Nu Skin Enterprises Reports Third-Quarter 2016 Results

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FOR IMMEDIATE RELEASE

 

CONTACTS: 

Investors — Scott Pond (801) 345-2657, spond@nuskin.com

Media — Kara Schneck (801) 345-2116, kschneck@nuskin.com

 

 

NU SKIN ENTERPRISES REPORTS THIRD-QUARTER 2016 RESULTS

 

PROVO, Utah — Nov. 3, 2016 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third-quarter revenue above guidance at $604.2 million, compared to $571.3 million in the prior-year period. Quarterly revenue improved 6 percent, or 4 percent on a constant-currency basis. Earnings per share for the quarter were $0.98 and included a $0.09 positive impact from closing operations in Venezuela. Earnings per share in the prior-year period were $0.28 and were negatively impacted by several factors, including a $0.43 per share inventory write down.

 

“We are pleased that we exceeded guidance and posted year-over-year growth during the quarter,” said Truman Hunt, president and chief executive officer. “We introduced ageLOC Youth in South Korea in the quarter and saw continued enthusiasm around the globe for our latest ageLOC products. We produced double-digit gains in North Asia and Greater China and posted growth in each of our regions with the exception of South Asia/Pacific, where a significant limited-time offer in the prior year made for a difficult comparison. We also generated modest growth in sales leaders globally.”

 

 

Regional Results

 

The company’s regional revenue results for the three-month periods ended September 30 are presented in the following table. (In thousands)

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$             216,460

 

$              188,669

 

15%

 

20%

North Asia

 

               208,677

 

                167,748

 

24%

 

14%

South Asia/Pacific

 

                 70,867

 

                108,857

 

(35%)

 

(36%)

Americas

 

                 71,250

 

                  70,775

 

  1%

 

  3%

EMEA

 

                 36,908

 

                  35,259

 

  5%

 

  5%

 

 

 

 

 

 

 

 

 

Total

 

$             604,162

 

$              571,308

 

6%

 

  4%

 

The company’s regional revenue results for the nine-month periods ended September 30 are presented in the following table. (In thousands)

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$             611,887

 

$             576,172

 

  6%

 

11%

North Asia

 

               525,771

 

               512,757

 

  3%

 

---*

South Asia/Pacific

 

               226,742

 

               247,697

 

  (8%)

 

  (5%)

Americas

 

               204,882

 

               234,115

 

(12%)

 

  (8%)

EMEA

 

               107,186

 

               104,108

 

  3%

 

  4%

 

 

 

 

 

 

 

 

 

Total

 

$          1,676,468

 

$          1,674,849

 

---*

 

  2%

 

*Less than a 1% change.

 

The Company’s regional actives and sales leaders statistics are presented in the following table.

 

 

As of September 30, 2016

 

As of September 30, 2015

 

% Increase (Decrease)

 

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

       257,000

 

          30,617

 

       211,000

 

         25,044

 

22%

 

22%

 

North Asia

 

       334,000

 

          18,688

 

       374,000

 

         18,038

 

(11%)

 

  4%

 

South Asia/Pacific

 

       116,000

 

           7,213

 

       120,000

 

           9,925

 

  (3%)

 

(27%)

 

Americas

 

       171,000

 

           6,660

 

       178,000

 

           7,962

 

  (4%)

 

(16%)

 

EMEA

 

       121,000

 

           4,104

 

       110,000

 

           4,120

 

10%

 

---*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

       999,000

 

          67,282

 

       993,000

 

         65,089

 

  1%

 

  3%

 

                             

*Less than a 1% change.

 

“Actives” are persons who purchased products directly from the company during the previous three months.


“Sales Leaders” are independent distributors, and sales employees and independent marketers in China, who achieve certain qualification requirements.

 

Operational Performance

The company’s operating margin for the quarter was 13.6 percent, compared to 7.4 percent in the prior-year period. Gross margin for the quarter was 79.2 percent, compared to 73.3 percent in the prior-year quarter. Comparisons for both gross and operating margins were impacted by the China inventory charge in the third quarter of 2015. Selling expenses, as a percent of revenue, were 42.3 percent, compared to 42.1 percent in the prior-year period. General and administrative expenses, as a percent of revenue, were 23.3 percent, compared to 23.8 percent in the prior-year period. The company incurred a loss in Other Income/Expense of $5.7 million compared to $14.4 million in the prior-year period. The company’s effective income tax rate for the quarter was 25.8 percent, compared to 42.1 percent in the third quarter of last year. The decrease in the effective tax rate is the result of a tax benefit from closing operations in Venezuela. Dividend payments during the quarter were $19.9 million, and the company repurchased $17.4 million of its outstanding shares, with $405 million remaining in the authorized share repurchase plan at the end of the quarter.

Outlook

“We are raising our guidance for the year given strong results in the third quarter,” said Hunt. “Fourth-quarter promotional activities are focused on driving consumer loyalty. South Korea and South Asia will run ageLOC Me incentives, the Americas will launch ageLOC Me, and Japan and South Korea will launch ageLOC Youth. In addition, we have chosen to push the launch of ageLOC Me in the Greater China region to January of 2017.

 

“Toward the end of the quarter we began deploying funds to repurchase stock, and anticipate that by the end of 2016 we will have utilized the $210 million acquired through the convertible note investment made by Ping An Securities,” concluded Hunt.

 

“We are raising our revenue guidance for the year to $2.23 to $2.25 billion assuming a negative currency impact of approximately 2 percent,” said Ritch Wood, chief financial officer. “For the fourth quarter, we project revenue of $550 to $570 million including a negative currency impact of 0 to 2 percent. We project fourth-quarter earnings per share of $0.77 to $0.81. We look forward to discussing our 2017 plans with shareholders at our annual investor day to be held on December 7, 2016 in New York,” concluded Wood.

 

The Nu Skin management team will host a conference call with the investment community on Nov. 3, 2016 at 5 p.m. (EDT). 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 at the same URL through Nov. 18, 2016.

 

About Nu Skin Enterprises, Inc.

Founded more than 30 years ago, Nu Skin Enterprises, Inc. develops and distributes innovative consumer products, offering a comprehensive line of premium-quality beauty and wellness solutions in more than 50 markets worldwide. The company builds upon its scientific expertise in both skin care and nutrition to continually develop innovative product brands that include the Nu Skin® personal care brand, the Pharmanex® nutrition brand, and most recently, the ageLOC® anti-aging brand. Since its introduction in 2008, the ageLOC brand has generated more than $5 billion in sales, and built a loyal following for such products as the ageLOC Youth nutritional supplement, the ageLOC Me® customized skin care system, as well as the ageLOC TR90® weight management and body shaping system. Nu Skin sells its products through a global network of sales leaders. As a long-standing member of direct selling associations globally, Nu Skin is committed to the industry's consumer guidelines that protect and support those who sell and purchase its products through the direct selling channel. Nu Skin is also traded on the New York Stock Exchange under the symbol "NUS." More information is available at nuskin.com.

 

Please Note: 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, initiatives, sales force, consumers and new product introductions; projections regarding revenue, earnings per share, foreign currency fluctuations, 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," "project," "anticipate," "estimate," "intend," "plan," "targets," "likely," "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:

 

  • any failure of current or planned initiatives or products to generate interest among our sales force and customers and generate sponsoring and selling activities on a sustained basis;
  • risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;
  • risk that direct selling laws and regulations in any of our markets, including the United States and China, may be modified, interpreted or enforced in a manner that results in negative changes to our business model or negatively impacts our revenue, sales force or business, including through the interruption of sales activities, loss of licenses, imposition of fines, or any other adverse actions or events;
  • risks related to accurately predicting, delivering or maintaining sufficient quantities of products to support our planned initiatives or launch strategies, and increased risk of inventory write-offs if we over-forecast demand for a product or change our planned initiatives or launch strategies;
  • regulatory risks associated with the company's products, which could require the company to modify its claims or inhibit the company's ability to import or continue selling a product in a market if it is determined to be a medical device or if it is unable to register the product in a timely manner under applicable regulatory requirements;
  • adverse publicity related to the company's business, products, industry or any legal actions or complaints by the company's sales force or others;
  • unpredictable economic conditions and events globally;
  • 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 growth 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 this amount to the prior-year period’s revenue.

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Third Quarters Ended September 30, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

$                604,162

 

$                571,308

 

 

 

 

Cost of sales

                  125,863

 

                  152,755

 

 

 

 

Gross profit

                  478,299

 

                  418,553

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  255,274

 

                  240,260

        General and administrative expenses

                  140,651

 

                  135,752

Total operating expenses

                  395,925

 

                  376,012

 

 

 

 

Operating income

                    82,374

 

                    42,541

 

 

 

 

Other income, net

                     (5,695)

 

                   (14,428)

Income before provision for income taxes

                    76,679

 

                    28,113

Provision for income taxes

                    19,807

 

                    11,846

 

 

 

 

Net income

$                  56,872

 

$                  16,267

 

 

 

 

Net income per share:

 

 

 

        Basic

$                      1.02

 

$                      0.28

        Diluted

$                      0.98

 

$                      0.28

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                    55,983

 

                    57,725

        Diluted

                    57,852

 

                    58,663

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

$            1,676,468

 

$            1,674,849

 

 

 

 

Cost of sales

                 391,937

 

                 368,073

 

 

 

 

Gross profit

              1,284,531

 

              1,306,776

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 699,196

 

                 713,714

        General and administrative expenses

                 415,014

 

                 410,074

Total operating expenses

              1,114,210

 

              1,123,788

 

 

 

 

Operating income

                 170,321

 

                 182,988

 

 

 

 

Other (expense), net

                  (19,618)

 

                  (29,454)

Income before provision for income taxes

                 150,703

 

                 153,534

Provision for income taxes

                   45,802

 

                   56,328

 

 

 

 

Net income

$               104,901

 

$                 97,206

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     1.87

 

$                     1.66

        Diluted

$                     1.85

 

$                     1.63

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   55,963

 

                   58,403

        Diluted

                   56,586

 

                   59,565

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

September 30, 2016

 

December 31, 2015

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                516,994

 

$                289,354

        Current investments

                    15,603

 

                    14,371

        Accounts receivable

                    35,985

 

                    35,464

        Inventories, net

                  253,350

 

                  265,256

       Prepaid expenses and other

                  160,537

 

                  101,947

 

                  982,469

 

                  706,392

 

 

 

 

Property and equipment, net

                  451,571

 

                  454,537

Goodwill

                  114,954

 

                  112,446

Other intangible assets, net

                    65,408

 

                    67,009

Other assets

                  137,413

 

                  165,459

               Total assets

$             1,751,815

 

$             1,505,843

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$               40,490     

 

$               28,832     

        Accrued expenses

                  337,562

 

                  310,916

        Current portion of long-term debt

                    73,328 

 

                    67,849

 

                  451,380           

 

                  407,597           

 

 

 

 

Long-term debt

                  356,298

 

                  181,745

Other liabilities

                    89,726

 

                    90,880

                Total liabilities

                  897,404

 

                  680,222

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

       Additional paid-in capital

                  431,563

 

                  419,921

       Treasury stock, at cost

              (1,047,975)

 

              (1,017,063)

       Accumulated other comprehensive loss

                   (68,523)

 

                   (71,269)

       Retained earnings

               1,539,255

 

               1,493,941

 

                  854,411

 

                  825,621

              Total liabilities and stockholders’ equity

$             1,751,815

 

$             1,505,843

 

 

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