Youngevity International, Inc.
Q3 2015 Earnings Call Transcript

Published: 16 Nov 2015

[Operator:]

Good morning and welcome to the Youngevity International Q3 2015 Shareholder Call. During this call we will be making forward-looking statements regarding Youngevity's current expectations and projections about future events. General and forward-looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, estimates, and similar expressions. These statements are based upon current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties including those set forth in Youngevity's filing with the SEC many of which are difficult to predict. No forward-looking statements can be guaranteed and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call, and Youngevity undertakes no obligation to update any forward-looking statements contained in this conference call on account of new information, future events, or otherwise, except as required by law. I would now like to hand the call over to Youngevity's CEO and Chairman, Steve Wallach.

[Steve Wallach:]

Thank you, Mike. Hello, I want to welcome everyone to the Youngevity International shareholder's call. Speakers on the call today are myself, and our President and CFO, Dave Briskie; our Vice President of Distributor Relations and Training, Alex Theis, Vice President of Asia, Ben Ho. We will cover the following topics on today's call. We will highlight our Q3 performance. We will discuss our vision for the future. We will discuss our coffee operations, we will hear from our VP of field relations and training and we'll hear from our VP of Asia. So what I would like to do now is bring Dave Briskie on the call to talk about our financial results for Q3. Dave, are you there?

[Dave Briskie:]

Will the other moderators that are on the call mute their lines because I'm hearing some static before we get started Okay, so let's get to Q3 results for the three months ended September 30, 2015 our Youngevity reported revenue of $41.3 million compared to $37.6 million in 2014 and this represents almost a 10% increase. Our 90% of our revenue is coming from the direct selling segment this quarter at approximately 10% of our revenue is coming from the commercial coffee segment. Gross profit for the third quarter of 2015 increased approximately 19.3% to $25 million as compared to $21 million for the three months ended September 30, 2014. We are very pleased with this strong improvement of our gross profit as a percentage of revenue as this quarter logged gross margins of 60.6% in Q3 versus 55.8% for the same period a year ago. Operating expenses for the three months ended September 30 increased approximately 21.5% to $24 million as compared to $19.7 million for the three months ended September 30, 2014. The main contributor to the increase was derived from distributor compensation which increased 20.2% to $17.4 million in the current quarter from $14.5 million in the same period last year. This was primarily attributable to increase in revenues and increase in incentives - higher rank advancements. For the three months ended September 30, sales and marketing expenses increased 9.6% to $2.4 million from $2.2 million in the same period a year ago. This is primarily due to increased compensation costs and an increase in distributor event cost period to period. For the three months ended September 30, 2015 general and administrative expenses increased 35.8% to $4.2 million from $3.1 million for the same period in 2014 primarily due to increases in consulting cost, employee compensation and international expansion efforts. Very important point to listen here clearly on this increase although its seems fairly dramatic. In addition to the items that I just discussed, we recorded a non-cash expense of $120,000 to the contingent acquisition liability during the quarter and $253,000 non-cash expense related to warrant modifications compared to a decrease of $342,000 in non-cash expense to contingent liability in the prior year. So if you were to back out these non-cash impacts on the general and administrative expenses, we would have just 11.5% increase, in other words $3.8 million SG&A versus $3.4 million for the same period in 2014. For the three months ended September 30, 2015 there was a non-cash expense reduction of $1,69,000 as result of the change of fair value of our derivatives compared to the non-cash expense of $273,000 during the three months ended last year. The primary reason for the change in the valuation of the warrant derivative liability was due to the decrease in the market price of the company stock to $0.33 at September 30, 2015 compared to $0.38 as of June 30, 2015. Our net income was $416,000 for the three months ended this year Q3 compared to a net income of $185,000 for last year's Q3 quarter. EBITDA Earnings Before Interest Taxes Depreciation and Amortization as adjusted to remove the effect of stock based compensation expense and change in fair value of warrants are adjusted EBITDA as we call it was $2,83,000 for the three months ended September 30 compared to $2,61,000 in the same period for the prior year. Now if we exclude the non-cash expenses discussed in the general and administrative expenses I just described a little bit ago, the adjusted EBITDA would have been $2.456 compared to a $1.719 million for the same period of the prior year. After backing out the non-cash impact we achieved a 42% improvement in adjusted EBITDA we’re pleased with the improvement over the year ago numbers. We continue to feel that this non-GAAP term adjusted EBITDA represents a vehicle for providing clears metrics for tracking the performance of our business. As always we encourage our shareholders to review our financial numbers posted on virtually all financial sites today as well as our YGYI corporate site. We also encourage you to email in any questions you might have via our investor relations line or to me directly [e-mail] and we'll be happy to get you any answers you might have on our current filing. Of the $41.3 million in quarterly revenue, $37 million came from the direct selling segment and $4.27 million came from the coffee segment. The coffee business revenue was lower by over $2 million substantially due to price decreases of the green coffee in the commodities market. In fact I ran a 12 month chart this morning on the prices of green coffee commodities, and a year ago today it was $2.05 a pound, while today it's a $1.13 per pound, almost 100% decline just under that decrease. While we cannot explain the suppressed price of the coffee commodity, we're proud to be insulated from its effect from a profitability standpoint. Although the price of green coffee certainly affects the topline revenue of the coffee division, it has little negative effect on the bottom-line. Why, you might ask. One reason is on our green coffee business our plantations had the certifications that keep a higher floor on the coffee market, being Fair Trade Certified and Organic Certified, our coffee program establishes $1.64 in the green coffee market in terms of where you sell your green coffee. This is a very nice competitive advantage that we have in that particular area of the business. It's sad for those producers and those farmers in this coffee world today when it cost about a $1.12 per pound to produce coffee, and meanwhile the market is at $1.13. Obviously these suppressed price level sometimes are unexplainable. We don't establish the commodity pricing market but we do expect based on simple economics that eventually those prices will move in a forward direction. Why do you ask, because world coffee consumption is on the rise and coffee manufacturing or coffee output is on a decline. So, eventually we should see economics takeover and see prices of the commodity move in a forward direction. Obviously on the other side of our business with the coffee market, we benefit from falling prices. So we've got a pretty good hedge against these types of situation although it does have a dramatic decline on top line revenue in the coffee sector. We still target coffee over the longer term to be 30% to 35% of our overall revenue. The direct selling continues to grow nicely, logging in 18.4% increase over Q3 of 2014. The coffee business top line revenue as discussed was affected by the commodity prices. Acquisitions on the direct selling side contributed $3.1 million to its growth or 54% of the revenue growth, while organic growth accounted for 46% of the revenue growth for our segment. We're really pleased with 46% revenue growth from organic nature, we think that's very, very strong. And we're also pleased that our direct selling segment continues to benefit from our acquisition model. It's important to note that we are continuing to invest heavily in Nicaragua, and our direct selling segment, international markets, and expect the expenses related to this to hold back profitability in the near future but significantly drive profitability in the future. Let me take a second to just talk a little bit about our Youngevity business model and how it really works. I've had the pleasure over the last 18 days to sit down with a number of institutions, a number of Wall Street people, a number of high net worth investors to discuss our business model. And I thought with all the new shareholders on this call today it would be a good point to bring them in and really explain what we're doing here at Youngevity, First of all, Youngevity operates in two giant consumer product business segments, one of them being commercial coffee and the other being direct sales of the number of whole sum vertical consumer products. We are proud to be operating in each segment. The biggest business segments operate independent of one another. However, the coffee segment does vertically integrate with the direct selling segment offering a complete line of coffees that our customers and distributors enjoy. Make no mistake about it, our plans are ambitious but not reckless. By Wall Street standards we are still a small Company with annualized revenue now approaching $165 million based on our Q3 revenue. It's looking back just four years ago when Youngevity merged with the coffee segment, when we were a $22 million enterprise and here we are four short years later at a $165 million and growing. Our business philosophy is to operate in multiple verticals within space that offers giant revenue opportunity. In coffee, we are purified the cup business, obtaining every certification that matters in coffee. Fair trade, Organic, Rainforest alliance and Bird Friendly certifications. This not only yields a great product but a fantastic marketing for our distributors to leverage. Having these certifications insulate us as discussed earlier from negatively impacting profitability in the coffee segment. When the coffee market is down, we benefit from different verticals within our coffee operations, and when coffee prices are up, the green coffee distribution models will benefit greatly. But neither the price of coffee really affects the profitability of the segment. So we're a distributor of green coffee and that segment, we're a manufacturer, we're a private label producer, we produce for Carnival cruise lines, we produce for Norwegian cruise lines for the private label roaster for all these stores and many, many others. We own our own brands that exist in retail with the Cafe La Rica brand, and Josie's Java House brand, and we are in the food service business. All of these verticals have massive potential to deliver significant revenue and ultimately produce significant shareholder value. In the direct selling channel, no one does what we do and how we do it. The greatest power of this selling channel is the face-to-face interaction between our distributors and our customers. This has always been the greatest strength of the direct selling channel. Youngevity is transforming the space by marrying the high touch component with a significant and robust investment in technology, which our CEO, Steve Wallach will talk about a little later in the call. Essentially, a combination of high touch and hi tech is what we're after at Youngevity. This allows the Company to prove in technology to help its distributors maximize consumption opportunities that already exist in their customer base. Because our distributors are being provided the power of our e-commerce solution, they can benefit from multiple vertical opportunities that exist within our platform. This is why our acquisitions work so well and why we have limitless possibilities for expansion. So, we operate on the direct selling side in verticals with giant revenue potential. Already offering product lines in health and wellness, and a complete line of supplements and nutritional products in that category. Meanwhile, we're in the beauty and care space with a complete line of mineral makeup, hair care products and personal care products. Also, operating in food and beverage with a line of energy drinks, healthy chocolate, wholesome foods and of course, coffee products. And we're in the home and family oriented vertical with fantastic photo booking products, memory booking lines and home and garden, and even now a complete line of pet products. Many of you know, I have been quite active over the last couple of weeks taking our story to the investment community. The biggest question I'm getting, the biggest question we are getting from the investment community is “not why we do what we do but how we're doing it?” Apparently, its unusual if not rare for a company to execute such an ambitious plan in multiple verticals with giant potential, grow at a significant space, launch a global platform and somehow remain profitable. Like I said, we are ambitious but we're not reckless. I'd like to bring Steve back onto the call, our CEO. And he's going to talk about our vision for 2016. Steve?

[Steve Wallach:]

Thanks Dave. I appreciate the update. November is a time of the year that we put in place our vision for what we wish to accomplish in the coming year. Let's take a look at some of the plans for 2016. We are in the process of opening Youngevity's’s technology design center. We're currently moving into the facility now. The design center is located in Aliso Viejo, California, which is a technology hub in Southern California in Orange County. Let's see. Google, Microsoft, Sony, Rekrutmen, which is formerly known as buy.com, core logic to name a few are located in this technology region. Brad Kenson our newly appointed Chief Technology Officer is assembling a team that will take our technology initiatives to an industry leadership position. The IT team will be responsible for distributor and customer facing websites, back office administration, ERP systems, CRM systems and ultimately a fully capable mobile development team. We've added third party logistics capabilities which are not available due to ERP system improvements. This will allow for limitless expansion and distribution of our goods. Training initiatives. We are adding additional training initiatives based on this technology platform throughout 2016. One of the areas we are most excited about. This will also include onboarding technology improvements. That is, bringing on new distributors, new customers exposing our products and our product brand divisions to our new customers and our new distributors around the world. This will also have a huge effect, I believe in our product marketing. It will provide technology tools and simplification tools to our distributors that allow them to better market the products that we do have. We are going to be adding brand managers and putting them in place across all brand categories which brings micro focus to each product category. We will be expanding our acquisition team. You have heard Dave talk about the acquisition model and we’ve talked about on these calls in the past but by adding to our acquisition team, what that will do is, it will bring faster and more understanding of our products and our mission to a new people and new customers and new distributors coming into Youngevity. So we are excited about expanding on our acquisition team as well. As a maturing global company, that caused us to look at expanding all major marketing projects to include multiple language production. We’ve added to our video production capabilities over the last couple of years and in fact, we are now able to roll out launch videos in multiple languages. You’re hearing more about our international expansion strategy. In fact, we’ve just completed through a collaborative effort, a video series on the corporate story and it’s available and completed now in three languages including English, of course, Spanish as well as Russian and so we are excited about the video capability and production expansion that we’ve undertaken as well. You’ve heard on this call and heard in the past, an increased commitment to training resources. This also ties into the technology and initiatives that we are discussing. In addition to that, you’ve heard Dave talk about the coffee division. The CapEx expenditures will continue for our coffee operations and we’re quite bullish on the potential of this business segment as you’ve heard Dave talked about already a little bit on this call. What I would like to also do is bring Dave back on to talk about the coffee division and he would provide a more detail update on what’s going on our coffee, Dave.

[Dave Briskie:]

Yes, be my pleasure to do so. And Steve you mentioned a video series, the video series got a four part series right it includes the plantation level, it includes be the change foundation, it includes the coffee segment, all in video where we literally flew a video team right on location, an incredible shot of the Youngevity headquarters and all that’s going on there and then it reaches the global. So it’s four videos and we'll start to roll them out this week, I believe in multiple languages. So that’s an exciting conclusion of a monster project that we’ve been dealing with for the last 90 days or so. So, I appreciate you mentioning that. And talking about Coffee. Coffee, the key is scale. It’s all about scale. When I met Steve Wallach 6 years ago, we had a conversation about coffee and he asked me what I thought about it and I said it’s pretty simple business. It’s go big or go home. And Steve decided we are going to go big and we’ve been working on building infrastructure on that business to become a true field to cup play. And what we’ve created really is two of the most modern coffee plantations in Nicaragua, fitting on the 1,000 acres that we now control. We’ve planted 500,000 new coffee trees since we have acquired these plantation and we have a mission to plant 300,000 to 400,000 new trees a year. Our goal for this plantation is to create the most densely covered coffee plantation in the world and we have a mission for that to be accomplished over the next four years. Coffee plants take about three years to reach maturity where they can bear fruit and we are on that mission and we are very committed to it. I was asked how we were able to make sure that the soil in service all of these coffee trees and we have two benefits. One, we happen to be in a very pristine area up in the rainforest unaffected by pollution and two is we’re working on a fairly significant project to take our minerals that we use in farming and the – on the Youngevity side that’s tested so well and to fortify the soil in our plantations up in Nicaragua. So that’s an interesting project that we are working on, that will assure us we believe that we will ultimately have the most dense coffee producing plantation in the world. We own the most modern processing mill now in Nicaragua that’s sits on 28 acres. Many of you know it’s been discussed on last calls, that we’ve tiled and the equivalent of almost 10 football fields if you will, or acres which now allows us to dry and process £7 million of coffee every 30 days from the drying perspective. So really built this part of the business to scale and we just entered to the green coffee business really in the last year. We have been selling the second largest producer of green coffee, it has been a very nice customer of us. We don’t usually disclose our customers on this call for obvious competitive reasons. We did test with another large customer in green coffee last year. Keep in mind, we are new to this space so we obtained a three container test which is about £120,000 of coffee last year that we shipped and it went very well. We have just recently from the same customer received a 22 container order which represents over £900,000 of coffee to be delivered in Q1 of 2016. So we’re real confident that the green coffee business which takes a substantial investment upfront will pay great dividends over a long period of time. Our margin improvement plan of CLR continues. One of the areas that we feel is going to help us in a big way is the food service launch. We have placed our first two operations in business in the food service business which is all of the restaurants are target and South Florida as well as government cafeterias, and these types of opportunities. We expect this to be a great brand loyalty driver as the food service division is only selling our Café La Rica Espresso and our Josie's Java House brands. So very excited to have finally received our first 100 Espresso machines and grinders. This is our $200,000 investment just in equipment and our goal is to place this quantity of machines over the next six months in each six months to bring in another 100 machines and keep adding to this very, very high margin lucrative business as a fantastic brand builder of our product because at the food service end of the business people get to actually try our product and taste it and as they are walking through grocery store and so forth they can go ahead and see the product and buy it for their home use as well. So very excited about this part of the vertical. Something that happened just here very recently is we recently signed on with KeHE, K-E-H-E a very, very significant food service distributor to grocery factor a multibillion dollar company. We gained distribution into publics now with KeHE and they are representing our Café La Rica brand and they will start shipping the public stores beginning December 1. We received authorization also from publics which we are very, very proud of that we can start shipping our Josie's K-Cups to publics and KeHE is picking up the distribution on this product line as well and that will begin in February of next year. This is a significant distribution of play with KeHE. They are multibillion dollar distributor as I mentioned and publics alone last year they did $400 million in revenue. So on an annual basis KeHE is a significant player. They come to us with a network of accounting managers now and now we have access to distribution really across the country for our Café La Rica and Josie’s brand, and as we get a product placement into these various retailers and grocers, we have distribution set up to the enter those markets not only in South Florida, which we've been kind of handling on our own but now with a big player as our partner to help us expand our own brands. So we’re very, very excited about this relationship and the potential that brings to us. With Josie's Java House being picked up by KeHE and many, many other retailers now, it forced our hand and our distributor field is so excited that now we can create our own brand instead of sharing a brand with Josie's Java House and we have created a Be The Change foundation brand of coffee and we actually trade mark the term Y- Cups. So Youngevity is building its own Y- Cup brand, its own bag and its own bag line of coffees that will be distributed not only here in the United States through our incredible distribution force but really on a worldwide basis. So we're excited that Youngevity has it own coffee line, and that coffee line will only utilize our plantation grown coffees with all of its certification, and we're proud to be able to deliver the best quality of coffee through our distributors and then to our customers there . So that's an exciting opportunity and I believe we're still the only Company that really can offer Y-Cups, I guess we can call them K-Cups as well. So we're excited to be in that business. We also have already started shipping Brew La La and DDK cups through various retailers, and one of the big announcements we have and I'm excited to bring it to you all of you is the hiring of [indiscernible] and many of you would want to know who [Magel] [ph] is and I want to give you a brief discussion about his background. As anyone knows who's ever built a business, the key to building a business over a long period of time is very simply to bring in the right people, people with experience and build a very, very powerful team. We feel so fortunate to have added Magel to our business, Magel comes to us via Green Mountain Coffee Roasters. He was one of the original three hirers as an original OCS account manager when Green Mountain launched into the K-Cup business. He handled the entire Southeast U.S.A., all the way up to the Northeast in a newly established at the time OCS division for Green Mountain Coffee. He has extensive distribution experience. Extensive experience in the sales and marketing of K-cups, and extensive relationships into the OCS sector of the K-Cup distribution business, he has worked in D.C., Virginia, Carolina, Georgia, up in the Northeast Alabama, and of course Florida. He was one of the men that was strategically responsible for developing the OCS distribution network in the region for Green Mountain and Keurig. He was promoted in 06, so he did that starting from in 2000, and in 2006 he was promoted to the regional Director for this division, he directed eight sales reps in the Southeast region. He was responsible for national account such as Aramark, Standard Coffee, Sodexo, within the region. He had $24 million budget just to run the division. He implemented field business plans positioning strategies, strategic channel initiatives, he drove double digit growth of single cup business in the region and we are so, so proud to have him on our team at CLR Roasters in driving our K-Cup business. And I think that is the news of the day as it relates to the coffee business, obviously we're committed to it and we're certainly committed to our K-Cup capabilities. So enough about coffee, let's get back to the direct selling end of the business. It is my sincere pleasure to introduce Alex Theis under the call. Alex is our VP of Field relations, and just so everyone is clear, Alex has actually been involved in Youngevity for almost a year. I met Alex just about a year ago and we brought him in to work on some projects that we were keen on testing and using his expertise as extensive industry experience in direct selling. To really us help develop some revenue initiatives and some new strength that we could add to our field organization, and we're so proud to have a Alex on the call with us, our VP of field Relations and Training, Alex Theis. Are you there Alex?

[Alex Theis:]

I'm here, can you hear me alright?

[Dave Briskie:]

Yeah, I hear you good.

[Alex Theis:]

Good. Well, I want to thank Dave and Steve and special thanks to all the shareholders that have joined us today, everybody on the call today, thank you. And I want to get a little bit into why I'm here. Now I'm on the call, why I'm with Youngevity, as Dave explained, not new to Youngevity, I've been here almost a year a little over ten months. And what I love about Youngevity, why I'm here, why I'm excited about the future. First and foremost is the leadership. One thing that CEO, Steve Wallach, allows people could do is operate in their strength zone which I'm a huge proponent of. I liken it to a football team, when football team is on offense, and every player, all 11 players executes perfectly, they cannot be stopped. And Steve recognizes that the great team can't be stopped when they're cohesive, when they communicate, and when they're operating in their strength zone. And that's what Youngevity Dave, Steve, and the whole team have a lot of need to do over the last years, work in the background is very important project, learn the company, learn the distributors, learn the model that we have here at Youngevity, which is highly innovative, which is another reason why I'm here. And just so all of you know, I've been in the industry since 1997, and I love it because it's a word of mouth we simply cannot replace the trust that word of mouth brings and somebody you know tells you about something they value or like, you are much, much more likely to take action on that, you cannot pay for the advertising that happy customers give you, and you heard President, CFO Briskie, mentioned the power of face-to-face interaction, which has been called the connection economy. But I feel like the economy is still catching up to our innovative business model which relies on face-to-face interaction, on a word of mouth interaction , and taps into today's technology – the forward moving of social media and today's other technologies, we are literally on the leading edge, not just in our industry but in the whole economy especially with all the products we have to offer. So, another reason why I'm here is the products. I'm a product of the product as they say, but it pass the real test of my family, they absolutely love the products and I'm also here because I love impacting lives, and here I get to do with finances and with personal development and training which is what we're going to be moving into 2016. But I want to start by talking about one of the initiatives I was initially brought on to implement, which is our outbound retention team. We had another record month in October against setting our sales and retention record, and we are in the same pace this month in November, which is pretty rare in my almost 20 years in the industry. In November, and Thanksgiving, and holidays to have a retention team continue this pace with their highly trained and highly efficient and the mission of every call is to leave everyone better than we found them, which is working extremely well and the feedback we're getting when we talk to people. And the more people we talk to the better but – it's not just retention with this outbound team, it's marketing. They are feeding information to our IT and marketing teams based on the feedback they get which no amount of surveys can replace where you actually talk to people. Another point with our retention campaign, the orders average almost $100 above our normal average order once again indicates that our customers as they get to know our products they will buy substantially more. And as all of you know on this call, there is only a few ways fundamentally to grow a business, you can get new orders, more orders, more frequent orders or higher revenue per order, we're seeing all that with our retention team and massive customer loyalty that our great products provide. Our retention initiatives will continue to grow next year going into the first quarter, second quarter 2016, including taking its feedback to create better product, education, training and communication. What I found in this industry and with all nutritional products when there is good is we have the best, I believe the best products in the world. When people start taking these products for 90 days or more, they make it part of their lifestyle and anytime somebody introduces a new habit, whether it's exercise, saving money, when somebody makes it part of their lifestyle they are much more likely to stick with it. And that's how we're going to be helping both our customers, and distributors with product, loyalty and retention, by introducing technology and enhancing our technology that will improve retention and keep our products in the forefront of people's mind even as simple and fundamental as reminding them to open the box, put those products on their counters, start taking them every day. And we'll do this by introducing and expanding some of our technology comprehensive and responsive auto responders and SMS, text messaging campaigns, also enhancing our email. Essentially what we're going to do is communicate with people how they want to be communicated. For some of us email is wide noise, for others we rely on it heavily. Some of us really rely on phone calls while the majority of us carry a smartphone and love to get text to be reminded and communicate with people. We will provide options to our customers and distributors so they can choose how they want to be communicated with, but the bottom line is, the more we can suddenly market and communicate with people, the more like are to get people on our products for 90 days and more and in my experience when they hit that magical 90 day mark, we've got a customer for life and our retention team, our outbound retention team is proving that. So our focus on training will continue as we move into 2016 including cost promotion and education across all of our product verticals similar to what Amazon does like all of us are buying things on Amazon, many of you are probably prime members like me and when you go to buy something it will say customers who bought this also bought something else. Customers who bought X also bought Y or customers who visited this page went onto buy this product. With our new IT initiatives with our Chief Technology Officer, Brad Kenson, we will see more and more of this technology come into play, rewarding, fun, rich experience and I really want to stress that, a rewarding, fun, rich experience that is easy and fun to talk about with people, it is going to be one of our differentiators as we head into 2016 with some of our technology initiatives. We are talking about - we are taking a greater role of distributor and customer events as well as Dave talked about with face to face interaction and this is going to take place across the globe by having a stronger and more regular corporate presence at events working hand in hand with our business leaders. We have already seen great feedback and buying from our initial delve into the strategy, we started the strategy over the last four to six weeks, our COO, Michelle Wallach has been at back to back events in the last two weeks including women's events, and Chief planning women’s events, our CEO Steve Wallach was at an event last week, our President Dave Briskie, our President and CFO has been at events and traveling throughout the East Coast for the last two weeks. Our VP of Asia who you will hear from on this call Ben Ho spent some time in New Zealand just across the water from Singapore where he located training and listening to people and that is the key piece. I had been on the road for the last two weeks. I will continue to be on the road throughout the months of December, January, and February. We must have face to face interaction with our leaders just like we are doing on this call, more and more communication that people can tap into, we are going to be increasingly our field touchpoints at in person events, which will help to continue and create fluency in our messaging and training. Again back to that Football team concept when everybody is on the same page with everybody is executing when we are blocking and tackling, when we are doing the fundamentals right, we are operating as the United Force, we cannot be stop and that is one of the things I love about where we are headed in this new role I have taken on here at Youngevity. So distributor relations team will be working much more closely with IT and marketing, the front end feedback and trends and improve our technology and training of our consumption model as I mentioned our new Chief Technology Officer, Brad Kenson has already build into this, I took a trip to our Utah office, our Utah facility with Brad with our IT and customer service teams together and stay on the same page there. We would be creating a more low rounded training system, companywide in 2016 including heavier use to place social media and communication pieces like webinars, podcast, periscope, interactive online training essentially using innovative tools to make it easy to share and again create a rich experience for all of our customers and distributors. Improvements forthcoming include a highly refined online ordering and signup process, a user friendly autoship management module, a revamp back office enrolment tool which should produce all of these should quick ROI to a much better user experience and again focused on those fundamentals once we get those fundamentals out there, working well, working through our top distributors we will then begin to enhance even more of our technology. We have made improvements in our customer service metrics throughout the last quarter including hiring a trainer, having a dedicated training staff, ramping up our staff the result of this have been reduced hold and answer time significantly, reduced other metrics that have improved as we really focus on our customer service experience and I want to stress this, we will not rest with our customer service not just with the best in our industry, we want our customer service to be a phenomenal experience, no matter where you are coming from compared to any industry on the globe and we know by having great customer service on a great experience will make it even easier for our products to reach further and further across the globe. Moving into 2016, we'll look deeper at our data as well as I’m a big fan of diving into data to point out trends where you should go marketing decisions, where sales are headed and where our strength lie. I think a lot of company is focused on the weakness, here it's been very clear to me to focus on our strength from our executive team so we use the data to identify strength and trends especially when it comes to our mergers acquisition, product consumption buying habits and will continue to assist our distributors with growing our teams and increasing retention again exploding our strength which our product royalty is one of our greatest strengths. We’ll also be expanding our acquisition team over the next several quarters, making our leading edge business model even more efficient and profitable by continuing to build a platform for new companies, distributors, customers and products to ran safely and comfortably with Youngevity, what we are talking about is the well factor, when these companies, then mergers acquisitions, new distributors and customers coming. We want them to be allowed by our customer service, our technology, our high touch, our high-tech pieces. We will have a team and will be expanding this team that will literally taking acquisitions like a – embrace them get them going and create the well factor to make acquisitions and merger – well we made in the right decision and expand those. After I discovered this innovative model with Youngevity and really learn how it works and saw the results. So merger comes in and may be they’re buying their products, how they jump in and start buying the majority of Youngevity products, nothing short of amazing and its one of the most innovative things I’ve ever seen in the industry and really put this on the forefront of growth not just in 2016 but in productivity, so I’m really excited to help Dave and Steve develop his acquisition team, expand his acquisition team over 2016 to really help grow this innovative business model. I have to say I’m probably most excited about the future because I get to focus on my strength, distributor relations, field advocacy events, customer growth and retention, continuing to prove our overall distribution and customer experience in all areas, customer service, retention, training, IT, web, technology and acquisitions and may be most importantly for distributor base not just helping them make more money but helping them to develop their leadership is one of things I am very, very passionate about and that’s all – there on this call, the more leaders you have, the more you are on the forefront of leadership, the more likely you are to continue just to grow and that will be one of our big focuses. I want to thank you again to all shareholders for joining us on this call. I’m really, really excited to be here and really looking forward to the great innovative things that coming in 2016 and with that I will hand this call back to our CEO Steve Wallach.

[Steve Wallach:]

Great, Thank Alex. Appreciate all of that. Alright so let’s get into some of the global expansion, information that we have been taking about and I’ll give you an update on international as you know we have focused on five global geographic regions. Canada being our number one international market, our second largest overall market right now its approaching about $5 million in annual sales and we have initiatives in place that are expanding upon our growth in Canada, increasing our support across Canada for not only our products, distributor business development. Australia and New Zealand being one region, the Australia and New Zealand region is our number two market already in excess of $3.5 million annualized in sales and growing at about 50% over the last year and so we’re excited about that we’ve been increasing our support for this region and for the distributor group there as well and will continue to do so throughout 2016. As, we’ve been focused about for the last two years on opening three new regions Latin America, Eastern Europe, as well as Asia. We’re excited as we move into Eastern Europe, as well as Asia. We’re excited as we move into 2016 to have all three of these regions to begin contributing to our revenue. On the last call, we discussed opening Singapore in Q4 for instance and what I would like to do in regards to that is bring on our VP of Asia, Ben Ho it is about midnight this time in Singapore but Ben is used to working long hours, as he has worked tirelessly to bring Singapore to launch. Ben has extensive experience in new start-ups, market expansion, strategic planning, operations as well as sales and marketing. Ben are you on the call?

[Ben Ho:]

Steve I’m here.

[Steve Wallach:]

Great, you're coming in perfectly clear.

[Ben Ho:]

Thank you, Steve for the introduction. Good morning ladies and gentlemen, my name is Ben Ho, I’m excited to come onboard the Youngevity management team as Vice President of Asia. I strongly believe that at Youngevity, there is a strong value proposition for people all over the world with Dr. Joe Wallach’s book and message and especially more so in Asia where we are facing a rapidly aging population. Inevitably with the rapid changing demographic across Asia, this presents Youngevity with unprecedented growth opportunity. And the opportunity for many is popular as we expand our global footprint touching lives and changing lives. Asia is the largest and most populous of continents and it is located in both the Northern and Eastern Hemisphere. Asia comprise a full 30% of the world's land area with 60% of the world’s current population. It also has the highest growth rate today, it's population almost corporate during the 20 century. While most direct selling companies expand into Asia to non-English speaking countries, Youngevity has particularly decided to fixing [up as] gateway to the rest of Asia. A journey of a thousand miles begin with the footstep in the right direction. This decision will certainly serve our faithful leadership for many years as we have mitigated one of the greatest challenge for most distributors from the West. It is common for distributors of many direct selling companies to struggle trying to communicate with a different language when they expand into non-English speaking nation. Let them alone experience it totally different cultures. Please allow me to give you highlight the language advantage. English is the language of administration in Singapore, the official language of Singapore are English, Chinese or Mandarin, Malay and Tamil. Literacy rate of the population in Singapore is more than 96% more than half of the [world publish] are literate in two or more languages. Singapore is a metropolitan society with people from many parts of the world living and working here. Our distributors in U.S. may not speak many of these Asian language. However, this gives unique opportunity at Youngevity today and start bidding our business from Singapore, it may well be the gateway to the rest of Asia. With the high population density of more than 8,000 people per square kilometers and they were to connect with a handful of people in Singapore, the chance to bid an international network are normal. The opportunity is huge with more than 60% of the world’s population, 4.3 billion people in Asia, this is an opportunity of a lifetime. A few weeks after my first meeting with Steve and Dave at Chula Vista office Youngevity International Singapore Private Limited was successfully incorporated March 10, 2015. Since then we have been working on the clearance of our first batch of -- products with the local health authorities. In August, we signed the lease of our Singapore Office Cum Showroom situated in the vicinity of Orchard Road, a prime shopping district well known internationally. Our first container arrived from U.S. in mid-October. I’m glad to inform all that the Singapore Office Cum Showroom is almost operational. I have taken every effort to design it to be an office that many will be proud of. We are days away from opening our doors for business. While we were working on the Singapore setup, I made two trips to the Philippines, a country of more than 100 million population. Following my first trip in April we received the license to operate in short LTO from the Food and Drugs Administration of the Philippines. Where things commence work on the product registration, this would take some time. We are hopeful that we will have product clearance by the first half of 2016. We hope to launch the Philippine business before the end of 2016. Following Singapore I hope we can commence work on our closest dealer Malaysia this is a country of more than 30 million population in all it will be great if we can materialize Philippine and Malaysia in 2016. To my direct selling career I witnessed how many companies fail to recognize the need of the market and the importance of building a strong foundation. Combing the experience I had as a Distributor and the Corporate Executive, I'm passionate about bidding a business to last a lifetime. This is the best time at Youngevity, I'm excited and proud to be part of this journey and in spreading Dr. Joel Wallach 90 for Life Message to the rest of Asia. With that I would like to hand this back to our CEO Steve Wallach. Steve, back to you.

[Steve Wallach:]

Great, thanks Ben. Now we have very easy to see how large the opportunity of Asia is with 60% of the world’s population that’s incredible. Thank you, Ben. All right so, I’d like to go ahead and wrap up the call and thank everybody for being on the call with us today. We look forward to the next shareholder update call next time with all of you. So everybody have a great day and thank you again.