Nu Skin Enterprises, Inc. (NUS) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q2 2013 Nu Skin Enterprises Earnings Conference Call. My name is Litlie, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Scott Pond, Director of Investor Relations. Please proceed, sir.

Thank you, Litlie. Good evening, everyone. We appreciate you joining us. Today, on the call, we have Truman Hunt, President and Chief Executive Officer; Ritch Wood, Chief Financial Officer; and Joe Chang, Chief Scientific Officer. Just a reminder, during the call, comments can and 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. We encourage you to refer to today’s earnings release and our SEC filings for a complete discussion of these risks. And with that, I'll turn the time over to Truman.

Thanks, Scott. Good morning, everyone. We appreciate you joining us today. Last fall, as we were firming up our forecast for 2013, we knew that the second quarter was going to present our most difficult comp, as we were going up against the 40% revenue increase in the second quarter of 2012. So we're really pleased with our results for the second quarter. We generated record revenue of $683 million, which is an 18% increase in local currency, while increasing our earnings per share by 30% to $1.22. Given the strong growth we're seeing in our consumer base, which has continued through the month of July and is reflected in our active account number, we're also increasing, again, today our guidance for the remainder of the year. We now expect revenue to increase by 35% for the year with earnings up over 40% year-over-year. As also announced this morning, our board has increased our stock repurchase authorization by an additional $400 million. We're pleased to receive this most recent increase from our board and it reflects our optimism for the future of the business. We're also generating significant levels of cash flow as the business grows so we're happy to return as much as possible to our shareholders. Our strong second quarter results can be attributed to a sustained interest in our innovative products, as reflected in the 32% growth in active accounts in the quarter, as well as my enthusiasm for the business opportunity we offer, as reflected by 23% growth in our executive count. Turning our attention to a few geographic markets. Greater China's growth obviously continues to be very strong. Sales in the second quarter in Mainland China were $198 million. And as we announced a few weeks ago, we're pleased that China recently approved 5 additional direct-selling licenses, which will become increasingly important as our business develops throughout China. We continue to invest to sustain growth in this market and are committed to working to ensure our long-term success there. From what we're seeing, we believe that the market continues to have significant upside potential. Our north Asia region also had a very strong quarter. South Korea generated an impressive 54% quarterly gain in local currency and continues its long run as a stellar market for us. And Japan had another solid quarter with 5% revenue growth. The weakness of the yen against the dollar is obviously hurting our reported results, but we feel good about the direction of our business in Japan and we believe that North Asia can be $1 billion market for us in the next few years. The Americas and South Asia/Pacific also performed well in the quarter. Latin America growing at a very robust rate. The U.S. is steady with an 8% increase in Q2, while Columbia and Venezuela, in particular, are progressing very well. The Q2 revenue decline in South Asia is a comp issue against last year's product launch. The sequential trends there are very good and you'll see a return to year-over-year growth in the second half of this year. Our first half results set us up nicely for what we expect to be a strong back half of the year. As you know, we're looking forward to introducing our latest ageLOC innovation, the TR90 weight management system, in the third and fourth quarters. We have spoken now on several occasions about how we expect this to be our largest product launch in our history. And as indicated in our release today, we're increasing our outlook for the global limited time offering to $450 million in net sales. Ritch is going to review the timing and expectations for the TR90 launch market-to-market in just a minute. But all indications are that this product will be well-received with LTO volumes spread out over both Q3 and Q4. Our product launch process has become one of the key elements in our accelerated growth rate over the past few years. When we initially introduced a product, we use a limited time offer, or an LTO, first on a global basis and then on a regional basis, which allows our sales leaders a brief window in time where they can buy the products. We then stopped selling the product and don't make it available again for a few months. And while we're forecasting now $450 million in global LTO volume this fall, we believe that next year's LTOs, on a regional basis, could generate an even higher level of sales volume before the product is made available on a full-time basis. So from a comparative perspective, if you're wondering how we'll comp this year's strong results, particularly in the back half of the year, we're feeling quite confident that we'll be able to do that through our regional LTO mechanism. We'll then repeat this launch process for the next global product launch in 2015. So our launch process has added a potent dynamic to our business. Our product development pipeline is full for several years with very compelling products, and our launch process is becoming more refined and more powerful as more markets and as more of our sales leaders around the world adopt the process, giving us confidence that we can continue to sustain growth. So looking at the second half of the year and at the LTO launches that begin about 1 month from now, it's a very exciting time for us. Our 165,000 square-foot innovation center here at our home office is nearing completion. And in fact, we're scheduled to move into it in about 6 weeks time. For those of you who plan to come to our global sales convention in October, we certainly hope that you'll take time to visit our new corporate campus. And we're also on schedule to move into our new Greater China headquarters outside of Shanghai by the end of this year. So with that, let me turn the call over to Ritch.

Thank you, Truman, and good morning to all of you. I remember at the end of last year, as we're providing our initial guidance for 2013 feeling sense of anxiousness to get to the back half of the year. Here we are, we've made it beyond the difficult comparisons with the first half and we're now into the significant product launches that'll be happening here in the second half of the year. I like the way the first half of the year came together. Revenue growth driven by very strong increases in our consumer base, as well as our sales leaders, our growth in our distribution channel really is what gives us confidence and increasing confidence in our ability to deliver on our revenue and profit expectations in the back half of the year. I'll provide a little more detail on our expectations for product launches in a minute, but needless to say, I like to way that the business is developing and especially as we look to begin rolling out the TR90 product the first part of September. Strong revenue growth in the second quarter helped us to achieve an operating margin of 16.8%, which was ahead of our previous guidance and slightly ahead of prior year's 16.5% operating margin. A higher operating margin was due primarily to our ability to leverage our overhead. Our gross margin for the quarter was 83.7% compared to 83.9% in the prior year. Selling expenses this year at 45.2%, similar to the 45.1% in the prior year. Our G&A expenses for the quarter as a percent of revenue improved to 21.7% compared against 22.3% in the prior year period. And then our tax rate came in at 34.4% compared to 36.1% in the prior year. During the quarter, we paid dividends of $17.6 million and our stock repurchase authorization was approximately $121 million at the end of June. After pre-releasing our Q2 results a few weeks ago, we were able to get back in the market repurchasing shares. And as announced this morning, our board approved an increase to our authorization of $400 million. As Truman mentioned, we continue to be very optimistic about the future and feel that we can create shareholder value using excess cash to repurchase shares. The additional authorization represents our conservative estimate of excess free cash flow available over the next 24 months. That's after meeting our planned investments that will be required to sustain growth in the business, combined with our commitment to continue to increase the dividend each year. Just remind you that we have a long track record of both share repurchases and dividend increases, which would be a fair expectation as we move forward into the future. Just a little bit of detail now on the guidance that we updated this morning. We see great enthusiasm and demand for our new products. We believe that being conservative in forecasting, as the business accelerates, is important. And so we're particularly careful in forecasting the product launch sales and the growth that we're seeing in our China business. Our methodology for projecting sales in our limited time offering of new products is done by estimating the size of our active base and multiplying that by the percentage of actives that we believe will participate in the near product launch. Our active base, as you'll all notice in our numbers, has grown substantially in the past 6 months, which increases our confidence in the size and delivery of our LTO sales during this upcoming LTO. So we're raising our overall expectation for net LTO sales in the back half of the year to $450 million. That's a $70 million, approximately, increase over our previous guidance. As you know, we've previously discussed an LTO sales target of around $600 million. This continues to be the target that our sales leaders are shooting for. So we believe the $450 million is conservative and reflects our estimate for returns and cannibalization as well. The LTO sales and shipments for Greater China and Southeast Asia will be split between Q3 and Q4. We currently include about $190 million of LTO volume from these 2 regions in our Q3 guidance and a total of $260 million of LTO sales in our Q4 guidance, making up the $450 million. Today's guidance reflects a yen rate to the dollar of 103 for the balance of the year, Korean won rate of 1,150 and our euro rate at 0.78 to the dollar. We now project our 2013 revenue to be $2.91 billion to $2.95 billion, including a negative 5% impact from foreign currency fluctuations. By the way, that consistent with our previous guidance and how that related to the foreign currency impact. And we expect our earnings per share of $5.05 to $5.15. We continue to see operating margin for the year slightly above 16%. For the third quarter, we estimate revenue to be $790 million to $810 million, assuming a negative impact from foreign currency of 6% to 7%. We estimate third quarter earnings per share to be $1.35 to $1.40, and we anticipate fourth quarter revenue, therefore, to be approximately $890 million to $910 million. So with that, we'll go ahead and open it up now for questions.

[Operator Instructions] Your first question comes from the line of Rommel Dionisio of Wedbush Securities.

This [indiscernible] infrastructure projects in Provo, as well as in China. Or you guys, what's the progress on the facilities that you're building? And I think you mentioned, Truman, that you're going to have the Provo one up and running fairly shortly, just a little more color on that on that please?

Sure. Thanks for the question, Rommel. We're actually really excited about both of these facilities. And we're about 6 weeks away from moving our staff into our innovation center here in Provo. This building, for those of you who may not have seen it yet, is actually attached to our existing or previously existing high-rise building here in Provo. And it's an absolutely stunning facility. As it has come to fruition, it's more beautiful in reality than it even looked on paper as we designed it. So we're very excited about it. In terms of square footage, it's about the same amount of square footage we have here in our original office complex, so nearly double the size of our downtown campus and will be a real showpiece for our distributors who, of course, like to come to home office and kick tires here. And I know Dr. Chang and his team of scientists are very eager to move into their new labs. And we're really -- just really happy with the way it's coming along. In Shanghai, we are building a Greater China headquarters, which is also quite large in scale and will enable us to have enough infrastructure to continue to grow there for some time. It includes manufacturing facilities, warehousing facilities, office facilities, as well as a recognition center for China sales leaders. It, too, will be a real showpiece and will attract a lot of our sales leaders from around the Greater China region who will be proud of that. So we'll be into that facility in the December, January timeframe and are equally excited to be moving into that one.

Your next question comes from the line of John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Just some quick clarification on the share repurchase program. So you talked about what you had left at the end of June. I'm assuming you finished that program entirely since then. If you could sort of give us again how much that would have been since then. And then looking out, you talked about using excess free cash flow to get to the $400 million number. I guess, can you give us some updated thoughts in terms of whether you would consider adding additional leverage or adding any leverage from that standpoint in terms of buying back more stock?

Thanks, John. Yes, as it relates to share repurchases, our sort of focus is that anytime we have excess free cash, we want to make sure we're trying to return that to shareholders. And as we look out over our projections, we believe $400 million is a conservative look at the excess cash that we will have for share repurchase availability when taking into account our first 2 priorities, which would be, number one, to sustain the growth in the business; and then number two, to continue to raise our dividend and pay out a good dividend. We were in the market in July. We don't normally state how much that is. We'll update that at the end of the quarter, but we haven't used all of the $121 million. We'll roll that in to this new $400 million and continue to work on that. What we really watch for, John, is try and look at where our multiple is trading, where we believe that's trading, what our optimism is for our go-forward plan for the business, and then evaluate how much we should be in the market or not. So our commitment is to continue to use free cash to create shareholder value. And that's been our historical approach and will continue to be what we approach as we go forward.

Let me just add to that, John, on the question with respect to our philosophy, with respect our leverage. I mean, as you know, we've been very conservative with our balance sheet and traditionally, historically really since our inception have been largely debt adverse. We're not afraid to borrow money but we do like the flexibility that our balance sheet provides. And it's nice to have options. And even this week, as Ritch and I approved some large capital expenditures for China supply chain initiatives that are critical to our supply chain there that, frankly, we didn't foresee even 6 months ago because of the rapid rate of growth that's happening there. And so it's really nice, I got to tell you, from a management perspective, to have the flexibility that we enjoy with our balance sheet. And particularly, during a period of rapid growth, which we're going through and which we expect to continue, it's nice to not be limited with levels of debt. John A. Faucher - JP Morgan Chase & Co, Research Division: Okay, great. And then you did a good job in terms of laying out how we should think about the LTO through the balance of this year. I guess one of the things I'm still struggling with is trying to figure out what the impact is going to be if we head into 2014. And I'm not looking for guidance on that, but how should we be thinking about the impact of the weight loss? You're going to have sort of 8 or 9 incremental months heading into next year. What's the right way thinking of that, just sort of conceptually?

The right way to think about it conceptually is that despite the fact that the second half of this year is loaded with LTO volume, we're feeling very comfortable today that our launch process, as we go into next year's regional launch -- regional launches and then making the products available on a full-time basis, will allow us very comfortably to nevertheless surpass the global LTO sales that we'll generate in the second half of this year. So it'll be staged a little bit differently because most of the regional launches happen in the first half of next year. So next year's volume will be largely first half-weighted as against this year's second half weighting, but we're very comparable that we can still lap on a year-over-year please basis very favorably the launches that will be coming up.

Your next question comes from the line of Frank Camma of Sidoti. Frank A. Camma - Sidoti & Company, LLC: I had a couple quick questions, one on the historical performance. For the quarter, the selling expenses, on a sequential base at least, went up and there were no LTOs during the quarter. So typically, we see that go up when you have an LTO. I'm just wondering could you explain that?

You bet, Frank. Thanks for that question. As it relates to selling expense, obviously, the growth of the business is one thing that impacts it in addition to LTOs. And then we have this incentive that we've talked about in our Greater China region that if the Greater China region achieves $1 billion, there's a special incentive that we put in place back in 2009 that would pay out. At this point in time, we're highly confident and obviously on the track we're on now we'll exceed that $1 billion target this year. So we're accruing to hit that number that pushed our selling expenses up just a little bit. We have more people in qualification, more people qualifying to hit sales incentive targets, kind of trip incentives and promotional incentives that we put in place, which has also pushed the incentive up just a little bit. The way we really calibrate that through is that the faster growth helps us to leverage our overhead as well. So the growth in selling expenses is offset in the overhead number, which allows us to continue to improve margins as we go forward. Frank A. Camma - Sidoti & Company, LLC: Yes, absolutely. And that was actually -- it leads me to my second question, which is on the guidance. I mean, clearly, it looks like margins on the second half of the year, now -- well, first of all, I guess, just starting with the selling expense, should we think about it as when you roll out these LTOs, typically you do pay out more, is that -- am I correct about that?

That is correct, that is correct. I'd expect the selling expense in the back half of the year to be somewhere around 47% to 48% in the last 2 quarters. And then the G&A, obviously, will come down as a percentage of revenue because of the increase in the revenue. And then I'll just highlight also on the fourth quarter, October, we have about a $10 million planned expense for our convention. Overall, our margins are going to be strong because we'll have a lot of LTO sales but we do have a $10 million expense associated with the convention in October. Frank A. Camma - Sidoti & Company, LLC: In October. So we should see a fourth quarter G&A, I mean, obviously, creep out. That should be your highest, obviously.

On a dollar basis. Frank A. Camma - Sidoti & Company, LLC: On a dollar basis.

Yes, that's right. Frank A. Camma - Sidoti & Company, LLC: Okay. And I guess -- so the final question then -- or just -- so if you could reiterate, you said that operating margin for the year, you expected slightly north of 16%, did you say?

That's right, yes, 16.1%, 16.2% is what I've modeled in the numbers that I've provided this morning. Frank A. Camma - Sidoti & Company, LLC: Okay. So I mean, fourth quarter must be -- I mean, just based on what you gave us, I mean, fourth quarter obviously is your lowest margin -- it's got to be lower than your third quarter, I mean, that's obvious, right?

Yes -- no, I think they should be fairly similar, actually, Frank, because the increase in the revenue, we should be $900 million or so in revenue, which will help to offset the convention expense. So I'd expect both quarters to be 16% to 16.5% in operating margin.

Your next question comes from the line of Bill Schmitz with Deutsche Bank.

Can we just talked about the cash flow it's a bit more? Can you just talk about you think the sort of ongoing normalized CapEx is? Because obviously it's massively elevated this year because of the facility in Shanghai and obviously the headquarters? And then in terms of inventory build, I think there was a big use because you're obviously building inventory for the weight management launch. And so, kind of as it looks forward, does that inventory also come down?

Yes, great questions, Bill. And as that relates to the CapEx, we have both the big headquarters for China and for here coming up, those will be primarily complete this year. Next year, as we go forward, the CapEx, we believe, will continue to stay somewhere in the $150 million to $200 million range. That's an early estimate, so we'll fine-tune that as we get towards our Investor Day in November. But basically, the vast majority of that will be going towards China as we look to expand our manufacturing capacity, as well as tripling the number of stores that we have in place today. By the end of 2015, we'll have 3x the number of stores we have today. So a lot of CapEx going into China to sustain that growth. Furthermore, we think there's some pretty important initiatives from an IT side that can really help us get better at customer relationship management that we're putting in place in Korea and Japan, which will be some CapEx projects. So I think as a percentage of revenue, our CapEx is not going to be increasing, in fact, probably coming down a little bit, but the number overall will probably stay high as we continue to invest behind some really key growth initiatives that we have going on. So your other question related to -- sorry.

Inventory.

Inventory, oh yes. And you're exactly right, we're building inventory right now. Much of that will come out in September with the first shipments of the TR90. It will still be elevated at the end of September because of the product that's built up for our October LTOs. Then it'll come down in Q4, but then it'll begin to ramp again right after that as we build inventory for next year's LTO. So we'll be accustomed to a little bit higher inventory balance this year over the next few quarters as we build for these significant launches.

Great. And then what do you guys see in Japan? I mean, did you feel things really improving? Obviously, the results for Nu Skin have been great. Maybe it's down a little bit sequentially, but is there sort of a different mindset in terms of consumption developing?

Well, I wouldn't say, Bill, that we're really noticing kind of a fundamental change in consumer mentality there. But last year's obviously been encouraging, 4 straight quarters of growth. Now we still expect Japan to be up 5% or 6% this year. And we're doing some innovative things there that we'll talk more about at our Investor Day. But we're really quite excited about what our team's doing there to sustain top line growth. Some out-of-the-box thinking. And we're just actually in the test phase now so we haven't talked much about it. But hopefully, going into this fall, we'll give you a little more of an insight about why we think we can continue to sustain growth in Japan.

Got you. I mean, and obviously, I'm not trying to beat you up there because it's 5% growth in Japan. It's great number year-over-year, but it actually come down a little bit sequentially. Is there any issue there or kind of what's going on?

Maybe if I could just add 1 comment too, Bill, on that. In the second quarter, first quarter, we are rolling out the Body Galvanic (sic) [Galvanic Body] Spa, which was exciting for our sales leaders. So our earnings were -- or our revenue was up a little bit stronger. There is pretty good excitement building for the TR90 LTO, which will happen in October. This will really be kind of a follow on to our first sort of launch using the LTO process that we do everywhere else. The first time we kind of did that was with the Body Spa in Japan. We got fairly good traction, so we'll see if we can execute on this next one well. The reason we're being a little cautious, I think, with our guidance in Japan is that our active number hasn't gone positive yet. We like our executive number, we're up 9% in the quarter. The active number continues to trail down about 4%. So once that active number continues to come up, we'll feel a lot more confident in our ability to sustain that growth going forward. So I'd say we're encouraged about the way things are developing, but still cautious because we're looking for those indicators to move in the right direction.

That's great. And one more if I could. Just what's the timing again for the launch following the TR90? And maybe any kind of color you can sort of talk about on what you think that's going to be and maybe some expectation how it's going to grow.

Yes. So you mean what follows TR90 on the product pipeline?

Yes, I know where it is. I just don't know how to describe it. I just wanted to know.

Right, yes. We haven't really said much about it yet. But let me just say, and I'm going to have to be a little bit careful here to dampen my enthusiasm for it, but as successful as the TR90 launch is going to be, what's in the pipeline in 2015, I really believe, is going to be even more dramatic. And we're really excited about what we're going to be showing the field, both in the upcoming few months and perhaps we'll even talk about it more on Investor Day. But we've done a lot of work on this concept and years in development, very innovative, very unique in the personal care space and we're just really excited about it. So very optimistic that the 2015 global launch is going to be very powerful.

Your next question comes from the line of Scott Van Winkle of Canaccord Genuity.

Rich, I want to follow-up on that margin question. I can't get to a 16% EBIT margin in this third quarter, maybe I misheard you. I kind of back in with your guidance to like an 18% plus margin.

Yes, I think, just walking through the top, kind of the top issues there, I see our selling expenses moving between 47.5% and 48%. That's what I have in my model. I have our overhead coming in somewhere around 20%. So -- then gross margin should stay pretty consistent with where we're at. So that puts us right between kind of a 16%, 16.5% margin for the next 2 quarters. There'll be quite a bit of promotion expense surrounding the LTO launches here in the next few months, so that'll push our overhead, in dollar terms, up a little bit. But obviously, it'll be offset with the increase in sales.

Okay. Anything strange or different on taxes or share count that you could indicate or...

I still expect that tax rate to be about 34.5%. And then and our share count, I just factored in right around 60 million shares, so not a significant change to the share count either.

Okay. Well, I'll follow up offline. But on China, you talked about authorizing some capital investments on the procurement side. More broadly, with the sales level you're doing there, I mean, how stressed is the infrastructure? Everything from management to back-office operations, systems, et cetera, et cetera?

Yes, well, I guess -- I mean, it's stressed on all of those fronts. I mean, our team is working their tails off not just at the management level but, really, throughout the entire organization. From the infrastructure standpoint, as you know, Scott, we're fairly rapidly building out our store presence this year and next. The supply chain initiatives are important. I mean, we're really constrained to some degree in our ability to meet demand there by how much product we can put on shelves, and that's an issue. It's not a critical issue yet but as the business continues to ramp, we obviously need to be able to continue to stay in stock. And with the local manufacture requirements there, that requires some capital investment. So yes, I mean, this rate of growth is putting some strain on all of those issues. But so far, our team is doing a phenomenal job of managing through them.

Great. And then lastly, the comment -- did I hear you correct that the $400 million buyback was an estimate of your excess free cash flow that you could utilize to repurchase next year?

In the next 2 years, that's right, over the next 24 months.

Next 24 months, alright. I'll look into next year in trying to figure out the earnings number of $400 million of free cash. And glad I corrected that.

Yes, 24 months.

Your next question comes from the line of Tim Ramey of D.A. Davidson. Timothy S. Ramey - D.A. Davidson & Co., Research Division: Ritch, I admit that my head is spinning slightly, so I may have this wrong, but I've got the same problem as Scott. And I think one of the clues might have been, I think I heard you say your 3Q guidance was like $1.43 to $1.50 but the press release says $1.63 to $1.70. Am I -- where am I wrong here? Because if it is $1.63 or $1.70 EBIT margin on $800 million in sales has got to be 18%?

No, our EPS guidance should be $1.35 to $1.40. I'll go back and check. Timothy S. Ramey - D.A. Davidson & Co., Research Division: For the 3Q? Okay, there is an error in the press release then.

Okay, we'll go back and check. It should be $1.35 to $1.40 with about -- in the fourth quarter, somewhere around $1.60 to $1.63. Timothy S. Ramey - D.A. Davidson & Co., Research Division: That's going to make life much different, okay. Yes, that -- you might want to get a 10 -- or an 8-K out on that. Okay. Let's see, so let me think if I can get my breath here then again. Should we assume that you were not in the market in the 3Q -- or in the Q2 because of the fact that your delivery of earnings looked like it was materially above your guidance?

Well, we're -- as a policy, we don't tell when we're in market, when we're not in the market, why we're in, why we're not, because then we have to update every time something changes. So yes, we weren't able to be in the market in Q2 for reasons that obviously keep us out of the market. And we were in during the month of July.

Thanks, Tim, and thanks, everyone, for joining us on the call today. I want to close with just 1 additional thought. Back in 2006, those of you followed us for a long time know that we initiated what we call our business transformation effort. And this included not only an overhaul of our business strategy and a significant corporate reorganization but it also included the initiation of performance-based equity incentives for a senior management team. So our first performance target was $2 EPS per share, which we achieved well ahead of schedule on a rolling 4-quarter basis. And then when we hit that target, our board doubled down and put a $4 EPS target in place with the similar structure. Now we had until 2015 to hit that target but we'll actually be achieving that target in the third quarter of this year on a rolling 4-quarter basis, more than 2 years ahead of schedule. So recognizing that achievement and believing in the power of performance-based incentives, our board has recently approved a new incentive plan with EPS targets set at $6, $8, $10 and $12 per share. So we have 6 years to hit that $12 target, but if history any reflection of the future, I think our team is going to be laser-focused on getting to that target on as aggressive a timeline as possible. Back in 2009, you'll also recall that we announced our Nu Skin 2.0 vision is this notion of becoming the world's leading direct-selling company by paying more to our sales leaders than any other company pays to theirs. And at that time, this required a $5 billion revenue level to enable us to pay out $2 billion in commissions. That goal was originally set for 2020. But at that time, our growth rate at the time wouldn't have really even justified that aggressive a timeline. Now at this point in 2013, the prospect of achieving $5 billion of revenue has gone from being a remote possibility to what, I believe, is a high probability and well ahead of schedule. We're focused with our sales leaders on this objective and I honestly think it could happen sooner than people think. So we look forward to talking with you more about our progress towards this objective at our October sales leader convention. For those of you who can make it, at our annual investor meeting in November. Thanks for joining us today.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.