Nature's Sunshine Products Inc (NATR) 2020 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine's financial results for the fourth quarter and full year ended December 31, 2020.

Joining us today are Nature's Sunshine's CEO, Terrence Moorehead; CFO, Joseph Baty; and General Counsel, Nate Brower. Following their remarks, we'll open the call for questions. Before we go further, I would like to turn the call over to Mr. Brower. He reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Nate, please go ahead.

Thank you. Good afternoon, and thanks to all of you for joining our conference call to discuss our fourth quarter and full year 2020 financial results.

I'd like to remind everyone that this call is available for replay via telephonic dial-in through March 24 and via a live webcast that will be posted on the Investor Relations portion of our website at www.naturessunshine.com.

The information on this call may contain forward-looking statements. Such statements are often characterized by words such as believe, hope, may, anticipate, expect or will. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K under the caption Risk Factors and other reports filed with the Securities and Exchange Commission.

The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now I will turn the call over to the CEO of Nature's Sunshine, Terrence Moorehead. Terrence?

Thank you, Nate, and good afternoon, everyone, and thank you for joining today's call. I hope you all continue to be safe and well during the ongoing challenges of the pandemic. 2020 was certainly a challenging year marked by unprecedented change from COVID-19, but our management teams around the world were able to rise to the challenge as our fourth quarter results closed out the year strong, resulting in what we believe to be a transformational period for our company.

During the fourth quarter, we saw net sales reach their highest level in the company's 48-year history as performance eclipsed the record that we set last quarter. In addition, we drove absolute growth across all 4 of our operating business units for the second straight quarter, and we generated record-breaking net sales growth and bottom line improvements for the full year. All of this was made possible by our unwavering commitment to our vision that drives us to share the healing power of nature with everyone.

Throughout 2020, our management team showed incredible resolve to transform our business and bring our business to life, while our practitioners and retailers showed incredible stamina and determination to deliver the highest-quality natural products to our customers. That combination and that partnership helped make 2020 a tremendous success.

Throughout the second half of the year, we benefited from improved field fundamentals and the strength of our recently revamped business model. In the fourth quarter, net sales increased 11% to $101.7 million, reflecting strong sales practices, growth in new customer acquisition and continued positive response to our new branding and product launches. We maintained our momentum in markets that experienced strong growth last quarter such as NSP U.S. and China, which grew 7% and 24%, respectively, in local currency.

In addition, we continued to see strong momentum from our transformation initiatives in LatAm, which grew 21% in local currency, and our product introductions in Central and Eastern Europe, which contributed to Europe's overall growth, up 35% in local currency. While we saw significant improvement in net income during the fourth quarter driven by a favorable tax rate from the release of valuation allowances, our adjusted EBITDA reflects several seasonal initiatives and key strategic investments to support ongoing growth. I'll provide a more comprehensive overview of the fourth quarter results and our upcoming plans shortly.

But first, I'd like to provide some additional detail on the performance of each of our OBUs. Let me start with North America, where we saw continued positive momentum throughout the region as sales increased 6% overall. In NSP U.S., sales increased for the fourth consecutive quarter, delivering growth of 7%. We continue to benefit from improved sales fundamentals as well as increases in new customer activation and engagement driven by positive consumer responses to our new branding and messaging.

With consumers continuing to place a high priority on their health, we believe we are well positioned to attract customers and address their needs. To help navigate the early stages of our transformation and identify potential areas for improvement, we've continued to partner with our incredible practitioners and retailers. This helps ensure that we continue to enhance the business model and fully integrate the new initiatives into our distributors' daily routines. I'll talk about our progress on the transformation a bit later in the call. But for now, I'll summarize by saying that we're very pleased with the rollout and the overall reception to the plan so far.

Moving to Asia. While our sales increased by 2% on an absolute level, we experienced a slight year-over-year decline in local currency due to reinstated lockdowns across our second largest market, South Korea. While we grew in Korea in the third quarter, the new restrictions constrained our ability to maintain the positive momentum into the fourth quarter as sales fell by 23% due to the market's strong reliance on in-person gatherings and events. In the months ahead, we'll continue to focus on the health and safety of our South Korean distributors as we develop new initiatives that will allow customers to more easily access the products they desire.

Excluding South Korea, Asia sales increased 18% in local currency. In China and Japan, we continue to see strong growth as both markets delivered significant increases in orders, new customers and average order spend. China's fourth quarter sales grew 24% on a local currency basis while sales in Japan increased 30% in local currency. We're also starting to see robust growth in one of our smaller strategic markets, Taiwan, which experienced 200% growth in local currency during the fourth quarter. And we expect to see continued strong growth in this market as it begins to reach scale.

In Europe, we saw growth of 35%, led by continued strength in Central and Eastern Europe. Strong field fundamentals and targeted new product launches fueled our performance in both Russia and Poland. And we look forward to officially launching our rebranding initiatives in the second half of 2021. Despite the recent social unrest in Russia, our performance remained strong as sales in the fourth quarter grew 37% in local currency. Poland continues to deliver explosive growth, with fourth quarter sales increasing 64% versus prior year in local currency.

In Western Europe, we struggled for most of the year to deal with the crushing effects of COVID-19. However, in the fourth quarter, we were able to deliver 13% growth in local currency sales, driven by strong progress in the U.K., which was up 32%, and Italy, which was up 47%. Moving forward, there is still some uncertainty with respect to the impact of the pandemic so we anticipate a gradual recovery for Western Europe.

Finally, in Latin America, we continue to see strong growth from our revamped go-to-market strategy. In the fourth quarter, sales increased 21% versus prior year in local currency. The rollout and implementation of the new business model is still underway, but we saw a strong improvement in new customer growth throughout the quarter. Of course, meaningful improvement to our few fundamentals will take time, but the increased amount of field content, improved communication and the move to a single compensation plan appears to be having a positive impact on sales force productivity.

At the same time, the introduction of new digital capabilities seems to be helping to drive new customer growth. Overall, we're pleased with how customers and distributors have responded to the transformation, and we expect to experience continued growth as we move forward over the long term.

Our performance across our 4 OBUs demonstrates that our transformation initiatives are gaining momentum. Over the course of 2020, we saw momentum build as the team focused on implementing our global growth strategies. For the full year, 2020 sales grew 6% to a record of $385 million in sales, which is the highest sales in the company's history. Operating profits also increased 33%, delivering $21 million while adjusted EBITDA increased 16% to $36 million.

We're very pleased and encouraged by the favorable response we've received from our customers and distributors to our revamped business model, the new branding and the new website. We still have a lot of work to do, but we've made tremendous progress and are deeply grateful for the amount of flexibility and adaptability our distributors have shown. And we're very fortunate to have such incredibly skilled and savvy partners as we navigate through this transition together. The changes we've implemented have only just begun to unlock the power of Nature's Sunshine, and there are still many new exciting elements of our plan to come, and I look forward to sharing those plans with you sometime in the future.

For now, however, I'd like to give you a brief update on our progress on our 5 global growth strategies. I'll begin with brand power, where our updated packaging and branding are already receiving strong praise from our customers and distributors around the globe. Our new clean modern design highlights the potency and effectiveness of our products while positioning Nature's Sunshine as a clear choice for consumers looking for quality products that deliver significant health benefits.

In the fourth quarter, we also began testing our new Force of Nature digital marketing campaign, and I'm pleased to announce that the initial results have exciting implications for the business. The test campaign exceeded our expectations as the results revealed a higher level of customer engagement that surpassed our initial objectives and industry benchmarks. It's still early to come to any final conclusions but based on the results we've seen so far, we feel confident that our new branding will effectively support our customer growth initiatives moving forward.

In summary, we continue to see strong consumer response to our initial marketing efforts and believe that our performance-based products, industry-leading quality and unique branding truly distinguishes Nature's Sunshine from the competition.

Turning to Field Energy. This is the area where we've experienced the greatest challenges due to the pandemic. Around the globe, all of our markets have been forced to adapt and build new flexible capabilities to augment our field fundamentals. The introduction of new updated sales tools has been key, but we've also had to rely more heavily on new digital tools to keep our teams connected and productive in a remote work environment. The increased number of Zoom calls, webinars and video conferences has helped us reach a broader group of distributors, including those that might normally fall through the cracks. As a result, we're working more closely with our distributors to find new ways to drive customer growth and improve activation.

The launch of our new business model was designed to support these efforts and more, and we continue to make excellent progress in our 2 key launch markets, North America and Latin America. It's still early days but we've been -- but we're seeing success in both OBUs and believe that we're laying a strong foundation for the future.

One of the areas where we're seeing increased participation is in the number of customers signing up for Subscribe and Thrive. Remember, Subscribe and Thrive is our new auto-ship program and is the most cost-effective way to purchase our products. Subscribe and Thrive customers receive our best prices, a complementary 1-year premium membership that offers them exclusive savings on all of their purchases and they get free shipping. After just a few months, Subscribe and Thrive already represents about 25% of our monthly orders, and we continue to see steady growth in the number of people joining the program each month.

The program not only helps people save time and money, it also helps contribute to their health since our products become more effective when used over time. The new business model also introduced the new affiliate program, which continued to gain momentum in the fourth quarter. Since the launch of the program in September, we've seen a 300% increase in the number of people joining the program. The new affiliates continue to join the company each month and are sharing our products with friends and acquaintances through their social media networks. This has helped introduce our brand to an entirely new group of consumers, supported by influencer recommendations.

Amidst all of this, our incredible distributors continue to lead the way as we continue to transform the business. As you've heard me say before, I believe we have some of the most skilled, dedicated and talented practitioners and retailers in the industry. Their passion for herbs, natural products and sharing the healing power of nature make them an invaluable partner in the transformation of our business and we're committed to their success.

Our industry-leading bridge program offers our distributors what we refer to as a Passport to Success and reflects our unwavering commitment to ensuring that each and every one of our distributors has the time and support needed to adapt to the new system, build confidence and create a plan to drive growth in their business.

Moving on to our digital-first initiatives. The fourth quarter launch of our new website ushered in a new era for Nature's Sunshine. The new digital platform has played a key role in the relaunch of our business over the past 2 quarters by introducing customers and distributors to a more powerful online toolkit that more effectively helps them search for and share our products. Ongoing enhancements to the platform will focus on improving and strengthening the user experience as we continue to strengthen Subscribe and Thrive functionality, Google search parameters and our website content in areas like product ratings, customer reviews and sourcing transparency.

We're also building our database marketing capabilities and are developing strategic partnerships with several top-tier database marketing platforms. This will allow us to more effectively target and serve customers while enhancing the level of engagement in future marketing campaigns. We look forward to continuing the comprehensive rollout of our digital transformation in 2021.

Turning to Manufacturing Inc., a recent study by the Nutrition Business Journal showed that 85% of Americans say that they trust independent third-party certification organizations when evaluating brands. At Nature's Sunshine, we take tremendous pride in the vast number of product certifications that we have. Our industry-leading list of certifications and accreditations truly distinguishes our company from the competition.

In the fourth quarter of 2020, we continued to increase our lead over the competition by gaining our ISO 9001 recertification for quality processes, securing our ISO 17025 certification for testing excellence and receiving an A1 TGA rating, which is the highest rating available from TGA, which is similar to a pharmaceutical-grade certification. Again, we take pride in our rigorous quality controls, meticulous testing and precise manufacturing standards. The fact that we keep these processes largely in-house distinguishes us from the more than 85% of competitors who outsource their products to less accredited third-party manufacturers that lack the science, quality, testing, controls and manufacturing capabilities that Nature's Sunshine has developed over the past 49 years.

Going forward, our excellence in product quality, reliability and testing will form the foundation for our increased commitment to sustainability and transparency. We've already made the move to 100% recyclable bottles and have implemented a supplier code of conduct agreement with all of our suppliers to ensure that they're in compliance with our -- with all of our sustainability goals and objectives.

We're also working to enhance and expand our ESG efforts, and we'll share additional updates on that in the future. As the company committed to its vision of sharing the healing power of nature, we are proud to take on this challenge and to lead the industry in this area.

Lastly, on our Right Stuff initiatives, we continue to benefit from our revamped organization structure, as evidenced by the team's improved ability to drive transformational change throughout the pandemic. 2020 represented the largest transformation in the company's history, and it has impacted every single area of the business. Without the increased level of focus, attention to detail and collaboration, we would not have been able to deliver a historic year of growth while significantly increasing profit.

For the full year, again, operating profit increased 33% while operating margins increased 110 basis points despite COVID-related increases in cost of goods sold, onetime restructuring charges, incremental incentives for driving growth and several strategic investments designed to build momentum and drive future growth, where we invested ahead of sales as we talked about last quarter.

In the future, we expect to see continued improvements to profitability as our streamlined organization and operational efficiencies are designed to improve productivity across the business. We continue to be pleased with the progress we've made on our 5 global growth strategies and are proud of our financial success in 2020. Despite the economic and operating challenges posed by the pandemic, our improved productivity and effectiveness have strengthened the financial health of the company and created significant long-term growth potential.

As we announced earlier today, our record-breaking financial performance has put us in a position to return a meaningful amount of capital to our shareholders through a special dividend in the amount of $1 per share as well as a $15 million share buyback authorization. While Joe will walk you through the details of these shortly, I want to walk you through our capital allocation strategy, which prioritizes 3 areas as we move forward.

Our first priority is maintaining our financial strength and stability. Obviously, we want to make certain that we have sufficient cash reserves on hand to meet our financial obligations. From there, our next priority is to invest in incremental growth in the form of organic opportunities that will take our business to the next level or strategic M&A transactions that expand our capabilities or accelerate market penetration. And finally, our third priority is to allocate funds to future dividends or share repurchase programs as opportunities arise. Overall, however, at this point, our main focus is on supporting and driving growth.

With that, I'd like to turn the call over to Joe, who will walk you through our fourth quarter and full year financial results and our strategic priorities for 2021 in more detail. Joe?

Thank you, Terrence, and good afternoon, everyone. So let's just jump into this. Net sales in the fourth quarter increased 11% to a company record of $101.7 million compared to $91.7 million in the year-ago quarter. This increase was primarily driven by new product development and continued execution on our business transformation plans and growth in new customer acquisition within key markets.

As Terrence mentioned, we achieved absolute growth across all 4 operating business units. Excluding the benefit of overall favorable foreign exchange rates, net sales increased 9% in the fourth quarter of 2020. On an absolute basis, net sales in Asia increased 2% to $36.9 million compared to $36.1 million in the year-ago quarter, but on a local currency basis, this represented a 3% decrease. The decrease was primarily attributable to a net sales decline in South Korea during the fourth quarter as a result of stricter lockdown restrictions as well as a decrease in net sales across our other Asian markets. The decrease was partially offset by a 24% increase in sales in China and a 30% increase in sales in Japan due to the lift of lockdown restrictions and increased market penetration within these regions.

Net sales in Europe increased 35% year-over-year in local currency to $23.6 million compared to $17.2 million in the year-ago quarter. The increase reflects the continued success of new product launches and stronger field fundamentals throughout Central and Eastern Europe. North America net sales increased 6% on a local currency basis to $34.7 million compared to $32.9 million in the year-ago quarter. With the various strategic and e-commerce enhancements we have implemented through our transformation initiatives, we continue to capitalize on strong demand resurgence within the U.S. market and driving future growth in new customer acquisitions during the fourth quarter.

Net sales in Latin America and Other increased 21% in local currency to $6.6 million compared to $5.6 million in the year-ago quarter, with the increase primarily due to new product launches and the continued success of our transformation initiatives in this market, particularly with our revamped field fundamentals and digital resources for distributors as Terrence mentioned.

Gross margin remained flat at 74% compared to the year-ago quarter. Volume incentives as a percentage of net sales were also consistent at 34.1% for the respective fourth quarters. Selling, general and administrative expenses were $38.4 million compared to $32.7 million in the year-ago quarter. The increase was primarily attributable to variable costs associated with sales growth, incremental stock-based compensation, bonus related and restructuring expenses as well as incremental support for future growth initiatives. As a percentage of net sales, SG&A expenses were 37.8% compared to 35.7% in the year-ago quarter. Excluding the impact of almost $0.7 million of restructuring expenses in the fourth quarter of this year, SG&A expenses were 37.1% of net sales compared to 35.7% in the year-ago quarter.

Operating income in the fourth quarter was $2.2 million or 2.2% of net sales compared to operating income of $3.9 million or 4.3% of net sales in the year-ago quarter. Excluding the restructuring-related expenses, we generated $2.9 million of operating income or 2.9% of net sales for the current quarter compared to $3.9 million or 4.3% of sales in the year-ago quarter. The reduction in margin is primarily related to incremental stock and bonus compensation of $2 million and marketing investment associated with our transformation initiatives.

Adjusted EBITDA, as defined in our press release as net income from continuing operations before income taxes, depreciation, amortization and other income or loss, adjusted to exclude share-based compensation and certain noted adjustments, were $7.5 million in the fourth quarter as compared to $7.6 million in the year-ago quarter. The lack of adjusted EBITDA growth from increased sales was primarily attributable to the aforementioned timing of certain expenses, including incremental bonus amounts and investments made in support of the company's long-term growth, as Terrence has noted previously.

Net income attributable to common shareholders for the quarter was $5.9 million or $0.29 per diluted share as compared to $1 million or $0.05 per diluted share in the year-ago quarter.

Turning to liquidity. We had cash and cash equivalents on December 31 of $92.1 million and outstanding debt of $3.7 million. For the full year 2020, we generated $37.7 million of cash from operations as compared to $8.5 million in 2019. Adjusted EBITDA for 2020 increased $5 million, including an almost full point margin increase.

As we look back at 2020 into the fiscal year ahead, we are proud of our stronger financial foundation. Our significantly improved financial health enables us to invest in our business and positions us to return a portion of our cash to shareholders. As Terrence mentioned, today, our Board of Directors declared a special cash dividend of $1 per share payable on April 9 to shareholders of record as of March 29.

In addition, our Board authorized the repurchase of up to $15 million of the company's common shares. The repurchases may be made from time to time as market conditions warrant and are subject to regulatory considerations. Future capital allocation strategy, including initiatives, will be balanced with our aim to continue investing ahead of sales growth. This includes strategic investments to support our customer acquisition and activation, where we have already made progress.

Similar to the results we are reporting today, our investments in the next phase of our business transformation may increase our costs over the next several quarters. However, the long-term benefit of these investments will sustain our growth, drive long-term operational improvements and result in increased operating and adjusted EBITDA margins. We believe the initiatives we have put in place this year have only just begun to fully optimize our platform, and we look forward to further enhancing and expanding our transformation in 2021. Now I will turn it back to the operator for Q&A. Operator?

(Operator Instructions)

We'll now take our first question from Steven Martin of Slater.

Congratulations on the revenue increase, but I guess we're all a little surprised on the cost increase was so great. You know I always ask you about costs. What do you see going forward? Because it was all the G&A line. So what can we expect in 2021?

You know what, I'll let Joe take a stab at that. Obviously, we expect to see continued expansion in our margins and in overall profitability. But Joe, do you want to give a little bit more color on that?

Sure. Steve, how are you doing? What I would tell you directionally is that, yes, we expect, as I noted in my comments, we may have some incremental costs associated with certain of our initiatives and spending a bit ahead of growth, if you will. Having said that, looking at 2021 overall, as we -- well, we don't give guidance per se. I would just say that we could expect our overall margins to be north of where they are in 2020, if that helps to answer your question.

It does, it does. And once Korea straightens itself out, what do you -- can you give us -- I mean, you're getting better at this. Can you give us a range of what your expectation is for top line growth in 2021?

Well, again, I won't necessarily give you specific direction. But as we've seen in our other markets when the COVID-19 restrictions are eased, you kind of see the unleashing of our potential. In Korea, we've got such strong field fundamentals and such a strong kind of operating machine there that is built on relationships and kind of -- ship is finally tuned and finally oiled machine.

And then you throw something like COVID into the mix and it just really slows them down. So -- as you saw. So I would -- I think our expectation is that we would return to kind of normal growth rates and almost historical growth rates that we would have seen there, historical performance in that market. But again, that will be determined by kind of when that market can open up, as well as our ability to build out some more digital capabilities on the ground there.

And we are working on that, Steve, but it will take a little bit of time for us to put that infrastructure in place. So obviously, before I came on board, there just wasn't much there. We focused on it as a core component of our strategy and are building out the capabilities right now. But it will take a little bit of time. But that's a great market for us, and my expectation would be that they'll step back.

What's the status of that market now? Is it still closed up?

They actually have some additional restrictions put in place and largely on meetings and just how people can get together. And again, as you know, that's such a large part of the Korean -- South Korean business and the dynamic that they've had in place there. They are working with some -- again, some -- they've just launched a new business app that's designed to take some of the meeting dynamic and the training that they do and kind of build that into a digital platform. But that is brand new. It's hot off the assembly line, just launched this quarter. So that's why I don't want to make any predictions on the impact that, that's going to have. But clearly, the more tools and the more contact you have, the more helpful it is.

Okay. I do applaud the rewards -- decision to pay a special dividend and buy back shares. As you know, I've been pushing for that for a long time. So with $90 million of cash, I think that's really good use of cash. And I hope you're reasonably aggressive about how we use the buyback.

One other question on -- yes, you took out that Bank of America loan, you obviously [made more] you took some more of it out. Do you think your cash position is the reason why you're keeping it out?

We -- yes, I mean, it's a -- we have an equipment line. We have a couple of lines of credit, Steve. And at the end of the day, we're trying to give -- maintain our banking relationship, and the money is very, very cheap. So given that we paid back the PPD loan, we turned around and borrowed a little bit against our equipment line. But obviously, in any given day, if we feel so compelled, we can obviously pay it back.

Okay. And CapEx thoughts for this year?

Well, for 2020, they're still relatively consistent with 2019, somewhere in that $5 million or $6 million range. Again, directionally, I would say that because of the number of initiatives that we have, that it's certainly possible that CapEx for 2021 could be 1.5, 2x what it was in 2020.

Got it. And are you guys having any -- there are a lot of shipping and supply disruptions as a result of your doing most of your manufacturing. Are you guys experiencing any of that?

For the most part, no, we're not. That's not to say that we haven't had experienced a hiccup or 2. And sometimes, those have been domestic-based, right. Trying to get product out of the Westport facility and on the water to one of our markets. I mean, we've had a hiccup or 2, but for the most part, we've been relatively unscathed by disruptions, both on the distribution side and on the supply side.

(Operator Instructions) We'll hear next from Jon Hollander with CAG Advisors.

First question to you on the metrics that you use to manage your business. Through Q2 of 2020, your earnings release has included numbers of distributors and managers. Those numbers have been removed for Q3 and again in this earnings release. Can you give me an update what metrics investors should be looking at to help analyze your business?

Well, first off, let me -- in regards to the removing some of the distributor information that we've had in prior years, it's not required data. And frankly, based on the introduction of our new business model back in September, we think -- consider some of that data just less relevant as there's much more of a focus differentiating between who our customers are versus who the distributors and leaders are. So as Terrence touched on his comment, I would recommend that you listen to some of the data points that he called out in his comments, but he gave you a pretty good road map as to some of the things, the metrics, if you will, that we look at in trying to measure the results and how we're doing on a go-forward basis.

But when all's said and done, I mean, obviously, we're looking for growth. We're looking to build on the customer base. We're looking to build on our distributor base. We've seen some success on that, especially with programs, as Terrence touched on, like Subscribe and Thrive and the significant amount of increase we've seen in customer activation and so forth.

Okay. Can you give any data points as to what percent of your sales are coming from the digital set, I guess, or digitally originated?

Those numbers are still -- [some of the] percent of sales coming from digital. I'd say that percentage, Jon, is still relatively low, in the 10% range. However, having said that, most of our distributors now are doing business with us digitally. So the volume of digital transactions overall is very high. The amount coming from consumers is still relatively low. And again, we just launched our new platform and our new website September 1, 2020, so we're relatively kind of new into the journey.

Okay. So then I assume you guys have a metrics such as customer acquisition costs or like a value cost or average orders or anything yet for digital consumers?

Yes. Not yet, we don't. Again, we just started our -- we have our test doing some of that type of work, the database marketing work in kind of the November time frame, and we'll be rolling out some additional initiatives going forward. So that's all kind of part of the digital campaign, our Force of Nature campaign and many of the other things that I talked about that we're doing going forward. But again, that's still kind of new territory for us, new ground for us. But it's tremendous opportunity.

Okay...

One of the interesting things, Jon, just to build on that, Jon, one of the interesting things about kind of our business and our platform is not only will we be leveraging those tools but we've also kind of made sure that all of our distributors have the exact same tools and the exact same capabilities that we have as well.

So each 1 of our distributors, all of our practitioners, all of our retailers, everyone in our business here, especially in North America and Latin America, they will have the exact same kind of tool, the fully functional website, sharing tools, kind of everything, e-mail marketing tools, in order to help them create a whole digital business of their own. So there's kind of a multiplier effect that we hope to get going forward out of our digital toolkit.

Okay, that's helpful. Can you just give me a quick sense of how you think about the working capital?

Joe, you want to comment on that?

How we think about working capital as far as going forward, what I'd say is, obviously, if you break in particular components, obviously, as we discussed earlier, we are doing a lot. We had a decent year growth-wise in 2020. We do believe it will continue to grow going forward. We'd like to see that growth increase. That certainly drives maybe a little bit of an uptick on inventory.

Accounts receivable for us are primarily credit card-related so they convert to cash pretty quickly. And then on the current liability side, obviously, to some degree, the inventories will be financed with accounts payable and so forth and so on. So it's a little bit of a long-winded answer to your question, Jon, but we don't see any major pressures or on using cash -- for using cash as a result of working capital going forward.

There will always be some things, just from a timing perspective, that will come into play but we don't consider working capital as -- our growth in working capital is a major use of cash for us going forward.

Okay. So obviously, we're already near the end of Q1. I was hoping the discussion we just had about Korea and about the other geographies are all [strong] in Q4. Can you give any comments on how things are trending for Q1 as you see some reopening worldwide (inaudible).

At this time, no, we're not going to provide any comments regarding Q1. Obviously, we've already provided a little bit of thoughts in as far as how we believe 2021 shake out. We clearly believe that we're going to experience growth, clearly believe and expect that we're going to see improvement in our profitability and so forth and so on. I mean, our next earnings release is early May, and we'll obviously talk much more at length about how our first quarter played out. And then maybe we'll be a little bit better positioned to talk a little further about the rest of 2021.

Okay. And just one final question. On the cash flow statement, I've noticed a line item for noncash lease expense. Can you just comment on that?

I'm sorry, could you repeat that question?

Yes. In your cash flow statement, I've noticed a line item for noncash lease expense.

Okay, yes. The -- if your question is specific to adjusted EBITDA, the other noncash -- the noncash items for us were primarily depreciation and stock-based compensation. And there is a table at the earnings release that breaks...

The amortization had the rent expense and part of the lease standard change accounting.

We have the -- yes, the consideration maybe we're referencing is obviously, there was a new accounting standard put in place a couple of years ago, where you have to put all the leases on the books, right? You have to evaluate in present value the lease liabilities for your various office leases, warehouse leases, whatever you may have, you put those on the books. And then there is some amortization associated with that liability. But I would think it's an asset and it's a liability. I don't really look at that as an adjustment to EBITDA. It's just -- it's a gross-up that you're required to do for accounting purposes.

Okay, that's helpful. I thought it might have been [pained to leases] with stock, which is locked to about (inaudible).

Yes. That's one of those accountants gone wild things.

No problem. A very good quarter that we [had the light] questions.

Well, thanks for your questions.

Thanks for the question.

Thank you. And at this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Moorehead for closing remarks.

Okay. Well, thank you very much. I just want to take a moment to thank everybody for participating and listening in today's call. We look forward to speaking with you again when we report our first quarter '21 results in May. Until then, stay well and look forward to speaking with you all soon. Take care. Bye now.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may now disconnect your lines at this time. Thank you for your participation.