Nature's Sunshine Products, Inc. Aktie

Thank you, Marissa. Good afternoon, and thanks for joining our conference call to discuss our first quarter 2026 financial results. I'd like to remind everyone that this call is available for replay via telephonic dial-in through May 21 and via a live webcast that will be posted in the Investor Relations portion of our website at ir.naturesunshine.com. .

The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will and other similar expressions. 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 the results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K quarterly reports on Form 10-Q, our earnings release issued today 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 would like to turn the call over to the CEO of Nature's Sunshine, Ken Romandy. Ken?

Thank you, Nik. And good afternoon, everyone. Thank you for joining our first quarter earnings call. I'm very pleased to report that we delivered a very strong first quarter, growing sales 9% and EBITDA 33% and reflecting continued momentum across our key strategic initiatives.

We generated sales growth across all regions, led by North America with over 9% constant currency growth. driven by our digital channel strategy with strong engagement from both new and returning customers. A healthy increase on our active consultants across the globe also drove solid growth.

Our first quarter performance underscores our focus on disciplined execution, strengthening consultant and customer acquisition, expanding our digital capabilities accelerating adoption of our Autoship subscription programs and improving gross margin.

As we look ahead, we are confident that the key strategies of our vision for growth will drive accelerated, sustainable growth and long-term shareholder value. I will update you on the progress we've made in developing our vision for growth, a bit later in the call. After our CFO, Shane Jones, provides the details of our strong Q1 performance. Shane?

Thank you, Ken. We are very pleased to report another outstanding quarter with growth in constant currency terms across all our business units, North America, Asia, Europe and Latin America. This growth continues to be bolstered by our expansion into new digital channels, strong adoption of our subscription auto ship programs exceptional new customer acquisition and strong partnerships with our independent consultants across the globe.

Our efforts to modernize the business, expand digital capabilities and strengthen engagement with both our customers and our independent consultants continue to drive momentum in the business.

Now diving into specific financial performance. Net sales in the first quarter was $122.9 million, representing our strongest first quarter in company history and our third largest quarter ever. This represents a 9% increase versus the year ago quarter or a 7% increase excluding the impact of foreign exchange rates.

Growth was driven by continued acceleration in North America, combined with strength in Asia Pacific and Europe. We continue to closely monitor the geopolitical tensions in Iran, given the expected impact on inflation and potential short-term impact on consumer buying patterns.

However, as of yet, consumer demand remained strong as reflected in the robust sales growth that we're seeing. Looking at our results in more detail, starting with regional performance. In North America, we are building strong momentum driven by rapid growth in digital, while maintaining our core business across specialty retailers, practitioners, affiliates and independent consultants.

Q1 sales grew 9% and year-over-year to $38.3 million, our best growth in over 5 years. Our digital business continues to produce very robust year-over-year growth, increasing 42% in Q1. This was fueled by continued strength in customer acquisition, coupled with robust adoption of our subscription Autoship program, leading to better retention and frequency from returning customers.

Similar to the exceptionally strong growth that we've seen over the last several quarters, new digital customers increased 60% in Q1. We Likewise, subscription auto ship continued to perform very well in Q1, accounting for 48% of the digital sales coming through our website.

As we've highlighted before, continued improvement in this metric is a leading indicator for future growth and profitability since the lifetime value of customers that utilize subscription auto ship is more than 3x higher than other customers.

We're also very excited about the growth of our social commerce business within digital. While still relatively small, in Q1, this business grew triple digits year-over-year. Also, while subscription auto ship in this channel just launched in the second half of last year, it already makes up 23% of total social commerce revenue.

We are excited to see the fundamentals of this business continue to move in the right direction, validating the strategic investments we are making and strengthening our confidence that we will meet and exceed the goals we have set.

As we've said many times, digital momentum is a key component of our broader transformation and represents an important long-term growth lever for our business.

Given the very strong momentum in digital, we expect continued mid- to high single-digit revenue growth in North America throughout 2026.

Moving to our business in Asia Pacific. Sales grew 7% year-over-year to $52.2 million or 6% growth on a constant currency basis. This performance was driven by outstanding execution in China, Japan and Korea, where sales increased 40%, 16% and 14%, respectively, excluding the impact of foreign exchange.

As outlined in our last earnings call, the turnaround in China has been driven by very strong adoption of our subscription Autoship program, which has grown from nothing at this time last year to more than 25% of total revenue today, combined with a double-digit increase in independent consultants.

During Q1, these fundamental drivers were combined with a strong response to our field activation efforts yielding exceptional results. While we continue to be encouraged regarding the fundamentals of the China business, the 40% growth seen in Q1 is unlikely to be repeated in the coming quarter.

The double-digit growth seen in Japan and Korea during Q1 and came as a result of a very successful launch of our Lumara skin care products, along with strong year-over-year increases of independent consultants. We are very pleased with the commitment and strong execution from our independent consultants in these markets and believe that our focused, differentiated products, along with our knowledgeable, passionate consultants position us well for continued growth in the APAC region.

We're also pleased with the continued strength in our European business, where Q1 sales increased 9% and versus the prior year to $26.4 million or 6% growth on a constant currency basis. These outstanding results were driven by 11% growth in Eastern Europe in local currency terms.

The strength in Eastern Europe has been fueled by improved product availability as we have worked to ensure appropriate in-stock levels for our key products where we see high demand. This improvement was combined with outstanding execution from our independent consultants and some economic stabilization in the region.

This remarkable growth is a testament to the perseverance and commitment of our staff in that area, given the continued war in the region. For the remainder of 2026, we expect continued mid-single-digit growth in Europe.

Now turning to gross margin. We continue to build on the progress we've made over the past several quarters as gross margin increased 116 basis points to 73.2% compared to 72.1% a year ago.

This improvement represents the benefit of our ongoing gross margin initiatives and favorable market mix. These initiatives include renegotiating logistics contracts, better conversion costs through improved manufacturing efficiency, improved sourcing, more disciplined pricing and other cost-saving measures.

Despite some uncertainty regarding the short-term impact of the situation in Iran on inflation, we still anticipate continued modest improvement in gross margin. Therefore, during 2026, a gross margins are likely to average around 73%, which represents a significant step up from where we've been historically.

Volume incentives as a percentage of net sales were 30% compared to 30.8% in the year ago quarter. The decrease was primarily due to the strong growth in our digital business as well as changes in market mix. Selling, general and administrative expenses during the first quarter were $43.5 million compared to $40.6 million in the year ago quarter.

As a percentage of net sales, SG&A expenses were 35.4% for the first quarter compared to 35.8% a year ago. The $3 million increase versus prior year was primarily related to variable cost associated with the sales increase and compensation costs.

While Q1 spend was less than the quarterly SG&A range communicated last quarter due to the timing of certain strategic investments, we expect quarterly SG&A of $45 million to $47 million for the remainder of the year as we ramp up these initiatives.

Operating income increased 53% and to $9.5 million or 7.8% of net sales compared to $6.2 million or 5.4% of net sales in the year ago quarter. GAAP net income attributable to common shareholders for the first quarter was $5.1 million or $0.28 per diluted common share compared to $4.7 million or $0.25 per diluted common share in the year ago quarter.

Adjusted EBITDA, as defined in our earnings release, increased 33% to $14.6 million compared to $11 million in the year ago quarter. The increase was primarily driven by the growth in sales and improvement in gross margin.

Our balance sheet remains clean with cash and cash equivalents of $87.6 million at 0 debt. Inventory decreased to $67.1 million at the end of the first quarter, a $1.2 million decrease versus Q4 last year. We expect to see a moderate increase in inventory during 2026 to ensure appropriate in-stock levels and fulfill continued strong demand.

Net cash used by operating activities was $1.8 million compared to cash provided of $2.6 million in the prior year period. We repurchased 20,000 shares for approximately or $24.54 per share during the first quarter ended March 31, 2026, with $16.9 million remaining on our share repurchase program. Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.

Now turning to our 2026 outlook. We are reiterating the guidance issued last quarter, expecting full year 2026 net sales to range between $500 million and $515 million compared to $480 million for 2025.

This equates to year-over-year growth of 4% to 7%. For adjusted EBITDA, we are guiding to a range of $50 million to $54 million representing year-over-year growth between 1% and 9%. This incorporates a cautious stance regarding the potential impact of the Iran conflict on both demand and cost.

Also, as communicated previously, this guidance includes measured investments to improve our technology infrastructure, drive further customer acquisition, advanced geographic expansion, expand penetration in existing markets and accelerate product innovation.

These investments will ramp in Q2 and Q3 of this year, thereby temporarily reducing the double-digit EBITDA growth rate seen historically and in Q1 2026. We continue to see strong momentum in the business, and believe that now is the time to make these key investments in order to position the company for sustained rapid growth in 2027 and beyond.

Overall, we believe the business is well positioned to capitalize on current opportunities in a growing market and remain very optimistic about our ability to continue to unlock the substantial growth prospects that we see.

The strategic initiatives we've been implementing are working, and we're confident in our ability to continue to accelerate growth in sales, profitability and free cash flow. Now I'll turn it back to Ken for some further commentary.

Thank you, Shane. Well done. As I reviewed on our earnings call last quarter, Nature's Sunshine has a very strong foundation, driving today's results and 1 upon which we can build an accelerated vision for growth. The key pillars of this foundation include 2 very strong brands, steeped and heritage in quality. .

Nature Sunshine and Synergy operating in a large global and rapidly growing category of natural health supplements, a globally diverse business operating in over 40 countries around the world exceptional product development capabilities, sourcing and blending hundreds of nature's best ingredients from around the world and scientifically verifying their effectiveness.

An army of independent consultants, passionately representing our products every day around the world, a rapidly growing digital business, penetrating new channels driven by a subscription model that enables consistent recurring revenue streams, a rock-solid balance sheet with nearly $100 million in cash and no debt.

And last but not least, a passionate, mission-driven organization dedicated to elevating people's lives globally through improving their health and economic well-being while delivering industry-leading results for our shareholders.

To build upon this foundation, we have developed what we call Nature's Sunshine vision for growth. with the goals of doubling our sales to $1 billion and to leverage our infrastructure to achieve a 15% EBITDA margin over time.

The key elements of our Vision for Growth plan include: one, continued rapid expansion of our digital business; two, explore distribution in select U.S. brick-and-mortar retail channels working in a complementary and harmonious manner with our existing business; three, deeper penetration in our direct selling markets.

The U.S. and China, the world's largest consumer markets are 2 markets where we see terrific opportunities. For example, our Asian brand synergy is very small in the U.S. but rapidly growing. So we are doubling down to expand U.S. synergy distribution as a key growth driver. Four, expansion into new high-value markets. This year, we will enter Germany, our largest new market that we've entered since China in 2016. And the largest supplemental supplement market in Europe.

Looking ahead, we plan to expand to attractive new Asian markets utilizing our very powerful Synergy Asia sales system. Five, we will drive growth through sharper brand positioning and product innovation behind both Nature's Sunshine and Synergy brands. Our new product pipeline is very strong over the next 2 years and we will share the details of these new product launches as their launch dates draw near.

Six, leveraging our supply chain for scale efficiency with excess capacity in our manufacturing facility, we can drive higher variable margins with volume growth. In addition, we'll be investing in automation to drive further efficiencies.

And lastly, 7, with nearly $100 million in cash and a debt-free balance sheet, we are well positioned to pursue bolt-on accretive acquisitions and to leverage efficiencies in our manufacturing plant.

By executing this vision for growth, we believe $1 billion in sales is within our grasp. We believe the sun has never shined brighter for Nature's Sunshine, and I look forward to sharing more about our vision for growth in the near future.

Thank you for your time today and your continued support of nature of Sunshine. I would now like to turn the call back to the operator for questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from Susan Anderson with Canaccord Genuity.

Nice to see another really strong quarter. Maybe if you can talk about the 15% EBITDA margin longer term. I'm just curious if you could give us an idea of the building blocks to kind of get there, I guess, how much driven by gross margin expansion versus SG&A leverage? Or should we think about it as kind of being equal between the 2?

I'll let Shane -- Susan, great to hear your voice, and I hope we'll catch up soon personally. I'll give you a general answer, and then Shane has got a got a very -- a latter approach to how we're going to do this.

It's really through scale. If we get the volume growth accelerated and we have good cost discipline, we can get the scale, and it comes in several areas. It's not just 1 big idea. It comes in several areas up and down the P&L.

To get it a little bit more little more specifics for you. So we're basically today in a little over 10%. So as we look at what we need to do to get there. So there's 3 blocks of that. So part of that, which should be about 1 point of that is going to be coming from gross margin.

And gross margin, that's just continuing to do what we're doing as well as Ken talked about, the scale portion as well. as we put more volume through our manufacturing plant, we're underutilized today, we'll be able to be more efficient and be able to drive efficiencies there.

So that's about 1 point of that. About 2 points of that is through our volume incentives line. As you can see, we've brought that down significantly over the last year. And really, the biggest push of what's making that happen is just our digital business, which where we don't pay the commissions or don't pay as much commission as we do in our other parts of our business.

As that we mix more to digital, that will continue to come down. So that's about 2 points. And then the final piece is just leveraging our SG&A as we continue to grow. That's also another 2 points. And as we talked about, that's not reducing head count or anything like that. It's really just leveraging as we grow. So it's a 1 and 2.

Perfect. That's really helpful. And then maybe I saw you guys appointed a new Chief Technology Officer. I guess does this signal -- I mean digital has obviously been very strong and very successful, particularly in the U.S. I guess, this kind of signal that you're going to continue to focus on that area and maybe even continue to expand the products offered on the DTC side as you see a lot more opportunity there longer term?

Yes. The hiring of a CTO is crucially important. We have a really good IT group here. However, technology, as you know, in every business is just -- it's a game changer these days, everywhere from your base infrastructure all the way to the use of AI.

And we needed a leader that came from very different experiences in the industry, both from evolving our base ERP system as a company. We face some end-of-life end-of-life dates in 5 or 6 years on our Oracle ERP system.

We have to figure out what's the next step there in our ERP system to absolutely putting the pedal to the metal on digital growth. There's so much more we can do there and the use of as well as how do we digitally enable our independent consultants.

So for instance, we just launched an app that allows independent consultants to do their entire business by phone. And there's so much more we can be doing with that. We just launched it, but there's so much more we can be doing that. And John Hanacek, our new CTO, has a lot of experience in doing things like that.

And so we're really taking technology and driving it all across base infrastructure digital growth direct-to-consumer as well as how do we digitally enable the tens of thousands of independent consultants we have around the world. And that's a lot of our investments this year.

A lot of our investments this year, as we talked about, why we're not continuing the typical digital -- the most recent double-digit EBITDA growth and only do around single-digit EBITDA growth this year was because we're making enhanced investments. A lot of it's in technology.

Okay. Great. And then maybe last question, if you could just give some color on the brands and products that drove the strong growth in each region. Then how -- I guess, also maybe how you're thinking about new products you expect to roll out new products to each of the regions this year.

I don't want to get specific about new products too much in advance. We will let you know as they occur. But when you think about what brands drove the growth, Nature's Sunshine is our brand in the U.S. in Latin America, North America, Latin America, Europe and in China.

And then the rest of the Asia Pacific region, Korea, Taiwan, Japan, Southeast Asia, that's synergy. So when we say APAC growth, it's kind of both brands because Nature Sunshine is in China and the rest of Asia has synergy.

So hopefully, that will give you a little bit of indication as to what brands are driving the growth. So both brands drove great growth in this quarter and continue to do over time.

New products they're mattering. We don't do the same new product everywhere. They're all on different time frames. We do have a very promising product that we're launching for the first time ever, a pan-Asian launch, meaning our 3 biggest Asian country, Korea, Japan and Taiwan are all going to be launching the same product with the same formulation at the same time through our very, very powerful Asia sales system.

It's never been done before. So they are gearing up for that. We will -- as we get closer to the date, we'll say what that product actually is. But it's a really -- it's a way to leverage the power of that system unlike we ever have done before.

Great. Okay. Excited to see what that is. Thank you so much for all the details.

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

Thank you, Merisa, and we'd like to just thank everybody for listening to today's call, and we look forward to speaking with you when we report on our second quarter 2026 results. Have a great night.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. We thank you for your participation.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine financial results for the fourth quarter and full year ended December 31, 2025. Joining us today are Nature's Sunshine, CEO; Ken Romanzi, CFO, Shane Jones; and General Counsel, Nate Brower. Following their remarks, we'll open the call for analyst questions.

Before we go further, I would like to turn the call over to Mr. Brower as 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 for joining our conference call to discuss our fourth quarter and full year 2025 financial results. I'd like to remind everyone that this call is available for replay by telephonic dial-in through March 24. And by a live webcast that will be posted on the Investor Relations portion of our website at ir.naturesunshine.com.

The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will and other similar expressions.

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 from those implied herein include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K under the risk -- 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 would like to turn the call over to the CEO of Nature's Sunshine, Ken Romanzi. Ken?

Thank you, Nate, and good afternoon, everyone. Thank you for joining our fourth quarter and full year 2025 earnings call. I've now been at Nature's Sunshine for 131 days, and I am even more delighted to be here than when I last spoke to you on our third quarter earnings call on November 6 of last year.

Nature's Sunshine delivered another terrific quarter, growing sales 5% and EBITDA at 10% and by continuing to execute against its key drivers of success, leading to its highest annual sales level ever. But I'm most pleased -- but what I have found in this great company over the past 3 months.

Simply put, I love what I see, 2 very strong brands steeped in heritage and quality, Nature's Sunshine and Synergy, operating in the large global and rapidly growing category of natural health supplements, a globally diverse business, operating in over 40 countries around the world, xceptional product development capabilities, sourcing and blending hundreds of nature's best ingredients from around the world and scientifically verifying their effectiveness. An army of independent consultants, passionately representing our products every day to consumers all over the world.

Our rapidly growing digital business, penetrating new channels driven by a subscription strategy that enables consistent, recurring [indiscernible]. But what I have found solid balance of nearly $100 million in cash and no debt. And last but not least, a passionate, mission-driven organization dedicated to elevating people's lives globally through improving their health and economic well-being, while delivering industry-leading results for our shareholders.

Suffice to say, I see so much to build upon in Nature's Sunshine. And I believe we can drive even more accelerated growth going forward. I will share an outline for the future of Nature's Sunshine after our CFO, Shane Jones, provides the details of our strong fourth quarter performance. Shane?

Thank you, Ken. We are pleased to report another outstanding quarter with strong growth across North America and Europe. This growth continues to be bolstered by our expansion into new digital channels strong adoption of our subscription auto ship programs, exceptional to customer acquisitions and strong partnerships with our independent consultants across the globe.

Our efforts to modernize the business expand digital capabilities and strengthened customer and consultant engagement continue to pay big dividends. Now diving into specific financial performance. Net sales in the fourth quarter were $123.8 million, representing our second largest quarter in company history and our strongest fourth quarter burn. This represents a 5% increase versus $118.2 million in the year ago quarter or a 4% increase, excluding the impact of foreign exchange rates.

Growth was driven by continued acceleration in both North America and Europe. Net sales for the full year 2020 finished at $480.1 million, our best year ever and slightly higher than the high end of our most recent guidance range. This compares to $454.4 million of net sales in 2024 and represents 6% of year-over-year growth or 5% excluding the impact of foreign exchange. These results reinforce the traction we're seeing from our digital and other transformation initiatives. The strength of our product portfolio manufactured in-house with the very highest quality ingredients and the power of our passionate and knowledgeable independent consultants. Looking at our results in more detail, let's start with regional performance.

In North America, we continue to see building momentum as digital accelerates, while maintaining our core business of specialty retailers, practitioners, affiliates and independent consultants.

Q4 sales grew 6% year-over-year to $37.4 million. We're particularly excited about the strength in our digital business, which continued to show exceptional growth in Q4. And increasing 47% versus prior year.

Our work to move to an improved platform, leverage digital tools, optimize our digital marketing, enhance the customer experience and increased lifetime value continues to pay off, evidenced by our -- by very robust growth in new customers, coupled with better retention and frequency from returning customers.

Similar to what we reported in Q3, during Q4, we saw new digital customers nearly double compared to the prior year. We're also pleased to see very strong adoption of our subscription auto program. This program provides the strongest value proposition for the consumer, while improving consistent use to ensure the very best results for improved health. It also promotes increased frequency and retention and provides the company with a predictable recurring revenue stream.

In Q4, digital subscriptions coming through our website increased 260 basis points versus prior year to 47% of revenue. And subscription autoship on TikTok, which only started this past summer, reached 25% of TikTok revenue. Finally, we also continue to make progress with the efficiency of our digital marketing spend, which is resulting in meaningful improvements in customer acquisition cost and enhanced return on ad spend.

We are excited to see these fundamentals continue to move in the right direction, validating the strategic investments we are making and strengthening our confidence that we will meet and exceed the goals we have set.

As we've said many times, digital momentum is a key component of our broader transformation and represents an important long-term growth lever for our business. As digital continues to see robust growth, we expect continued mid-single-digit revenue growth in North America during 2026. The Sales in Asia Pacific declined 1% year-over-year to $55.7 million or a 1% decline on a constant currency basis. As we highlighted in our discussion last quarter, Q4 was a very difficult compare for APAC as sales increased 21% in constant currency terms during Q4 2024.

This performance over that difficult compare was driven by outstanding execution in China and Japan, where sales increased 35% and 21%, respectively, excluding the impact of foreign exchange.

We are pleased with the commitment and strong execution from our independent consultants in both markets, which has allowed Japan to sustain 20%-plus growth for 6 consecutive quarters now. and has helped to drive the meaningful turnaround in China.

In addition to great execution, strong adoption of our subscription autoship program also continues to drive meaningful growth. along with predictable recurring revenue. We are seeing rapid adoption of this program across all of our markets in APAC.

In Japan, subscription auto ship accounts for nearly half of all sales in that market. We only recently launched the subscription autoship program in China during the first half of 2025. Last quarter, we announced that the program already accounted for 12% of sales in Q3.

We are pleased to report that subscription auto ship in China continued to surge in Q4, increasing to 18% of revenue. We are very pleased with the progress being made in APAC and expect continued mid-single-digit growth from this region in the coming year, but acknowledge the inherent lumpiness of quarter-to-quarter sales due to the nature of our field activation efforts.

We're also pleased with the continued strength in our European business, where Q4 sales increased 18% versus the prior year to $25.2 million or 14% on a constant currency basis. These outstanding results were driven by 23% growth in Eastern Europe in local currency terms.

The strength in Eastern Europe has been fueled by improved product availability as we have worked to ensure appropriate in-stock levels of our key products where we see high demand. This improvement was combined with outstanding execution from our independent consultants and some economic stabilization in the region. This remarkable growth is a testament to the perseverance and commitment of our staff in that area given the continued war in the region. For 2026, we continue -- we expect continued mid-single-digit growth in Europe as well.

Now turning to gross margin. We continue to build on the progress we've made over the past several quarters as gross margin increased 55 basis points to 72.5% compared to 72.0% a year ago. This improvement represents the benefit of our ongoing gross margin initiatives and favorable market mix. We've been talking about these margin improvement efforts for some time.

These initiatives include renegotiating logistics contracts, better conversion costs through improved manufacturing efficiency, improved sourcing, more disciplined pricing and other cost-saving measures. We're proud of our team's continued efforts to streamline our supply chain. I'm pleased to see the benefit reflected in our results.

As we look forward, we anticipate continued modest improvement in gross margin during 2026. But note that some uncertainty remains around the impact of tariffs and inflation. Therefore, gross margins are likely to settle into the upper 72% range during 2026, which represents a significant step-up from where we've been historically. Volume incentives as a percentage of net sales were 29.1% compared to 31.1% in the year-ago quarter.

The decrease was primarily due to the strong growth in our digital business as well as changes in market mix. Selling, general and administrative expenses during the fourth quarter were $48.4 million compared to $43.7 million in the year ago quarter.

As a percentage of net sales, SG&A expenses were 39.1% for the fourth quarter compared to 35.7% a year ago. The $4.7 million increase versus prior year was primarily related to digital ad spend, variable costs associated with the sales increase and nonrecurring expenses. The decision to increase digital ad spend during Q4 was based upon the opportunity for very strong customer acquisition and a favorable customer acquisition cost.

Looking forward to 2026, we expect quarterly SG&A of $46 million to $48 million. Operating income increased to $5.3 million or 4.3% of net sales compared to $4.6 million or 3.8% of net sales in the year ago quarter. GAAP net income attributable to common shareholders for the fourth quarter was $4.1 million or $0.23 per diluted common share compared to a loss of $0.3 million or $0.02 per diluted common share in the year ago quarter. Adjusted EBITDA, as defined in our earnings release, increased 16% and to $11.9 million compared to $10.3 million in the year ago quarter.

The increase was primarily driven by the growth in net sales and improvement in gross margin. Adjusted EBITDA for the full year 2025 was $49.4 million, above the high end of our most recent guidance range and representing 22% growth versus 2024.

The increase for both the quarter and the full year was driven by the increase in net sales, improved gross margin and cost leverage. Our balance sheet remains clean with cash and cash equivalents of $93.9 million and 0 debt. Inventory increased to $68.3 million at the fourth -- end of the fourth quarter a $1 million increase versus Q3 as we work to replenish inventory after the robust growth seen in Q3 and Q4.

We expect to see a moderate increase in inventory during 2026 and to ensure appropriate in-stock levels and fulfill continued strong demand. Net cash provided by operating activities was $35.3 million compared to $25.3 million in the prior year. We repurchased 1.3 million shares for approximately $16.3 million or $12.95 per share during the year ended December 31, 2025, and with $17.4 million remaining on our share repurchase program. Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.

Now turning to our 2026 outlook. We expect full year 2026 net sales to range between $500 million and $515 million compared to $480 million for 2025. This equates to year-over-year growth of 4% to 7%. For adjusted EBITDA, we are guiding to a range of $50 million to $54 million, representing year-over-year growth between 1% and 9%.

This guidance includes measured investments to improve our technology infrastructure, drive further customer acquisition, advanced geographic expansion, expand penetration in existing markets and accelerate product innovation.

While these investments will temper our 2026 EBITDA from our consistent double-digit growth rate, we see strong momentum in the business and believe that now is the time to make these key investments in order to position the company for more rapid sustained growth in 2027 and beyond. Overall, we continue to believe the business is well positioned to capitalize on current opportunities in a growing market and remain very optimistic about our ability to continue to unlock the substantial growth prospects that we see. The strategic initiatives we've been implementing are working, and we're confident in our ability to continue to accelerate growth in sales, profitability and free cash flow. Now I'll turn the time back to Ken for some further commentary.

Thank you, Shane. Very well done. As I mentioned earlier, I see many opportunities for Nature Sunshine to take advantage of those opportunities, we're doubling down in 2026 to make the investments, Shane shared with you to accelerate our growth. We're setting a goal of growing Nature's Sunshine to $1 billion in sales with improved profitability along the way.

As our plan is still in its early stages, we will present more details of when and how we'll get there in future presentations. But simply put, we expect to accelerate our top line growth ahead of the 4% to 5% we've been growing over the past few years and then leverage that higher growth to improve our bottom line profitability. We're calling our accelerated rate growth plan, major Sunshine vision for growth. The core drivers of our vision for growth include the following 7 elements.

One, continued rapid expansion of our digital business into new channels; two, deeper penetration in our core direct selling markets; three, expansion -- geographic expansion in new high-value markets; four, exploring opportunities in retail channels; five, deepening our consumer relationship with differentiated brand positioning, marketing and product innovation for both Nature's Sunshine and Synergy; six, leveraging our supply chain for scale efficiencies and seven searching for complementary accretive M&A opportunities.

By executing our vision for growth we see $1 billion in sales clearly in our grasp. The future has never been before at Sunshine, and I look forward to sharing more about our vision for growth in the near future. Thank you for your time today and your continued support of Nature's Sunshine. I would now like to turn the call back to the operator for questions. Operator?

[Operator Instructions] And your first question comes from the line of Brian Holland from D.A. Davidson.

Congratulations on the strong 2025 results. maybe just starting, Shane, with the outlook for 2026. You've obviously provided a wider range of outcomes on the EBITDA line than the net sales line. I assume that's fairly straightforward, i.e., obviously, you talked about more investment behind advertising, marketing, et cetera, as well as innovation, bringing new products to market, et cetera.

So is it as simple as kind of the bottom end of the EBITDA range assumes that those investments don't kind of perform at the level that maybe some of the incremental investment that you put into the business in the second half of 2025 showed -- and maybe -- and similarly -- maybe just help me understand also the midpoint and the high end of the range, does the midpoint assume that 2026 looks similar to the second half of and maybe the high end is better? Just trying to understand what's all in there. Sorry, that was kind of a jumbled one, but...

Yes. No, that's okay, Brian. Yes. No, absolutely. There's a lot of things that are going into -- obviously, into those EBITDA projections that we have out there. One of it, as we talked about, there's still some uncertainty about things like tariffs and inflation. And so at the bottom end, obviously, we've got some bigger impacts from potential inflation increases as well as tariffs this year. .

We also have the impact then most of our investment, the investments we're talking about, we're making considerable investments in many different ways, as you saw there. Some of those benefits this year. Many of those -- the real benefit comes in the out years, in 207 and beyond. So that is incorporated into that as well.

And then there's also just some macro uncertainty currently in the world with what's happening with current war that's out there and all the implications that, that could have for the consumer for oil prices for all of that. We've tried to encompass all of those factors into our guidance. And so that's why you have a little bit bigger range from that $50 million to $54 million. Does that answer your question.

Yes. No, that's extremely helpful. I appreciate it. And then maybe just a good segue into 2026. Your comment about some of the uncertainties here, we're 2/3 of the way through 1Q 26 a number of factors, both within the past week and maybe even earlier in the quarter to consider. Just any sense about how the consumer -- your core consumer is holding up in some of your strategic initiatives here as we're early in 2026. Any commentary about that relative to how 25 finished off for you?

Yes. We're still seeing very consumer demand in our markets. We've talked about some of the demand what you saw in Q4 across the digital, places like digital in China continues to be very, very strong. Japan, and we see no letup in the current quarter from those trends.

And then maybe just...

And I'll keep in mind because the recent issues in the world that I don't even think they showed up the gas pump yet. So we have not seeing anything...

Right, right. So we haven't seen anything yes, to summarize, we're not seeing anything yet. We're still seeing very strong demand, but who knows?

I appreciate it changes by the day. And then maybe just to finish off on kind of some of the long-term stuff that you teased there, Ken. Maybe first of all, obviously, when you -- you guys have really kind of stepped into something here, the digital side with North America, the auto subscribe in China.

And I imagine those are things you're going to double down on, obviously, sort of embedded within the outlook for 2026. You're going to continue to lean into some of this. What have you learned about the addressable market for Nature's Sunshine over the past year. is there any way to quantify the extent to which that's expanded that might inform kind of $1 billion business at some point in the future? I know you haven't down to a time on that. And then maybe just a second 1 on that. Would that be -- are you assuming the path to $1 billion would be all organic? Or is -- or could M&A be part of that path to $1 billion? And I'll leave it there.

Yes. Great. Thank you. Well, first of all, what we've seen in the market, this is a big and growing market. And depending on what sources you use, you can look at health and wellness trends, you can look at total supplement trends, you can look at natural clients. There's a lot of different sources, and we're honing in on what source they want to use to kind of measure our market share. .

But basically, the market has been growing mid-single digits, 5%, 6%. And it's projected to like step up to grow a little bit higher than that, maybe 6% to 7%. And in what we're measuring in terms of health supplements going forward. Because if you look at health and wellness trends, some of the data includes exercise equipment weight loss we're really looking at the supplement market. So it's large. The TAM is huge. And we've looked at market share in some places. And right now, we're looking at per capita consumption, and there's just opportunity everywhere. In some of our strongest markets, we only have like a 2% to 3% share of health supplements. So we just think there's tremendous opportunity to both grow with the market as well as increase market share.

In terms of growth going forward, to double the business in 10 years, you got to grow 7% a year to double our business in 7 years, you got to grow about 10%, 11% a year. So we think that there's strong organic growth, but we also think that new channels and M&A have to play a part of that. So I listed a menu of things. We're not leaving anything unturned. But as we've discussed it with the Board, it depends on how fast we want to get there.

We believe there's opportunities in the M&A area because we have capacity in our manufacturing facility, so we can we can do bolt-on acquisitions and get a lot of variable margin by leveraging our fixed cost in our manufacturing industry as well as perhaps brands that might be able to help us get into other channels. So we have amazing product development. We have 2 brands, and we're going to open up our aperture and not be limited by whatever channel we've done in the past. We have so much product development capabilities. We can probably have different products and different channels underneath the brands we already have, even before we consider buying anything new.

And your next question comes from the line of Susan Anderson from Canaccord Genuity.

I guess maybe I kind of wanted to drill down a little bit on the strong digital growth in North America. I guess I'm kind of curious if you're seeing customers come to the site, maybe they're buying your products in another channel or elsewhere, how are you guys acquiring these customers.

And then also, when they do go to the site, I guess, are they purchasing any different products you're seeing in other channels? Are they looking for anything different or kind of basically their interest is very similar to consumers purchasing in another channel.

Great question, Susan. So one of the things that we're starting to really appreciate is this is an ecosystem. As we're opening different channels in digital, all of those digital channels actually are synergistic and feed one another. Let me give you an example. We've been utilizing TikTok lately and have seen tremendous results in customer acquisition there. And we're able to drive new customer acquisition at a CAC that's way lower than anything we've seen in other channels.

Those customers come into TikTok, purchased first time on TikTok, but then many times, they'll go and then buy something -- and sometimes they don't even buy on TikTok. They'll go to Amazon and they'll buy the product on Amazon or they might go to our website or they might even go to one of our independent consultants and actually buy something there.

So it is -- and it feeds that way across all of those channels. So I think we're getting to an inflection point where we're starting to see those benefits and this thing, frankly, to understand them well enough to feed them in the right way. so that we're utilizing our digital media in the right way to get a very strong return on that. We understand when we acquire a customer how much it costs to acquire that customer and then what we're going to get in the lifetime value of that customer and then just maximizing that, improving retention as we go along the way.

So we're excited about what we're seeing because the real fuel here is newcomer acquisition, which is coming largely through ticktock, but also through the other channels, but then that overflows into virtually everything else we're doing.

Yes. And the thing I'd add is that if you think about your own -- you or your own families purchase behavior or I look at our family, we don't shop in just 1 place. Sometimes we shop in a retail store, sometimes the same item at Amazon. Sometimes, we get it directly to a website. .

Some people come to our website, learn about it, but then they can't -- they can avoid free shipping being a prime member on Amazon, so they go there. We have a great example of this ecosystem that Shane just mentioned. We worked with an influencer on Tiktok. And that influence got really excited about 1 of the items that I think was #83 in our lineup in North America. It's called lymphatic drainage and lymphatic drainage is a hot health issue right now. We work with this influencer. And not only did they sell an amazing amount on TikTok shop, we sold a lot more on Amazon a lot more in our nsp.com and then a lot more amongst our independent consultants.

So what influence on TikTok created this unbelievable demand across all of the whole ecosystem and everybody every channel benefited from that. So they're not as distinct we sometimes talk about them because consumers are shopping everywhere, every day, and they're mixing it up. And it's just the power of if we are where the consumer is, we can benefit from that. And that item drove to be our #1 item last year across the board. You have to be like #83 for years.

Okay. Great. So it sounds like you guys are definitely acquiring new customers. So I guess as you think about kind of like this plan to accelerate growth to $1 billion and maybe go into some rational channels, such as retail I guess is the thought is that you'll continue to drive new customer acquisition through those new channels. I guess, is there any point where there is risk of kind of cannibalizing the older channels such as some of the partners that you work with and everything?

Well, one of the ways we can do this is we can do it through product differentiation. So we still want to treat our independent consultants is very special. Right now, there's a lot of times where they bring consumers in and then people jump off to Amazon. So that is a little bit of channel conflict, but we believe we have enough products to feed the channel.

So if you think about our independent consulting business and direct-to-consumer alone, we've got enough to feed those independently to drive growth. because our independent consultants can't sell everything and we can't sell everything DDC.

We can't concentrate on the amount of new product activity that we have coming down the pipeline because at some point, you can have too much. So we're fortunate enough to have such a robust pipeline. We're going to be able to start to differentiate and pick our way through to drive growth because I'm not very patient. And when my product development team has a great idea, I'm not going to wait for a channel to be ready.

We're going to go find where the consumers are, and we'll open up the channels necessary to make sure that we have an outlook for the strong product pipeline we have coming down the road.

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. Romanzi for closing remarks.

Well, thank you for your questions. Thank you for your attention. We're really excited, as you can tell, about Nature's Sunshine. I just -- I see these -- both brands in a Sunshine and Synergy popped by an amazing organization with great product development capabilities. If we just opened up our aperture just a little bit to think about being where the consumers are, that lymphatic drainage example is a great one to share with you that if we start to untap that type of potential and not be limited by our channel scope we really believe we can accelerate the growth. It's not doing the same thing the same way.

We're going to take all of the great levers that the team has been working on and replicate that and add a few new levers to accelerate our growth. So we're looking forward to sharing more details of that plan going forward. So thanks so much for your time and attention and your continued sort of Nature's Sunshine.

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

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine's financial results for the third quarter ended September 30, 2025. Joining us today are Nature Sunshine CEO, Ken Romanzi; CFO, Shane Jones; and General Counsel, Nate Brower. Following their remarks, we'll open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Brower as 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, Sergio. Good afternoon, and thanks for joining our conference call to discuss our third quarter 2025 financial results. I'd like to remind everyone that this call is available for replay by telephonic dial-in through November 20 and a live webcast that will be posted in the Investor Relations portion of our website at ir.naturesunshine.com. The information on this call contains forward-looking statements. These statements are often characterized by terms such as believe, hope, may, anticipate, expect, will and other similar expressions. 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 from those implied here to 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 would like to turn the call over to our recently appointed CEO of Nature's Sunshine, Ken Romanzi, Ken?

Thank you, Nate, and good afternoon, everyone. Thank you for joining our third quarter earnings call. Before I turn the call over to Shane to discuss our strong third quarter performance, I'd like to quickly introduce myself and share how excited and grateful I am to be the CEO of Nature's Sunshine. I joined just over a week ago, and I am absolutely honored to lead this iconic brand into its next chapter of growth. Throughout my career, I've had the privilege of leading organization transformations and driving growth of beloved iconic brands, many in your kitchens at home at both public and private companies across the consumer packaged goods industry, including B&G Foods, Nabisco, now part of Mondelez, Hasbro, Ocean Spray cranberries, Cadbury Schweppes and Frito Lay, just to name a few.

At each stage of my career, one thing has always been true, strong brands with great products and a clear mission, create lasting value for customers, employees and shareholders. That is exactly what Nature's Sunshine. The company possesses a strong legacy of foundation of trusted products, passionate consultants and practitioners, a deep-rooted commitment to improving lives through natural health. As someone who is dedicated to health and wellness myself, I see tremendous potential to build on this foundation and accelerate growth globally. In my very short time here, I've met with our teams, listened to field leaders and employees and immersed myself in our business. And it's very evident that we have a mission-driven organization and a unique opportunity to strengthen our brand, leverage our vast direct sales network of amazing consultant entrepreneurs. Expand our digital and direct-to-consumer capabilities and deliver even greater value to our customers and shareholders. I'd like to thank my predecessor, Terrence Moorehead for his leadership and the strong platform that he and the Nature's Sunshine team have built.

And I'm excited to lead the business through its next phase of growth, powered by our iconic brand our operational excellence and continued innovation in natural health and wellness. I look forward to meeting our various stakeholders over the coming months and addressing our shareholders more formally on our fourth quarter earnings call. Now I'd like to turn it over to the real highlight of the show today, our CFO, Shane Jones to provide details of our strong operational and financial performance in the third quarter. Shane?

Thank you, Ken. I'd like to start by saying that I'm very happy to be working with Ken. He combines a wealth of knowledge and experience with outstanding values and leadership. He is the right person to take Nature's Sunshine to the next level and I am more confident than ever in our future. We're pleased to report our best quarter ever. As the strategic investments we've made over the past 2 years, combined with strong execution and hard work are yielding meaningful improvements across North America, Asia and Europe. We're seeing a strong surge in new customers, better engagement from current customers and improved activity with our distributors. Our efforts to modernize the business, expand digital capabilities and strengthen field engagement are translating into tangible growth across our key regions. The combination of these initiatives, along with disciplined cost management positions us very well for continued profitable expansion despite the macroeconomic and trade headwinds that persist in many of our markets.

Now diving into specific financial performance. Net sales in the third quarter were $128.3 million, a quarterly record compared to $114.6 million in the year ago quarter. This represents a 12% increase versus the prior year or an 11% increase, excluding the impact of foreign exchange rates. Growth was driven by acceleration across Asia Pacific, North America and Europe. These results reinforce the traction we're seeing from our transformation initiatives and the strength of our product portfolio manufactured in-house with the very highest quality ingredients and our passionate and knowledgeable distributors, combined with our 50-plus year heritage and global brand.

Looking at our results in more detail, starting with regional performance. In North America, we continue to see improved momentum as digital accelerates, while maintaining our core business of specialty retailers, practitioners, affiliates and business builders. Q3 sales grew 7% year-over-year to $36.2 million. We're particularly excited about the strength in our digital business, where year-over-year growth accelerated to 52% in Q3. Our work to move to an improved platform, leverage digital tools optimize our digital marketing, enhance customer experience and increased lifetime value is paying off. Meaningful acceleration in new customers, combined with improved retention and frequency, have been key to the strength. As an example, the number of new digital customers making a purchase in Q3 more than doubled versus prior year. We're also pleased by the growth in our subscription auto ship program, which now represents more than half of DTC ordering accounts.

Just as a reminder, our auto ship programs are a win-win for consumers and the company. They provide the strongest value proposition to the consumer, while improving consistent use to ensure the best results for better health. In addition, they drive improved frequency and retention with a predictable recurring revenue stream for our products. Finally, we are also making progress with the efficiency of our digital marketing spend, resulting in meaningful improvements in customer acquisition cost and enhanced return on ad spend. The combination of these fundamentals validates the strategic investments we are making and strengthens our confidence in our ability to meet and exceed the goals we have set. As we've said many times, Digital momentum is a key component of our broader transformation and represents an important long-term growth lever for our business. As digital continues to see robust growth, we expect continued strong growth in North America during Q4 and mid-single-digit growth in 2026.

Asia Pacific delivered 17% and year-over-year net sales growth to $64.7 million or 15% growth on a constant currency basis. Growth was driven by strong performance in Japan, China and Korea where sales increased 32%, 36% and 12%, respectively, excluding the impact of foreign exchange. In each of these markets, our efforts to introduce more consumer-friendly products, enhance our subscription auto ship programs and strength in field activation have been key contributors to the improved momentum. The more consumer-friendly product bundles introduced last year in APAC continue to have strong appeal from both our customers and distributors, leading to increased acquisition along with better repeat. Likewise, our autoship program continues to benefit consumers while driving predictable recurring sales growth. In Japan, autoship now accounts for approximately 50% of the sales in that market. China launched an autoship program earlier this year, and we are seeing a strong response as that program already accounts for 12% of sales and has helped to reaccelerate growth in that market.

Finally, our field activation initiatives were particularly effective in Q3 driving exceptional results and likely accelerating some sales originally expected in the fourth quarter. Given the very difficult Q4 comparable, remember that APAC grew 21% in constant currency terms last Q4 combined with the fact that approximately $2 million of revenue was likely accelerated from Q4 to Q3 this year. APAC growth is likely to be flat to down slightly in Q4 2025. We are very pleased with the progress being made in APAC and expect continued mid-single-digit growth from this region in the coming year, but acknowledge the inherent lumpiness of sales due to the nature of our field activation efforts.

Europe also continues to perform well, with Q3 sales up 13% versus the prior year to $22.1 million or 10% on a constant currency basis. This growth was driven by 10% growth in Central Europe and 14% growth in Eastern Europe, both in local currency terms. In Central Europe, our expansion into the Baltics continues to progress very well. supported by steady demand for our power line products. We're encouraged by our team's ability to drive growth while successfully broadening our regional footprint. The growth in Eastern Europe has been fueled by improved product availability, combined with outstanding execution from our distribution partners. This growth is remarkable given the current instability in that region and is a testament to the perseverance of our staff in that area. For Q4 and 2026, we expect continued growth from both of these markets. with Europe as a whole growing mid-single digits.

Turning to gross margin. We continue to build on the progress we've made over the past several quarters as gross margin increased 200 basis points to 73.3% compared to 71.3% a year ago. This improvement represents our highest gross margin in 15 quarters and reflects the benefit of our ongoing gross margin initiatives and favorable market mix. We've been talking about these margin improvement efforts for some time. These initiatives include renegotiating logistics contracts better conversion costs through improved manufacturing efficiency, improve sourcing, more disciplined pricing and other cost-saving measures. We are proud of our team's continued efforts to streamline our supply chain. I'm pleased to see the benefit reflected in our results. As we look forward, despite our efforts to avoid and delay the impact of tariffs, we do anticipate a small impact on gross margin. Therefore, gross margins are likely to settle into the upper 72% range next quarter and into next year, which represents a significant step up from where we've been historically.

Volume incentives as a percentage of net sales were 30.7% compared to 31% in the year ago quarter. The decrease was primarily due to the strong growth in our digital business as well as changes in market mix. Selling, general and administrative expenses during the third quarter were $45.7 million compared to $41 million in the year ago quarter. As a percentage of net sales, SG&A expenses were 35.6% for the third quarter compared to 35.7% a year ago. The $4.7 million increase versus prior year was primarily related to digital ad spend, other variable costs associated with the sales increase and nonrecurring expenses. The decision to increase digital ad spend during Q3 was based upon the opportunity for very strong customer acquisition at a favorable customer acquisition cost. Similar to what occurred in Q3, we will continue to make additional investments in digital advertising when we can achieve an outstanding return on that investment. In Q4, we expect SG&A of $46 million to $47 million which includes $1 million to $2 million of nonrecurring expenses.

Operating income increased to $9 million or 7% of net sales compared to $5.3 million or 4.6% of net sales in the year ago quarter. GAAP net income attributable to common shareholders for the third quarter was $5.3 million or $0.30 per diluted common share compared to net income of $4.3 million or $0.23 per diluted common share in the year ago quarter. Adjusted EBITDA, as defined in our earnings release, eclipsed our previous record increasing 42% to $15.2 million compared to $10.7 million in the year ago quarter. The increase was primarily driven by the increase in net sales and improvement in gross margin. Our balance sheet remains clean with cash and cash equivalents of $95.6 million and 0 debt. Inventory decreased to $67.3 million at the end of the third quarter, a $2 million decrease versus Q2 driven by the very strong demand in Q3. We expect to rebuild that inventory during Q4 to ensure appropriate in-stock levels and fulfill continued strong demand in Q4.

Net cash provided by operating activities was $25.4 million compared to $13.1 million in the prior year period. We repurchased 1.1 million shares for approximately $14.4 million during the 9 months ended September 30, 2025, with $19.3 million remaining on our share repurchase program. Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.

Now turning to our 2025 outlook. Based on our strong Q3 results and the improved momentum in the business, we are raising our guidance for 2025. We now expect full year 2025 net sales to range between $476 million and $480 million compared to previous guidance of $460 million to $475 million. This new range equates to year-over-year growth of 5% to 6%. For adjusted EBITDA, we are now guiding to a range of $47 million to $49 million, versus the prior range of $41 million to $45 million. This new range equates to year-over-year growth between 16% and 21%. This implies Q4 guidance of $119.7 million to $123.7 million of revenue and EBITDA between $9.6 million and $11.6 million. As a reminder, the fourth quarter of last year represented the largest single quarter in our company's history at that point, driven by very strong performance across Asia Pacific and Europe, which naturally creates tougher year-over-year comparisons. Overall, we continue to believe the business is well positioned to capitalize on current market opportunities and remain very optimistic about our future growth prospects. The strategic initiatives we've been implementing are working and we're confident in our ability to continue to accelerate growth in sales, profitability and free cash flow. Now I will turn the time back to the operator.

[Operator Instructions] Your first question comes from Brian Holland from D.A. Davidson.

Can you hear me now? So I'll start again. I apologize. First of all, welcome and congratulations, Ken, look forward to working with you. And then just digging into the quarter here, Shane, maybe to start naturally in the North America segment, particularly in light of the ongoing inflection in the digital business. Maybe just kind of -- maybe a multipart question here. But one, are we seeing particular success as far as reaching the consumer, which channels within digital, how is that informing investment? And then mindful of the particularly compelling combination of new customer acquisition and retention which doesn't usually happen, usually trade one-off for the other, right, from a growth perspective, especially when one is that magnitude. How does one think about the right level of investment going for leading into this momentum and kind of peaking into 2026.

Yes. That's a great question, Brian. So first of all, we're really pleased with what we're seeing in our digital channel. And it's really across multiple areas. Our Amazon business is doing very well. Our DTC business is doing well and our social commerce business is also doing very well. So very encouraged by what we're seeing is the most encouraging is we've seen an opportunity to really invest in digital advertising at a much lower CAC, customer acquisition costs than what we've seen in the past and which is driving a lot of new customers, which is obviously a good thing for the business now and go forward. So we will continue to invest as long as our return on ad spend and our CAC continue to be at advantageous rates.

Appreciate it. Good color. Maybe just quickly this is...

Actually, sorry, I think Ken had something on to add.

I'm sorry to interrupt, but I just wanted to add, just in my learning curve in the last week, I've heard a few amazing things, number one, TikTok has become a really great social commerce at avenue for us. I had not even realized there was a store competing with Amazon on TikTok, I am not a personal user, but that has been tremendous success over the last quarter. And we have a tremendous opportunity for more autoship. I love the autoship program. It's working well around the world. And in the U.S., if people's first experience and purchase for us is combined with an autoship the repeat, obviously and the coming back nature of that customer is far greater than someone who just buys product wants and doesn't sign up for autoship. So autoship is the gift that keeps on giving. And if we can get people into that early, it just creates much more retention and, of course, drives a lot of the great numbers that Shane was describing.

I appreciate the color, Ken, and Shane as well. Moving over to APAC, there are obviously certain markets where the momentum has been in place Japan, et cetera. China was, I think, a positive surprise here. So maybe just mindful of you guys have spent a fair amount of time talking about the challenging macro backdrop and how that was flowing through in the business. So that seems to me to be the biggest source of surprise here relative to what I was thinking even just conceptually going into the quarter. So would be great to kind of double-click there on how that business is kind of flipping.

Yes, we're very pleased with what we saw in Q3 and what we continue to see from China in that a lot of the trends that we had talked about 6 months ago are getting much, much better now. If we look at really what's driving that, there are a number of factors, but the biggest factor goes back to that auto ship program that Ken was talking about as well. We didn't have an auto ship program in China until earlier this year. So we implemented a subscription autoship program there, similar to what we have in other markets already around the world. And already, it accounts for over 12% of total sales and is a big part of what's really driven around the economics and the fundamentals there to get that business running again. And once you've got the momentum going there, that actually helps feed the rest of the business as well.

And maybe just a quick follow-up on China from your perspective. Is the underlying macro backdrop as it pertains to your core consumer, has there been any improvement there? Or is this really just about execution and self-help at year-end and the backdrop really hasn't changed that much.

So the macroeconomic environment there, we've seen it stabilize. So I wouldn't say that it's gotten a lot better, but it hasn't gotten worse either. And just getting the stabilization there has helped us then to do some of the fundamental changes that we need to do to be able to reaccelerate that market.

Great. And I'll be mindful of time here. So maybe 1 for Ken, and I'll hop back in the queue. But can maybe just, obviously, we saw in the press release in your introductory remarks today. So a sense of the overlap here from a consumer-facing standpoint with some of the brands that you've dealt with before. Maybe just a little bit more I would love to understand as you think about the skills that you've developed over your career and applying it here at Nature's obviously, the business is performing quite well year-to-date. Where do you see yourself spending a disproportionate time here at the first 100 or so days? And where do you see particular opportunity to apply your expertise to the infrastructure here to maybe either improve or enhance what's in place.

I can't wait to see you one-on-one, because I can take a long time answering that question. I will try to -- in the spirit of time, I will try to be as brief as possible and condensed 43 years into a few minutes. So number one, my first 100 days is just learning the business, learn the [indiscernible], learn the people, the organization, and most of all, get out with leaders. I had my first meeting with a leader last night. It was so inspiring a long-term practitioner in North America. It was a fascinating meeting, I have pages of notes just from a 90-minute discussion with him. So learn the business and get out there and be with our frontline leaders. And my particular inspiration about this company is great brand, great products, great -- we're on a macro trend -- megatrend of with the wind in our sales. I've spent a lot of time trying to sell things against the wind, but the wind is in our sales on health and wellness and people looking for natural health and wellness cures, both the young and old. it is a trend that's been around for a long time and will continue for a long time.

So that's what excites me about this. To me, we have hundreds -- to me, I look at this company, and we have hundreds of thousands of salespeople in our company. That's the way I see our consultants and practitioners and partners. When I started my career, I was a company called Frito-Lay, we used to brag that we had 10,000 route salesman delivering to 300,000 retail accounts a day in the U.S. And we used to brag we had 10,000. I have hundreds of thousands of salespeople. When I ran sales and distribution in Nabisco, I had 5,000 salespeople. We felt like we were like -- and we were some of the best food distribution companies in the world. We have hundreds of thousands of frontline salespeople. So I worked in the soft drink business, where I partnered as a franchise owner we were the franchise ores of soft drink brands, and we went through independently owned bottlers, soft drink bottlers, who do the bottling and the sales and distribution of our products.

So it may not be obvious to people, but that system is no different from this system. I have a brand I do the marketing. I do the product development and the innovation and the thought leadership. And then I have to actually sell that syrup to a soft drink bottler who's an independent entrepreneur, many times third, fourth and fifth generation entrepreneur and has hundreds of millions of dollars invested in their system, running manufacturing operations and route trucks. I see no difference in selling to -- through that mechanism than selling through this mechanism. I had a sales force that they did, but they weren't employees, but we had a lead and motivate and influence them to build their business and our business mutually. I see that as a wonderful tangential experience that I can apply here. I grew up in marketing. So I'm a consumer marketer, that's the way I step out of bed every morning. But since 1993, I've been a general manager. So what can I bring? I mean, organizational leadership. I mean, we don't do anything without great people, and we have unbelievable people here.

The passion and enthusiasm and dedication to our employees is amazing. So we have a lot to build on from there. And then just business management, running a P&L and a balance sheet, I've been doing that for decades. But really motivating our people and focusing everybody on the highest leverage points to accelerate growth in our business, and then motivating hundreds of thousands of leaders around the world, which our team does well, but I just met with our head in North America earlier today, and I said, "start booking me with customers. So I will be with leaders in Southern California 2 weeks from now. I will be throughout 5 different countries in Asia in December. And then our Head of Europe already has me planned for January, February and March in various markets there. So I hope that starts to answer your question, and I appreciate it.

Your next question comes from Susan Anderson from Canaccord Genuity.

[indiscernible] on for Susan. Welcome, Ken. We're definitely excited to work for you. We can hear the passion already coming through. question on for third quarter, I mean, obviously, there was a big step change in growth going from low single digits to low double digits. I guess was there any 1 key factor or something that came together? Or was it just the strategy that you've been executing everything is coming together in the quarter?

It really is the combination of all the work that we've done over the last couple of years coming to fruition and really starting to fire on all engines. So we had very, very robust growth, as you see in digital, which was a key part of that. In addition to that, we had very, very good growth in APAC and some of APAC is timing based. So because of our field initiatives and the way the timing of what that was this year, it pushed some of the revenue that we would have normally seen in Q4 into Q3. So there's about a $2 million slide in timing there. but then also just really, really robust growth and good things happening in Europe, both in Eastern and in Central Europe. And then all of that combined with strong gross margin, good cost containment as well. So I think it's largely just the work that we are doing, it's great to actually see the strong momentum and those actions coming to fruition combined with just a little bit of timing.

And then I saw there was a new power line launch not too long ago. Is that a global rollout or just in North America? Or is that also included in the Baltic region where that line is fairly popular?

Right. So we will be phasing when the timing on that, but it will go to multiple markets. We'll start in the U.S. and then move to other markets as well.

And then my last question. On SG&A, a little bit of a step up there. It looks like on a pretty good return on ad spend. Is that a new level that we should think of SG&A going forward? Or is that pretty flexible just depending on the market?

Yes. So a little bit going back to the question of the previous person, as we see strong opportunities to be able to invest and get a very strong return on digital ad spend. We will continue to make those investments. And right now, we see those opportunities. So we've guided our SG&A for the next quarter to be in that $46 million to $47 million range with $1 million to $2 million of nonrecurring. I think that's the right amount to think about for the short term, but we will continue to respond as we have good opportunities that make sense. As I said, we will -- as we have good returns, we will feed those returns.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Romanzi for closing remarks.

Thank you very much. So as I said earlier, I'm just delighted to be leading major Sunshine feel so privileged. And after hearing and learning about and hearing our third quarter results, which are which I have no association with, right? I didn't do anything to drive those results. But hearing those results and learning what Shane said about what drove all those results, the business is working on all cylinders. We have issues to address, but you saw a quarter where the strategies are working and the management team and leadership team is really delivering. So it just makes me so much more excited about the potential of the business, even more so than I was just a few days ago. So I just want to thank everyone for listening and joining with us today and really look forward to speaking with you when we get together to report our fourth quarter 2025 results.

And I'm new, so I'll have much more to say on that call about kind of where we think we're taking it in the future. But there'll be a lot of the same of what's working now. I don't feel like I have to overturn the whole ship. So I just feel very fortunate to be joining such a strong team with great results and a great strategy in place. So with that, we wish you again, thanks for joining us, and wish you a good night.

Ladies and gentlemen, these concludes today's conference call. You may disconnect your lines at this time. Thank you all for your participation.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine's financial results for the second quarter ended June 30, 2025.

Joining us today are Nature's Sunshine's CEO, Terrence Moorehead; CFO, Shane Jones; and General Counsel, Nate Brower. Following their remarks, we'll open the call for analyst questions.

Before we go further, I would like to turn the call over to Mr. Brower as 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, and good afternoon. I'd like to remind everyone that this call is available for replay by telephonic dial-in through August 14 in via a live webcast that will be posted on the Investor Relations portion of our website at ir.naturesunshine.com. The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will and other similar expressions.

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 from those implied therein 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 would like to turn the call over to the CEO of Nature's Sunshine, Terrence Moorehead. Terrence?

Thank you, Nate, and good afternoon, everyone. I want to thank you for joining today's call to discuss our second quarter results. Today, I'll provide some context for our second quarter performance and offer some insights into how the business is building momentum. From there, Shane will take you through our financials in more detail. In the second quarter, Nature's Sunshine continued to build on the momentum we saw in Q1 with another quarter of strong performance. Our team is focused. The strategies are holding steady, and we continue to position the company for long-term sustainable growth.

For the quarter, revenue came in at $115 million, up 4% and versus the prior year or 2% in constant currency. Q2 adjusted EBITDA was also strong, coming in at $11 million, an 8% increase versus the prior year's adjusted EBITDA of $10 million. These results reflect strong execution across the business with standout performance in Japan, continued strength in Central Europe and improved traction in North America, where we saw a notable acceleration in our digital business.

As we move into the back half of the year, we remain focused on unlocking long-term value through strong consumer engagement, and continued execution of our sales and marketing strategies. We delivered these results despite ongoing uncertainty from the current macroeconomic environment and the evolving trade and tariff situation. Fortunately, we've taken strong proactive measures to minimize our exposure and safeguard our business.

We're also closely monitoring consumer spending patterns and whether household budgets come under increased pressure. Having said that, our focus remains unchanged as we continue to implement strategies to drive customer growth and strengthen our value proposition with targeted investment, new innovation and more reliable service.

As a result, we believe our growth strategy continues to demonstrate significant long-term potential. Looking at our business by geography. Asia Pacific saw sales in the second quarter increased 5% or 2% on a local currency basis. Growth in the region was driven by another exceptional quarter in Japan, where sales increased 27%. Our focus on attracting younger consumers while leveraging our Subscribe and Thrive Auto shift program continues to pay dividends as we saw a strong growth in both customers and orders in the second quarter.

Taiwan and South Korea experienced strong growth for the past 3 quarters, but we saw softer results this quarter as consumer spending slowed. In the second quarter, both Taiwan and South Korea faced a more challenging macroeconomic environment, driven by slowing exports, fragile domestic demand and increased uncertainty surrounding trade policy. Taiwan's last 6 GDP forecast is tariff fears escalated, while South Korea narrowly avoided recession and grappled with weak consumption and the threat of new import duties.

In both markets, inflationary pressure political instability and a shift in global trade environment have raised new challenges. As we move into the back half of the year, we expect tough comparisons to pressure our year-over-year growth trends in these markets, but we're confident in the strength of our underlying fundamentals and expect to see improved performance as the macroeconomic environment stabilizes. Asia Pacific will continue to be a key growth driver of our business.

In North America, we continued to make significant progress as sales increased 4% versus prior year, driven by strong performance in our digital business, which grew 34% and continued to build momentum. This further validates the strength and potential of our digital strategy and puts us on track to deliver our long-term objectives. We also continued to build momentum in our Subscribe and Thrive Autoship program, which remains the most attractive way for consumers to buy our products.

The program continued to expand in the second quarter and now represents over 50% of TTC sales, and we expect this to help drive further sales growth as we optimize and improve the experience. As we continue to strengthen our digital capabilities, we believe our digital footprint will continue to expand and grow. Another important factor driving North America's second quarter performance was the significant improvement in field fundamentals, discipline and sales support.

Our specialty retailers, nutritional health practitioners and affiliates responded well to increased touch management and targeted field activation as sales with this very important improved in the quarter.

Moving to Europe. Sales were up 1%, but down 2% in constant currency, reflecting the timing of price changes between Q1 and Q2. Notably, we experienced robust growth in Central Europe, which was supported by strong management and disciplined execution across the region.

The success of our power line products continue to drive customer growth and help expand customer activation, including expansion in the Baltic states. We also saw average order increase, which, in this case, is a strong sign of consumer loyalty and engagement as our positive sales trends continued. Overall, we remain confident in the underlying direction of the business.

In summary, the strategy we've outlined sharpening digital execution, stabilizing the core business in North America, and driving focused growth in key international markets is working. Importantly, we're seeing progress on these fronts at an accelerated pace, and we believe the momentum is sustainable.

Shane is going to talk about this a little bit later. But as a result of our strong first half performance and increased visibility into the back half of the year, we're increasing our full year guidance to remove some of the risks associated with market uncertainty and to reflect the positive direction of the business. Based on the momentum we're seeing, we have a more positive outlook for our full year sales and adjusted EBITDA. Shane will provide more details and insights in a moment.

But with that, I want to turn the call over to our Chief Financial Officer, Shane Jones. Shane?

Thank you, Terrence. Let's dive into our results. Net sales in the second quarter were $114.8 million, compared to $110.6 million in the year ago quarter, a 4% increase versus the prior year or a 2% increase excluding the impact of foreign exchange rates. As Terrence discussed, this was driven by a resurgence of growth in North America as we saw acceleration in both digital and the core.

Looking at sales by market in Q2, I'll start with North America. North America sales grew 4% on both a reported and local currency basis. This represents the best quarter for North America in over a year and reflects an acceleration in both the digital and the core businesses. Digital grew 34% in the quarter, driven by increases in the number of ordering accounts, a 180 basis point improvement in retention and a step-up in conversion.

We also saw a meaningful increase in our Subscribe and Thrive auto ship program that now constitutes 53% of DTC revenue. Likewise, the core business continues to show steady sequential improvement driven by strong distributor engagement and better field activation. We're excited about the momentum that we see in both parts of the North America business and expect continued growth in the quarters ahead.

In Asia Pacific, we reported growth of 5% to $52.7 million or up 2% when excluding the impact of foreign exchange. This was driven by very strong growth in Japan where sales on a local currency basis grew 27%, fueled by continued growth in customers and orders as well as strong participation in our Autoship program that makes up nearly 50% of sales in Japan.

Japan has now seen 20% plus growth for 4 consecutive quarters, validating the strategic adjustments made last year. In addition, we have seen some sequential improvement in China sales trends, where Q2 sales were essentially flat, reversing the decline seen for over a year now. While we are certainly seeing some stabilization and expect that to continue, China continues to be impacted by a difficult macroeconomic environment.

Results in Taiwan were challenged this quarter with reported sales up only 3% after exceptional growth over the past 3 quarters. While some of this is driven by timing, we do expect tough comparisons in Q3 and Q4 to impact year-over-year growth trends this year. Therefore, we expect low to mid-single-digit growth from Asia Pacific for the balance of this year.

Sales in Europe during Q2 increased 1% on a reported basis, but were down 2% on a local currency basis. Central Europe continued to perform well, with reported sales up 15%, driven by strong execution and disciplined cost management across the region. Our power line product focus and growing customer engagement across the Baltics region continued to drive robust growth in both customers and orders.

The strength in Central Europe was offset by a 5% decline in Eastern Europe, driven by the year-over-year timing of price increases between Q1 and Q2. Looking at Q1 and Q2 combined, provides a more accurate depiction of the Eastern European business where sales increased 2% over that period. The strength in Central Europe, combined with continued low single-digit growth in Eastern Europe gives us confidence in our strategy as well as in our ability to continue to deliver mid-single-digit growth in that region.

Gross margin in the second quarter increased 36 basis points to 71.7% compared to a year ago, driven by our gross margin savings initiatives. Despite the year-over-year expansion, Q2 gross margin results were muted by headwinds from market mix and foreign exchange.

Looking forward, as we continue to execute against our pricing and sourcing initiatives and as the impact of foreign exchange rates diminishes, we expect continued modest improvement in gross margin. This improvement will be despite the impact from tariffs and continued trade volatility.

We have a diverse supply chain and have already taken measures to prepare for and mitigate changes in trade policy. Therefore, we believe we are well positioned to be able to adapt and adjust as necessary and expect no impact to gross margin in 2025. Volume incentives as a percentage of net sales were 29.9% compared to 31.4% in the year ago quarter. The decrease was primarily due to the strong growth in our digital business, along with changes in market mix.

Selling, general and administrative expenses during the second quarter were $43.7 million compared to $38.6 million in the year ago quarter. The increase was primarily related to timing of compensation, digital ad spend and nonrecurring expenses.

As a percentage of net sales, SG&A expenses increased to 38.1% in the second quarter compared to 34.9% a year ago. Operating income decreased to $40.3 million or 3.7% of net sales compared to $5.6 million or 5.1% of net sales in the year ago quarter.

GAAP net income attributable to common shareholders for the second quarter was $5.3 million or $0.28 per diluted common share compared to net income of $1.3 million or $0.07 per diluted share in the year ago quarter. Adjusted EBITDA, as defined in our earnings release, increased 8% to $11.3 million compared to $10.4 million in the year ago quarter.

Our balance sheet remains clean with cash and cash equivalents of $81.3 million and 0 debt. Inventory increased to $69.3 million at the end of the second quarter, a $4.4 million increase versus Q1 as we purchase additional raw materials to prepare for and mitigate the impact of tariffs or potential supply chain disruptions.

Net cash provided by operating activities was $7 million compared to $3.5 million in the prior year period. We repurchased 1.1 million shares for approximately $12.3 million during the 6 months ended June 30, 2025, with $21.4 million remaining on our share repurchase program.

This repurchase activity includes our participation in the secondary offering and demonstrates our confidence in the business and commitment to driving long-term shareholder value.

Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.

Now turning to our 2025 outlook. Based on the improved momentum in the business, especially in North America, we are raising our guidance for 2025. We now expect full year revenue of $460 million to $475 million compared to previous guidance of $445 million to $470 million. This new range equates to year-over-year growth of 1% to 5%. For adjusted EBITDA, we are now guiding to $41 million to $45 million versus the prior range of $38 million to $44 million.

This new range equates to year-over-year growth between 1% and 11%. This assumes that gross margin will be modestly higher in Q3 and Q4 and and that quarterly SG&A will be $41 million to $42 million.

Overall, we continue to believe the business is well positioned to capitalize on current market opportunities and remain very optimistic regarding future growth prospects. The strategic initiatives we've been implementing are working, and we are confident in our ability to accelerate growth in sales, profitability and cash flow.

Now I will turn the time back to the operator.

[Operator Instructions]. Your first question comes from Brian Holland of D.A. Davidson.

Congratulations on the strong results this quarter. were. Just picking up washing left off on the guidance. plus 1% to plus 11% on year-over-year EBITDA still seems to imply like a pretty wide range. So just curious what you're thinking about on both ends of that range? What's being contemplated that you would end up at plus 1? And what would have to happen for you to get to plus 11 million?

Shane, do you want to grab that?

Sure. Happy to do that. So we're seeing good momentum in the business, as we've talked about, especially in North America and have a lot of confidence in that. We've got several initiatives that we're beginning or continue to accelerate into the latter half of this year and expecting very good results from that. I think the big thing that will be the difference there will be really on our digital business.

We've seen an acceleration, if that acceleration continues, we'll be near the top end of that if we can -- if we don't, that's where we'll likely be a little bit lower, not lower than the guidance range, but lower in the range.

Understood.

So we're running on the company that range.

Following up.

The other thing is Asia. The other one would be Asia. Just Taiwan, we've seen a little bit of a deceleration in the growth rate there. We expect that to be very strong in Q3 and in Q4, but we are having very tough comps -- and so depending on how that ends out, that could be slightly different as well.

Okay. And then I appreciate the color on the SG&A line for the second half of the year. But if I just kind of wind this back, again, this is just my number. So maybe apples and oranges to some extent. But I think you beat EBITDA in by-model in the first half by about $3.5 million, you took the guide of SP-2 $2 million I'm just curious if there's anything changing in the second half versus original expectations?

And maybe the thing that I wanted to double click on obviously, the SG&A number in Q2 included some digital investment. I'm just wondering if that's something that you're doubling down on given the momentum that you talked about specifically in this quarter and the inflection in the North America business in particular.

Good insight, Shane.

Yes, that's a good catch there. We did have -- we saw some great results in our digital, and we did apply some additional funding there to our digital media about $1 million extra, which paid out in additional sales as well. as we go through the rest of the year, we'll be very thoughtful about how we do that. And if we continue to see the strong returns that we're seeing, we'll spend a little bit more, but that will be -- have a very strong return on that investment.

But we do want to keep that digital growth moving going forward. So we like to see it in that plus or minus 30% range, and we're investing to make that happen.

And Terrence, I think you mentioned in your prepared remarks you talked about innovation. I'm just curious Certainly, in my sort of core consumer packaged goods space, we're really seeing the impact of kind of this Make America healthy again movement.

And we see it in a number of forms. Just curious to what extent you're seeing that focus hit your business and the extent to which you are or can being nimble from an innovation standpoint to sort of meet the moment.

Yes, I definitely think there's momentum behind that, especially with the consumers that we would want to talk to. They're already in that space. They're very motivated by that. the innovation that we're putting out in the market is -- it's new, it's fresh. We've got some first-mover opportunities for us that are doing quite well.

New products like our Marine Glow, marine-based collagen is kind of very exciting. So again, there's freshness there that comes from new products, but also having that first-mover physician in the right areas is critical for us, and we're going to keep pushing that lever.

And last one for me, and I'll get out of the way. You talked previously about the CapEx investment the cost savings coming from increased automation, et cetera. Obviously, this opens up a fair amount of incremental capacity within your manufacturing network, your advantage within the industry, to the extent that you do self-manufacture.

Just curious if you could kind of talk about the pipeline, either from an M&A or co-manufacturing standpoint, whereby you would be able to leverage that capacity with either another brand or brands or some other partnerships. It seems to me to be a huge leverage opportunity, just kind of curious if that pipeline is as we look out over the next 6 to 18 months through the end of '26?

Yes. Brian, you're exactly right. We have done a lot of work to improve our throughput and efficiency in the plant, which has freed up capacity -- and we're actively looking at ways to fill that capacity, both by driving growth of -- organic growth within the business, but also through kind of possible third-party opportunities. Shane, I don't know if you want to add any color to that or not.

Yes. We have a couple of opportunities that we're working through right now. We are very early stages though probably not a lot that we can talk publicly about it, yes.

But the opportunity is there and we're actively pursuing kind of those opportunities, which, as you mentioned, that just helps the economics of our business and the efficiency of our operations.

Fair enough. Appreciate all the color. Keep up the great work.

[Operator Instructions]. Your next question comes from Susan Anderson of Canaccord Genuity.

Nice job on the quarter, you guys I guess maybe just going back to North America, obviously, great result in the digital business. It sounded like the core business with the practitioners and the retail partners also improved. I guess I'm curious, did you see a return to growth there?

And then I think you mind just kind of some better engagement, better field activation. Maybe if you could expand a little bit on kind of what's driving that improvement and then your expectation there for the rest of the year?

Yes. On the core, we didn't quite see kind of growth across all those segments combined, but we did see a vast improvement in activation and sales overall. So I think we're really pleased with what's going on there. In terms of kind of the things that we're doing to drive that activation, I spoke a little bit about just improved touch management in the field. making sure that we're spending time with those folks providing appropriate -- just putting discipline, it's basic field fundamentals, blocking and tackling.

I can't tell you how -- and I think you and I have spoken about the importance of this in the past of just getting that blocking and tackling kind of right which is important in any sales organization, no matter where you are, making sure that we're giving people the right sales tools.

We've changed some staffing -- so in the field organization. So we've got some new people out there, some new talent that is really driving change, driving results, built out our sales support team as well just to make sure that we're giving people the right level of support across the business. So those are just a series of things that we're doing, and I think we're seeing some momentum as a result of that.

Okay. Great. That sounds good. And then I guess, just looking out to the back half by region, you mentioned some tough compares in Asia coming. I guess how should we think about the puts and takes in terms of growth in the drivers there as we look out in the back half. Should we expect maybe North America to kind of start to be more of the driver of growth there versus the international markets we've seen over the last few quarters?

Yes, I think we would expect to see continued acceleration in North America. That's going to -- again, with the momentum that we've got on the core side of the business is going to continue, but digital as well. So we've got a really solid, I think, proposition building in North America, and we'll get that to where we want to by the end of the year. As we mentioned, we've got some very tough comps in Asia Pacific, but it's a strong business. And Shane, do you want to provide some additional commentary on APAC?

Yes. So we're looking for the back half of the year to be low single digit to mid-single digit, low to mid-single digit for APAC. And if you look at what we'll likely see in there, we'll see some growth in Taiwan, but it will be more muted than what we've seen in the past. We're likely to see stabilization in China and some growth there.

Korea continues to struggle. So it may be flattish there. But then Japan will continue to do very, very well, and that will be what really drives that region. So we do expect continued growth it will just not be at the double-digit levels that we've seen over the last few quarters.

And remember, Susan, last year, Q3 and Q4 were largest quarters in the history of the region. So to Shane's point, you're talking about huge numbers that they're going up against. So still very strong performance in Asia Pacific going forward. Just kind of not at the growth multiple that we've seen in the past.

Right. And then as we move to Europe, we do expect growth in Europe as well. Most of that will be coming from Central Europe as we expect double-digit growth to continue in Central Europe and then likely low single-digit growth in Eastern Europe.

So -- but good results in Europe as well. And then as Terrence talked about, North America, that's where you see the most acceleration we're most excited about that largely because digital will continue to grow at that 25% plus level. And as that happens and then the base business also is close to flat. That's going to result in better numbers from North America, likely in the mid-single-digit range.

Okay. Great. That was really helpful. And then I guess maybe just touching on the gross margin really quick as well. I think you -- well, to get to your annual, I guess, the back half has to be a little bit higher. Maybe just talk about kind of the drivers there versus the first half?

It's really -- we've been working on our gross margin initiatives for some time, and those gross margin initiatives have been muted by headwinds from a, from FX and those FX headwinds are going to abate or at least they appear to be going to abate here as rates come down in those -- in those regions, especially in the APAC regions.

And additional to that, we've had a headwind from mix that headwind from mix, just because North America tends to have a little bit lower gross margin than APAC and as North America does better in APAC does not quite as well as it has in the past. There's a little bit of a headwind there. Some of that will continue.

But really, as our gross margin initiatives take hold, we would expect, as we've said, modest improvement in the back half of the year.

Okay. Great. And then 1 last one, maybe just looking out at the new product pipeline for -- I guess, for the rest of the year, we've noticed some new stuff on the website like you mentioned, the Marine Glow collagen. I guess how should we think about these new products?

Do they kind of make an immediate impact or does it take time to build them to really kind of helped to drive that growth? I know the power line was obviously a really huge success. So I guess just in context, how should we think about these other new products? And then do you have anything else coming out the rest of the year?

I think that, obviously, it depends on the new product. But certainly, they do provide consumer energy. They provide consumer acquisition. -- activation, excuse me, as well as new customer acquisition.

So I think they're important. We have such a large portfolio and a large business. I don't know if a single product is necessarily going to move the year, but they certainly will build momentum over time. And our goal with products with things like the power line is to move the business over time. The goal with something like Marine Glow and getting into collagen, which is such an important area of vibrant growing area.

Collagen is growing 15% to 20%. It's going to continue to grow at that pace over the next several years. So kind of being in that space and having a relevant position in a high-intensity growth segment like that is very important. And so again, we're going to continue to make sure that we're placing products in the right areas to help us get momentum over time to help us attract new customers, to help us reactivate consumers -- and so I think that's kind of how we think about it, Susan.

It really all is about customer acquisition and then getting repeat purchase. And these are the types of products that are very well suited to do that because people want to use them and they do use them every single day. So -- on an ongoing basis. So I think we should expect to see the cumulative effect of our innovation and new product development to really make a difference to the business going forward.

And on that [ Maringa, ] we actually launched just over a month ago. So it's a fairly new product, doing really well, beating our expectations at this point in time. So excited about the potential that it has. But as Terrence noted, it's not going to drive a huge increase in our numbers right off the right.

There are no further questions at this time. I would hand over the call to Mr. Moorehead for closing remarks. Please go ahead.

Okay. Thank you, Alan. Hey, I'd like to thank everybody for listening to today's call, and we look forward to speaking with you when we report our third quarter 2025 results in November. So thanks again for joining us, and have a great day. Take care, everybody.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect, and thank you for your participation.