Youngevity International, Inc.
Q1 2015 Earnings Call Transcript

Published: 15 May 2015

[John Zervas:]

Good afternoon everyone and thank you for joining the First Quarter 2015 Earnings Conference Call for Youngevity International. Before we get started, I'd like to take this opportunity to read the Safe Harbor statement. The following information presented on this call includes forward-looking statements on current expectations and projections about future events. In some cases, forward-looking statements can be identified by terminologies such as may, should, potential, continue, expects, anticipates, intends, plans, believes, and similar expressions. These statements are based upon current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict. The information in the shareholder call is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this call based on new information, future events, or otherwise, except as required by law. Now, I would like to turn the call over to our Chief Executive Officer, Steve Wallach.

[Steve Wallach:]

Thanks John. Hello, I want to welcome everyone to the Youngevity International shareholder's call. Speakers on the call today are myself and our CFO, Dave Briskie; our President, Bill Andreoli and we'll be covering today for the following topics. We will highlight our Q1 performance. We will provide a review on marketing initiatives and customer and distributor acquisition activity. We will take a deeper dive into the numbers. We'll discuss new initiatives in our global expansion progress and we will provide a comprehensive update on our coffee operations. I'd like to now, turn the call over to our Chief Financial Officer, Dave Briskie.

[Dave Briskie:]

Thank you, Steve. Welcome everyone to the call. Appreciate all the shareholders that are joining us. First quarter, we're going to get right into it, for March 31 ending, Q1 2015, first of all, some of the highlights. We had a net revenue increase of 39.4% over prior year period, which delivered sales of $36.8 million for the Q. Gross profit increased 28.1% to $20.3 million compared to the prior to year. Our adjusted EBITDA was $1.3 million compared to $1.7 million in the prior year period. A couple of things that were material to note during the quarter is we held our annual convention with record attendance which I know Bill will talk about briefly and we also discussed at on the K call that took place just a few months ago, and we entered into two acquisitions also during the first quarter. For the three months ending March 31, 2015, the Company reported revenue of $36.8 million compared to $26.4 million in 2014. This is a 39.4% increase, whereby 86% of our revenue is derived from the direct selling segment and approximately 14% of the revenue from our commercial coffee segment. Gross profit for the three months ended March 31 increased approximately 28% to $20.3 million as compared to $15.8 million for the three months ended March 31, 2014. Our operating expenses for the three month period increased approximately 33.8% to $19.9 million, as compared to $14.9 million for the three months ended March 31, 2014. The main contributor to the increase was derived from distributor compensation which increased 29.1% to $14.1 million and this is primarily due to the increase in revenue of $10.9 million from Q to Q. For the same period, sales and marketing expenses increased 55.7% to $2.1 million from $1.4 million, primarily due to the Company's costs related to our annual convention, which was held in Q1 this year against a convention that was held in Q2 last year. So, that increase really is mostly due to timing differences. For the three months ended March 31, the general and administrative expenses increased 42% to $3.6 million from $2.6 million, for the three months ended prior. This primarily is due to a number of things, but mainly employee compensation due to our growth, legal expenses, accounting, set up costs associated with the MK Collaborative initiative and of course our Nicaraguan coffee operations, as well as the expenses associated with our international expansion efforts, which we are continuing to do on an aggressive basis. For the three months ended March 31, 2015, we reported a net loss of $369,000, as compared to a net income of $427,000 in the prior year. The loss was impacted by $1.46 million of non-cash expenses and the $700,000 of convention costs that occurred in the quarter. EBITDA for the period and EBITDA for us is earnings before interests, taxes, depreciation and amortization as adjusted to remove the effect of stock-based compensation, which we call adjusted EBITDA was $1.3 million for the three months ended March 31, compared to $1.7 million for the same period. I encourage all shareholders to review our financial numbers, which are posted virtually on all financial sites, as well as, will be posted on the ygyi.com corporate site. I'd like to dig into the numbers a little bit to add some color to the numbers. The direct selling, as discussed earlier accounts for 86% of our business and the coffee segment now accounts for about 14%. If we break it down, of the $36.8 million in revenue $31.6 of that is direct selling, while $5.2 came from the coffee segment. Both segments are growing significantly and are on the pace that we've set out for them. Direct selling grew 31% over last year's numbers while coffee has grown at a pace of 130% over the quarter prior. So where does this $10.4 million quarter over quarter revenue increase come from? The coffee segment accounted for $2.9 million of the growth which represents 28% of that number, acquisitions contributed $2.1 million representing 20% of the number and the direct selling segment grew organically by $5.4 million representing 52% of that growth number and we're very, very intrigued and we continue to work on the organic growth number, as it pretty much proves out how our business model works. Clearly, our model is working as is intended and it continues to achieve the growth objective that we set out. Longevity International and its coffee division is truly a growth story. We've got a keen eye towards growing our business right now, but we're also keeping an eye on the bottom line in our deployment and use of capital. We believe that it is our responsibility to get as great a return as we can on capital, our cash in all of our assets while growing the business at the fastest pace that we possibly can, and we're pretty proud of those results. I think it's important to maybe take a step back and look at what we've achieved and how we achieved it and help you understand our acquisition model and why it's working so well. My example, as many know these companies merged together, the coffee division and Youngevity International in 2011. So, that's a great point to look at our growth and how this Company is achieving what it's doing in terms of its financial metrics. For example in 2011, this was a $22.5 million enterprise when the companies merged together and as of this quarter, we're on a pace of $147 million if we annualize Q1's results. In 2011, our assets were $24.3 million, but as of Q1 2015, our assets now are $61.4 million. Liabilities in the meantime, just four years ago was $15.3 million and as of today through Q1 2015 are now $42.6 million. This equates to shareholder equity improvement from 2011 of 9 million to today of 18.8 million. The reason why I bring this to your attention is to really focus on the number of shares that were issued and outstanding just four years ago at 385 million shares. Meanwhile, in this Q's filing, you will see that we've issued about 392 million shares. So, really since the merger, it's a modest increase of 1.8% of shares or a non-material shareholder dilution. So we achieved those growth statistics without the traditional means of growing the business. Many companies that grow at a pace like this will do it in two fashions. The first fashion they'll do it is, they'll issue shares to acquire businesses, and that's very, very common. We've achieved this growth without the issuance of shares. The second way it'll be done is by borrowing capital in the capital markets, so they'll go out as a public company, put shares on the market, raise capital and then do the acquisitions, and that also creates shareholder dilution. So, we've been able to achieve our growth and maintain profitability or at least EBITDA in the case of this quarter without diluting our shareholders. You're going to see more of this in the coming months and years. We believe we've got a refined model in terms of company acquisition. It's working extremely well. It's worked for us thus far and continues to work well, and I'm going to get into some details on that. You'll notice that although we had positive EBITDA of $1.3 million, we did experience a loss of $369,000, and I thought it was important for you to understand the underlying factors that affect our net income line. First of all as mentioned briefly earlier, we have $1.46 million of non-cash impact on our financial statements. So, it's $1.4 million impacting our net income line. The reason why these numbers are at this pace is because of the way our acquisition structure works. Our acquisition model is very, very tax friendly and it amortizes the better the acquisition performs. So, when we see acquisitions that are brought into the Youngevity family performing very, very well the amortization costs go up and of course our non-cash interest related to that goes up and this affects our net income line to the detriment, but it does not have a negative effect on EBITDA, which is why, in spite of the loss our EBITDA was still $1.3 million. I also want to bring to your attention, some of the additional costs in terms of the incubator deals we do as a business as we launch our global strategy and some of the new business enterprises that we enter. Included in these numbers, in our top line, we discussed some of the effect of our expenses. As an example, we had $739,000 just for the quarter invested in projects that included our international expansion efforts, our plantation improvements, which continued through Q1. The first harvest, we'll get to that later in the call, will actually start to experience revenue in Q2. So it's just – we're in that period now, and all the other investment objectives that we are taking on as a company, all of these efforts are designed to deliver future profits and continue to fund our future growth. So, I think it's important to point those out. In light of all of this, we still have a keen eye towards margin improvement and cost-cutting efforts. We believe that we just cannot grow without looking at fortifying our bottom line and we've made some significant improvements. We've enacted some price increases if you will on some of our core products as we haven't had a price increase in three years and we do all this to make sure that we continue to grow and as we're growing, we're also keeping a keen eye to the bottom-line. We expect that these improvements will show up as soon as Q2 of this year and we expect to see significant and profitable movement in EBITDA in the coming quarters through the balance of the year. I also want to talk briefly about our acquisition model and I think it's important to note, I pulled the last several acquisitions, that being, Beyond Organic, GOFood, Biometics, Good Herbs, HM, Restart Your Life, the two for this quarter, JD Premium and Sta-Natural, and I quantified what they delivered in terms of total revenue for the quarter and what their impact was. And their total sales for the quarter was $6.17 million. That was their acquisition impact. What is so critical and why our model works so well is when we acquired these companies their sales of their products to their organization in total was just $2 million or 33% of their revenue of what it's producing now. The balance of that revenue, the $2 million when we acquired the businesses, to what they're delivering now, is coming from Youngevity distributors that were already in the Youngevity nation buying these new products that have become available and there the acquired companies' distribution team or distribution genealogy acquiring the Youngevity products which is $2.6 million of that number. So 67% of the revenue from our acquisitions are coming because it's plugged into our model. That's how quick the model delivers growth and that's why we're going to continue to refine our acquisition model and continue to look for good companies that are a good fit with us and we believe that can continue to be a key driver, not only in the United States here, but as we take this model globally. With that, I'd like to turn the call over to our President, Bill Andreoli who will talk about our sales and marketing initiatives. Bill?

[Bill Andreoli:]

All right. Thank you, so much Mr. Briskie and a special thank you to our shareholders that have joined us today. Q1 of 2015 was not only good growth quarter for Youngevity's direct sales division it also reinforced the foundation for the steady growth that we are seeing now in Q2, which we hope to carry throughout the year. Coming out of the November and December holidays into the New Year is typically a bit tenuous as our independent distributors return their focus to products sales in growing business, while at the same time, we are bringing on aggressive year-end promotions to a close. As expected, January sales were slightly lower than December, but rebounded quickly in February and were almost – up almost 16% in March over December numbers. On our last quarterly call, we spoke of our refinement of many different marketing and communication systems. We've continued to do just that, as promised. While, it's not really possible to relate any particular system or refinement to any specific sales increase, the evidence does show that the smoother, simpler and more unified our marketing method and marketing systems are, the more predictable our sales growth becomes. This is exciting because, as we continue to develop our international footprint in infrastructure, these systems will be virtually plug-and-play in these emerging markets. Before we talk about the ongoing initiatives, I think that it's important to acknowledge the significant progress in growth that we have experienced over the past two years, within the direct selling segment of Youngevity. We continue to advance up the rankings of the Direct Selling News top 100 global list, achieving a rank of 81, and in the inaugural publication of the Direct Selling News North American top 50 list, we placed at number 43. The Direct Selling News is one of our industry's top trade magazines. They track direct sales companies relative gross sales volumes and then publish the results annually in these two highly coveted top achiever lists. Needless to say, we anticipate moving even closer to the top 50 this year. To summarize, here are some of the ongoing projects and enhancements that we are working on currently. Our new web presence with the more comprehensive online shopping experience was launched in Q1 and is now fully operational. One of our goals with this new system was to more easily adapt and assimilate our up and coming up-and-coming international markets. Not only does this platform include fully replicated and personalized sites for each of our independent distributors, I'm happy to say that with this flexible structure we have already created a dedicated Australasia sub-site for our New Zealand operations and we'll soon have a fully integrated Spanish equivalent site, with Russian, Hebrew and many other languages to follow. This has been over a year in the making, but it will help pave the way for both cultural integration and seamless sales processing around the globe. As we briefly mentioned on our Q4 and 2014 call in March, our recent annual convention was March of this year, and as we indicated, this event was by far our largest and most successful event to-date. We put a great deal of strategy behind the look and feel as well as the training and recognition of these key events. Although the investment in these types of events are significant, we definitely are seeing a return on this investment. Attendance is up and more importantly sales are also up immediately following the event. In fact, April, the month following the event delivered the largest revenue-generating month in the Company's history. We continue to refine our event strategy with the next half dozen events already in the planning stage, we'll be conducting events every six months, with an annual convention every 18 months followed by two leadership training events six months apart. This six-month rotation has already proven itself, as all eyes are already on our next leadership summit this upcoming September in Charlotte, North Carolina. Youngevity has and is tracking some of the greatest leadership in our industry. I'm reminded at every event about the power of our direct selling force as top leaders that are proven in our field. As our acquisition strategy becomes better defined, we find that we are becoming more discriminate with the companies and products that we choose to bring into our collective. However, we will not shy away from any leadership groups or proprietary products and services that enhance our 90 for Life core message. Our staying in the lane marketing and organic growth strategy is being expanded into various media, which now includes PowerPoints and videos in social media channels. This extension of our original print marketing series is further strengthening the Youngevity brand, making our Company even more attractive to distributors, and customer recruiting as well as strategic acquisitions. Our distributors though independent, appreciate structure. The more focused and useful tools we can provide while not diminishing their individuality, the more they flourish. All these key marketing initiatives will continue to see further refinement for the balance of Q2 and throughout the year. 90 for Life continues to gain brand recognition and loyalty across the U.S. and around the globe. It is clear that our motto is working, while many of our competitors may achieve but struggle to sustain growth, especially in the U.S. market. As each quarter and year passes, Youngevity becomes more of an industry icon and 90 for Life becomes more of a household expression. We are in a unique position to capitalize on decades of customer loyalty, while still aggressively sharing the relevancy of our message as if we were a brand-new start up. Even so, we are not resting on our laurels. We will continue to discuss and implement metered yet aggressive strategies for our teams here in the U.S. and abroad. Our overall growth in acquisition success is rooted in sustained organic growth, which is the true test of any direct sales organization. Our consistent level of growth, although not unprecedented is a key indicator that these fundamental philosophies are resonating strongly with our core field leadership. It is also an indicator of our overall reputation and status within the industry as a whole, and distributors and consumers alike are attracted to noticeable success. Needless to say, we are pleased with our current growth and anticipate continued upward movement, something to look forward to in 2015, simply put more of what works and less of what doesn't and we increased the size of our international footprint. We expect to see double-digit growth in Australia, New Zealand as well as Canada and these are areas where we already have key leadership, established product lines and dedicated support staff. This is of course in addition to our new initiatives in other key international markets. We will also continue to forge ahead in the Spanish-speaking marketplace with both web and printed supporting materials as well as multimedia presentations. As we reiterated today, Dr. Wallach's 90 for Life messaging is perhaps the strongest and most effective in the industry. Rest assured that as we move forward and as diverse product offerings and acquisitions come on board, we will never abandon our core belief in people and the message that started this Company nearly 18 years ago, and those four words, one team, one dream aren't just a catchphrase. They're our way of life and our way of business. I want to thank you all again so much for joining us on this call today, and with that, I'll hand this call back over to you, Dave.

[Dave Briskie:]

Thank you, Bill. I think, there's several things important to note there, but one in particular, I wanted to point out. I had mentioned that we had made some price adjustments. We haven't had price increases in three years here, but when we do this, it's not just a card blush. It's very targeted on key products with key ingredients where there really is truly value and these increases went into effect April 1, and the challenge we have as executives for the business or any business has is when prices go up, everyone's really concerned about their growth rate. Geez, if I increase prices will growth be affected negatively, and obviously we've put the price increases. We're pretty happy with the results, because April had anything but a negative impact from the price increase, in fact, it's the best month in terms of revenue that the Company ever experienced and obviously we expect it to be a very nice profit month as well. So, with that Steve Wallach's going to come back and join us on the call. There's a number of new initiatives he's going to provide an update to, and so Steve, can you take it over from here?

[Steve Wallach:]

Sure. Thank you, both. Obviously, we're excited about the growth and we continue to be a growth story and again that's fantastic and we look forward to more of that, but at the same time, as we've also discussed, it's imperative to us to maintain profitability, to keep an eye on profitability to really pay attention to the bottom line as well. And so, one of the things that we've recently done is evaluated all our expenses and re-evaluated all of our expenses, I should say and it continues to be a fact that shipping is a very large expense annually of our Company, with 86% of our revenues being generated by the direct selling side. Shipping is just a very large number, and so, one of the things that we did in addition to looking at pricing and margins again, and cost of goods, certainly our cost of goods has gone up over the last three years and as Dave and Bill, both pointed out we wanted to hold the line on pricing to maintain our growth as long as possible and we intend to continue growing, as I've said. But with that said, we pulled every major carrier back in and we ship a significant number of packages and we're going to get into some of the initiatives and things that we're doing here and have done here as I go through this, but one of the biggest aspects is just how much we're spending on shipping, because we also subsidize the shipping expenses to our customers and through our distributors, through our auto ship program and just the cost of shipping has also increased and fuel surcharges and so forth. And so, since we are such a significant shipper, our primary shipping service and partner in shipping essentially has been UPS. We're one of the largest shippers of goods in Southern California and so we wanted to re-evaluate and have them basically rebid our business and not just UPS, FedEx and USPS. We went through a very expensive bidding process and we wanted to see what they could do for us. We're a large customer of theirs and so with that said, we wound up having them each shipping service present just a comprehensive plan and we were able to pick and choose ways to save money and improve the services that we provide both to our distributors and customers. So, that's one of the things that we've recently gone through here, and those initiatives continue to be rolled out and will continue to be rolled out over the summer time, which we anticipate some cost savings in association with those as well. One of the things that goes along with that is the investment in technology which also allows us to become much more efficient and which shipping service that particular package or shipment winds up being chosen for. So, if UPS is the best option for speed and efficiency and cost, then obviously our shipping systems would choose that for example or USPS or FedEx. And so, our goal is to get packages to the end recipient, the consumer, the purchaser as fast as possible and yet keeping a lid on expenses. And what we've also further discovered is that each shipper seems to kind of have their own niche, whether it's international shipping or smaller packages or larger packages. And so the investment in technology will allow us to further save on shipping costs and expenses that we have been traditionally incurring over the past numerous years as well. So we're excited to roll that out, again going forward, as Dave and Bill have talked about, the cost saving initiatives over the coming quarters. We've talked about on these calls as well that, we've made – especially over the last year significant investment in our distribution centre and we upgraded just about every aspect of this facility, really to get packages out, not only faster but to take advantage of the space we have here to not have to go out and rent additional facilities just to get more packages out. So with UPS, we re-evaluated everything about a year, year and a half ago, and we were able to double the holding capacity as well as improve the throughput capacity, the number of packages per day for example or per shift and so, we've implemented pretty much all of those. We have some additional things that we're now looking at doing, but with that said, we have been able to complete all of those. In fact, we just recently received our, what's called, a city final on the construction projects and interestingly enough, we – the improvements in construction projects were significant enough that we had to re-submit the building and the facility to obtain current status on fire code approval, building code approvals and so forth and we just recently obtained city final on that, this last week in fact. So, that's great to have behind us. One of the things that we're looking at doing, for example, also rolling forward or going forward through the summer is purchasing a conveyance equipment system and the completion of additional shipping lines that we've talked about on these calls in the past and we're just a matter of weeks away from implementing those. What that'll do for us is without expanding the facility further, without renting additional space or finding additional locations and additional overhead, it allows us to maximize the efficiency and utilize what we have. This will put our throughput of packages – of unique packages per day at over 6,000 packages. So, what that allows us to do is get packages out even faster – to people faster, to consumers faster, to distributors faster and capitalize on the space we have, maximize the efficiency of the space and staff that we have. By doing that, we believe that we would almost be able to double the daily per shift throughput of packages without the addition of additional staff members even for example and again, it's one of the benefits of automation and this updated and upgraded equipment allows us to continue refining the efficiencies and keep the fixed costs in check as we've talked about. Currently, we have over 200 people working at Youngevity, just kind of interesting to note how we've expanded as part of all that our customer service and distributor service department here. We've over 55 agents handling inbound calls at this facility for example and with that also, we have just recently launched a new initiative for outbound calls and so we implemented an outbound calling team that just recently began and already we're seeing meaningful revenue from the outbound calls and were looking to double that in the upcoming months. What that does for us, is it, not only supports the field leaders, the distributors and the customers by having a program that reaches out to them, but also with the acquisitions and acquisition model that both, Dave and Bill have talked about, even on this call, the goal is to be able to further refine the efficiency of onboarding additional acquisitions by reaching out to members and customers and distributors within their database with a well-trained outbound calling team from here. And so, we're excited about that. We're seeing positive, not only revenue generation already, but positive result. People are loving the fact that they're hearing from people and so that's always a great thing and we're just seeing great positive results and it's just really at the beginning stages. So, we're excited about the potential and future of that group as well. Again, what that does is it allows us to further leverage the potential of those oncoming databases of distributors in the acquisition models I've also explained. Our ultimate goal as mentioned is – what we want to do is build a state-of-the-art outbound calling not only facility, but group as I've said – just specifically to further refine that aspect of the onboarding process of those acquisitions. Further talking about initiatives, one of the things that we've talked about on this call, on these calls in the past, I should say, is we've talked about the investment in science and the investment in science behind our core products. Obviously that started with the Clemson study, we talked about that, months and months and months ago. We then moved to a net level study using – and working with the University of Manitoba. Interestingly enough, the report on that study has been accepted for a peer-reviewed journal publication, called the Journal of Dietary Supplements and so what you'll see in the near future is actually a peer-reviewed journal article published about that study using our products in that study and the results. And so, you would be able to see it pubmed.gov for example and it would name our products and go into a synopsis of that study. With that said, we're working on the protocols now of a human clinical trial using our products, using our products the way they're designed to be used and the outcome of that trial. Obviously, we have great confidence in our products. We're going to continue building on the science of not only the formulations of the ingredients of my father's work but also of the studies we now have already under our belt around the products and how the products have been designed to be used, but now we're taking it to the next level and really, that level is usually what biotech companies wind up doing with products that they hope to bring to market. And so, for us, it's essentially, trailblazing using our product, the way they're designed to be used and the way that they're to be used as directed but with humans and so, it's a human clinical trial with our supplement program with our 90 for Life program with our Healthy Body products and packages for example. And so, not only does that further exemplify the confidence we have in our products, but it also further allows distributors and new distributors and new customers around the world to see that we continue to invest in science behind the products and they can point to that and utilize that as well. In addition to the investment in science behind our products, we continue to validate our core products as well through various procedures, third-party validators, not only are our manufacturers CGMP certified, so the processes that are many factors use to make our products are essentially audited. The third-party validated by companies that come in and make sure that the batch records are kept up to date, that the process, they say they do to make our products, they actually do and so it's great that all our manufacturers are at that level. But with that said, we're taking it to the next level and we talked a little bit about this and we certainly talked about it at our last convention, but several of our key products are under the process or in the process of being NSF certified, and what that does, and I'll read you a little snippet about what that means, from the NSF website, products that have been put through rigorous testing and meet the NSF standards or approval receives the seal, to be placed on the product. The NSF seal is generally accepted by county health departments, but is not a onetime deal. Products are repeatedly tested year after year after year to ensure that they still are meeting the rigorous standards of NSF. It's further important to also let you know that we're considering taking it to the next level, even and NSF is one of the key, if not the key certifier for professional athlete use of supplements and that also includes collegiate athletics and Olympic athletics. And so, we have many professional and college-level athletes using our products but that's that based on all of things that I've just explained, but having the NSF logo right on the label allows, somebody that isn't familiar with our products or our company or our reputation or any of that to look at the label and say, oh this product has been tested to ensure that it's not going to take me out of competitive contention as an Olympic level athlete, as a collegiate level competitive athlete or a professional athlete. So, we're excited about that prospect as well and we're moving down that track on our key products also. Something else that we've also already achieved is IFOS certification for essential fatty acid products, what that is International Fish Oil Standards program, what that means is IFOS is a third-party that actually tests every batch of fish oil that our products are made from and the products have to, the fish oil has to pass very, very stringent, the most stringent quality standards or it's rejected and so for our products and our products are specifically tested by the IFOS and their third-party validating organization. So, they're independent from us or our manufacturers and so, we're excited about that because again we will have their logo right on our packaging and people will be able to point to that or show it to their prospects or customers and so everybody will understand that the products have been third-party validated and tested for quality and purity. So again, we're excited about. An additional initiative that we're extremely excited about over and above the science is, and we've talked about it on this call or the last shareholder call as well, is that we are just launching the K-Cups now in direct selling. And so obviously, we've talked a lot about the coffee aspects, field cup this Company owns, the plantation, the roasting facility, the packaging, now the K-Cup machine and also the distribution channel, direct selling side. There is not another single direct selling company that has their own K-Cups in the distribution channel. There are companies that have packets of instant coffee and so forth, but to have real field to cup, the highest quality coffee, Rainforest certified, certified organic, high mountain grown, shade grown coffee from our own plantations, from our own processing facility, from our own roasting facility, from our own K-Cup manufacturing machine, right to the distributor and to their customers. No other Company has that opportunity or that advantage and so these are just launching now and so these are hot off the press and we're extremely excited about the potential. Obviously, coffee is a huge, huge commodity product around the world. It's something that people still talk about other international markets and Dave's talked about other international markets. Coffee is obviously an international product and international language if you will, and so, we're excited about the K-Cups right from our fields to your cup. And so, that's exciting, and so, with that, I want to turn it over to – the call over to Dave and he's going to get a little bit more into it and so, Dave?

[Dave Briskie:]

Appreciate it. That's great information there. I'm excited to be able to see these new – this new shipping system. We've invested a lot of human capital in implementing it, and there's been a lot of meetings and to know that, Q3, which is just around the corner for us, from where we are right now, we'll start to see significant savings and efficiencies in getting our packages to the consumer quicker and I'm looking forward to seeing that flow through the numbers, and I think you made a really great point on the outbound team. That's a major, major initiative. One thing we've learned and I hope you all understood, the value of the acquisitions that we're doing and how much value is not only in these products that we require, but even to a bigger extent, the value in the databases and what we're learning is, the more time we spend on these databases that we can out extreme value. So, this outbound team, it helps accelerate and leverage that process and give us even greater returns on what is already a successful program. So, we're just ramping up the further support of this acquisition model that we believe is going to bear dividends over many, many years to come as we fine tune it. Before, I get into the coffee end of the business, I wanted to talk about the global expansion. Obviously that is a very, very big initiative for this Company. We continue to add resources for it. We continue to work on it vigorously every day. I've had so many different shareholder type of calls dealing with different funds in terms of an outline of the strategy and I'd like everyone just in a nutshell to understand how the strategy is being laid out and what we're really doing here. So obviously, we're already active and producing revenue and have offices set up in Australia and New Zealand which Bill mentioned. Canada obviously is a very, very big market for us to continuing to grow at double-digit rates but we've also started to develop some of these new markets and we belief But we've also started to develop some of these new markets and we believe it's going to be really driving future growth for Youngevity. And these are three areas. So, you'll notice specifically, we opened that office in Guadalajara, Mexico. There is a big strategy there and Bill discussed briefly, some of the things we're there. The opening of that office is really a beachhead if you will or an entry point into all of Latin America. So, all of the investment that goes into opening that office in terms of Spanish-speaking materials and Spanish-speaking websites and all of the materials that put us in the Latino countries in Latin America, we then can take and refine that within Guadalajara and then move around and through Latin America. So that, number one, kind of on our list. Number two, there's three areas we're focused on, is Russia/Kazakhstan and the reason why we're focused on that area is Eastern Europe. Eastern Europe is another area we want to really dig into and you have to build a strong beachhead before you can enter these specific markets and you have to dial in your distribution and understand what's going on in that specific area and your product approvals also end up getting linked together in this particular region. So Moscow office has been open and that really the strategy there is to really dial into all of Eastern Europe. Then the third area is Singapore, and we're opening an office in Singapore shortly and start shipping here at the end of the summer. Singapore obviously is focused on Asia. Asia is a monstrous market and our strategy as it relates to Singapore is then to circle China in the various countries around China to get a grip on the Asian market before we actually enter China, which we believe is in the three-year timeframe for us barring an acquisition that could come our way, because you never know. We're certainly evaluating a lot of pieces. So between Latin America, Eastern Europe and Asia, those three areas is really the basis for our entree point to our whole global strategy. We picked those areas because they're markets that are very, very acceptant of direct selling. They love the direct selling model. The consumer there is a very supportive consumer of this model. They believe in it wholly and they also have healthcare issues, and when you have a healthcare system that's struggling, supplements tend to sell at a very, very high rate. So once again, those three areas are very calculated and very, very strategic and we still continue to work them hard I think our biggest challenge in in all of the international markets is really getting products approved. That's always the piece that we can't control, but we've got all our pieces in place and as we get products approved, our sales will grow and ultimately we'll have our entire core ready to roll there. So that's what's going on in the international piece. Real quickly on a dovetail into the coffee roasting operation. Obviously, we're a two-pronged Company. We've got two business segments and we have to report that way. We've got a direct selling segment and we've got this – our coffee segment. We truly believe and this is an opinion of management that were actually only getting value for the direct selling segment in our marketing cap at this point. That's our opinion. We believe the coffee division, on its own has the ability to achieve similar valuations that we're getting out of the whole Company now. We've put in the pieces and we've put in the potential and we're now beginning to realize the potential to really grow that coffee end of the business. If you think about it, we acquired these plantations literally a year ago today. So in one year's time, we've acquired plantations. We fertilized them and brought them up to speed. We've made them more efficient. We've gone into the coffee plant, La Pita our processing plant mill. We've expanded the mill significantly to the point where we've tiled and – concrete and tiled the equivalent of 10 football fields of drying area for future growth. We've gone ahead and expanded the coffee roasting operation at CLR Roasters. It's now north of 50,000 square feet. We've gone ahead and acquired, installed, and purchased a K-Cup manufacturing machine which is literally putting up K-Cups as we speak. We've gone ahead and automated that plant. For example, our bagging lines have just been automated thin tie equipment and automated bowling equipment, just that purchase of automation alone has allowed us to reduce payroll overhead by 7 people and we expect it could to be 10. As you start to scale a manufacturing operation, that's when the opportunity really presents itself and that's where the CLR Roasters operation is for us. It's really built to be scalable and built to put on significant revenue without the increase of significant overhead. Literally minor overhead investment at this point to put out large chunks of revenue. Examples of that obviously is the K-Cup machine. The other thing we have our eye on for CLR you'll see this migration is in the higher margin businesses. The K-Cup business is an example of a higher margin business and we're very, very excited to be launching into the K-Cup business and we already have customers on board to take in our K-Cups into the food service industry. So you'll see our product in hospitals and various healthcare institutions. We've got pretty large distribution there we've also signed with us as a distribution partner, the largest distributor of K-Cups in North America is now on board with often us in buying our line of products into the office coffee service industry. Steve touched on, we're being the first company to actually market K-Cups into a direct selling organization and we love the fact that that is the truth field to cup play and we're reserving the very finest and best coffees for our direct selling group, as they deliver these K-Cups. We've also launched a whole foods service initiative, a brand new initiative for the business where we're entering and following the model of Pilon and Bustelo, who has been purchased by the Smucker's Group. It has literally been moved out of Florida and into New Orleans and this has allowed us to kind of fill that void that has been left by the Pilon and Bustelo brands and now the Cafe La Rica brands are taking positions and being built into the various restaurants that are around South Florida and we've acquired over an initial 110 espresso machines and we're starting to place espresso machines into large restaurant chains that are buying the Cafe La Rica brand and serving the Cafe La Rica brand at these restaurants which then of course dovetails back onto the retail shelves where Cafe La Rica can be purchased at retail. The food service business is another high margin business and that has been launched. We continue to service all other aspects of the business. We're happy to say that our contract with the cruise lines have just been renewed. All of our contracts, as it relates to the larger cruise industries, where we are the largest provider of coffee to the cruise line industry and we continue to enjoy year after year growth with them and our business continues to be very, very stable there. We've also – when you look at CLR roasters as a plant, you will learn very quickly and there are many shareholders that have come down to Miami and have toured the plant. It literally is a turnkey operation that can produce every type of coffee. The only thing that plant was missing was the ability to produce K-Cups and we can do that now. The bag business is growing very, very significantly. We have brought on [indiscernible] brand and it's now being distributed through the [indiscernible]. We've also landed Sprouts and their bag business, which the size of those businesses in our continued growth with all the, is what drove us to have to acquire a mechanized tin tie and bag folding piece of equipment. So, we're really bullish on where the coffee business can go. The green coffee distribution business continues to grow at a very, very nice pace. The investment we have made in the processing plant, Nicaragua, allows us to grow that business at a significant rate and as we enter into 2016, we expect to achieve similar growth rates that we've had right now. So, important to note there, scalable, certainly the potential equal to the direct selling division and you will be very, very pleased I believe in the second and third quarter at the margin improvement and the sales growth that you're going to experience at our coffee roasting operation. With that, I just want to touch briefly on our story to the Street, obviously our stock has enjoyed some recent rise in value and we're happy to see that. We feel like we are finding the right partners and we're finding the right people to tell the YGYI story to. We've done some compelling road shows to tell the story and we're telling it to smart investors and prudent investors. Those that really understand our model and the feedback obviously has been very good. Our model really works. Our acquisition model is unique. The Youngevity direct selling model is unique. It's different. It's trailblazing. It's got other people taking a look at what we're doing and how we're doing and we believe we're just getting started and this thing is continuing to be built on a very solid foundation, but it's ready to grow and it's scalable on both ends. So, we're going to do more of that. We're going to also do, follow up with the significant road show we did in Boston in New York, a little over a month ago. We're taking that same program and we're taking that now to the West Coast and that will be up and coming in the next 30 days. So, we're going to continue to do that, more radio, more conferences, more road show, more telling the story and most importantly, one of the things that we've seen as well is significant involvement from our distributors actually becoming proud shareholders of Youngevity and we're certainly grateful for their confidence in what we're doing and their investment in the Company and of course in themselves and what they can deliver to this business. With that, I want to turn it back over to Steve Wallach, our CEO to close out the call.

[Steve Wallach:]

Thank you, Dave. Again, thank you Bill as well, and just a very special thank you to our shareholders and distributors for attending this call also, and I look forward to our Q2 conference call coming up in the near future as well. So, everybody have a great day and talk to you soon.