Nu Skin Enterprises Reports First Quarter Financial Results

Nu Skin Enterprises Reports First Quarter Financial Results

 

PROVO, Utah — May 4, 2022 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced first quarter 2022 results.

 

Executive Summary

Q1 2022 vs. Prior-year Quarter

Revenue: 

 $604.9 million; (11)%

     · (3)% FX impact or $(17.2) million

Earnings Per Share (EPS): 

 $0.76; (16)%

Customers: 

 1,321,451; (13)%

Paid Affiliates: 

 251,436; (14)%

Sales Leaders: 

 52,462; (22)%

 

“Despite heightened global uncertainty and COVID-related obstacles, we are pleased with our first quarter results, which exceeded guidance,” said Ryan Napierski, Nu Skin president and CEO. “Demand remained strong for our most recent product introductions, ageLOC® Meta and Beauty Focus™ Collagen+, and the momentum from these product launches helped drive strong revenue growth in several markets including the U.S., Taiwan and Southeast Asia. Our business in Mainland China and several other markets was disrupted due to severe COVID-related lockdowns and other factors, and the conflict in Ukraine and Russia negatively impacted business throughout the EMEA region.

 

“As we look ahead to the remainder of the year, we are focused on the strategic imperatives that underpin Nu Vision 2025, including: EmpowerMe, our personalized beauty and wellness strategy with connected beauty device introductions beginning in the third quarter; expansion of our affiliate-powered social commerce business model; and the continued enhancement of our digital platform. While we anticipate near-term headwinds given the dynamic macro environment, we remain confident in the significant growth potential of our business, achieving our vision for the future and driving value for our shareholders.”

 

Q1 2022 Year-over-year Operating Results               

Revenue: 

 $604.9 million compared to $677.0 million

     · (3)% FX impact

Gross Margin: 

 73.3% compared to 74.8%

     · Impacted by product mix and promotions

     · Nu Skin business was 76.5% compared to 77.8%

Selling Expenses: 

 40.1% compared to 40.8%

     · Nu Skin business was 43.0% compared to 43.7%

G&A Expenses: 

 24.6% compared to 24.8%

Operating Margin: 

 8.6% compared to 9.3%

Other Income / (Expense): 

 $(1.5) million compared to $1.6 million

Income Tax Rate: 

 23.6% compared to 26.5%

EPS: 

 $0.76 compared to $0.91


Stockholder Value

Dividend Payments: 

 $19.3 million

Stock Repurchases: 

 $10.0 million

     · $235.4 million remaining in authorization

 

Q2 and Full-year 2022 Outlook

Q2 2022 Revenue: 

 $590 to $620 million; (16) to (12)%

     · Approximately (3) to (4)% FX impact

Q2 2022 EPS: 

 $0.75 to $0.85; (35) to (26)%

2022 Revenue: 

 $2.51 to $2.62 billion; (7) to (3)%

     · Approximately (3) to (4)% FX impact

2022 EPS: 

 $3.60 to $3.90; 26 to 36% on a reported basis, or (13) to (6)% non-GAAP

“Our results outperformed expectations in the first quarter including a beat in revenue and earnings per share driven in part by sales late in the quarter ahead of an April 1 price increase,” added Mark Lawrence, chief financial officer. “In light of the ongoing global uncertainties, including increasing COVID-related factors, foreign exchange pressure and geopolitical conflict, we are adjusting our annual guidance. Our 2022 revenue guidance is $2.51 to $2.62 billion with a 3 to 4 percent foreign currency headwind and EPS of $3.60 to $3.90. We are projecting second quarter revenue of $590 to $620 million with a 3 to 4 percent foreign currency headwind and EPS of $0.75 to $0.85.”

 

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 May 18, 2022.

 

About Nu Skin Enterprises, Inc.

Nu Skin Enterprises, Inc. (NYSE: NUS) is a leading 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 and affiliates; 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,” “opportunity,” “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 adjusted earnings per share growth, each excluding impairment and restructuring charges, also are non-GAAP financial measures. Impairment and restructuring charges 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 impairment and restructuring charges facilitates period-to-period comparisons of the company’s performance. Please see the reconciliations of these items to our earnings per share and earnings per share growth calculated under GAAP, below.

 

 

The following table sets forth revenue for the three-month periods ended March 31, 2022 and 2021 for each of our reportable segments (U.S. dollars in thousands):

 

 

Three Months Ended

March 31,

 

 

 

Constant-Currency

 

2022

 

2021

 

Change

 

Change

Nu Skin

                     

     Mainland China

$

124,495

 

$

149,593

 

 

(17)%

 

 

(18)%

     Americas

 

123,580

 

 

133,761

 

 

(8)%

 

 

(6)%

     Southeast Asia/Pacific

 

90,236

 

 

83,289

 

 

8%

 

 

11%

     South Korea

 

72,133

 

 

81,131

 

 

(11)%

 

 

(4)%

     Japan

 

61,791

 

 

69,864

 

 

(12)%

 

 

(3)%

     EMEA

 

52,968

 

 

76,180

 

 

(30)%

 

 

(25)%

     Hong Kong/Taiwan

 

38,494

 

 

36,345

 

 

6%

 

 

6%

     Other

 

620

 

 

878

 

 

(29)%

 

 

(29)%

Total Nu Skin

 

564,317

   

631,041

   

(11)%

   

(8)%

Rhyz Investments

                     

     Manufacturing

 

40,341

   

45,985

   

(12)%

   

(12)%

     Rhyz other

 

241

   

           

Total Rhyz Investments

 

40,582

   

45,985

   

(12)%

   

(12)%

Total

$

604,899

 

$

677,026

 

 

(11)%

 

 

(8)%

 

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 March 31, 2022 and 2021:

 

 

Three Months Ended

March 31,

   

 Customers

2022

 

2021

 

Change

     Mainland China

$

289,060

   

316,000

 

(9)%

     Americas

 

318,458

   

374,867

 

(15)%

     Southeast Asia/Pacific

 

165,657

   

185,435

 

(11)%

     South Korea

 

140,648

   

152,390

 

(8)%

     Japan

 

122,616

   

126,525

 

(3)%

     EMEA

 

216,037

   

296,001

 

(27)%

     Hong Kong/Taiwan

 

68,975

   

66,042

 

4%

Total

 

1,321,451

   

1,517,260

 

(13)%

 

 

 

Three Months Ended

March 31,

   

Paid Affiliates

2022

 

2021

 

Change

     Mainland China

$

22,762

   

41,944

 

(46)%

     Americas

 

46,281

   

52,767

 

(12)%

     Southeast Asia/Pacific

 

43,262

   

45,871

 

(6)%

     South Korea

 

49,328

   

51,006

 

(3)%

     Japan

 

38,059

   

38,283

 

(1)%

     EMEA

 

33,834

   

43,696

 

(23)%

     Hong Kong/Taiwan

 

17,910

   

17,885

 

Total

 

251,436

   

291,452

 

(14)%

 

 

 

Three Months Ended

March 31,

   

Sales Leaders

2022

 

2021

 

Change

     Mainland China

$

14,146

   

23,013

 

(39)%

     Americas

 

9,547

   

11,394

 

(16)%

     Southeast Asia/Pacific

 

8,012

   

8,446

 

(5)%

     South Korea

 

6,072

   

6,682

 

(9)%

     Japan

 

5,977

   

6,135

 

(3)%

     EMEA

 

5,455

   

7,479

 

(27)%

     Hong Kong/Taiwan

 

3,253

   

3,755

 

(13)%

Total

 

52,462

   

66,904

 

(22)%

 

“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

March 31,

 

2022

 

2021

           

Revenue

$

604,899

 

$

677,026

Cost of sales

 

161,499

 

 

170,566

Gross profit

 

443,400

 

 

506,460

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

     Selling expenses

 

242,699

 

 

275,965

     General and administrative expenses

 

148,556

 

 

167,582

Total operating expenses

 

391,255

 

 

443,547

 

 

 

 

 

 

Operating income

 

52,145

 

 

62,913

Other income (expense), net

 

(1,453)

 

 

1,582

 

 

 

 

 

 

Income before provision for income taxes

 

50,692

 

 

64,495

Provision for income taxes

 

11,976

 

 

17,065

 

 

 

 

 

 

Net income

$

38,716

 

$

47,430

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

     Basic

$

0.77

 

$

0.94

     Diluted

$

0.76

 

$

0.91

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

 

 

 

 

 

     Basic

 

49,991

 

 

50,706

     Diluted

 

51,066

 

 

52,172

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)

 

 

March 31, 2022

 

December 31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

     Cash and cash equivalents

$

302,216

 

$

339,593

     Current investments

 

15,313

 

 

15,221

     Accounts receivable, net

 

52,171

 

 

41,299

     Inventories, net

 

381,585

 

 

399,931

     Prepaid expenses and other

 

97,923

 

 

76,906

 Total current assets

 

849,208

 

 

872,950

 

 

 

 

 

 

     Property and equipment, net

 

448,822

 

 

453,674

     Operating lease right-of-use assets

 

132,949

   

120,973

     Goodwill

 

206,432

 

 

206,432

     Other intangible assets, net

 

74,874

 

 

76,991

     Other assets

 

179,964

 

 

175,460

Total assets

$

1,892,249

 

$

1,906,480

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

     Accounts payable

$

40,719

 

$

49,993

     Accrued expenses

 

343,737

 

 

372,201

     Current portion of long-term debt

 

110,000

 

 

107,500

Total current liabilities

 

494,456

 

 

529,694

 

         

     Operating lease liabilities

 

100,844

 

 

88,759

     Long-term debt

 

258,995

 

 

268,781

     Other liabilities

 

103,754

 

 

106,474

Total liabilities

 

958,049

 

 

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

 

599,258

 

 

601,703

     Treasury stock, at cost – 40.4 million and 40.7 million shares

 

(1,526,778)

 

 

(1,526,860)

     Accumulated other comprehensive loss

 

(69,528)

 

 

(73,896)

     Retained earnings

 

1,931,157

 

 

1,911,734

Total stockholders' equity

 

934,200

 

 

912,772

Total liabilities and stockholders’ equity

$

1,892,249

 

$

1,906,480

 

 

 

 

NU SKIN ENTERPRISES, INC.

 

 

 

Reconciliation of Earnings Per Share Excluding Impact of Restructuring and Impairment to GAAP Earnings Per Share

 

 

 

(in thousands, except per share amounts)

 

Year Ended 2021

2022 EPS Guidance – low end

2022 Projected Annual
Growth Rate – low end

2022 EPS Guidance – high end

2022 Projected Annual
Growth Rate – high end

Net income

$147,266

 

 

 

 

Impact of restructuring and impairment:

   

 

 

 

     Restructuring and impairment

51,870

 

 

 

 

     Inventory write-off

6,656

 

 

 

 

     Income tax impact

6,933

 

 

 

 

Adjusted net income

$212,725

 

 

 

 

Diluted earnings per share

$2.86

$3.60

26%

$3.90

36%

 

Diluted earnings per share, excluding restructuring and impairment impact

$4.14

$3.60

(13%)

$3.90

(6%)

 

Weighted-average common shares outstanding (000s):

51,427

 

 

 

 

                     

 

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