Nu Skin Enterprises Reports First-Quarter 2017 Results

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FOR IMMEDIATE RELEASE

 

NU SKIN ENTERPRISES REPORTS FIRST-QUARTER 2017 RESULTS

 

PROVO, Utah — May 3, 2017 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced first-quarter 2017 financial results.

 

Key Highlights

Revenue:

$499.1 million, a 6% improvement over Q1 2016; negatively impacted 1% by foreign currency fluctuations

Earnings Per Share (EPS):

$0.51, compared to $0.06 in Q1 2016 which included a $0.36 non-cash Japan customs charge

Sales Leaders:

54,600, a 1% year-over-year decrease

Customers:

980,000, a 2% year-over-year improvement

 

“We are pleased to deliver strong first-quarter results, which demonstrates the progress we made executing on our strategic priorities to increase customer trial and acquisition,” said Ritch Wood, chief executive officer. “Our quarterly results reflect solid growth in Mainland China, South Asia/Pacific and EMEA. Our expanding social selling efforts and the continued rollout of ageLOC Me and ageLOC Youth contributed to our strong revenue during the quarter, positioning us to deliver solid performance for 2017.” 

 

 

 

Q1 2017 Operating Results

Revenue:

$499.1 million, a 7% constant currency improvement

Gross margin:

77.7% compared to 70.8% in Q1 2016, or 77.4% when excluding the Q1 2016 Japan customs charge

Selling Expenses:

41.9% of revenue compared to 41.5% in Q1 2016

G&A Expenses:

26.6% of revenue compared to 27.6% in Q1 2016

Operating Margin:

9.3% compared to 1.7% in Q1 2016, or 8.4% when excluding the Japan customs charge

Other Income / (Expense):

($4.6) million, compared to ($2.9) million in Q1 2016; the change is primarily interest expense

Income Tax Rate:

34.1% compared to 37.3% in Q1 2016; benefitted from a new stock compensation accounting standard

EPS:

$0.51, a 21% increase compared to Q1 2016, when excluding the Japan customs charge

 


Stockholder Value

Dividend Payments:

$19.0 million

Stock Repurchases:

$6.8 million; $192.9 million remaining in authorization

 

 
2017 Outlook

Q2 Revenue:

$530 to $550 million; negative foreign currency impact of 1 to 2%; prior year included $106 million in LTO revenue

Q2 EPS:

$0.65 to $0.70

2017 Revenue:

$2.26 to $2.30 billion; negative foreign currency impact of approximately 2 to 3%

2017 EPS

$3.10 to $3.25

 

“Looking forward, we will continue to focus on accelerating growth, driving innovation throughout our business, and empowering our customers and sales leaders with the products, programs, and platforms they need to succeed in a rapidly-evolving marketplace,” said Wood. “A key component of our strategy is capitalizing on our early social selling success by expanding our reach through online channels globally. As part of this effort, we are making our product portfolio and business opportunity more accessible and attractive, particularly to the important millennial segment. We are confident that as we continue to execute on our initiatives, we will reach our 2017 business targets and will be well positioned for long-term growth and shareholder value creation.”

 

“Our financial results in the first quarter put us on track to achieve our previously announced annual guidance,” said Mark Lawrence, chief financial officer. “As we discussed at our investor day, we had significant limited-time-offers (LTOs) of $106 and $56 million in the second and third quarters of 2016. In the fourth quarter, we will begin a significant product introduction of our new ageLOC LumiSpa skin renewal and deep-cleansing device, which we anticipate will generate approximately $100 million in sales. These LTOs and product introductions will significantly impact our comparable sales and guidance for the balance of the year. We reiterate our 2017 forecast of $2.26 to $2.30 billion in revenue, and earnings per share of $3.10 to $3.25. We project second-quarter revenue of $530 to $550 million and earnings per share of $0.65 to $0.70,” concluded Lawrence.

 

Conference Call

 

The Nu Skin management team will host a conference call with the investment community on May 3, 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 at the same URL through May 19, 2017.

 

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. 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. The ageLOC brand has generated 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 in Asia, the Americas, Europe, Africa and the Pacific. 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.

 

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, sales force and customer base, growth, shareholder value creation, initiatives and areas of focus, 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 Mainland 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 favorable 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: Earnings per share, gross margin and operating margin, each excluding the Japan customs charge, and constant-currency revenue growth are non-GAAP financial measures. Constant-currency revenue growth 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. Management believes that the non-GAAP financial measures assist management and investors in evaluating, and comparing from period to period, results from ongoing operations in a more meaningful and consistent manner while also highlighting more meaningful trends in the results of operations. These measures are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

 

The Company’s revenue results by segment for the three-month periods ended March 31 are presented in the following table (in thousands).

 

 

 

2017

 

2016

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Mainland China

 

$         150,004

 

$              118,655

 

26.4%

 

33.1%

South Korea

 

                  82,471

 

                  86,118

 

  (4.2%)

 

  (8.2%)

South Asia/Pacific

 

                  69,798

 

                  63,578

 

  9.8%

 

11.0%

Americas

 

                  65,658

 

                  65,748

 

  (0.1%)

 

  (0.4%)

Japan

 

                  61,156

 

                  65,091

 

  (6.0%)

 

  (7.3%)

Hong Kong/Taiwan

 

                  35,948

 

                  40,056

 

(10.3%)

 

(13.4%)

EMEA

 

             34,064

 

                  32,585

 

   4.5%

 

  6.6%

 

 

 

 

 

 

 

 

 

Total

 

$          499,099

 

$              471,831

 

  5.8%

 

  6.6%

 

The company’s Customers and Sales Leaders statistics by segment for the three-month periods ended March 31 are presented in the following table.

 

 

2017

 

2016

 

% Increase (Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

        176,000

 

          19,100

 

        142,000

 

          16,900

 

23.9%

 

13.0%

South Korea

 

        189,000

 

            8,000

 

        208,000

 

            8,800

 

(9.1%)

 

  (9.1%)

South Asia/Pacific

 

        116,000

 

            6,900

 

        110,000

 

            6,800

 

5.5%

 

        1.5%

Americas

 

        172,000

 

            6,200

 

        164,000

 

            6,900

 

4.9%

 

(10.1%)

Japan

 

        132,000

 

            6,400

 

        145,000

 

            7,000

 

(9.0%)

 

  (8.6%)

Hong Kong/Taiwan

 

          70,000

 

            3,900

 

          77,000

 

            4,800

 

(9.1%)

 

(18.8%)

EMEA

 

   125,000

 

  4,100

 

    112,000

 

 3,800

 

11.6%

 

  7.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

    980,000

 

 54,600

 

  958,000

 

  55,000

 

2.3%

 

  (0.7%)

 

 

“Customers” 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.

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the First Quarters Ended March 31, 2017 and 2016

(in thousands, except per share amounts)

 

 

 

 

 

2017

 

2016

 

 

 

 

Revenue

$               499,099

 

$               471,831

 

 

 

 

Cost of sales

                 111,266

 

                 137,869

 

 

 

 

Gross profit

                 387,833

 

                 333,962

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 209,008

 

                 195,559

        General and administrative expenses

                 132,563

 

                 130,254

Total operating expenses

                 341,571

 

                 325,813

 

 

 

 

Operating income

                   46,262

 

                     8,149

 

 

 

 

Other income (expense), net

                    (4,567)

 

                    (2,863)

Income before provision for income taxes

                   41,695

 

                     5,286

Provision for income taxes

                   14,206

 

                     1,970

 

 

 

 

Net income

$                 27,489

 

$                  3,316

 

 

 

 

Net income per share:

 

 

 

        Basic

$                 0.52    

 

$                  0.06     

        Diluted

$                    0.51

 

$                       0.06

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                  52,678

 

                   55,955

        Diluted

                  54,057

 

                   56,411

 

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

March 31, 2017

 

December 31, 2016

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                335,578

 

$                357,246

        Current investments

                    11,759

 

                    10,880

        Accounts receivable

                    28,838

 

                    31,199

        Inventories, net

                  251,947

 

                  249,936

       Prepaid expenses and other

                    77,717

 

                    65,076

 

                  705,839

 

                  714,337

 

 

 

 

Property and equipment, net

                  450,607

 

                  444,732

Goodwill

                  114,954

 

                  114,954

Other intangible assets, net

                    61,678

 

                    63,553

Other assets

                  161,338

 

                  136,469

               Total assets

$             1,494,416

 

$             1,474,045

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$               42,076     

 

$             41,261     

        Accrued expenses

                  253,359

 

                  275,023

        Current portion of long-term debt

                    99,482

 

                    82,727

 

                  394,917          

 

                  399,011           

 

 

 

 

Long-term debt

                  329,001

 

                  334,165

Other liabilities

                    82,913

 

                    76,799

                Total liabilities

                  806,831

 

                  809,975

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                         91        

 

                         91        

       Additional paid-in capital

                  449,762

 

                  439,635

       Treasury stock, at cost

              (1,251,788)

 

              (1,250,123)

       Accumulated other comprehensive loss

                   (74,771)

 

                   (84,122)

       Retained earnings

               1,564,291

 

               1,558,589

 

                  687,585

 

                  664,070

              Total liabilities and stockholders’ equity

$             1,494,416

 

$             1,474,045

 

 

 

NU SKIN ENTERPRISES, INC.

Reconciliation of GAAP Gross Profit to

Gross Profit Excluding Japan Customs Expense

(in thousands)

 

 

 

 

 

 

 

 

Quarter Ended

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Revenue as reported

 

$         499,099

 

$      471,831

 

 

 

 

 

 

 

GAAP gross profit as reported

 

$         387,833

 

$     333,962

 

 

 

 

 

 

 

        Japan customs expense

 

          

 

       31,355

 

 

 

 

 

 

 

Gross profit excluding Japan customs expense

 

$         387,833

 

$    365,317

 

 

 

             

 

             

 

GAAP gross profit as a percent of revenue

 

            77.7%

 

           70.8%

 

 

 

 

 

 

 

Gross profit as a percent of revenue excluding Japan customs expense

 

           77.7%

 

             77.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

               

 

 

 

NU SKIN ENTERPRISES, INC.

Reconciliation of GAAP Operating Income to

Operating Income Excluding Japan Customs Expense

(in thousands)

 

 

 

 

 

 

 

 

Quarter Ended

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Revenue as reported

 

$     499,099

 

$     471,831

 

 

 

 

 

 

 

GAAP operating income as reported

 

$      46,262

 

$        8,149

 

 

 

 

 

 

 

        Japan customs expense

 

   

 

      31,355

 

 

 

 

 

 

 

Operating income excluding Japan customs expense

 

$       46,262

 

$      39,504

 

 

 

               

 

               

 

GAAP operating income as a percent of revenue

 

                9.3%

 

                1.7%

 

 

 

 

 

 

 

Operating income as a percent of revenue excluding Japan

        customs expense         

 

 

                9.3%

 

 

                8.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

                     

 

NU SKIN ENTERPRISES, INC.

Reconciliation of GAAP Diluted Earnings Per Share to

Diluted Earnings Per Share Excluding Japan Customs Expense

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Quarter Ended

March 31,

 

%

Increase

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

GAAP net income as reported

 

$     27,489

 

$      3,316

 

 

 

 

 

 

 

 

 

        Japan customs expense

 

                  —

 

          31,355

 

 

 

 

 

 

 

 

 

        Tax effect of Japan customs expense

 

                

 

    (11,257)

 

 

 

 

 

 

 

 

 

Net income excluding Japan customs expense

 

$    27,489

 

$   23,414

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

 

$        0.51

 

$      0.06

 

   750.0%

 

 

 

 

 

 

 

Diluted earnings per share excluding Japan customs expense

 

$        0.51

 

$      0.42

 

     21.4%

 

 

 

 

 

 

 

Diluted weighted-average common shares outstanding

 

        54,057

 

      56,411

 

 

                       

 

 

 

 

 

CONTACTS:
Media: media@nuskin.com, (801) 345-6397

Investors: investorrelations@nuskin.com,  (801) 345-3577­­­

 

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