Nu Skin Enterprises Reports Second Quarter Financial Results

PROVO, Utah, Aug. 4, 2022 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced second quarter 2022 results.

Executive Summary
Q2 2022 vs. Prior-year Quarter

Revenue:	$560.6 million; (20)% (5)% FX impact or $(34.6) million
Earnings Per Share (EPS):	$0.67 or $0.77 excluding charges associated with our Q4 2021 exit from Grow Tech, compared to $1.15 in Q2 2021
Customers:	1,380,615; (6)%
Paid Affiliates:	242,133; (16)%
Sales Leaders:	50,085; (24)%

"As previously announced, our second quarter results were impacted by extended COVID-related factors in Mainland China, distractions in EMEA related to the ongoing conflict, weaker global economic conditions impacting emerging markets and the record strength of the U.S. dollar," said Ryan Napierski, Nu Skin president and CEO. "Despite these challenges, we delivered our ninth consecutive quarter of growth in the U.S. on the strength of new product launches and our social commerce model. Additionally, we drove year-over-year growth in our Southeast Asia/Pacific and Hong Kong/Taiwan segments due to the successful launch of ageLOC Meta and early social commerce adoption.

"Looking toward the balance of the year, we remain focused on Nu Vision 2025, including:

• Introduction of EmpowerMe, our personalized beauty and wellness strategy, with the launch of our connected LumiSpa iO device beginning in the third quarter;
• Expansion of affiliate-powered social commerce by introducing a new affiliate incentive structure known as 'One Price' beginning with LumiSpa iO and other select products; and
• Further adoption of our recently introduced Vera and Stela apps with expanded languages and functionality, as well as the introduction of MyShop in China.

"Given the current landscape, we are taking aggressive measures to re-align our capabilities and resources with a focus on delivering Nu Vision 2025, which will result in a restructuring event in the second half and reduced operating expenses going forward. While we anticipate macro factors will continue to weigh on the business in the short-term, we remain confident in the direction and potential of our vision."

Q2 2022 Year-over-year Operating Results                

Revenue:	$560.6 million compared to $704.1 million (5)% FX impact
Gross Margin:	73.6% compared to 75.6% Impacted by product mix and foreign currency exchange Nu Skin business was 77.0% compared to 78.3%
Selling Expenses:	39.1% compared to 39.9% Nu Skin business was 42.0% compared to 42.8%
G&A Expenses:	25.3% compared to 23.6%
Operating Margin:	9.2% compared to 12.1%
Other Income / (Expense):	$(8.6) million or $(2.9) million excluding charges associated with our Q4 2021 exit from Grow Tech, compared to $(4.0) million
Income Tax Rate:	20.2% compared to 27.1%
EPS:	$0.67 or $0.77 excluding charges associated with our Q4 2021 exit from Grow Tech, compared to $1.15 in Q2 2021

 

Stockholder Value

Dividend Payments:	$19.4 million
Stock Repurchases:	$10.0 million $225.4 million remaining in authorization

 

Q3 and Full-year 2022 Outlook

Q3 2022 Revenue:	$550 to $590 million; (13) to (8)% Approximately (6)% FX impact
Q3 2022 EPS:	$0.04 to $0.22 or $0.70 to $0.85 non-GAAP
2022 Revenue:	$2.33 to $2.41 billion; (14) to (11)% Approximately (5)% FX impact
2022 EPS:	$2.46 to $2.76 or $3.30 to $3.60 non-GAAP

 

"In light of the heightened global uncertainties and their impact on our business, we are adjusting our annual guidance," added Mark Lawrence, chief financial officer. "Our 2022 revenue guidance is now expected to be $2.33 to $2.41 billion, with an approximate 5 percent foreign currency headwind. We anticipate reported EPS of $2.46 to $2.76 or $3.30 to $3.60 excluding the Q2 charges associated with our Q4 2021 exit from Grow Tech, as well as second half restructuring and impairment charges of $35 to $45 million associated with the strategic reallocation of our capabilities and resources toward Nu Vision 2025. We believe these actions will benefit the balance of 2022 and provide approximately $100 million in cost savings in 2023. For the third quarter, we project revenue of $550 to $590 million, assuming a negative foreign currency impact of approximately 6 percent, with reported earnings per share of $0.04 to $0.22 or $0.70 to $0.85 when excluding the third-quarter charge of approximately $30 million of the $35 to $45 million estimate."

Conference Call

The Nu Skin Enterprises management team will host a conference call with the investment community today at 5 p.m. (ET). Those wishing to access the webcast, as well as the financial information presented during the call, can visit the Investor Relations page on the company's website at ir.nuskin.com. A replay of the webcast will be available on the same page through Aug. 18, 2022.

About Nu Skin Enterprises, Inc.

Nu Skin Enterprises, Inc. (NYSE: NUS) is a global integrated beauty and wellness company, powered by a dynamic affiliate opportunity platform. The company helps people look, feel and live their best with products that combine the best of science, technology and nature. Backed by more than 35 years of scientific research, Nu Skin develops innovative products including Nu Skin® personal care, Pharmanex® nutrition and the ageLOC® anti-aging brand which includes an award-winning line of beauty device systems. Nu Skin operates in approximately 50 markets worldwide in the Americas, Asia, Europe, Africa and the Pacific. Rhyz Inc. is the company's strategic investment arm that includes a collection of technology and manufacturing companies to support growth in the core Nu Skin business. Nu Skin is committed to sustainability, including global initiatives such as transitioning to reduced and sustainable packaging for all products by 2030. The Nu Skin Force for Good Foundation also strives to improve children's health, education and economic circumstances throughout the world. For more information, visit nuskin.com.

Important Information Regarding Forward-Looking Statements: This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent the company's current expectations and beliefs. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws and include, but are not limited to, statements of management's expectations regarding the company's performance, growth, shareholder value, strategies, vision, transformation, initiatives, product pipeline and product introductions, digital and social-commerce tools and initiatives, customers, sales leaders, affiliates, and operational improvements; projections regarding revenue, expenses, operating income, earnings per share, foreign currency fluctuations, uses of cash and other financial items; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as "believe," "expect," "anticipate," "project," "outlook," "guidance," "remain," "become," "plan," "potential," "expand," "will," "would," "could," "may," "might," the negative of these words and other similar words.

The forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed herein. These risks and uncertainties include, but are not limited to, the following:

• risk that epidemics, including the ongoing COVID-19 pandemic, and other crises could negatively impact our business;
• adverse publicity related to the company's business, products, industry or any legal actions or complaints by the company's sales force or others;
• risk that direct selling laws and regulations in any of the company's markets, including the United States and Mainland China, may be modified, interpreted or enforced in a manner that results in negative changes to the company's business model or negatively impacts its revenue, sales force or business, including through the interruption of sales activities, loss of licenses, increased scrutiny of sales force actions, imposition of fines, or any other adverse actions or events;
• any failure of current or planned initiatives or products to generate interest among the company's sales force and customers and generate sponsoring and selling activities on a sustained basis;
• political, legal, tax and regulatory uncertainties associated with operating in international markets, including Mainland China;
• uncertainty regarding meeting restrictions and other government scrutiny in Mainland China, as well as negative media and consumer sentiment in Mainland China on our business operations and results;
• risk of foreign-currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;
• uncertainties regarding the future financial performance of the businesses the company has acquired;
• risks related to accurately predicting, delivering or maintaining sufficient quantities of products to support planned initiatives or launch strategies, and increased risk of inventory write-offs if the company over-forecasts demand for a product or changes its planned initiatives or launch strategies;
• regulatory risks associated with the company's products, which could require the company to modify its claims or inhibit its ability to import or continue selling a product in a market if the product is determined to be a medical device or if the company is unable to register the product in a timely manner under applicable regulatory requirements;
• unpredictable economic conditions and events globally, including trade policies and tariffs;
• the company's future tax-planning initiatives; any prospective or retrospective increases in duties on the company's products imported into the company's markets outside of the United States; and any adverse results of tax audits or unfavorable changes to tax laws in the company's various markets; and
• continued competitive pressures in the company's markets.

The company's financial performance and the forward-looking statements contained herein are further qualified by a detailed discussion of associated risks set forth in the documents filed by the company with the Securities and Exchange Commission. The forward-looking statements set forth the company's beliefs as of the date that such information was first provided, and the company assumes no duty to update the forward-looking statements contained in this release to reflect any change except as required by law.

Non-GAAP Financial Measures: Constant-currency revenue change is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the company's performance. It is calculated by translating the current period's revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing that amount to the prior-year period's revenue. The company believes that constant-currency revenue change is useful to investors, lenders and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on the company's revenue from period to period.

Earnings per share and other income (expense), each excluding restructuring and impairment charges and/or charges associated with our Grow Tech exit, also are non-GAAP financial measures. Restructuring and impairment charges and charges associated with our Grow Tech exit are not part of the ongoing operations of our underlying business. The company believes that these non-GAAP financial measures are useful to investors, lenders and analysts because removing the impact of restructuring and impairment charges and charges associated with our Grow Tech exit facilitates period-to-period comparisons of the company's performance. Please see the reconciliations of these items to our earnings per share and other income (expense) calculated under GAAP, below.

The following table sets forth revenue for the three-month periods ended June 30, 2022 and 2021 for each of our reportable segments (U.S. dollars in thousands):

	Three Months Ended June 30,									Constant- Currency
	2022			2021			Change			Change
Nu Skin
Americas	$	124,445		$	138,512			(10) %			(9) %
Mainland China		86,808			154,182			(44) %			(42) %
Southeast Asia/Pacific		94,067			83,968			12 %			16 %
South Korea		69,308			88,604			(22) %			(12) %
Japan		55,952			68,020			(18) %			(3) %
EMEA		50,871			83,115			(39) %			(31) %
Hong Kong/Taiwan		39,327			38,529			2 %			6 %
Nu Skin other		1,318			947			39 %			39 %
Total Nu Skin		522,096			655,877			(20) %			(15) %
Rhyz Investments
Manufacturing		38,229			48,140			(21) %			(21) %
Rhyz other		290			38			663 %			663 %
Total Rhyz Investments		38,519			48,178			(20) %			(20) %
Total	$	560,615		$	704,055			(20) %			(15) %

 

The following table sets forth revenue for the six-month periods ended June 30, 2022 and 2021 for each of our reportable segments (U.S. dollars in thousands):

	Six Months Ended June 30,									Constant- Currency
	2022			2021			Change			Change
Nu Skin
Americas	$	248,025		$	272,273			(9) %			(8) %
Mainland China		211,303			303,775			(30) %			(31) %
Southeast Asia/Pacific		184,303			167,257			10 %			14 %
South Korea		141,441			169,735			(17) %			(8) %
Japan		117,743			137,884			(15) %			(3) %
EMEA		103,839			159,295			(35) %			(28) %
Hong Kong/Taiwan		77,821			74,874			4 %			6 %
Nu Skin other		1,938			1,825			6 %			6 %
Total Nu Skin		1,086,413			1,286,918			(16) %			(12) %
Rhyz Investments
Manufacturing		78,570			94,125			(17) %			(17) %
Rhyz other		531			38			1,297 %			1,297 %
Total Rhyz Investments		79,101			94,163			(16) %			(16) %
Total	$	1,165,514		$	1,381,081			(16) %			(12) %

 

The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business for the three-month periods ended June 30, 2022 and 2021:

	Three Months Ended June 30,
Customers	2022			2021			Change
Americas		302,849			368,052		(18) %
Mainland China	$	392,268			328,526		19 %
Southeast Asia/Pacific		152,775			165,221		(8) %
South Korea		135,290			153,282		(12) %
Japan		122,643			125,734		(2) %
EMEA		205,379			261,881		(22) %
Hong Kong/Taiwan		69,411			64,861		7 %
Total		1,380,615			1,467,557		(6) %

 

	Three Months Ended June 30,
Paid Affiliates	2022			2021			Change
Americas		44,523			53,492		(17) %
Mainland China	$	19,257			39,889		(52) %
Southeast Asia/Pacific		41,512			44,734		(7) %
South Korea		48,605			52,680		(8) %
Japan		38,269			38,623		(1) %
EMEA		32,323			42,682		(24) %
Hong Kong/Taiwan		17,644			17,815		(1) %
Total		242,133			289,915		(16) %

 

	Three Months Ended June 30,
Sales Leaders	2022			2021			Change
Americas		9,320			11,752		(21) %
Mainland China	$	11,458			20,946		(45) %
Southeast Asia/Pacific		8,407			8,190		3 %
South Korea		6,557			7,701		(15) %
Japan		6,097			6,057		1 %
EMEA		5,192			8,002		(35) %
Hong Kong/Taiwan		3,054			3,446		(11) %
Total		50,085			66,094		(24) %

 

"Customers" are persons who have purchased directly from the Company during the three months ended as of the date indicated. Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase products directly from members of our sales force.

"Paid Affiliates" are any Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who earned sales compensation during the three-month period. In all of our markets besides Mainland China, we refer to members of our independent sales force as "Brand Affiliates" because their primary role is to promote our brand and products through their personal social networks.

"Sales Leaders" are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who had achieved certain qualification requirements as of the end of each month of the quarter.

 

NU SKIN ENTERPRISES, INC. Consolidated Statements of Income (Unaudited) (U.S. dollars in thousands, except per share amounts)
	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue	$	560,615		$	704,055		$	1,165,514		$	1,381,081
Cost of sales		148,100			171,975			309,599			342,541
Gross profit		412,515			532,080			855,915			1,038,540
Operating expenses:
Selling expenses		219,426			280,589			462,125			556,554
General and administrative expenses		141,562			166,115			290,118			333,697
Total operating expenses		360,988			446,704			752,243			890,251
Operating income		51,527			85,376			103,672			148,289
Other income (expense), net		(8,640)			(4,012)			(10,093)			(2,430)
Income before provision for income taxes		42,887			81,364			93,579			145,859
Provision for income taxes		8,650			22,026			20,626			39,091
Net income	$	34,237		$	59,338		$	72,953		$	106,768
Net income per share:
Basic	$	0.68		$	1.18		$	1.45		$	2.12
Diluted	$	0.67		$	1.15		$	1.43		$	2.06
Weighted-average common shares outstanding (000s):
Basic		50,368			50,115			50,181			50,409
Diluted		50,960			51,557			50,959			51,850

 

NU SKIN ENTERPRISES, INC. Consolidated Balance Sheets (Unaudited) (U.S. dollars in thousands)
	June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	363,923		$	339,593
Current investments		17,877			15,221
Accounts receivable, net		43,694			41,299
Inventories, net		354,211			399,931
Prepaid expenses and other		103,188			76,906
Total current assets		882,893			872,950
Property and equipment, net		443,036			453,674
Operating lease right-of-use assets		118,413			120,973
Goodwill		206,432			206,432
Other intangible assets, net		72,665			76,991
Other assets		177,462			175,460
Total assets	$	1,900,901		$	1,906,480
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	55,013		$	49,993
Accrued expenses		289,130			372,201
Current portion of long-term debt		40,000			107,500
Total current liabilities		384,143			529,694
Operating lease liabilities		90,156			88,759
Long-term debt		387,179			268,781
Other liabilities		98,388			106,474
Total liabilities		959,866			993,708
Commitments and contingencies
Stockholders' equity:
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued		91			91
Additional paid-in capital		606,349			601,703
Treasury stock, at cost – 39.9 million and 40.7 million shares		(1,520,769)			(1,526,860)
Accumulated other comprehensive loss		(90,638)			(73,896)
Retained earnings		1,946,002			1,911,734
Total stockholders' equity		941,035			912,772
Total liabilities and stockholders' equity	$	1,900,901		$	1,906,480

 

NU SKIN ENTERPRISES, INC. Reconciliation of Earnings Per Share Excluding Charges Associated with Our Q4 2021 Exit from Grow Tech to GAAP Earnings Per Share (in thousands, except per share amounts)
	Three Months Ended June 30, 2022
Net income	$                               34,237
Impact of charges associated with our Q4 2021 exit from Grow Tech:
Unrealized investment loss	5,711
Income tax impact	(459)
Adjusted net income	$                               39,489
Diluted earnings per share	$                                   0.67
Diluted earnings per share, excluding charges associated with our Q4 2021 exit from Grow Tech	$                                   0.77
Weighted-average common shares outstanding (000s):	50,960

 

NU SKIN ENTERPRISES, INC. Reconciliation of Other Income (Expense), Net Excluding Charges Associated with Our Q4 2021 Exit from Grow Tech to GAAP Other Income (Expense), Net (in thousands)
	Three Months Ended June 30, 2022
Other income (expense), net	$                              (8,640)
Impact of charges associated with our Q4 2021 exit from Grow Tech:
Unrealized investment loss	5,711
Adjusted Other income (expense), net	$                              (2,929)

 

NU SKIN ENTERPRISES, INC. Reconciliation of Earnings Per Share Excluding Certain Charges to GAAP Earnings Per Share
	Three Months Ended				Year Ended
	September 30, 2022				December 31, 2022
	Low End		High End		Low End		High End
Earnings per share	$               0.04		$                0.22		$                 2.46		$                2.76
Impact of charges associated with our second half restructuring and impairment charges:
Restructuring and Impairment	0.59		0.59		0.88		0.88
Income tax impact	0.07		0.04		(0.13)		(0.13)
Impact of charges associated with our Q4 2021 exit from Grow Tech:
Unrealized investment loss	—		—		0.11		0.11
Income tax impact	—		—		(0.02)		(0.02)
Adjusted Earnings per share	$               0.70		$                0.85		$                 3.30		$                3.60

 

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SOURCE Nu Skin Enterprises