Scott Pond - Nu Skin Enterprises, Inc. Ritch N. Wood - Nu Skin Enterprises, Inc. Ryan S. Napierski - Nu Skin Enterprises, Inc. Mark H. Lawrence - Nu Skin Enterprises, Inc..

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

Good day, ladies and gentlemen, and welcome to the Nu Skin Q1 2017 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. As a reminder, this conference call is being recorded.

I would now like to introduce your host, Mr. Scott Pond, Head of Investor Relations. Sir, you may begin..

Thanks, Bryan, and thanks, everyone, for joining us. On the call today with me are Ritch Wood, Chief Executive Officer; Ryan Napierski, President; Mark Lawrence, Chief Financial Officer; and Joe Chang, Chief Scientific Officer. During the call, comments will be made that include forward-looking statements.

These statements involve risks and uncertainties, and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks.

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

Thank you, Scott, and good afternoon, everyone, and thank you for joining us today. As this is my first earnings call as a CEO, I wish to thank you all for your interest in Nu Skin Enterprises. I'm excited about our future and since recently changing to this assignment from my previous CFO assignment, my optimism for our future has only grown.

I believe our business, I believe that – I believe in our business, I believe we have great confidence in our ability to compete and succeed. And I feel fortunate to be surrounded by a very talented and experienced management team. To that point, I'd like to begin by introducing to you our new CFO, Mark Lawrence.

Mark brings a tremendous skill set to our management team, and we look forward to his impact on helping us grow our business, and create shareholder value. And we'll hear from him a little bit later on during this call. I'll provide a few quick highlights to the quarter, and then turn the time over to our President, Ryan Napierski.

He will provide information on segment results and key initiatives in the business, and then Mark will address a few financial highlights and as customary, we'll open up the call for questions. Overall, I'm quite pleased with what we accomplished in the first quarter. We posted revenue nearly $500 million, compared to $472 million in the prior year.

This represents growth of 6% in reported revenue and 7% in constant currency. Our quarterly earnings per share were $0.51, which compares to $0.06 on a reported basis or $0.42, when excluding the impact of a Japan customs charge in the prior year.

Our growth in revenue was driven by strength in Mainland China, in South Asia-Pacific and in the EMEA region, while the Americas revenue was flat for the quarter, we're actually seeing encouraging signs of growth, particularly in our customer count and believe this will lead to revenue growth in the future.

And we continue to have challenges in South Korea and Japan and we'll address these a little bit further, when Ryan speaks. As a reminder, we executed strong LTO sales in 2016, in both Q2 and Q3.

To remind you, we reported a $106 million in LTO sales in the second quarter, mostly in China and in South Asia-Pacific, and $56 million in LTO sales in the third quarter, that was mostly in South Korea and China. In the current year, our planned introduction of the ageLOC LumiSpa is for the fourth quarter.

And Mark will speak to our guidance, but note that the comparable year-over-year sales over the next few quarters are impacted by the timing of these product introductions. During the quarter, we made steady progress against our key initiatives for 2017.

We continued the roll out of ageLOC Me during the quarter, which positively impacted results in Mainland China and South Asia-Pacific. This is an important product for us, and it further strengthens our competitive advantage in the skin care device category.

We continue to see good progress in our China business, and solid growth particularly in this market, in our customers and sales leaders. And social selling is becoming a multiplier in our global business, allowing our sales leaders to share our products with many more of their friends in a powerful and efficient manner.

We're focused on driving growth through social selling as we move forward. With that introduction, let me turn the time over to Ryan to provide additional detail regarding our markets and our growth plan..

Thanks, Ritch. Good afternoon, everybody. I'm also very excited about our business potential around the world. As Ritch mentioned, we are acutely focused on customer and sales leader acquisition. We believe that this is key to driving growth in 2017 and sustaining that growth moving forward.

Let me address some first quarter highlights, as well as our plans to generate growth and improvements throughout the world. In Mainland China, we generated 33% local currency revenue growth in the first quarter. We were encouraged by a significant year-over-year increase in customer growth, as well as the sequential increase from Q4 to Q1.

Typically, we see a sequential seasonal decline in customers in the first quarter. We initiated the product launch of ageLOC Me in China at the end of the quarter, which is proving to be a strong product for both attracting and retaining customers. We continue to leverage business incentives and quarterly expos in the market.

These initiatives introduce our products and business opportunity to many potential customers and drive sales leader productivity. And we're working towards a strong LumiSpa introduction in the fourth quarter. Japan and Korea continue to be challenging markets for us.

While the economic and political environments are difficult in both markets, we believe our key to improving these markets is to increase our focus on customer acquisition through social selling and other mediums.

I just returned from visiting both of these markets last week, where I spent time with our management teams, as well as key leaders in the area, who remain optimistic despite the challenging environment. In Japan, we executed a successful convention, which is helpful in aligning our sales leaders with the company's direction.

Over the next several quarters, we will focus our initiatives around social selling and customer-focused promotions, while training and preparing these markets as well for a successful LumiSpa introduction in the fourth quarter.

While we don't expect to see immediate improvements, we anticipate that our initiatives will begin positively impacting these markets later this year. Let me briefly speak about social selling, as it is becoming a powerful platform for us around the world.

Generally, our sales leaders are introducing new customers to many of our differentiated products through their social media outlets. We're seeing strong trial and customer acquisition through the social business model.

Social selling has become a powerful business driver in many of our markets in EMEA, South Asia-Pacific, and most recently in the Americas.

Our efforts to enable social selling include providing differentiated products positioned for a broader demographic, including millennials, enhancing the platforms that empower our sales leaders to build their businesses, and providing programs that increase the velocity of our business.

Lastly, we look forward to meeting with our top sales leaders from around the globe in two weeks, as we continue to partner with them to grow our business. We feel contagious excitement that will help us accelerate the pace of growth moving forward. I'll now turn the time over to Mark..

Thanks, Ryan. I'm happy to be with you today and I'm looking forward to the opportunity ahead of me. I can tell you that after just a few short weeks in my new position, I am confident in the leadership of Nu Skin, and I look forward to building on the already great things taking place.

It truly is an honor to be part of the Nu Skin family, and I look forward to getting to know many of you soon.

My immediate focus as the new CFO will be on three areas – supporting an accelerated pace of growth in top-line revenue, identifying the efficiencies in the business to improve margins, and working with our management team to create shareholder value.

Before diving into the financials, let me explain some of the changes you will notice in our financial reports for this quarter. First, we have modified the format of our earnings release to highlight what we believe are the key financial metrics.

Secondly, you will notice that we began reporting revenue in seven segments to provide increased visibility into Japan, South Korea and Mainland China. I will now take you through the financial details from the first quarter.

As Ritch mentioned, our revenue grew approximately 6% over the prior-year quarter to $49.1 million (sic) [$499.1 million], there were no limited time offers in either quarter. The operating margin for the first quarter improved to 9.3% compared to 1.7%, or 8.4% when excluding the impact of the Japan's customs charge in the previous year.

Gross margin improved slightly in the quarter to 77.7% compared to 70.8%, or 77.4%, when excluding the customs charge. Selling expenses for the first quarter were 41.9% compared to 41.5% in the prior year. General and administrative expenses were 26.6% compared to 27.6% in the prior-year period, reflecting leverage from the revenue increase.

We incurred an expense in the other income expense category of $4.6 million, due largely to interest expense in conjunction with the Ping An transaction, which took place in 2016. This compares to an expense of $2.9 million in the prior year. Our income tax rate for the first quarter was 34.1% compared to 37.3% in the prior-year period.

During the quarter, we paid $19 million of dividends and repurchased roughly $7 million of our stock, leaving approximately $193 million remaining in our share repurchase authorization. Our guidance for the second quarter is, revenue of $530 million to $550 million with earnings per share of $0.65 to $0.70.

Second quarter revenue is expected to be negatively impacted 1% to 2% by foreign currency fluctuations. As a reminder from our Investor Day, the quarterly comparables to 2016 are challenging due to significant LTOs in the prior-year of $106 million and $56 million in the second and third quarters respectively.

We have no significant product introductions in Q2 or Q3 of 2017. We do anticipate a significant bump in the fourth quarter revenue from the planned introduction of ageLOC LumiSpa beginning in October. We estimate approximately $100 million in revenue from this new product in the fourth quarter.

With this in mind as we look to the year, we are reiterating our previous guidance with revenue of $2.26 billion to $2.30 billion with a negative currency impact of approximately 3% and earnings per share of $3.10 to $3.25. We will now open up the call for questions..

Thank you. And our first question comes from the line of Tim Ramey from Pivotal Research Group. Sir, your line is now open..

Thanks so much. You didn't, I don't think you updated us on CapEx plans for this year.

Do you have a number on that?.

Yeah. Tim, we'll keep it consistent with what we've talked about at our Investor Day, really about $60 million for the year, I think that first quarter was $16 million. So, consistent on that line around $45 million for the balance of the year..

Sounds good. The China performance was quite strong, very impressive in Mainland China and Greater China overall.

Can you be a little more granular about, what do you think went on in the quarter, is this all ageLOC Me, or is there anything else we should be thinking about there, social selling, et cetera?.

Yeah. I'll take that, Tim. Yeah, we were encouraged as we indicated with the results in China. And this is partially related to ageLOC Me where the response to that was good. Although ageLOC Me really only began to sell in the last few days of the quarter.

And so the growth that we were seeing earlier on is really attributed to better customer performance in the quarter, again sequential improvement that we typically don't see, which is a very positive. We have some good business promotions – or programs, excuse me, going on there that are helping this as well. So overall we feel very good about it..

Great. And just one more and then I'll let you go.

The share repurchase not a lot of follow through in the 1Q, any particular reasons where you boxed out of the market, or just did a lot in the fourth quarter last year, I guess?.

Yeah. We did do a lot in the fourth quarter. And we'll continue to be in the market, I won't expect our behavior around stock repurchase to change at all under my leadership as a CFO here..

Perfect, thanks..

Thank you, Tim..

Our next question comes from the line of Frank Camma from Sidoti. Sir, your line is now open..

Good afternoon, guys..

Hi, Frank..

Question on the sales leaders, I mean, obviously, good growth in Mainland China on the sort of the momentum you got there, but the rest of the markets, obviously I think they were all pretty much down and flat, I was just wondering if you can talk about that, is that a function of the fact that you didn't have any LTOs in the quarter, that may have kind of disqualified some people? I'm just trying to figure that out..

Yeah. I think great question and going back to customer activity was really solid in the quarter, one of the unique elements of the social selling model is that we find that the customer growth is very favorable.

Our traditional model is – to your point where we have LTO activities in some of our business programs really strengthened the sales leader numbers. We didn't have a lot of that activity or those initiatives going on in Q1, but we did have quite a bit of the social selling activity that's really helping us around the world.

Also going back to ageLOC Me and the benefits we're seeing there on both customer acquisition and retention, are very positive there. So overall, combining these – the customer elements of the opportunity with the leadership elements of our opportunity, we think we'll go hand-in-hand..

Okay. And my other question a little bit similar to that because you gave a lot of detail. And LumiSpa, I think that's obviously a good device in a good price point, especially for certain of your markets.

Does that lend itself particularly well to like social selling, given that it's kind of like a unique product and the price point is pretty attainable, if you will?.

It does and in fact, I mean, one of the greatest benefits for social selling products are demonstrability and LumiSpa is a very, very demonstrable product.

So we believe both from a pricing standpoint, positioning standpoint, from a benefit standpoint, as well as just the overall attractiveness or the appeal of this product to a millennial market is going to fare very well in social..

Okay, great. Thanks..

Thank you, Frank..

Thank you..

Our next question comes from the line of Olivia Tong from Bank of America. Your line is now open..

Great. Thanks. Just wanted to talk a little bit about the guidance, because it would seem to suggest a very Q4 heavy year. And I guess we had already expected that all, but the delta of growth in Q2 and Q3 versus Q4 is probably going to be wider than, at least, I originally anticipated.

So, maybe, if you can give a little bit more color on the cadence, because it would seem to suggest that if we are sort of looking at an ex-LTO kind of growth rate, maybe Q4 is, you're looking at something in terms of sales growth in the 20-plus% range, first is that a fair assumption? And then, maybe we can talk a little bit, just a little bit more color around the cadence? Thanks..

Hi, Olivia. This is Mark. Yeah. I think you got the points accurate, we would expect to see a shifting of revenue out of Q2 and Q3 into Q4, just based on the historical. Last year, we had the large LTOs in both of those quarters.

And I think your growth rates in the 20% range are spot on where we think we will end up in Q4 with the launch of the LumiSpa..

So Olivia, let me just add one thing to that question as well. There is a lot of excitement building for the fourth quarter. We have a live event, which is our Global Convention, which will happen in October.

So that's really the kick-off of – the start, let's say, of the launch of LumiSpa, which will then kind of be introduced in several events throughout the quarter. So we are looking to a real strong fourth quarter, and as Mark mentioned, probably around $100 million mark, as it relates to the new LumiSpa launch.

So yeah, we would anticipate to have a real good strong fourth quarter. I think that we have real good ammunition in place to deliver that result..

Got it. Okay. And then on the social selling, can you give a little bit more detail on your idea of social selling? I mean, what are you doing that you didn't do before? And how does this impact sort of your existing model? Thanks..

Yeah. A great question and something we're focused on significantly here. For us, social selling is really a modification of direct selling. The fund – the underlying principles of social selling are not dissimilar to direct selling. They're just done in a new medium.

And so for us, what we're focused on is how to apply those fundamental principles into a new environment and then to support that again from a products, a programs and a platform perspective.

And so for us, we view it as very much as individual sharing products via their social networks and really taking advantage of the natural sharing practices that occur there and we're just – we're seeing – as I mentioned, we're seeing this pickup around the world.

It's a very natural process and it's something by the way that is just very, very natural for millennials. Direct Selling put out a new study on this just recently, talking about the appeal of the two models, direct selling with social selling. So that's really our view of it..

Got it. Okay. And then just last thing, and just on Q1 gross margin. I would have expected to see a little bit more of a pop after on a fairly easy comp.

So just wondering as you think about – the puts-and-takes in gross margin, does Q1 have a different mix relative to the rest of the year? And just some color on your gross margin expectations as the year progresses? Thank you..

Sure. I'll take this one. If you look at our gross margins reported at 77.7%, it's pretty close to in line with what we reported same quarter last year at 77.4%. As you look at last year, you also see that our gross margin improved as revenue improved throughout the year.

I would expect to see the same trends this year and as revenues goes up, our gross margin will improve. I don't think there was anything specific about product mix or mix shifts that we're seeing that will cause our margins to behave differently than it did last year..

Got it. Thank you..

Thanks, Olivia..

Our next question comes from the line of Faiza Alwy from Deutsche Bank. Your line is now open..

Yes. Hi, thank you.

So I was wondering if you could talk a little bit about Korea and Japan, sort of what specifically are the issues there and what's the plan to sort of reignite growth there going forward?.

Sure. Yeah. As you all know, the environments in Korea, while Korea in particular is facing some political and I guess war-oriented distractions, I think in that market that make it difficult and direct selling in general hasn't been as growing an industry as we've seen in years past.

Japan has just kind of an ongoing lag in both industry dynamics as well as economic dynamics in that market.

But again, as I stated earlier, our intent and our focus, our approach to these markets is to really focus on the fundamentals of customer acquisition via social selling, which is an emerging opportunity in these markets, both of which have unique regulations by the way around social selling. And so we've studied these intensely.

Nevertheless, we believe as we focus on the fundamentals, we focus on customer acquisition through these mediums will ultimately see improvements in the business.

Also we're very, very – looking at LumiSpa very favorably for these markets because again they're both very strong consumer markets, personal care markets, and for us to be able to offer a new cleansing device into that market that has kind of revolutionary science to it. We believe we'll fare quite well in those markets over the mid-term..

Okay. And then just to follow up on China. So we've been hearing from a number of other companies that the Chinese consumer is back.

Do you think that that is part of what's driving your growth or you're seeing sort of a similar trend in the overall category, macro environment, where the Chinese consumer is spending more in maybe premium cosmetics?.

Yeah. Let me speak to that, Faiza. Thank you for that question. We are really excited about China frankly, because we think there is great potential for the products we offer and especially the opportunity we provide as well.

So, while the customer – sort of there's been up and down in the customer over the last little while, we believe our primary focus is just delivering a real compelling opportunity and ageLOC Me seems to hit that, but we also have several other products that are doing very well, the Galvanic Spa, for example.

And again that's why we believe LumiSpa has great potential because these devices seem to be playing very well.

So I think it's partially the customer, it's partially the opportunity we provide for people to be successful and earn additional income and all those things are playing into our favor right now and we're real optimistic about what we see going on there..

Great. Thank you..

Thank you..

Our next question comes from the line of Beth Kite from Citi. Your line is now open..

Terrific. Thank you. Hello everyone. I would love, if we could just have a couple of more questions on Me and then on LumiSpa.

For Me, are you able to share with us since it did launch in China in late March, now that kind of the full month in April, what – sort of what your trends are, the customer sales leader response to that?.

Yeah. We – as I mentioned, really we launched it out the last few days of March and we're going into April, now sort of kind of our second month into it. Seeing some really favorable things.

I mean obviously the customer activity has been really favorable and that's really been driven both by customer acquisition as well as retention, now which for us is – well, any business but particularly ours in China, we're very interested in seeing that improve. So ageLOC Me has been critical for that.

And we will continue to focus upon initiatives and programs that will enable us to drive greater acquisition, but the retention is just continues to do really well there..

Yeah. Maybe I can add one thing to that Beth, too. I totally agree with Ryan here. This is a really interesting product for us, and I think it will be similar to what we've seen with Galvanic, which has become our largest selling product.

It took time to have our sales leaders really get to understand how to present that product, how to attract customers with it, and we think ageLOC Me all sort of have that, take a little bit longer time to get.

What I was really encouraged with in China was the fact that we had a lot of people who purchased the device last year in the LTO, who are back buying the cartridges now. So that to me is really encouraging.

We had to take mark-to-market for a short period of time, because we stocked out, as you know, in December, and those were all – the cartridges, the devices available for sale to a limited group at the end of the March and then to a larger group beginning in April.

And so, we're encouraged by both, as Ryan said, the ability to attract new customers but the fact that we have a lot of customers who purchased last year, who are back. Purchasing is very encouraging to us..

Great. Perfect. And with regard to the $300 price point of the promo, where the product was sort of pitched – as of (28:20) the Investor Day in December, are you feeling good about that $300 price point in many of your markets or might that need to shift or is that settling in pretty nicely..

We are – we're encouraged by that price point, I mean for us it's a persistent pursuit to finding the optimal offer that enables us to maximize our – really our customer acquisition with our margins. And so, we're pleased with what we're seeing so far in multiple markets.

I think we'll continue to focus on the optimal offer as we move forward, but so far so good..

Great. And then for LumiSpa, I know in the last call, and this when you spoke about live, but could you just help us a little bit understanding, how is that different from the biennial conventions of the past.

Will folks be buying it in person, virtually over the couple of days of the convention, we're just trying to understand the risk associated, is this is a big October event, is it a 4Q, and also is the supply chain in good order for that product?.

Yeah, absolutely and I'm glad you asked the question about it, because it gives us an opportunity to invite you all to the live event in October 11 through the 13. But the live event, so really we do this biannually as you mentioned, we're really changing this up in a few ways, though. First it is a live event being broadcast globally.

So while we can only fit 15,000 people in our arena here, we're seeking for many times that around the world and we've been experimenting this in EMEA for example and this live event forum is really favorable. It gives us an opportunity to truly globally preview our new programs and the initiatives and products.

So LumiSpa will be globally previewed onsite for people in attendance followed by some additional sales opportunities in markets and then, of course, we'll go throughout the market preview process throughout the quarter, Q4 that is. So that's really kind of how it differs.

We're excited about it, because it gives us an opportunity in a global stage to release this really unique product and as well our programs and initiatives for the last two years.

As far as supply chain goes and being geared up for that, we are gearing up for that and, of course, we're ramping up, we're conscious of ensuring that we don't over-produce, but we'll be able to supply certainly our forecast in the way we have our model set up that we – things are looking really good..

Great. And, Mark, if I could direct one towards you and welcome, we'll look forward to working with you. The guidance for reported sales I think is the same from prior and there is the update of I think 100 basis point less pressure from FX to the top-line, I believe it was 3% or 4%, now 2% to 3%.

And kind of how does that shake out with that less pressure, where does local currency sales – sort of I think was 4% to 6% previously now come out today in the guidance?.

I think we are pretty conservative on our – with our 3% approximate number. There is a lot of movement in the dollar right now. There is a lot of uncertainty what's going to happen with the Trump tax implications and the changes there. And we didn't see a tremendous amount of movement, 1% in Q1.

So we felt pretty comfortable leaving our overall guidance where it was and giving a range of roughly 3% FX impact for the quarter – for the year..

Fair enough. I've one last question, if I may.

Is there any chance that you use launches in China this year?.

No, no..

No..

No, it's a long timeline..

Yeah. It's just regulations in the market are so complicated and Dr. Chang's life is difficult..

Okay. Okay. Fair enough. Thank you all so much..

Thank you, Beth..

And our next question comes from the line of Mark Astrachan from Stifel. Your line is now open..

Yeah. Thanks and afternoon everyone..

Hi, Mark..

I wanted to ask about the LumiSpa sales by region, if you could just give us a bit more detail on sort of where you are expecting that, and the $100 million, so that's device plus related products. So the plan is still a 0.5 million units and so I guess that would entail some sort of delta in the related products.

Is that correct?.

Yeah. That's exactly right Mark and I appreciate that question. We're still frankly working on the allocation of exactly how many go to each market as they finalize their plans with their sales leaders on how to introduce this product.

So it will be spread, the – there is probably be somewhere around $60 million to $70 million of device sales, again based on where our price is with the balance coming from the cleansers and the heads that go with it.

And there is a lot – it feels like there is a lot of excitement around the product, we anticipate that that's a quantity that we will pretty much sell through for the most part and we kind of make those final allocations as we get closer right to the end and understand the direction of each market and how it's going to play out..

Got it. Okay.

Housekeeping item, tax rate for the year, Mark what should that be?.

Yeah. I think you still stay at 36%..

36%? Okay.

And then on gross margin, so I guess back to a prior question, given revenues that were at the high-end of expectations at least yours, I would have expected that to be a little bit better, so maybe talk a bit about that in the quarter inclusive, I guess, of looking at sort of the productivity per rep sales leader customer, however you want to think about it, especially given sequential declines there in terms of what may have been happening on productivity and sort of how that would flow through into the quarter?.

That's probably really a two-part question.

Mark, do you want to address the gross margin (34:52)?.

Yeah, for sure. I don't have a lot to add to what I said before. We came in at 77.7%, same period prior year we were at 77.4%, so we had a slight improvement there. As revenue increases, we get more leverage against the fixed cost that hit gross margin and you see gross margin go up.

I don't think we've seen anything from a mix perspective nor do we suspect anything from a mix perspective to challenge that number..

Yeah. I think overall, Mark, the numbers came in really where we had anticipated to – them to be from our guidance, the margin was similar to what we expected. Sometimes, you'll see a little movement, one line item to the next, but it was really pretty much in line.

What drove that and what I'm really encouraged about is that it felt like we've needed to really focus on customer acquisition. We've got to drive our active customer base up to support our growth as we go forward in sales leaders. And so I was really encouraged during the quarter to see several of our regions make some progress in this area.

And I think we can continue to stay focused on that trying to get our offerings just right for the customer, trying to accelerate customer acquisition through social selling. And I think it will do two things – number one, it will help the productivity of our salespeople, but it will also make us to be able to retain them longer.

They'll have a bigger base of customers that are purchasing. So from my perspective, one of the encouraging things out of the quarter was a quick response to our initiatives around customer acquisition and we're going to stay really focused on that, as we go forward..

Okay, great. And then just lastly, thinking about customer sales leaders, I think Ryan had made the comment that you typically see some seasonality around 1Q, but you've seen the metrics decelerate sequentially at least for a few quarters now.

How do you think about getting to that $100 million of expectations for LumiSpa, as you go into fourth quarter, meaning, what do you have to see from a customer and sales leader standpoint to be confident that you can actually, you hit the numbers that you forecast?.

Yeah. Great question, Mark. For us on LumiSpa in the $100 million, it really is a forecasting exercise based on the growth of the sales leader and then the number of customers per sales leader that we can acquire. And so for us, we build our programs, all of our initiatives in Q3 and Q4, to drive to those outcomes.

And then we've talked about this in years past how we've gone away from maximizing the size of the product introduction in order to really optimize the development of the channel, of our sales leaders and our customer base, and you'll be seeing this year a more balanced approach to driving through our programs and our initiatives, even our launch plan themselves, how we drive customer growth with sales leader growth attached, and so, yeah, we're forecasting it in that way and that's how we're planning all of the programs..

Got it. Okay. Thank you..

Thanks..

Thanks, Mark..

And our next question comes from the line of Tim Ramey from Pivotal Research Group. Sir, your line is now open..

Thanks.

I know this question was asked earlier, but I'm going to take another shot at it, because $100 million is a lot to kind of allocate around for fourth quarter by regional markets if you're building your model bottom-up, is there anything you can say – is there any markets where it's not likely to be sold or would you just kind of take a broad brush and go across (38:58)?.

Yeah. And to Ritch's point earlier, Tim, as we work with the markets and the program design, based on the dynamics of the sales force, these plans change as we go, and so we want to be somewhat non-committal that way.

But generally speaking, we – the consumer research across the board market-to-market has been consistent, very, very favorable response on the product concept, on testing that we've done around this product and we haven't seen one market outperform the other in terms of appeal, they're all very strong.

And so, for us it's really around maximizing the – we have a limited quantity of 500,000 and it's really optimizing the allocation according to the market's plans and, of course, we have to look into 2018 as well and how we allocate.

And so, we're seeing very favorable reaction in Greater China, in both Korea and Japan, very positive, Southeast Asia, really Americas, EMEA they're all very favorable. So for us, we'll be allocating according to the needs of the business. And, to some degree, reflect the revenue size of those businesses..

Yeah. And I'd just add one other comment, Tim. This is, as Ryan mentioned, a scale-backed version of what we've done with LTOs in prior years which have been substantially larger at times.

We really began training our sales force on the product, on the benefits of the product, how we're going to position it, three or four months before the product actually launches. So, the anticipation is that they will have several customers in place ready to purchase at the time the product becomes available.

And it's an exciting time, it's an exciting time for the business, it's exciting time to bring out a new product. So that energy should build throughout the third quarter and to a strong fourth quarter.

And we feel fairly comfortable with that number that we put out, both based historically on what we've seen, but as well as Ryan commented on the feedback we're getting right now..

Okay. Thanks..

You bet..

So it looks like that is all the questions that we have right now. And let me just take a second again to thank you all for joining us today and reaffirm our confidence in the future. I'm excited about what we're seeing. We're going to partner very closely with our sales leaders as we go forward. They are talented and excited, I think, about the future.

And we'll focus on three things. We'll focus on making sure we have the right products, building upon and leveraging our product portfolio, making sure we can deliver that, deliver innovation as well in our product pipeline.

We'll focus on the programs that we have which will enhance the appeal to a larger demographic in both of entrepreneurs but as well as customers and then we'll focus on our platforms and I'd really point there to social selling, our ability to support that and help that take shape all around the world. We think that's a game changer for us.

We look forward to the year. We got good things ahead and appreciate again your attention today. Thank you very much..

Ladies and gentlemen, thank you for participating in today's conference. This concludes today program and you may all disconnect. Everyone have a great day..