B. Riley & Co. 17 th Annual Investor Conference. May 26, 2016

Transcription

1 B. Riley & Co. 17 th Annual Investor Conference May 26, 2016

2 Safe Harbor Statement This presentation contains forward-looking statements regarding the Company s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of Forward-looking statements may include, but are not limited to, statements relating to the Company s objectives, plans and strategies. All statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates 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. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including the following. any negative consequences resulting from the economy, including the availability of liquidity to the Company, its independent distributors and its suppliers or the willingness of its customers to purchase products; its relationship with, and its inability to influence the actions of, its independent distributors, and other third parties with whom it does business; improper activity by its employees or independent distributors; negative publicity related to its products, ingredients, or direct selling organization and the nutritional supplement industry; changing consumer preferences and demands; its reliance upon, or the loss or departure of any member of, its senior management team, which could negatively impact its distributor relations and operating results; increased state and federal regulatory scrutiny of the nutritional supplement industry, including, but not limited to targeting of ingredients, testing methodology and product claims; the competitive nature of its business and the nutritional supplement industry; regulatory matters governing its products, ingredients, the nutritional supplement industry, its direct selling program, or the direct selling market in which it operates; legal challenges to its direct selling program or to the classification of its independent distributors; risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with the its 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; its dependence on increased penetration of existing markets; cyber security threats and exposure to data loss; its reliance on its 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 its independent distributors; product liability claims; the full implementation of its 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; its inability to register products for sale in Mainland China and difficulty or increased cost of importing products into Mainland China; managing rapid growth in China; and the slowing of the Chinese economy and/or the devaluation of the Chinese Renminbi. These and other risks and uncertainties that could cause actual results to differ from predicted results are more fully detailed under the caption Risk Factors in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this press release. Except as is required by law, the Company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this press release. 2

3 Overview of Nature s Sunshine Products Global natural health and wellness company that manufactures, markets and distributes 2,700 SKUs through the direct selling and retail channels, utilizing two distinct brands: & Rich 44 year history; first U.S. company to encapsulate herbs in 1972 Global footprint spans more than 40 countries with over 570,000 independent Managers, Distributors and customers Strong R&D capabilities provide competitive advantage and enable innovative sciencebased solutions to address mega-trend health conditions State-of-the-art manufacturing facility supports industry leadership in quality, safety and efficacy 3

4 Diversified Revenue Mix Revenue by Business Unit Revenue by Geography Revenue by Product NSP Russia, Central and Eastern Europe 8% Synergy WorldWide 36% China and New Markets 1% NSP Americas 55% Central & South America 7% Europe 15% Asia Pacific 25% North America 53% Weight Management 8% Immune 8% Cardiovascular 20% Personal Care 4% Digestive 22% General Health 38% Note: Percentage breakdown in pie charts for the quarter ended March 31,

5 Turnaround Story Poised for Growth year history built on strong foundational strengths: (1) commitment to world-class quality; (2) customer service; and (3) integrity Highest quality self-manufactured products in company-owned facility Developed and retained stable, large Distributor and consumer base Gregory Probert appointed CEO in October 2013 to turnaround the business and restore top-line growth, utilizing core foundational strengths Modified focus to one of science-based innovation Focused on entry into China and branding consistencies across all products and regions Driving growth via the IN.FORM TM program in NSP Americas Streamlining Synergy to a single cohesive sales method and unified product offering in all regions Reinvested in infrastructure through key management hires and investments in global information systems 2 ½ years later: As of Q1 2016, achieved first revenue growth quarter (year-over-year in local currency) in 6 quarters prior to realizing full potential of key growth initiatives Expect to obtain direct selling license in China in 2016 NSP North America demonstrated 7 consecutive quarters of growth following nearly a decade of decline Synergy had best first quarter in Company history 5

6 Strong Science Capabilities Systems Phytochemicals Discovery Delivery Clinical Provides strong competitive advantage that can be leveraged to enter new channels 8 patents in past 3 years, including ProArgi-9+, CardioxLDL, AnxiousLess and the IN.FORM program Chief Scientific Officer, Dr. Matt Tripp, leads highly skilled team of scientists to study and test our products Team includes 8 PhDs and 3 medical doctors Established Global Medical and Scientific Advisory Board focused on the underlying health mega-trends Opened the Hughes Center for Research and Innovation, a Molecular Biology and Phytochemistry clinic and laboratory, in February ,400 square foot, multi-million dollar facility houses state-of-the-art equipment to perform in-house clinical studies Provides capability to monitor and control entire product lifecycle 6

7 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 enhances speed to market Continue to develop 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) 7

8 Global Direct Selling Market ($ in Billions) The Direct Selling market is growing, fueled by China $180 $160 $147 $153 $140 $128 $120 $100 $80 $60 $106 Total CAGR: 8.2% RoW CAGR: 6.3% China CAGR: 24.6% $40 $20 $8 $13 $20 $30 $ Rest of World China Source: World Federation of Direct Selling Associations 8

9 China is a Key Component of our Growth Strategy Haerbing China is the 2 nd largest Direct Selling Market and the 2 nd largest VMS Market Shenyang Changchun Beijing Amway China revenues of $4 B & 29% of the China direct selling market Shijiazhuang Jinan Qingdao NuSkin China revenues were $772 M in 2015 East China North China Northeast China Chengdu Xian Chongqing Zhenzhou Wuhan Changsha Nanjing Wuxi Suzhou Shanghai Hefei Hangzhou Ningbo Nanchang Herbalife received Chinese direct selling license in 2007; Grew its Chinese business to $846 M in 2015 Mid China Northwest China Southwest China Kuming Nanning Guangzhou Shenzhen Fuzhou USANA grew its China business to over $440 M in 2015 South China Source: SFDA State Food and Drug Administration ( China)Southern Research Institute 9

10 Entering China Through Alliance with Fosun Pharma Working to obtain direct selling license in China in 2016 First and only Chinese-American direct selling partnership in China Combines NATR s 40+ years of experience with Fosun s brand recognition Products ready to be in market Management team in place under the leadership of Paul Noack, President of China and New Markets, to ensure successful launch Strong NATR team has significant direct selling experience in China Fosun Pharma provides significant local presence and eases the navigation of the Chinese regulatory environment to help mitigate risks Blue cap product registration and general food importation process is underway Opened Shanghai office headquarters 10

11 NSP Americas (55% (1) of Business) Seven consecutive quarters (1) of net sales growth for NSP United States & Canada Continuing to expand IN.FORM in both North America and Latin America Launched several new products over the past year: Patent-pending CardioxLDL for cholesterol metabolism support Re-launched an updated and extended line of authentic essential oils Continuing to gain traction with Distributor retail sales tools in North America (1) As of the first quarter ended March 31,

12 The IN.FORM TM Program Science-based, clinically studied, patent-pending program that supports metabolic function and lowers metabolic age Conducted IRB-approved, 2 arm healthy weight management clinical study on healthy individuals: 56% improvement in weight loss vs. diet alone 65% improvement in fat loss vs. diet alone 40% improvement in metabolic age vs. diet alone Demonstrated superiority over competitive programs (weight, fat, cardiovascular biomarkers) Filed program provisional patent application 12

13 Synergy WorldWide (36% (1) of Business) Developing the Elite Health System with a single global business and product system Streamlining focus from multiple product strategies to a single cohesive sales method across all regions Goal to achieve a unified, science-based product offering geared towards detox, weight management and building a daily habit of health Geographic diversity creates opportunity for growth Growth driven by key markets in Synergy Asia namely Korea, Japan, Indonesia and Thailand Working to reignite growth in Europe through the hiring of a new VP of Europe and through the Elite Health System Patent-pending ProArgi-9+ formula continues to be a top selling product in all major Synergy markets (1) As of the first quarter ended March 31,

14 Financial Highlights Net Sales Revenue Adjusted EBITDA (2) $ in Millions $ in Millions $400 $370 $366 $350 $3 $6 $325 $300 $108 $128 $250 $114 $63 $200 $50 $27 $48 $150 $37 $32 $100 $148 $146 $147 $50 $0 $4 $84 $82 $29 $1 $1 $30 $7 $6 $38 $8 $38 $ Q Q NSP North America NSP Latin America NSP RCEE Synergy WorldWide China & New Markets (1) $35 $32 $0.5 $31 $29 $30 $1.0 $2.2 $1.3 $25 $5.2 $20 $15 $31.9 $27.4 $10 $22.9 $9 $0.3 $6 $0.8 $0.4 $5 $7.7 $1.4 $4.2 $ Q Q EBITDA (as reported) Investment in China Investment in Science (1) Note: Net sales revenue in Q was $84.9 million in local currency, representing year-over-year growth of 1.3%. (2) Adjusted to exclude losses from discontinued operations, share-based compensation and other income. Additional investment spend adjustments include investment in China and investment in science and innovation. 14

15 Generate Significant Cash Flow Self-funded major growth initiatives while returning cash to shareholders Returned $73 million to shareholders in the past three years through regular quarterly and special dividends Annual dividend of $0.40 (4.4% yield) (2) Repurchased $17 million worth of shares from 2013 to 2015 Investments anticipated to bear fruit in 2017 Entry into China, IN.FORM TM program and Synergy streamlining initiatives anticipated to generate additional cash flow Investment in Oracle ERP implementation scheduled to go live in January 2017 Generated $10.2 million in cash flow from operations in 2015 (including $5.2 million investment in China) $46.4 (1) million in cash and cash equivalents Low debt balance of $7.5 (1) million and availability of $17.5 (1) million on revolving credit facility (1) As of March 31, (2) Dividend yield as of May 23,

16 Investment Highlights Emerging growth turnaround story with implementation of major initiatives underway Well-positioned globally for growth within Vitamin, Mineral and Supplement category Entry into China provides opportunity for sustainable long-term growth Science-based product and program development provides strong competitive advantage In-house manufacturing of high quality products through state-of-the-art facility World class management team with experience in direct selling, consumer goods and international operations 16