to increase in November and then jumped up big in December, because of the promotion that was done in China. And so – and then obviously we're not selling those cartridges in January here. So we continue to see good adoption. The base continues to build as we go forward.

I think we've now sold about 300,000 total units, and we're encouraged with what we're seeing..

Okay. Great. And then if we can move to LumiSpa, I feel like we're going to kind of be in a back-end loaded year again with that launch.

Is there any chance that some of that product might go out in the third quarter? I know you previously sort of said 2H, and it sounds like today it's more 4Q, but might anything occur with LumiSpa in the third quarter?.

Right now our plan is to really combine this with our global Nu Skin Live event and build energy around that. So our plan at this point in time is to have it all in the fourth quarter..

Okay.

And last one, do you have a cash flow from operations guidance point for 2017?.

I do. I think this year we came in right around $275 million, and it should be very similar next year..

Wonderful. Thank you all so much..

Yeah..

Thank you. Our next question comes from the line of Mark Astrachan of Stifel. Your line is open..

Thanks, and afternoon, everyone. Was curious about the change in definition of active to customers.

Any reason and any change to what that encompasses from a definitional standpoint?.

Yeah, I'll speak to that. We have felt for some time that it would be beneficial within the investment community in particular to use terms that were more customary. And so actually within industry association circles, we've been talking about trying to normalize our use of how we refer to sales leaders and customers as well.

So there's no change in how we're calculating these two categories. We're just trying to use terms that the market is more familiar with, and I think when you see other direct selling companies talking about their sales forces and their customer bases, hopefully you'll see them using similar terms as well..

Got it. Okay. And then switching to China, so Greater China customers, executives both sequentially, year-on-year worse – I guess customers not still been (36:35) on a sequential basis. But the greater revenue, or Greater China revenue also down.

So I guess I'm curious what that implies from a product suite standpoint or whether it implies anything about promotional activity or just sort of what clarity you can give or color you can give around what's going on in that market and what could potentially be driving those two metrics moving in unison?.

Yes. I think it's a good question regarding China and I think I caught the full thing, so if not let me know. You're asking about China sales leader and customer growth in Q4 and how we're reading the trends there..

Well, and relating to the revenue. So in other words, productivity fees being weaker..

Yeah. So yeah, generally speaking, as we look at the trends, as you'll recall from Q2, we had a strong LTO and carried a lot of those sales leaders through to Q3. In Q4, as we pushed back the launch of ageLOC Me, that had an obvious impact on our sales leaders at that point in time.

And so, for us, the focus in China is to ensure that our sales leader growth, our customer growth, and our revenue growth generally moves in a more consistent manner. And that's really where we've been focused because we acknowledge that there's some variance in there that tends to be less predictable than the way we want it.

And so as we look to Q4 and we see the activity around sales leaders and active versus revenue, for us it's how – what levers we pull to drive our business in various ways.

Ritch, I don't know if you want to add anything to that?.

Yeah, I think we're actually – we're disappointed that the sales leader number came down. We're actually encouraged that the active number, the customer number has really held steady. And so I think part of that is ageLOC Me and the retention that we're seeing there. So that's an encouraging sign.

But clearly, as we go into this next year, as Ryan mentioned, the focus will be on driving both sales leaders often lead out and then bring in customers that support and allow them to stay in the business. So it will be a real attack this year on driving both of those..

Great. Thank you..

Thank you. I think that our list of questions has expired. And I'm going to take just a second, inasmuch as this is my final earnings call as CEO to share a quick thought. Twenty years ago, I joined the company as a bit of a skeptic.

The founders had asked me to take the company public, and I thought at that time, I'd get the project done and move on, because I didn't really see myself spending my career in direct selling venture. But what I found here was not what I expected. This is an amazing company and a terrific business.

And like all businesses, we have our ups and downs, but we've survived and thrived through all of the challenges and we'll continue to do so. That's going to happen because of two things.

First, the world needs what we offer, both in terms of our high quality anti-aging products as well as the opportunity we provide to enable people to try their hand at an entrepreneurial endeavor. The marketplace trends for these two factors are not waning.

The world is aging, and there's seemingly endless need for opportunity in a world where opportunity often exists only for the privileged. For people seeking a better way, in my opinion, there's no other business platform that is as low risk and potentially as high reward as direct selling.

And secondly, Nu Skin is built on a foundation of solid values and principles that were a reflection of our founders originally, but that are now embraced by hundreds of thousands of remarkable people who want their lives to stand for something more than the size of their bank account.

That's why it's a privilege to be associated with such a fine enterprise, and it's why I believe Nu Skin Enterprises will continue to flourish. Thank you..

Thank you. Ladies and gentlemen, that does conclude your program. Thank you for your participation, and have a wonderful day. You may disconnect at this time..