Nu Skin Enterprises Reports Second-Quarter 2017 Results

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FOR IMMEDIATE RELEASE

 

NU SKIN ENTERPRISES REPORTS SECOND-QUARTER 2017 RESULTS

 

Increases 2017 FY EPS Guidance

 

PROVO, Utah — Aug. 2, 2017 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced second-quarter 2017 financial results. The Company reported second-quarter revenue of $550.1 million, which was at the high end of its outlook of $530 to $550 million, and earnings per share of $0.77, which exceeded its outlook of $0.65 to $0.70.

 

Executive Summary

Revenue:

$550.1 million, compared to $600.5 million in Q2 2016 which included $106 million in limited-time-offer (LTO) sales. Q2 2017 was negatively impacted 2% by foreign currency fluctuations.

Earnings Per Share (EPS):

$0.77 benefitted $0.04 by a lower-than-expected tax rate, compared to $0.79 in Q2 2016.

Sales Leaders:

58,900 – 11% year-over-year decrease impacted by prior-year LTOs.

Customers:

1,060,000 – 5% year-over-year improvement.

 

“We are pleased to deliver strong quarterly results as we implement our growth strategy,” said Ritch Wood, chief executive officer. “We believe our second-quarter results provide momentum we can build on as we prepare to introduce several new products and significant business initiatives in the fourth quarter. We remain focused on customer acquisition and are encouraged by our year-over-year customer growth. Looking forward, we believe our product and business initiatives, coupled with our continued efforts to increase our customer base, will help support business and sales leader growth in the second half of the year.”

 

Q2 2017 Year-Over-Year Operating Results

Revenue:

$550.1 million compared to $600.5 million.

Gross Margin:

77.9% compared to 78.7%.

Selling Expenses:

41.5% of revenue compared to 41.4%.

G&A Expenses:

24.6% of revenue compared to 24.0%.

Operating Margin:

11.8% compared to 13.3%.

Other Income / (Expense):

($2.7) million compared to ($11.1) million, which included a foreign currency loss from the translation of Yen-denominated debt in 2016.

Income Tax Rate:

32.2% compared to 35.0% – benefitted from exercise of stock options.

EPS:

$0.77 compared to $0.79.

Stockholder Value

Dividend Payments:

$19.1 million.

Stock Repurchases:

$15.3 million; $177.6 million remaining in authorization.

2017 Outlook

Q3 Revenue:

$540 to $560 million; 2% negative foreign currency impact.

Q3 EPS:

$0.71 to $0.76.

2017 Revenue:

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

2017 EPS

$3.20 to $3.30, an increase from the prior outlook of $3.10 to $3.25.

“As we move into the second half of the year, we remain focused on executing our three key growth drivers – platforms, products and programs,” said Wood. “In the platforms area, we continue to drive social selling throughout our markets to expand our customer acquisition efforts. To support this strategy, we will introduce several new products at our ‘Nu Skin LIVE!’ global distributor event in October, including our ageLOC LumiSpa device. Additionally, we will begin to introduce new and enhanced programs designed to more effectively reward our sales leaders to drive growth. The progress we are making with these initiatives gives us confidence in our future,” Wood concluded.

 

“Given our strong second-quarter financial results, we are raising our full year 2017 earnings per share outlook to $3.20 to $3.30 and reiterating our annual revenue guidance of $2.26 to $2.30 billion,” said Mark Lawrence, chief financial officer. “For the third quarter we project revenue of $540 to $560 million and earnings per share of $0.71 to $0.76. Our new products and programs are planned for the fourth quarter with the primary focus around ageLOC LumiSpa, which we anticipate will generate approximately $100 million in sales,” concluded Lawrence.

 

Conference Call

 

The Nu Skin management team will host a conference call with the investment community on Aug. 2 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 Aug. 18, 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, 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: 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.

 

 

The Company’s revenue results by segment for the three-month periods ended June 30 are presented in the following table (in thousands).

 

 

 

2017

 

2016

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Mainland China

 

$     172,098

 

$     184,344

 

  (6.6%)

 

  (1.9%)

South Korea

 

         86,917

 

          93,036

 

  (6.6%)

 

   (9.2%)

Americas

 

         77,096

 

          67,884

 

 13.6%

 

15.0%

South Asia/Pacific

 

         67,935

 

          92,297

 

(26.4%)

 

(24.7%)

Japan

 

         64,796

 

          72,849

 

(11.1%)

 

  (8.4%)

Hong Kong/Taiwan

 

         43,071

 

          52,372

 

(17.8%)

 

(20.7%)

EMEA

 

    38,188

 

    37,693

 

  1.3%

 

  2.6%

 

 

 

 

 

 

 

 

 

Total

 

$   550,101

 

$   600,475

 

  (8.4%)

 

  (6.8%)


 

The Company’s revenue results by segment for the six-month periods ended June 30 are presented in the following table (in thousands).

 

 

 

2017

 

2016

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Mainland China

 

$       322,102

 

$       302,999

 

  6.3%

 

11.8%

South Korea

 

         169,388

 

         179,154

 

  (5.5%)

 

  (8.7%)

Americas

 

         142,754

 

         133,632

 

  6.8%

 

  7.5%

South Asia/Pacific

 

         137,733

 

         155,875

 

(11.6%)

 

(10.2%)

Japan

 

         125,952

 

         137,940

 

  (8.7%)

 

  (7.9%)

Hong Kong/Taiwan

 

          79,019

 

           92,428

 

(14.5%)

 

(17.5%)

EMEA

 

      72,252

 

   70,278

 

  2.8%

 

  4.4%

 

 

 

 

 

 

 

 

 

Total

 

$  1,049,200

 

$   1,072,306

 

  (2.2%)

 

  (0.9%)


 

The company’s Customers and Sales Leaders statistics by segment for the three-month periods ended June 30 are presented in the following table.

 

 

2017

 

2016

 

% Increase (Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

     207,000

 

 22,600

 

     179,000

 

 26,300

 

15.6%

 

(14.1%)

South Korea

 

188,000

 

    7,700

 

  216,000

 

    8,900

 

(13.0%)

 

(13.5%)

Americas

 

209,000

 

   7,000

 

165,000

 

  6,500

 

26.7%

 

  7.7%

South Asia/Pacific

 

125,000

 

 7,100

 

113,000

 

7,700

 

10.6%

 

  (7.8%)

Japan

 

134,000

 

  6,400

 

140,000

 

7,200

 

  (4.3%)

 

(11.1%)

Hong Kong/Taiwan

 

  68,000

 

  3,900

 

   78,000

 

5,300

 

(12.8%)

 

(26.4%)

EMEA

 

 129,000

 

    4,200

 

121,000

 

  4,200

 

  6.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,060,000

 

58,900

 

1,012,000

 

66,100

 

  4.7%

 

(10.9%)


 

“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 Second Quarters Ended June 30, 2017 and 2016

(in thousands, except per share amounts)

 

 

 

 

 

2017

 

2016

 

 

 

 

Revenue

$               550,101

 

 $              600,475

 

 

 

 

Cost of sales

                 121,521

 

                 128,205

 

 

 

 

Gross profit

                 428,580

 

                 472,270

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 228,353

 

                 248,363

        General and administrative expenses

                 135,488

 

                 144,109

Total operating expenses

                 363,841

 

                 392,472

 

 

 

 

Operating income

                   64,739

 

                   79,798

 

 

 

 

Other income (expense), net

                    (2,731)

 

                  (11,060)

Income before provision for income taxes

                   62,008

 

                   68,738

Provision for income taxes

                   19,967

 

                   24,025

 

 

 

 

Net income

$                 42,041

 

$                 44,713

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     0.79 

 

$                     0.80

        Diluted

$                    0.77

 

$                     0.79

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                  52,929

 

                   55,952

        Diluted

                  54,839

 

                   56,356

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Six-Month Periods Ended June 30, 2017 and 2016

(in thousands, except per share amounts)

 

 

 

 

 

2017

 

2016

 

 

 

 

Revenue

$            1,049,200

 

$            1,072,306

 

 

 

 

Cost of sales

                 232,787

 

                 266,074

 

 

 

 

Gross profit

                 816,413

 

                 806,232

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 437,361

 

                 443,922

        General and administrative expenses

                 268,051

 

                 274,363

Total operating expenses

                 705,412

 

                 718,285

 

 

 

 

Operating income

                 111,001

 

                   87,947

 

 

 

 

Other income (expense), net

                    (7,298)

 

                  (13,923)

Income before provision for income taxes

                  103,703

 

                   74,024

Provision for income taxes

                    34,173

 

                   25,995

 

 

 

 

Net income

$                  69,530

 

$                 48,029

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     1.32

 

$                     0.86

        Diluted

$                     1.28

 

$                     0.85

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   52,804

 

                   55,953

        Diluted

                   54,466

 

                   56,388

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

June 30, 2017

 

December 31, 2016

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                345,102

 

$                357,246

        Current investments

                      7,982

 

                    10,880

        Accounts receivable

                    35,010

 

                    31,199

        Inventories, net

                  246,658

 

                  249,936

       Prepaid expenses and other

                    85,547

 

                    65,076

 

                  720,299

 

                  714,337

 

 

 

 

Property and equipment, net

                  450,707

 

                  444,732

Goodwill

                  114,954

 

                  114,954

Other intangible assets, net

                    59,802

 

                    63,553

Other assets

                  161,383

 

                  136,469

               Total assets

$             1,507,145

 

$             1,474,045

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                 37,846

 

$                 41,261

        Accrued expenses

                  262,123

 

                  275,023

        Current portion of long-term debt

                  100,533

 

                    82,727

 

                  400,502

 

                  399,011

 

 

 

 

Long-term debt

                  324,059

 

                  334,165

Other liabilities

                    83,014

 

                    76,799

                Total liabilities

                  807,575

 

                  809,975

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91

 

                           91

       Additional paid-in capital

                  448,928

 

                  439,635

       Treasury stock, at cost

             (1,261,983)

 

             (1,250,123)

       Accumulated other comprehensive loss

                  (74,743)

 

                  (84,122)

       Retained earnings

               1,587,277

 

               1,558,589

 

                  699,570

 

                  664,070

              Total liabilities and stockholders’ equity

$             1,507,145

 

$             1,474,045

 

 

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

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

 

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