Nature's Sunshine(US:NATR)2020-03-12 02:58Financial Data and Key Metrics Changes - In Q4 2019, net sales were $91.7 million, down from $97.4 million in the same quarter last year, representing a 5% decrease in local currency and a 5.8% decline as reported [24][19] - Operating profit increased significantly, reaching $3.9 million or 4.3% of net sales, compared to an operating loss of $1.2 million or 1.3% of net sales in the prior year [28] - Adjusted EBITDA was $7.6 million in Q4 2019, compared to $4 million in Q4 2018, indicating strong growth [29] Business Line Data and Key Metrics Changes - In Asia, net sales declined 13% year-over-year to $36.1 million, with a 26.2% decrease in China and a 5.9% decline in South Korea, partially offset by growth in Japan [24][19] - North American net sales decreased 6.3% year-over-year to $32.9 million, reflecting the exit from unprofitable sales and promotions [25][20] - European sales grew by 18% in local currency, driven by strong performance in Central and Eastern Europe, particularly in Russia [23][24] Market Data and Key Metrics Changes - Latin America sales declined 9% on a local currency basis, with restructuring plans underway to improve performance [21][25] - The company reported a gross margin increase of 20 basis points to 74%, driven by favorable market mix and cost efficiencies [26] Company Strategy and Development Direction - The company launched a new global strategy in 2019 aimed at improving consumer appeal and profitability, with operating profit almost tripling and EBITDA up 78% [10][19] - Key strategies include brand power, field energy, digital first, manufacturing capabilities, and developing high-performance teams [11][13][15][16][17] - A new brand called Qemp was soft-launched, focusing on CBD products, with plans for a full launch in the future [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of the coronavirus on business operations, particularly in Asia, but emphasized ongoing efforts to adapt and maintain engagement [9][8] - The company is optimistic about future growth, particularly in immune support products, as consumer awareness of health increases due to the pandemic [48][50] Other Important Information - The company has no long-term debt and reported cash and cash equivalents of $53.6 million as of December 31, 2019 [30] - Restructuring efforts have eliminated approximately $10 million in annualized costs, with additional savings initiatives planned for 2020 [17][27] Q&A Session Summary Question: How does EBITDA growth fit into the cost structure? - Management committed to maintaining discipline in SG&A costs while improving operating margins and gross margins [32] Question: Are the strategies the solution for reversing North American sales? - Management believes the strategies are correct and are addressing branding and digital capabilities to enhance competitiveness [33][34] Question: What plans are there for the cash reserves? - Management is discussing options with the board regarding shareholder returns, including dividends or share buybacks [36][37] Question: How to address the tax rate and its impact on EBITDA? - The tax situation is complex due to operations in multiple markets, but improvements in operating results should help reduce the tax rate over time [40][41] Question: What steps are being taken to capitalize on the current market demand for vitamins? - Management highlighted the opportunity to promote immune support products and is focusing on building out these offerings [48][50]