Investor Presentation. May 2015

Transcription

1 Investor Presentation May 2015

2 Safe Harbor Statement Certain information included or incorporated herein by reference in this presentation may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies. All statements (other than statements of historical fact) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as believe, hope, may, anticipate, should, intend, plan, will, expect, estimate, project, positioned, strategy and similar expressions, and are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. For example, information appearing under Management s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. any negative consequences resulting from the economy, including the availability of liquidity to us, our independent Distributors and our suppliers or the willingness of our customers to purchase products; our relationship with, and our ability to influence the actions of, our independent Distributors, and other third parties with whom we do business; improper activity by our employees or independent Distributors; negative publicity related to our products, ingredients, and the nutritional supplement industry or direct selling organization; changing consumer preferences and demands; our reliance upon, or the loss or departure of any member of, our senior management team which could negatively impact our Distributor relations and operating results; increased state and federal regulatory scrutiny of the dietary supplement industry; the competitive nature of our business and the nutritional supplement industry; regulatory matters governing our products, ingredients, the nutritional supplement industry, our direct selling program, or the direct selling market in which we operate; legal challenges to our direct selling program or to the classification of our independent Distributors; risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with our third party importers, governmental sanctions, ongoing Ukraine and Russia political conflict, pricing and currency devaluation risks, especially in countries such as Ukraine, Russia and Belarus; uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto; our dependence on increased penetration of existing markets; our reliance on our information technology infrastructure; the sufficiency of trademarks and other intellectual property rights; changes in tax laws, treaties or regulations, or their interpretation; taxation relating to our independent Distributors; product liability claims; share price volatility related to, among other things, speculative trading; and the full implementation of our joint venture for operations in China with Fosun Industrial Co., Ltd., as well as the legal complexities, unique regulatory environment and challenges of doing business in China generally. All forward-looking statements speak only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this presentation. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this presentation. Throughout this presentation, we refer to Nature s Sunshine Products, Inc., together with its subsidiaries, as we, us, our Company or the Company. 2

3 Overview of Nature s Sunshine Products Global health, wellness and lifestyle company that manufactures and markets 3,600 SKUs through the direct selling channel Global footprint spanning more than 40 countries with over 640,000 independent Managers, Distributors and Customers Strong R&D capabilities provide competitive advantages and enable innovative sciencebased solutions to address mega-trend health problems State of the art manufacturing and research facilities support industry leadership in quality and service Initiating a multi-brand, multi-channel approach to maximize the global performance of NSP & Synergy by enlarging addressable audience Entered China through first and only Chinese-American direct selling partnership with Fosun Pharma 3

4 Diversified Revenue Mix FY 2014 Net Sales Revenues of $366 million Revenue by Business Unit Revenue by Geography Revenue by Product NSP Russia, Central & Eastern Europe, 9% Russia & Europe 17% Weight Management, 8% Personal Care, 4% Synergy WorldWide, 34% NSP Americas, 55% Latin America 10% Asia 22% North America 45% Immune, 9% Cardiovascular, 15% General Health, 40% Digestive, 24% China and New Markets, 1% China and New Markets, 1% Note: Percentage breakdown in pie charts for the quarter ending March 31,

5 Direct Selling, which Represents 25% of the Global VMS, is Experiencing Healthy Growth Direct Selling VMS Sales by Region ( ) 1 Billions of USD CAGR (%) Total 8.4% Middle East & Africa 13.6% North America 2 Eastern Europe Western Europe Latin America Asia Pacific 3 China U.S % 20.0% 1.6% 10.9% 5.0% 16.2% 4.7% Notes: 1 Retail Sales; 2 Less U.S.; 3 Less China; 4 Supplement sales. Uses NBJ data through and assumes Euromonitor growth rate to calculate 2008 and 2013 Direct Sales; Source: Euromonitor, NBJ, NSP analysis

6 Robust Product Portfolio Addressing Leading Health Conditions in the U.S. Share of Top Health Conditions Categories Overall U.S. Health Conditions U.S. Market Sales $mm NSP # of Products In Category NSP US 2014 Sales $000s % of NSP US 2014 Sales Digestive (includes liver/detox) 5.2% $1, $39, % General Health 14.4% $4, $31, % Immune 6.8% $2, $20, % Cardiovascular 7.1% $2, $11, % Mood 1.6% $ $12, % Weight Loss 13.6% $4, $7, % Women's Health 1.4% $ $5, % Joint Health 5.0% $1, $5, % Bone Health 5.7% $1, $4, % Cellular Health 4.0% $1,285 2 $ % Cognitive Function 1.9% $631 9 $2, % Sports/Energy 14.9% $4, $2, % Beauty/Skin Care 2.3% $737 9 $1, % Blood Sugar Support/Diabetes 3.6% $1, $2, % Vision Health 1.3% $412 5 $1, % Sexual Health 1.8% $571 5 $ % Sleep 1.2% $407 6 $ % 6

7 Strong Science Capabilities Systems Phytochemicals Discovery Delivery Clinical Provides strong competitive advantage that can be leveraged to enter new channels Three-pronged approach to support our product strategy: (1) targeted innovation; (2) refresh and line extensions; and (3) basic research Appointed scientist, Dr. Matt Tripp, as Chief Scientific Officer Leads highly skilled team of scientists, that includes 7 PhDs and 2 medical doctors, who work with top researchers at universities to study and test our products Established Global Medical and Scientific Advisory Board focused on the science underlying health mega-trends (currently 6 member board) Opened the Hughes Center for Research and Innovation, a Molecular Biology and Phytochemistry clinic and laboratory, in February

8 The Hughes Center for Research & Innovation New 5,400 square foot, multi-million dollar R&D center and medical clinic at our corporate headquarters in Lehi, UT Serves as home base for researchers to conduct scientific research and product development Facility houses state-of-the-art equipment and medical clinic to perform in-house clinical studies Provides capability to monitor and control entire product lifecycle 8

9 State-of-the-Art Manufacturing Capabilities 270,000 sq. ft. manufacturing facility built to pharmaceutical standards Currently operating at 60% capacity In-house manufacture of tablets, capsules, liquids, powders and stick pack products Operational Excellence initiatives resulted in >$1M in the last 12 months Investing in science, R&D and manufacturing to strengthen our competitive advantage in: Development and speed to market of innovative product programs Development of best-in-class processes that enhance efficiency, improve service, reduce internal costs and empower distributors In-house labs enable the development of specifications and test methods that ensure the highest quality in the industry Regulated by the FDA (Food & Drug Association), USDA (United States Department of Agriculture) and TGA (Therapeutic Goods Administration in Australia) 9

10 Experienced Management Team Nature s Sunshine has assembled a deep bench of industry veterans and best-in-class management Name Position Previous Experience Greg Probert Paul Noack Adriana Mendizábal Chairman & Chief Executive Officer President of China & New Markets President of NSP Americas Penta Water, Herbalife, DMX Music, Disney Served as Chief Operating Officer of Herbalife from ViSalus, Herbalife, Disney Served as Managing Director of the Asia Pacific Region, Chief Strategic Officer and Senior Vice President of Corporate Planning and Strategy at Herbalife VISA, Herbalife, Proctor & Gamble Served as Senior Vice President and General Manager for Mexico and Central America at Herbalife Dan Norman President of Synergy WorldWide Health & wellness products, Tahitian Noni Bryant Yates Steve Bunker Richard Strulson President of NSP Russia, Central & Eastern Europe Executive Vice President, Chief Financial Officer & Treasurer EVP, General Counsel & Chief Compliance Officer Nature s Sunshine Products for 25+ years Geneva Steel Holdings, Arthur Andersen LLP Herbalife, Disney, Latham & Watkins Served as Senior Vice President, Chief Privacy Officer and Counsel of Herbalife from Matthew Tripp, Ph.D. Chief Scientific Officer Metagenics, KinDex Therapeutics, Kellogg Company Sue Armstrong Chief Operations Officer Metagenics, Carl Zeiss Vision Staci Glovsky Executive Vice President, Worldwide Marketing Health & Wellness Products, Herbalife Patrick J. O Hara Chief Human Resources Officer Danaher, Fluke Corporation, Los Alamos National Laboratory, IBM 10

11 NSP Americas Third consecutive quarter (1) of net sales growth for NSP United States & Canada Leverage new science opportunities with strong growth potential and R&D to provide efficacious products and programs Systematic reformulation of core categories to maintain competitive advantage Launched reformulated and re-branded Silver product line Continue to expand IN.FORM program, focused on weight management and a daily habit of health, and Distributor retail sales tools (1) As of the first quarter ending March 31,

12 NSP Russia, Central and Eastern Europe Strong reputation for reliability, longevity and quality in region Net sales continue to be impacted by political unrest in Ukraine and Russia and the devaluation of local currencies against the U.S. dollar Strong relationship with local general dealer to maintain service levels and retain stability until unrest subsides Focusing efforts on retention and engagement of distributors and customers in the region by: Targeted price promotions and training Introduction of value-priced product kits and programs that align with major health category trends Refresh and strengthen existing products 12

13 Synergy WorldWide Geographic diversity creates larger opportunity for growth Growth driven by key markets of Europe, Indonesia and Japan Third consecutive quarter (1) of net sales growth for Synergy Europe Focused plan to return Synergy s largest market, South Korea, to growth through new programs to provide Distributors with tools to drive recruiting Strategy to align product portfolio globally while enhancing scientificallysupported and differentiated products Product line expansion into weight management (launch of SLMsmart) and personal care Develop and propagate business methods that enable retailing of product, Distributor recruiting and leadership development (1) As of the first quarter ending March 31,

14 China: Alliance with Fosun Pharma First and only Chinese-American direct selling partnership in China Creates unique opportunity to attract distributors Largest and most popular distribution channel for nutritional supplements Direct selling will combine NATR s 40+ years of experience with Fosun s brand recognition Made several key hires under the leadership of Paul Noack, President of China and New Markets Strong NATR team has significant direct selling experience in China Retail business / e-commerce will leverage Fosun s wholly owned 600 retail locations, distribution infrastructure and consumer insight with NATR s product portfolio and manufacturing capabilities Fosun Pharma provides significant local presence with strong Chinese government relations Eases navigation of Chinese regulatory environment to help mitigate risks 14

15 China: Multi-brand, Multi-channel Approach Currently, working towards obtaining direct selling license Finalized product offerings and registration of products is underway in three channels: e-commerce, retail and direct selling In late 2015, expect to launch the e-commerce channel to offer Nature s Sunshine branded products online In 2016, expect to launch the retail channel In 2016, expect to launch the direct selling business Completed negotiation of long-term office space Expansion into China is a key part of our vision to transform Nature s Sunshine into a multi-brand, multi-channel organization and to further drive distributor adoption, leadership and engagement on a global scale. 15

16 China is a Key Component of our Growth Strategy Haerbing China is the 3 rd largest Direct Selling Market and the 2 nd largest VMS Market Shenyang Changchun Beijing Herbalife received its Chinese direct selling license in 2007 and has grown its business to $664M in 2014 Shijiazhuang Qingdao NuSkin China revenues were $949M in 2014 Jinan East China North China Northeast China Mid China Chengdu Xian Chongqing Zhenzhou Wuhan Changsha Nanjing Wuxi Suzhou Shanghai Hefei Hangzhou Ningbo Nanchang Fuzhou USANA grew its China business to over $325M in its first five years Amway China revenues of $4 B & 29% of the China direct selling market Northwest China Kuming Southwest China South China Source: SFDA State Food and Drug Administration ( China)Southern Research Institute Nanning Guangzhou Shenzhen NATR senior management has significant experience operating in China 16

17 Financial Highlights Net Sales Adjusted EBITDA (1) $ in Millions $ in Millions $400 $350 $300 $250 $368 $368 $378 $366 $350 $57 $58 $63 $50 $56 $69 $94 $101 $108 $128 $50 $40 $30 $20 $10 $0 $43 $41 $32 $27 $ $200 EPS From Continuing Operations $150 $1.75 $100 $225 $217 $209 $207 $188 $1.25 $50 $ $0.75 $0.25 -$0.25 $1.56 $1.12 $1.08 $1.12 $ NSP Americas Synergy NSP RCEE (1) Adjusted to exclude losses from discontinued operations, one-time contract termination costs, share-based compensation and other income. Adjusted EBITDA for Q was $7.7 million 17

18 Strong Balance Sheet $50 million in cash and cash equivalents, as of March 31, 2015 Low debt levels Availability of $25 million on revolving credit facility Generated $14.2 million in cash flow from operations in 2014 $ in Millions Cash (1) $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 $79 $77 $59 $59 $48 $50 $50 $63 $28 $44 $48 $45 $20 $15 $29 $14 $11 $ Q U.S. International (1) Includes payment of special dividend of $1.50 per share in Q of ~$24 million and Q of ~$28 million. 18

19 11/88 03/89 07/89 11/89 03/90 07/90 11/90 03/91 07/91 11/91 03/92 07/92 11/92 03/93 07/93 11/93 03/94 07/94 11/94 03/95 07/95 11/95 03/96 07/96 11/96 03/97 07/97 11/97 03/98 07/98 11/98 03/99 07/99 11/99 03/00 07/00 11/00 03/01 07/01 11/01 03/02 07/02 11/02 03/03 07/03 11/03 03/04 07/04 11/04 03/05 07/05 11/05 03/06 07/06 11/06 03/07 07/07 11/07 03/08 07/08 11/08 03/09 07/09 11/09 03/10 07/10 11/10 03/11 07/11 11/11 03/12 07/12 11/12 03/13 07/13 11/13 03/14 07/14 11/14 03/15 Stewards of Capital Annual dividend of $0.40 (3.1% yield) (1), in-line with peer group Special dividends of $1.50 per share paid on August 29, 2013 and September 19, 2014 $10 million share repurchase program completed in December 2014 $20 million share repurchase program in place $2.9 million purchased through Q Regular Quarterly Dividends $1.60 $0.20 $1.50 $0.18 $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 (1) Dividend yield as of May 1,

20 Investment Highlights Well-positioned within rapidly growing Vitamin, Mineral and Supplement category Entry into China provides opportunity for sustainable long-term growth Highly scalable business model with strong balance sheet Executing on transformation to multi-brand, multi-channel health, wellness and lifestyle Company Science-based product and program development provides competitive advantage State-of-the-art manufacturing facility with strong R&D capabilities World class management team with experience in direct selling, consumer goods and international operations 20