Nu Skin Enterprises Reports Third-Quarter 2017 Results

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FOR IMMEDIATE RELEASE

NU SKIN ENTERPRISES REPORTS THIRD-QUARTER 2017 RESULTS

 

PROVO, Utah — Nov. 1, 2017 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third-quarter 2017 financial results.

 

Executive Summary

Revenue:

$563.7 million, compared to $604.2 million in Q3 2016, which included $56 million in limited-time-offer (LTO) sales. Q3 2017 was negatively impacted approximately 1% by foreign currency fluctuations.

Earnings Per Share (EPS):

$0.76, compared to $0.98 in Q3 2016.

Sales Leaders:

64,200 – 5% year-over-year decrease, impacted by prior-year LTOs.

Customers:

1,069,000 – 7% year-over-year improvement.

“During the third quarter, we continued to execute our growth strategy and delivered results at the top-end of our previous guidance range,” said Ritch Wood, chief executive officer. “We generated sequential improvements in the business, and are confident that our focus on social selling served as an important catalyst for steady customer and business growth in many of our markets. We also saw healthy energy within our sales force leading up to our October Nu Skin LIVE! event.”

 

Q3 2017 Year-Over-Year Operating Results

Revenue:

$563.7 million compared to $604.2 million.

Gross Margin:

78.6% compared to 79.2%.

Selling Expenses:

41.7% of revenue compared to 42.3%.

G&A Expenses:

25.4% of revenue compared to 23.3%.

Operating Margin:

11.4% compared to 13.6%.

Other Income / (Expense):

($1.2) million compared to ($5.7) million.

Income Tax Rate:

34.1% compared to 25.8% due to closing of Venezuela operations.

EPS:

$0.76 compared to $0.98.

Stockholder Value

Dividend Payments:

$19.0 million.

Stock Repurchases:

$25.7 million; $152 million remaining in authorization.

2017 Outlook

Q4 Revenue:

$650 to $670 million; approximately 1% negative foreign currency impact.

Q4 EPS:

$1.16 to $1.21.

2017 Revenue:

$2.263 to $2.283 billion; approximately 3% growth.

2017 EPS

$3.20 to $3.25.

“As we look ahead to the fourth quarter, we remain focused on expanding our customer base as we begin rolling out our platform, product and program initiatives,” said Wood. “During our LIVE! event, we introduced several new products aimed at increasing the pace of our social selling efforts, including the ageLOC LumiSpa treatment and cleansing device which we plan to launch in every market during the first half of 2018. Over the next several quarters, we will begin implementing enhanced programs to more effectively reward our sales leaders and build long-term customer loyalty. We are confident that our strategic focus on these initiatives will help us build a solid base for future growth and enhanced value for our shareholders.”

 

“Looking forward, we expect fourth-quarter revenue in the $650 to $670 million range which includes a one percent negative foreign currency impact,” said Mark Lawrence, chief financial officer. “In the quarter, we continue to anticipate approximately $100 million from the introduction of ageLOC LumiSpa, and project fourth-quarter earnings per share of $1.16 to $1.21.”

 

Conference Call

 

The Nu Skin management team will host a conference call with the investment community on Nov. 1, 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 Nov. 15, 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 September 30 are presented in the following table (in thousands).

 

 

 

2017

 

2016

 

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Mainland China

 

$      172,556

 

$   168,320

 

  2.5%

 

  2.5%

South Korea

 

         89,238

 

     136,188

 

(34.5%)

 

(33.7%)

Americas

 

        79,214

 

       71,250

 

11.2%

 

12.1%

South Asia/Pacific

 

       78,994

 

       70,867

 

11.5%

 

12.9%

Japan

 

       62,513

 

      72,489

 

(13.8%)

 

  (6.5%)

Hong Kong/Taiwan

 

      41,050

 

      48,140

 

(14.7%)

 

(16.4%)

EMEA

 

       40,133

 

          36,908

 

  8.7%

 

  3.2%

 

 

 

 

 

 

 

 

 

Total

 

$    563,698

 

$    604,162

 

  (6.7%)

 

  (5.8%)

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

 

 

2017

 

2016

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Mainland China

 

$      494,658

 

$     471,319

 

  5.0%

 

  8.5%

South Korea

 

       258,626

 

       315,342

 

(18.0%)

 

(19.5%)

Americas

 

      221,968

 

        204,882

 

  8.3%

 

  9.1%

South Asia/Pacific

 

       216,727

 

        226,742

 

  (4.4%)

 

  (2.9%)

Japan

 

        188,465

 

         210,429

 

(10.4%)

 

  (7.4%)

Hong Kong/Taiwan

 

        120,069

 

         140,568

 

(14.6%)

 

(17.2%)

EMEA

 

        112,385

 

         107,186

 

  4.9%

 

  4.0%

 

 

 

 

 

 

 

 

 

Total

 

$   1,612,898

 

$     1,676,468

 

  (3.8%)

 

  (2.7%)

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

 

2017

 

2016

 

% Increase (Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

       190,000

 

         25,600

 

       182,000

 

         25,300

 

    4.4%

 

  1.2%

South Korea

 

       185,000

 

           8,400

 

       198,000

 

         11,700

 

    (6.6%)

 

(28.2%)

Americas

 

       215,000

 

           7,200

 

       171,000

 

           6,700

 

25.7%

 

  7.5%

South Asia/Pacific

 

       149,000

 

           7,900

 

       116,000

 

           7,200

 

28.4%

 

  9.7%

Japan

 

       131,000

 

           6,500

 

       136,000

 

           7,000

 

    (3.7%)

 

  (7.1%)

Hong Kong/Taiwan

 

         71,000

 

           4,300

 

         75,000

 

           5,300

 

    (5.3%)

 

(18.9%)

EMEA

 

     128,000

 

    4,300

 

     121,000

 

    4,100

 

    5.8%

 

  4.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

   1,069,000

 

  64,200

 

      999,000

 

  67,300

 

    7.0%

 

  (4.6%)

“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 Third Quarters Ended September 30, 2017 and 2016

(in thousands, except per share amounts)

 

 

 

 

 

2017

 

2016

 

 

 

 

Revenue

$               563,698

 

 $              604,162

 

 

 

 

Cost of sales

                 120,832

 

                 125,863

 

 

 

 

Gross profit

                 442,866

 

                 478,299

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 235,285

 

                 255,274

        General and administrative expenses

                 143,219

 

                 140,651

Total operating expenses

                 378,504

 

                 395,925

 

 

 

 

Operating income

                   64,362

 

                   82,374

 

 

 

 

Other income (expense), net

                    (1,172)

 

                    (5,695)

Income before provision for income taxes

                   63,190

 

                   76,679

Provision for income taxes

                   21,518

 

                   19,807

 

 

 

 

Net income

$                 41,672

 

$                 56,872

 

 

 

 

Net income per share:

 

 

 

        Basic

    $                 0.79    

 

$                     1.02

        Diluted

$                    0.76

 

$                     0.98

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                  52,873

 

                   55,983

        Diluted

                  54,834

 

                   57,852

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2017 and 2016

(in thousands, except per share amounts)

 

 

 

 

 

2017

 

2016

 

 

 

 

Revenue

$            1,612,898

 

$            1,676,468

 

 

 

 

Cost of sales

                 353,619

 

                 391,937

 

 

 

 

Gross profit

              1,259,279

 

               1,284,531

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 672,646

 

                 699,196

        General and administrative expenses

                 411,270

 

                 415,014

Total operating expenses

              1,083,916

 

              1,114,210

 

 

 

 

Operating income

                 175,363

 

                 170,321

 

 

 

 

Other income (expense), net

                    (8,470)

 

                  (19,618)

Income before provision for income taxes

                  166,893

 

                 150,703

Provision for income taxes

                   55,691

 

                   45,802

 

 

 

 

Net income

$               111,202

 

$               104,901

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     2.10

 

$                     1.87

        Diluted

$                     2.04

 

$                     1.85

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   52,834

 

                   55,963

        Diluted

                   54,519

 

                   56,586

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

September 30, 2017

 

December 31, 2016

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                363,769

 

$                 357,246

        Current investments

                      7,983

 

                    10,880

        Accounts receivable

                    37,725

 

                    31,199

        Inventories, net

                  252,470

 

                  249,936

       Prepaid expenses and other

                    87,282

 

                    65,076

 

                  749,229

 

                  714,337

 

 

 

 

Property and equipment, net

                  449,555

 

                  444,732

Goodwill

                  114,954

 

                  114,954

Other intangible assets, net

                    68,904

 

                    63,553

Other assets

                  164,689

 

                  136,469

               Total assets

$             1,547,331

 

$             1,474,045

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                41,638     

 

$                 41,261     

        Accrued expenses

                  276,486

 

                  275,023

        Current portion of long-term debt

                  101,701

 

                    82,727

 

           419,825          

 

           399,011           

 

 

 

 

Long-term debt

                  316,519

 

                  334,165

Other liabilities

                    93,464

 

                    76,799

                Total liabilities

                  829,808

 

                  809,975

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                     91        

 

                      91        

       Additional paid-in capital

                  460,782

 

                  439,635

       Treasury stock, at cost

              (1,284,043)

 

              (1,250,123)

       Accumulated other comprehensive loss

                   (69,233)

 

                   (84,122)

       Retained earnings

               1,609,926

 

               1,558,589

 

                  717,523

 

                  664,070

              Total liabilities and stockholders’ equity

$             1,547,331

 

$             1,474,045

 

# # #

 

Nu Skin Social Media Channels

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

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

 

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