Nu Skin Enterprises Reports Fourth-Quarter And 2018 Results And Provides 2019 Guidance

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FOR IMMEDIATE RELEASE

 

Nu Skin Enterprises Reports Fourth-Quarter And 2018 Results

And Provides 2019 Guidance 

 

PROVO, Utah — Feb. 13, 2019 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced fourth-quarter and 2018 financial results.

 

Executive Summary

Q4 2018 vs. Prior-Year Quarter

Revenue:

$683.3 million, +3%

·         (4%) fx impact or ($26.8 M)

Earnings Per Share (EPS):

($0.32), or $1.05 excluding impairment and restructuring charges, compared to $0.33, or $1.20 excluding the impact of U.S. tax reform in Q4 2017

·         ($1.37) impairment and restructuring charges

Sales Leaders:

73,400; (10%)

·         Up 16% since the end of Q1 2018

Customers:

1,244,000; +16%

2018 Annual

Revenue:

$2.68 billion, +18%

·         0.5% fx impact

Earnings Per Share (EPS):

$2.16, or $3.52 excluding the impairment and restructuring charges, compared to $2.36, or $3.23 excluding the impact of U.S. tax reform

“We delivered another strong quarter despite a challenging comparison from the $130 million LumiSpa introduction in the prior year,” said Ritch Wood, chief executive officer. “We grew our revenue 18 percent for the year, with growth coming from virtually all of our segments. We were also encouraged that our customer acquisition strategy resulted in 16-percent growth in our customer base. And while our sales leader numbers were down year-over-year due to the LumiSpa introduction, we are pleased with 16 percent growth in sales leaders since the first quarter.”

 

Q4 2018 Year-Over-Year Operating Results

Revenue:

$683.3 million compared to $666.2 million

·         (4%) fx impact or ($26.8 M)

Gross Margin:

76.3% compared to 77.7%

Nu Skin business was 77.9%

Selling Expenses:

39.4% of revenue compared to 39.8%

·         Nu Skin business was 40.9%

G&A Expenses:

23.9% of revenue compared to 23.0%

Operating Margin:

2.7% or 14.1% when excluding impairment and restructuring charges, compared to 14.9%

Other Income / (Expense):

($4.3) million expense compared to ($0.4) million expense

Income Tax Rate:

225% or 35.9% excluding impairment and restructuring charges, compared to 81.5% or 33.1% excluding the impact of U.S. tax reform

EPS:

($0.32), or $1.05 excluding impairment and restructuring charges, compared to $0.33, or $1.20 excluding the impact of U.S. tax reform

·         ($1.37) impairment and restructuring charges

Stockholder Value

Dividend Payments:

$20.2 million

Stock Repurchases:

$21.3 million; $471 million remaining in authorization

Q1 and Full-Year 2019 Outlook

Q1 2019 Revenue:

$615 to $635 million, 0 to 3% growth

·         6 to 8% constant currency growth

·         Approximately (5 to 6%) fx impact

Q1 2019 EPS:

$0.70 to $0.77

2019 Revenue:

$2.76 billion to $2.82 billion,  3 to 5% growth

·         5 to 7% constant currency growth

·         Approximately (2 to 3%) fx impact

2019 EPS

$3.80 to $4.05

“We are entering 2019 with strong momentum and are projecting meaningful constant-currency top-line growth with continued improvement on the bottom line,” said Wood. “We believe 2019 will be a pivotal year as we transform our digital platform to better support customers, while further enabling our sales leaders to leverage the power of social selling. Our product portfolio remains strong, and we plan to build on the breakout success of our LumiSpa skin treatment and cleansing device with the launch of LumiSpa Accent, a specialized eye treatment attachment. On the program front, our Velocity enhanced sales compensation program has now been rolled out in nearly every market, providing us with ongoing flexibility to drive and reward key behaviors from our sales force. We believe we can continue to grow our business and look forward to a strong 2019,” Wood concluded.

 

“Coming off a strong year, we are projecting continued growth in 2019,” said Mark Lawrence, chief financial officer. “We project first-quarter revenue of $615 to $635 million, including an approximate 5 to 6 percent negative currency impact, and earnings per share of $0.70 to $0.77. For the year, we are projecting annual revenue of $2.76 to $2.82 billion with a projected 2 to 3 percent negative foreign currency impact and earnings per share of $3.80 to $4.05. We look forward to providing additional details regarding our guidance and 2019 growth initiatives at our investor day event which will be held Feb. 28 at our headquarters,” concluded Lawrence.

 

Conference Call

 

The Nu Skin management team will host a conference call with the investment community on Feb. 13, 2019, 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 Feb. 27, 2019.

 

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 LumiSpa skin cleansing and treatment device, 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, growth, product launches, strategies and initiatives; 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," “continue,” "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:

 

  • 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 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;
  • 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;
  • 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 company’s recent acquisitions;
  • 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 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 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;
  • unpredictable economic conditions and events globally;
  • uncertainties related to interpretation of, and forthcoming regulations under, the recently enacted U.S. tax reform legislation; 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 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. Operating margin, income tax rate and earnings per share, each excluding impairment and restructuring charges and/or the impact of tax reform, also are non-GAAP financial measures. Impairment and restructuring charges are not part of the ongoing operations of our underlying business. The U.S. tax reform legislation was enacted in December 2017 and had a material impact on our tax rate and earnings per share. Removing the impact of these items facilitates period-to-period comparisons of the company’s performance. Please see the reconciliations of these items to our operating margin, income tax rate and earnings per share calculated under GAAP, below.

 

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

 

 

 

%

Change

 

Constant Currency

% Change

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

$     217,040

 

$   222,333

 

     (2%)

 

      2%

 

Americas/Pacific

         95,175

 

      102,335

 

     (7%)

 

      3%

 

South Korea

        102,840

 

      103,066

 

      —

 

      2%

 

Southeast Asia

         80,500

 

        73,920

 

      9%

 

     13%

 

Japan

         63,953

 

       67,620

 

     (5%)

 

      (6%)

 

Hong Kong/Taiwan

          47,746

 

        46,627

 

     2%

 

      4%

 

EMEA

        50,584

 

       47,890

 

     6%

 

    10%

 

Other

       25,449

 

          2,410

 

      956%

 

  956%

 

     Total

$     683,287

 

$   666,201

 

     3%

 

      7%

 

 

 

 

 

 

 

 

 

 

 

The Company’s revenue results by segment for the year ended December 31 are presented in the following table (in thousands).

 

 

 

%

Change

 

Constant Currency

% Change

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

$     886,472

 

$     716,991

 

    24%

 

    21%

 

Americas/Pacific

       385,034

 

      342,429

 

    12%

 

    20%

 

South Korea

        373,357

 

      361,692

 

      3%

 

      1%

 

Southeast Asia

        316,890

 

       268,631

 

    18%

 

     18%

 

Japan

        254,939

 

      256,085

 

      —

 

      (2%)

 

Hong Kong/Taiwan

        185,893

 

       166,696

 

    12%

 

    11%

 

EMEA

        182,394

 

       160,275

 

    14%

 

    10%

 

Other

        94,029

 

         6,300

 

1,393%

 

1,393%

 

     Total

$   2,679,008

 

$  2,279,099

 

    18%

 

    17%

 

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

 

2018

 

2017

 

% Increase

(Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

   304,000

 

   33,100

 

    193,000

 

 40,600

 

58%

 

(18%)

Americas/Pacific

 

249,000

 

   8,300

 

244,000

 

   8,900

 

  2%

 

  (7%)

South Korea

 

182,000

 

    7,600

 

 173,000

 

   8,400

 

  5%

 

 (10%)

Southeast Asia

 

153,000

 

   8,900

 

 122,000

 

  8,000

 

25%

 

11%

Japan

 

130,000

 

   5,900

 

132,000

 

   6,600

 

  (2%)

 

 (11%)

Hong Kong/Taiwan

 

  77,000

 

   4,800

 

  71,000

 

    4,700

 

  8%

 

  2%

EMEA

 

   149,000

 

   4,800

 

    135,000

 

   4,700

 

10%

 

  2%

              

 

 

 

 

 

      

 

     

 

 

 

 

Total

 

  1,244,000

 

  73,400

 

  1,070,000

 

  81,900

 

16%

 

     (10%)

“Customers” are persons who purchased products directly from the company during the previous three months. Our Customer numbers do not include consumers who purchase products directly from members of our sales force.


“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)

(in thousands, except per share amounts)

 

 

Three Months Ended

 

Years Ended

 

December 31,

 

December 31,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Revenue

$     683,287

 

$     666,201

 

$   2,679,008

 

$   2,279,099

Cost of sales

       161,853

 

       148,459

 

        634,140

 

        502,078

 

 

 

 

 

 

 

 

Gross profit

       521,434

 

       517,742

 

     2,044,868

 

     1,777,021

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

        Selling expenses

      269,052

 

      265,378

 

     1,071,020

 

        938,024

General and administrative expenses

      163,265

 

      153,244

 

        662,302

 

        564,514

       Restructuring and impairment expenses

        70,686

 

               —

 

          70,686

 

                 —

 

 

 

 

 

 

 

 

Total operating expenses

      503,003

 

      418,622

 

     1,804,008

 

     1,502,538

 

 

 

 

 

 

 

 

Operating income

        18,431

 

        99,120

 

        240,860

 

        274,483

Other income (expense), net

        (4,254)

 

           (446)

 

        (21,194)

 

          (8,916)

 

 

 

 

 

 

 

 

Income before provision for income taxes    

        14,177

 

        98,674

 

        219,666

 

        265,567

Provision for income taxes

        31,936

 

        80,439

 

          97,779

 

        136,130

 

 

 

 

 

 

 

 

Net income

$     (17,759)

 

$      18,235

 

$      121,887

 

$      129,437

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

        Basic

$         (0.32)

 

$          0.35

 

$            2.21

 

$            2.45

        Diluted

$         (0.32)

 

$          0.33

 

$            2.16

 

$            2.36

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

 

 

 

 

 

 

 

        Basic

        55,453

 

        52,722

 

          55,170

 

          52,806

        Diluted

        56,341

 

        55,053

 

          56,476

 

          54,852

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

December 31,

 2018

 

December 31, 2017

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                386,911

 

$                426,399

        Current investments

                    11,346

 

                    11,847

        Accounts receivable

                    53,282

 

                    33,196

        Inventories, net

                  295,821

 

                  253,454

       Prepaid expenses and other

                    51,877

 

                    52,893

 

                  799,237

 

                  777,789

 

 

 

 

Property and equipment, net

                  464,535

 

                  464,587

Goodwill

                  196,573

 

                  114,954

Other intangible assets, net

                    89,989

 

                    67,647

Other assets

                  144,112

 

                  164,895

               Total assets

$             1,694,446

 

$             1,589,872

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$             47,617     

 

$            50,341     

        Accrued expenses

                  322,583

 

                  319,189

        Current portion of long-term debt

                    69,455

 

                    77,840

 

      439,655          

 

   447,370           

 

 

 

 

Long-term debt

                  361,008

 

                  310,790

Other liabilities

                  111,916

 

                  127,116

                Total liabilities

                  912,579

 

                  885,276

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

               91        

 

             91        

       Additional paid-in capital

                  552,564

 

                  466,349

       Treasury stock, at cost

              (1,326,605)

 

             (1,304,694)

       Accumulated other comprehensive loss

                   (79,934)

 

                  (66,318)

       Retained earnings

               1,635,751

 

               1,609,168

 

                  781,867

 

                  704,596

              Total liabilities and stockholders’ equity

$             1,694,446

 

$             1,589,872

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share Excluding Impact of Restructuring and Tax Reform to GAAP Earnings Per Share

(in thousands, except per share amounts)

 

 

Three Months Ended

 

Years Ended

 

December 31,

 

December 31,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Net income

$     (17,759)

 

$      18,235

 

$      121,887

 

$     129,437

Impact of restructuring and impairment:

 

 

 

 

 

 

 

        Restructuring and impairment

         70,686

 

               —

 

          70,686

 

                —

    Inventory write-off

           7,240

 

               —

 

            7,240

 

                —

       Income tax impact

         (1,086)

 

               —

 

          (1,086)

 

                —

Impact of tax reform on provision for income taxes

           

                —

 

       

        47,729

 

          

                 —

 

        

         47,729

Adjusted net income

$       59,081

 

$      65,964

 

$      198,727

 

$     177,166

 

 

 

 

 

 

 

 

Diluted earnings per share

$         (0.32)

 

$          0.33

 

$            2.16

 

$           2.36

Diluted earning per share, excluding restructuring and tax reform impact

$          1.05

 

$          1.20

 

$            3.52

 

$           3.23

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

       

         56,341

 

       

        55,053

 

         

          56,476

 

         

          54,852

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Operating Margin Excluding Impact of Restructuring to GAAP Operating Margin

(in thousands, except per share amounts)

 

 

Three Months Ended

 

Years Ended

 

December 31,

 

December 31,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Operating income

$       18,431

 

$      99,120

 

$      240,860

 

$      274,483

Impact of restructuring and impairment:

 

 

 

 

 

 

 

        Restructuring and impairment

         70,686

 

               —

 

          70,686

 

                 —

    Inventory write-off

           7,240

 

               —

 

            7,240

 

                 —

Adjusted operating income

$       96,357

 

$      99,120

 

$      318,786

 

$      274,483

 

 

 

 

 

 

 

 

Operating margin

               2.7%

 

            14.9%

 

                9.0%

 

              12.0%

Operating margin, excluding restructuring impact

         14.1%

 

        14.9%

 

              11.9%

 

           12.0%

 

 

 

 

 

 

 

 

Revenue

$   683,287

 

$    666,201

 

$  2,679,008

 

$   2,279,099

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Effective Tax Rate Excluding Impact of Restructuring and Tax Reform to GAAP Effective Tax Rate

(in thousands, except per share amounts)

 

 

Three Months Ended

 

Years Ended

 

December 31,

 

December 31,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Provision for income taxes

$       31,936

 

$      80,439

 

$        97,779

 

$      136,130

Impact of restructuring on tax provision

           1,086   

 

               —

 

            1,086

 

                —

Impact of tax reform on provision for income taxes

              

                —

 

      

       (47,729)

 

               

                 —

 

    

        (47,729)

Provision for income taxes, excluding impact of restructuring and tax reform

$     33,022

 

$      32,710

 

$        98,865

 

$       88,401

 

 

 

 

 

 

 

 

Income before provision for income taxes

$        14,177

 

$      98,674

 

$      219,666

 

$      265,567

Impact of restructuring and impairment:

 

 

 

 

 

 

 

        Restructuring and impairment

         70,686

 

               —

 

          70,686

 

                 —

       Inventory write-off

           7,240

 

               —

 

            7,240

 

                 —

Income before provision for income taxes, excluding impact of restructuring and tax reform

$       92,103

 

$      98,674

 

$      297,592

 

$      265,567

 

 

 

 

 

 

 

 

Effective tax rate

           225.3%

 

            81.5%

 

              44.5%

 

              51.3%

Effective tax rate, excluding restructuring and tax reform impact

             35.9%

 

            33.1%

 

              33.2%

 

              33.3%

 

# # #

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

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