Earnings Transcript for NUS - Q4 Fiscal Year 2022

Operator: Good day and thank you for standing by. Welcome to the Fourth Quarter 2022 Nu Skin Enterprises Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Scott Pond, VP of Investor Relations. Please go ahead.

Scott Pond: Thanks, Victor, and good afternoon, everyone. Today on the call with me are Ryan Napierski, President and CEO; Connie Tang, Chief Global Growth Officer; and Mark Lawrence, CFO. On today's call, comments will be made that include some 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 consistent manner. Please refer to our investor website for any required reconciliation of non-GAAP numbers. And with that, I'll turn it over to Ryan.

Ryan Napierski: Thanks, Scott. Hello, everybody. Thanks for joining us today. We have a lot to cover, so let me just dive into this. 2022 was a year filled with unanticipated macro environmental disruptions that impacted our business globally. We finished the year at $2.23 billion and -- of revenue and EPS of $2.90, excluding onetime charges. The majority of the year-over-year decline in our business was due to strict COVID-related factors in China, which accounted for approximately $208 million of the revenue shortfall; as well as unfavorable FX, which negatively impacted us by about $150 million; and overall global inflation, which impacted consumer sentiment and global supply chain. Despite these headwinds, we made meaningful progress on several of the key strategic imperatives, foundational to our Nu Vision 2025 transformation, which helped us deliver annual revenue growth of 4% in the U.S. and 2% in Southeast Asia Pacific. Our Japan and Hong Kong, Taiwan segment also grew in constant currency in the year, while reported revenue was down due to FX headwinds. We remain well positioned to capitalize on enormous landscape shifts that are transforming the beauty and wellness industries around personalization, social commerce and the gig economy. Let me quickly review our fourth quarter results. Our revenue of $522 million was in line with revised guidance, while non-GAAP EPS of $0.89 was well ahead of our projection, reflecting disciplined expense control, along with a favorable tax-related adjustment. Like many companies, we are expecting macro conditions to remain challenging over the near term, with gradual improvements in the second half. And so we're taking a conservative approach to setting expectations for 2023, which Mark will address in just a minute. Last year at this time, we introduced Nu Vision 2025, our multiyear strategic transformation from our historic direct selling routes, to becoming the world's leading integrated beauty and wellness company that is powered by our dynamic affiliate opportunity platform. We defined 3 distinct strategic imperatives that enable our vision to come to life, which are

Connie Tang: Thank you, Ryan. While the macroeconomic factors Ryan discussed had a widespread impact on consumer acquisition and sales channel growth across our reporting segments, we were able to grow annual revenue in constant currency in 3 of our segments as well as in our U.S. market. ageLOC LumiSpa iO has been launched in all of our markets now, which we will continue to focus on. We will also launch a personalized approach to weight management with TRMe in several markets, followed by our next smart connected device system in the second half of the year. Let me give a little more color on each of our reporting segments. In the Americas, our U.S. market grew 4% for the year on top of 32% revenue growth in 2021, attributed to continued social selling momentum and customer subscription enrollment. The challenging macroeconomic environment in our Latin America markets offset the strength in the U.S., which led to a decline in revenue and other key metrics for the segment. This segment continues to lead the way for us in social commerce adoption, and our activities this year are focused on affiliate-powered social commerce to drive customer acquisition. For 2023, we are projecting revenue to range from plus 1% to minus 6%. Please note that as I provide our projection for each segment, the ranges may be larger than normal due to the uncertain macroeconomic environment. As Ryan noted, our Mainland China business continues to be challenged by COVID-related factors that are negatively impacting our selling and promotional activities. This is reflected in our decline in revenue and other KPIs. While China has been lifting restrictions and opening up in recent weeks, it has also led to a large surge in COVID infections. As a result, we anticipate the first half of the year to remain difficult. As we return to more typical business activities in China, we need to rebuild our salesforce, which will take time to revitalize momentum. We remain confident in the potential of China and our future here and are projecting a return to growth by the end of the year as we introduce our body iO-connected device system. Overall, we project revenue in China will be down this year between 23% and 35%. In our Hong Kong/Taiwan segment, our strong performance in Taiwan this year was largely offset by the impact of COVID lockdowns in Hong Kong, resulting in slight revenue growth in constant currency. The results of a preview of TRMe in both markets at the end of last year gives us optimism, heading into the consumer launches this month. We have discussed the growth of social selling in Taiwan in the past. And we have also been gaining traction with our customer base development through our loyalty programs with increases in customer acquisition and order volume. We project this segment to range from up 2% to minus 5%. For the past year, we have discussed the impact in EMEA of the ongoing conflict, energy crisis and inflationary pressures on consumer spending and our business activities throughout the region. We know that without these external disruptions, our social commerce model works in EMEA and typically drives strong customer acquisition. Looking forward, we are focused on expanding our channel to drive customer attraction and rebuild momentum with further promotion of Rose Gold LumiSpa iO and our social sharing Nutricentials pumps. This coming year, we anticipate annual revenue to range from up 3% to down 3%. We faced several challenging headwinds in South Korea in 2022 with COVID-related disruptions early in the year, followed by high inflation and associated pricing disruptions. We also faced a negative 9% FX impact for the year and the difficult comp with the successful launch of ageLOC Meta in 2021. Korea has been a strong market for our TR90 products, and we are looking forward to building upon that with the sales leader preview and consumer launch of TRMe in the first half of 2023, followed by the introduction of our newest iO device in the back half of the year. For the coming year, we are projecting revenue up 2% to down 5%. In Japan, we achieved growth in local currency, but they faced a 16% FX headwind in reported currency. Our other key metrics also remained relatively steady, with sales leader development activities helping to build some channel momentum, heading into 2023. Japan has been a strong market for customer subscriptions, and we expect to expand that base as Japan launches Beauty Focus Collagen+ in the first half of the year. For 2023, we are projecting Japan to grow between 1% and 2%. And finally, in Southeast Asia Pacific, we generated 7% revenue growth in constant currency for the year. Southeast Asia is our strongest region for TR90 sales, and efforts to increase the customer base through this brand will continue in advance of a 2024 launch of TRMe in these markets. Sales for ageLOC Meta, which is called ageLOC Reset in Southeast Asia, remained strong throughout the year. In the first half of the year, this region will focus on the combined efforts and benefits of ageLOC LumiSpa IO and Collagen+ ahead of the launch of our next connected body iO device system in the back half of the year. We anticipate 2023 revenue to range from up 1% to down 5%. Overall, all our markets continue to execute against Nu Vision 2025. We're focused on accelerating social commerce adoption across our markets and expanding our channel with affiliate acquisitions and productivity programs, which will also help us grow our customer base. With the insights we are gaining from our smart connected device systems and our Vera and Stela apps, we will also focus on retaining our customers and engaging them with personalized experiences to drive greater lifetime value. And now I will turn it over to Mark to go into more details on our financial performance. Mark?

Mark Lawrence: Thank you, Connie, and thanks to all of you for joining us today. I will give Q4 and a high-level 2022 financial review and then provide initial Q1 and full year 2023 projections that include additional financial detail. For more information, please visit our Investor Relations website. For 2022, we generated revenue of $2.23 billion, with a negative foreign currency impact of 5% or $150 million. Earnings per share for the year were $2.07 or $2.90 excluding restructuring and impairment charges associated with the previously announced company's strategic resource reallocation incurred throughout the year and a tax method change. For the fourth quarter, we generated revenue at the midpoint of our prior guidance at $522.3 million, with a negative foreign currency impact of 7% or $51 million. The U.S. dollar continued to strengthen, which negatively impacted our results. Both reported and non-GAAP earnings per share for the quarter exceeded our previous guidance at $1.15 or $0.89 excluding restructuring and impairment charges and a recent IRS-approved favorable tax method change, which allowed us to utilize foreign tax credits which were previously offset by a valuation allowance. Our fourth quarter 2022 earnings per share benefited from a reported negative 135% or a negative 3.7% tax rate excluding restructuring and impairment. Our Q4 reported gross margin was 71.7% and continued to be impacted by our geographic revenue mix, foreign currency exchange rates and global inflationary pressure. Gross margin for the core Nu Skin business was 74.9%. Selling expense as a percent of revenue was 38.5%, 60 basis points below the prior-year period. For the core Nu Skin business, selling expense was 40.5%. As part of our focus on operational efficiencies, general and administrative expense declined $36.5 million year-over-year to 24.4%, flat with the prior year. By concentrating on strict cost management throughout the year, we saved over $105 million against our original 2022 G&A budget. Operating margin for the quarter was 5.3% or 8.8% excluding previously mentioned charges. This compares to 3% or 11.7% excluding restructuring and impairment charges in the fourth quarter of 2021. The other income expense line reflects a $3.1 million expense compared to a $1.9 million expense in the prior-year period. We continue to prioritize a strong balance sheet and returning value to shareholders even during uncertain times. During the quarter, we paid $19 million in dividends and repurchased $10 million of our stock, with $175.4 million remaining on the current authorization. In a separate announcement today, our Board of Directors approved an annual dividend increase, which marks the 22nd consecutive year of both paying and increasing our dividend. Our Rhyz segment, which includes our manufacturing partners, was down 11.8% when compared to the prior-year quarter, primarily due to our customers rebalancing their inventory from higher levels in 2021. Our manufacturing entities continue to significantly benefit our core Nu Skin business by helping firm up our supply chain, increase our speed to market for new products and generate U.S. profit that lowers our overall tax rate. We anticipate our Rhyz segment to grow 6% to 13% in 2023. Our restructuring efforts, which began last year, remain on track. In the fourth quarter, we incurred an $18.4 million charge and expect an additional $5 million to $10 million in the first quarter as the original restructuring project wind down. Also, we recently finalized an outstanding legal matter pertaining to the exit of Grow Tech, which was closed in 2021. The implications of that resolution are reflected in our reported results. We remain focused on aligning all our resources toward Nu Vision 2025. Let me now provide Q1 and 2023 annual guidance ranges for revenue and EPS and give some additional detail regarding several key financial statement line items. As Ryan mentioned, we are on a multiyear path to transform our business with Nu Vision 2025, and we continue to operate in a very uncertain world, prompting us to give slightly wider guidance ranges. For Q1 2023, our seasonally softest quarter, our revenue guidance is $450 million to $490 million, including a negative foreign currency impact of approximately 5%. Our projection reflects continued macro challenges while lapping a strong Q1 from last year and are largely in line with our historical average sequential decline from Q4. Our Q1 EPS guidance is $0.17 to $0.27 or $0.25 to $0.35 excluding restructuring and impairment charges and a projected tax rate of 18% to 26%. While we face a challenging first quarter, I believe we will be able to demonstrate sequential progress towards our Nu Vision 2025 initiative throughout 2023. For the full year 2023, we are projecting revenue of $2.03 billion to $2.18 billion, which includes a 1% to 2% unfavorable foreign currency impact. We are expecting earnings per share of $2.27 to $2.67 or $2.35 to $2.75 excluding restructuring and impairment charges. We anticipate our operating margin to be 8.4% to 9.1% or 8.7% to 9.3% excluding restructuring and impairment charges, with a tax rate of 18% to 26%. Our tax rate will fluctuate, depending on where profit is generated geographically. I will now walk you through several of our projected 2023 P&L line items. We project 2023 gross margin to be 73.5% to 74%. We have experienced gross margin erosion due primarily to a shift in our geographic footprint and a strong U.S. dollar. We anticipate this will stabilize to some extent, and we should see sequential gross margin improvements over the course of the year. We anticipate that selling expense will remain in the 39.5% to 40% range. We expect general and administrative expense to be 25% to 26%, but down on a dollar basis for the year as we continue to see cost efficiencies while strategically investing in product innovations, technology and emerging markets. Other income expense, which includes interest expense, foreign currency gains and losses and gains and losses on investments, can fluctuate significantly, although we do anticipate that interest expense will increase this year as interest rates have risen significantly. We are modeling $20 million to $22 million of expense for the year, an approximate $10 million increase year-over-year. We project cash from operations of $170 million to $180 million. Depreciation and amortization will be approximately $70 million, and capital spend will be between $75 million and $95 million. As Ryan discussed earlier, Nu Vision 2025 is all about how we will transform our business from a traditional direct selling business into an integrated beauty and wellness opportunity platform. While the current macro environment remains volatile and therefore, our near-term projections are impacted, we believe that the future opportunities to accelerate our business will expand as we invest in our key strategic imperatives of EmpowerMe, affiliate-powered social commerce and our enterprise services platform. We are committed to continuing our operational improvement along the way to our stated 13% operating income target. Our strong balance sheet and proven expense management discipline during turbulent times gives me further confidence in our ability to navigate this journey effectively. And with that, operator, we will now open up the call for questions.

Operator: [Operator Instructions]. Our first question will come from the line of Mark Astrachan from Stifel.

Mark Astrachan: I guess just a few sort of related questions. Maybe first, if you could just walk us through -- you take a look at your revenue projections for the year, it seems pretty interesting that outside of Mainland China, all the regions are anticipating some sort of pretty decent improvement through '23. So how much of that is comparison? How much of that is sort of line of sight that you have about each respective region improving? And I guess, what should be the things that investors look for to get a sense of whether you're on track to do that?

Ryan Napierski: Yes, Mark. And by the way, good to hear from you. Yes, so revenue projections, as you noted, Mark, we see opportunities for growth in each of the segments, with the exception of China that maybe we can comment on because I'm sure that's of interest, and it's probably a follow-up question. And to your point about what we're looking at, the way we kind of see this playing out is really second half progress throughout the year. I think the macro factors, inflation, et cetera, will -- and I'm talking rest of world, will lessen over time, FX impact lessen over time. And we see just from a core business perspective, with our product launches scheduled out, especially this upcoming body iO device that we're pretty excited about, but also TRMe in some of our Asia businesses, where it does really well. We expect to see that growth continue to build throughout the remainder of the year. So we do see opportunities for growth, particularly in constant currency, in each of those regions. As far as what to look for, I just mentioned those 3 KPIs, and we're going to be talking more about those, Mark, and so -- as we go. But truly watching our iO device revenue as a percentage, which is very much leading out over the next few years. But the importance of that is going to be key. The affiliate growth in -- from a social commerce perspective, affiliates versus sales leaders, which are more of the traditional KPI, we anticipate that to continue to improve. And then the digital adoption of these apps, which will be really important. So I think those are the things we should watch. Maybe related to China specifically, as I'm sure that's of interest in our guide on that, you'll recall last year, we had anticipated an opening up of China in Q1 of last year. And we were seeing signs of that. It was a fairly strong quarter. And then the government went into strict lockdown, which was really unanticipated in Q2, mid-Q2 and that carried through to Q3, most of Q4. So we do have a tough comp in Q1. We also know, given global COVID, there's a lot of infection going on there. And as we know, our business really flourishes when people can be out and about. So we see that slowly alleviating and probably in pace with the way the government and the way the population kind of moderates its way into reactivation there. But we do see China with a possibility of returning to growth by the end of the year. But we need to be conservative in our guide because of the Q1. And we always must say, China can be unexpected. And so we need to continue to watch that, but that's kind of our outlook there.

Mark Astrachan: And just related to the China piece, what are you embedding there in terms of getting back to -- I don't know, business as usual probably is unrealistic with large gatherings. But how do you think about just the specific sales model there? You had talked, I think, on the last call about implementing the new flexible structure from a compensation standpoint. How is that impacting it? And then just unrelated, but I feel like Mark is neglected, so Mark, what's the revenue that we should bake into our models for innovation for '23?

Ryan Napierski: We'll come back to that third question, Mark. I want to make sure we're clear on revenue from innovation. Maybe you're talking about new product revenue perhaps?

Mark Astrachan: Exactly, yes.

Ryan Napierski: Okay. Okay. So new product revenue, we can talk about that and general ranges of what we've done in the past. Yes, so let me comment on China, and then Connie can fill in as well. She works more intimately with the team there locally. But to your point, Mark, we continue to see it within kind of a traditional direct sales realm of companies kind of moving backwards or maybe to the past. We absolutely do believe in the value of face-to-face interaction as human beings. And certainly, from the channel, meetings are important to our business, especially in terms of motivating our salesforce, encouraging, recognizing. There's no question that not having that ability in China has been really severe for us, and we anticipate that's going to alleviate over time as the government approves more meetings, et cetera. Nevertheless, we are continuing to lean into a digital-first approach to market. We continue to invest in our digital there proportion to the business. And so we'll continue to do that. But our anticipation is that the market allows for more and more people to meet face-to-face, and I literally mean that to be out in coffee shops and walking around. That's a good thing for our business. And certainly, larger meetings will be helpful from training and motivation and for us, in particular, reactivating a salesforce that has been dormant for 3 years and, by the way, has reduced -- as you see from the KPIs, has reduced significantly, going all the way back to the 2019 observation period in China. So we anticipate some alleviation there. Connie, anything you would add to that?

Connie Tang: Yes. I would add, there are -- what's most important is these activities and promotional drivers and incentives that we know and are confident can rejuvenate and revitalize and reengage not only our sales channel, but also allow for them to have the motivation to attract customers have simply not been possible. And so the ability to execute on that and to actually even communicate and to bring those to market, we have strong confidence that those would be some key drivers that will reignite. This business is as much emotional as it is practical as it is tactical. And we think the combination of that and the -- what we're seeing in the marketplace opening up, we're optimistic in the second half of the year, we will be able to realize some of those results.

Mark Lawrence: Great. And Mark, I'll give you a couple of numbers around innovation. We've talked a lot internally about having a metric that we track, which would be new product revenue. What we need to do is better define that for you and actually make that part of our regular reporting package. And so I'm just going to give you some general numbers, and that's something that we'll expand upon in the future. New product revenue, so products that we talk about, Meta, Collagen+ and our iO devices, made up about 13% of our revenue in 2022. What we're looking for as we think about next year, Ryan mentioned that we like our iO devices to be about 15% of our total. And so that's going to be our big push this next year, is iO devices as we move it from roughly 5% of our business up to 15% of our business. And then we'll have a number of new products that we'll also introduce that would be -- would augment beyond that number.

Mark Astrachan: Got it. Great. And Mark, maybe just quickly, CapEx and D&A in the fourth quarter, please?

Mark Lawrence: Yes. So I'll give you CapEx for the year. I didn't break it out by quarter. So CapEx for the year will be about $75 million to $90 million.

Mark Astrachan: I mean for '22?

Mark Lawrence: Oh, for the -- for 2022, CapEx was, I believe -- it was -- I've got it right here. For the quarter it was $13.7 million and for the year was about $60 million.

Mark Astrachan: Great. And D&A, please?

Mark Lawrence: Yes. Depreciation and amortization was $18.5 million for the quarter and $72.5 million for the year.

Operator: [Operator Instructions]. Our next question will come from the line of Linda Bolton-Weiser from D.A. Davidson.

Unidentified Analyst: This is Christina on for Linda Bolton-Weiser. So I guess my first question would be with the launch of the new One Price model. I'm curious to know, what kind of what feedback have you been getting from the ? And maybe another question on what do you think is driving the growth of the U.S. business?

Ryan Napierski: Yes. Christina, the -- so your two questions are, one, on the One Price model feedback and the growth in the U.S. And I'll comment, maybe Connie will have some additional thoughts. As I mentioned, we're really still testing new models in order to improve the early earning potential of our affiliates. One Price -- this One Price concept that we applied to LumiSpa iO and a couple of other product promotions is a new concept. And it's a relatively -- well, it's a very new concept, especially in many of our Asian markets. So we're still undecided as to whether or not we'll continue to roll that out. We're learning it as we go. Well, we do know that's important as early affiliate earnings is a key part of our future growth. So we'll continue to test new things, but we're not ready to really go on the record and say what and how exactly One Price will play in our business. As for growth in the U.S., and then I'll turn it to Connie, yes, I mean, we continue to see -- you have to remember, the U.S. has had 3 consecutive years of really solid growth. And what we've been really pleased with is that we've sustained the growth, even as some of the industry has kind of tapered a bit as it pulled out of the COVID kind of lockdown periods. So we've been pleased that we've been able to maintain that growth. While the comps are much more difficult, being able to sustain that has been a good thing. And certainly, social commerce has been the primary driver of that activity and the thing that we continue to lean into. But Connie, any additional thoughts on either of those?

Connie Tang: No, I think the U.S. market in particular has been able to not only test but refine and find tactics and models that work to support a strong early affiliate earning opportunity that drives the attraction of that affiliate base and leads to strong customer acquisition. We also found, in particular last year, with products that were socially adaptable, meaning that they are simpler to demonstrate and to also amplify, from a messaging standpoint, on social media. They became products that were not only simpler to understand but also extremely relevant and attractive for us to engage in improving and increasing our subscription enrollment. So coupled with that, with customer development along with a compelling affiliate opportunities where they can realize earlier earnings, we really felt that, that continued to lead to the growth in the U.S.

Operator: [Operator Instructions]. Our next question will come from the line of Chasen Bender from Citi.

Chasen Bender: I just want to come back to this idea of how big the iO devices could be as a percentage of sales. Can you give us a sense of how many customers already have devices? And specifically, how often do you see them upgrading devices? I get that the iO connectivity is a compelling tech and reason to upgrade for those customers that already have the devices. But is there anything else you can do to kind of drive adoption, whether that be targeted promotion or something else?

Ryan Napierski: Yes. Great question, Chasen. So in terms of iO devices and device systems -- and remember for us, the importance of iO devices are the systems that are attached to that and the integration of those systems across our broader portfolio. For example, LumiSpa iO, we have clinical studies around LumiSpa IO and Collagen+, which is a related product that -- where a user benefit or customer benefit connectivity. So -- but when we think about device systems and the value of that, we generally don't get into the level of detail you're asking, but approximately 25% to 30% of our global revenue is devices today. And when we see -- maybe even a little more than that, Mark?

Mark Lawrence: A little lower. It's about 20%.

Ryan Napierski: About 20%?

Mark Lawrence: Yes.

Ryan Napierski: And it fluctuates -- on the other products we produce. Yes, you're right, Meta comes in.

Connie Tang: The cadence.

Ryan Napierski: But those -- so as we look to the future, our goal, as we said, is we want -- we aspire to get iO device system revenue to 30% by 2025. And that's a really important indicator and balance because the system plus or the systems-plus portfolio in personalized product recommendation engines, we -- that needs to really lengthen the tail out on that. And so when we think about how to drive our business forward from a personalization perspective, the iO device systems are a big window into that connectivity. And so kind of that 1/3 to 2/3 balance is where we believe we need to get to. But of course, it's very early. I mentioned we're less than 5% of revenue today just because LumiSpa iO was Q4. We have a lot of promotions, as you asked about how do we drive adoption, that's precisely what we're focused on in the first half of this year, and then moving into body iO is how do we get more and more adoption. And exactly what you said is the key piece

Mark Lawrence: I would add just a couple of things. Lumi iO was a follow-on to our original LumiSpa. And so it has the great iO benefits. But if somebody had a LumiSpa, the iO benefits may not have been enough to get them to purchase. Body iO, which will have a different name when we launch it, is a completely different and new product, and it's a new category for us. And it shouldn't have that same overhang. Someone who has an existing body product, the new product will be so very different. It won't have -- it won't look or feel like a follow-on product. And so we will have further adoption. The other thing I would say, our digital tools and the devices themselves will get better. As people use them, as we collect data, as we're able to add features and make the iO experience that much better, as we add a second IO device and a third and a fourth and get smarter and smarter as we collect customer data, this will be our first set of products that will get better over time. And so I think that's going to be another reason why I think that are very long tails, and we'll be able to get to our 30% stated goal.

Connie Tang: And just to dovetail on Mark's comments, the increasingly improving iO experience for that end customer, for us, we have a strong belief that, that will also lead to stronger not only engagement but stickiness and relationship with the company and the brand, allowing us to further maximize on -- providing customized integrated product recommendations and really incorporating more of our Nu Skin products in various categories into the daily life of a customer, thereby increasing total lifetime value. That's really where, when we say long tail, there's a longevity of retention as well. But certainly, we believe an opportunity for us to increase how integrated we are in terms of their product usage and what we can provide as solutions for their total health and beauty.

Ryan Napierski: And Chasen, sorry, I don't mean to take so much time on this, but you could get us talking on iO. I mean, if you think about from a roadmap perspective and as Mark mentioned, launching multiple devices, when we think about our device ecosystem and what we're mapping out over time, you have a LumiSpa iO, which obviously addresses the facial dynamics of the personal care journey in a consumer. With our app, and -- we are able to help preferentially steer people towards products for that. As I mentioned, we're going to be launching a wellness consultation in second half of this year, which is more focused on body and on health, nutrition, with a body iO device to help gather insights. When you put together our multiyear roadmap, you can really start to see a digital construction of basically a digital twin concept, where we're gathering data and insights on multiple layers of the consumer, of course, with -- all privacy-driven and based on their own opt-in opportunities. But you can see that this is why these iO device systems are so important as we map the entire experience in the beauty and wellness space over time.

Chasen Bender: Got you. No, that's all super helpful color. So I appreciate all of that commentary. And then just to switch gears, I'd like to hone in specifically on kind of promotions and those targeted towards the new affiliates. It's something you guys have been talking about for a couple of quarters now. And I'm just kind of curious, what are you seeing in terms of productivity of these new affiliates, now that you guys have actually put that in place? And I guess specifically in the script, you mentioned some new reward programs going into North America and Lat Am. Is there any more color you could give around those? And what incrementally may be different than what you've already kind of put through? And at what point would you start to consider to institutionalize these types of promotions? And ultimately, any implications that may have for overall selling expense?

Ryan Napierski: Yes. Absolutely. So I mentioned previously and as you can see in the data that over the last year, our affiliates outpaced our sales leader activity by a fairly healthy margin, 30% or so, a little more than 30%. And part of that relates to Mark Astrachan's question, which was around sales leadership in China, and I recognize now I didn't fully answer that question. But the other part is that increasing effort to drive that early affiliate experience or you can think of that product share that's a little bit more gig-like. And so we are definitely very focused on that. We know -- we believe that to be very important for our future. And we are testing a lot of things. You asked about the rewards program in the U.S., our affiliate rewards, which is -- it's a special incentive program that's directed towards that early affiliate and improving customer acquisition and our overall productivity. And so we're testing -- we use a model of test to refine and expand. So when something -- we test it in one part of the world. We then refine it with further optimization, and then we end up expanding that around the globe. So we'll use that same model with each of these tests, just like we're doing with One Price or affiliate rewards, and we'll continue to drive that. As far as that impact on selling expense, we're not predicting an increase in selling expense associated with this program. It's more about optimizing dollars that we pay or that we pay through the selling expense model. So we wouldn't expect that to drive up. Okay. It looks like we're finished up. And apologies for a bit of a longer call today. We -- in lieu of an Investor Day, which we felt wasn't appropriate, we wanted to give that context. So I thank you for being here and being a part of this. As I reflected on the current landscape in our equity markets, I have to ask myself, which of today's companies are going to pull out of this recessionary environment stronger than when they entered it? And what is it going to take for us to do that? I truly believe that the companies that, a, have a clear vision for our future; b, focus our company's resources and assets towards building it; and c, maintain a healthy and prudent balance sheet that provides sustainable value to investors are those who will ultimately emerge stronger. This is our path at Nu Skin as we build the world a much brighter and more certain future as the world returns to a more normal state over time. Nu Vision 2025 is our vision, and it's our roadmap for the future. So thank you for joining us on the call. We do look forward to updating you next quarter on progress to plan.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.