Nu Skin Enterprises Reports Second-Quarter 2019 Results

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FOR IMMEDIATE RELEASE

NU SKIN ENTERPRISES REPORTS SECOND-QUARTER 2019 RESULTS

 

PROVO, Utah — Aug. 6, 2019 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced second-quarter 2019 results.  

 

Executive Summary

Q2 2019 vs. Prior-Year Quarter

Revenue:

$623.5 million; (11%)

·         (4%) fx impact or ($31 M)

Earnings Per Share (EPS):

$0.83; (8%)

Sales Leaders:

61,563; (14%)

Customers:

1,160,420; +1%

 

“As previously announced, our second-quarter results were negatively impacted by limited sales meetings, media scrutiny and consumer sentiment in Mainland China in connection with the recently completed 100-day review of the nutrition and direct sales industries,” said Ritch Wood, chief executive officer. “Outside of Mainland China, most of our other markets performed in-line with expectations. Our customer numbers remained steady as we continued our customer-focused initiatives globally, while sales leaders declined 14 percent, primarily due to Mainland China.”

 

 

Q2 2019 Year-Over-Year Operating Results

Revenue:

$623.5 million compared to $704.2 million

·         (4%) fx impact or ($31 M)

Gross Margin:

75.3% compared to 76.1%

·         Higher percentage of manufacturing revenue

·         Nu Skin business was 77.8% compared to 77.9%

·         Impacted by fx, offset by cost savings

Selling Expenses:

39.4% of revenue compared to 38.7%

·         Nu Skin business was 41.5%

G&A Expenses:

24.0% of revenue compared to 25.6%

Operating Margin:

11.9% compared to 11.8%

Other Income / (Expense):

($3.3) million compared to ($11.2) million

Income Tax Rate:

34.6% compared to 28.8%

EPS:

$0.83 compared to $0.90


Stockholder Value

Dividend Payments:

$20.6 million

Stock Repurchases:

Nil


Q3 and Full-Year 2019 Outlook

Q3 2019 Revenue:

$595 to $615 million; (9%) to (12%)

·         Approximately (2%) fx impact

Q3 2019 EPS:

$0.74 to $0.81

2019 Revenue:

$2.48 billion to $2.52 billion; (6%) to (8%)

·         Approximately (3%) to (4%) fx impact

2019 EPS

$3.20 to $3.35

“We remain committed to our long-term growth strategy focused on attracting and retaining customers, and are confident that, despite recent external factors, we are moving in the right direction,” said Wood. “We are encouraged by the resumption of some sales leader meetings in key areas of Mainland China. We remain optimistic about our opportunities with several key initiatives slated for the back half of the year around our Nu Skin LIVE global sales conference. Additionally, we will roll-out our new and improved Galvanic Spa beginning in September, which we believe will help drive global revenue. Finally, we are encouraged with the steady sales growth of our manufacturing platform, which we intend to continue to leverage moving forward.”

 

Mark Lawrence, chief financial officer, added, “Consistent with the guidance provided on July 16, we anticipate annual revenue in the $2.48 to $2.52 billion range, with an approximate 3 to 4 percent unfavorable foreign currency impact, and earnings per share of $3.20 to $3.35. For the third quarter, we project revenue of $595 to $615 million, with an approximate 2 percent negative foreign currency impact, and earnings per share of $0.74 to $0.81.”

 

Conference Call

The Nu Skin management team will host a conference call with the investment community today 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. 20, 2019.

 

About Nu Skin Enterprises, Inc.

Founded 35 years ago, Nu Skin Enterprises, Inc. (NSE) empowers innovative companies to change the world with sustainable solutions, opportunities, technologies, and life-improving values. The company currently focuses its efforts around innovative consumer products, product manufacturing and controlled environment agriculture technology. The NSE family of companies includes Nu Skin, which develops and distributes a comprehensive line of premium-quality beauty and wellness solutions through a global network of sales leaders in Asia, the Americas, Europe, Africa and the Pacific; and a collection of sustainable manufacturing and technology innovation companies. Nu Skin Enterprises is traded on the New York Stock Exchange under the symbol "NUS." More information is available at nuskinenterprises.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,” “continue,” “anticipate,” “optimistic,” “project,” “estimate,” “intend,” “plan,” “continue,” “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 the company’s markets, including the United States and Mainland China, may be modified, interpreted or enforced in a manner that results in negative changes to the company’s business model or negatively impacts its 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;

·         uncertainty regarding the continued impact of the 100-day review and negative media and consumer sentiment in Mainland China on our business operations and results;

·         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 businesses the company has acquired;

·         risks related to accurately predicting, delivering or maintaining sufficient quantities of products to support 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 its ability to import or continue selling a product in a market if the product is determined to be a medical device or if the company is unable to register the product in a timely manner under applicable regulatory requirements;

·         unpredictable economic conditions and events globally, including trade policies and tariffs;

·         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 change 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 believes that constant-currency revenue change is useful to investors, lenders and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on the company’s revenue from period to period.

 

The following table sets forth revenue for the three-month periods ended June 30, 2019 and 2018 for each of our reportable segments (U.S. dollars in thousands):

 

Three Months Ended

June 30,

 

 

 

Constant-Currency

 

2019

 

2018

 

Change

 

Change

 

 

 

 

 

 

 

 

Nu Skin

                     

Mainland China

$

185,333

 

$

245,256

 

 

(24%)

 

 

(19%)

Americas/Pacific

 

92,841

 

 

103,990

 

 

(11%)

 

 

(6%)

South Korea

 

84,732

 

 

91,624

 

 

(8%)

 

 

Southeast Asia

 

75,395

 

 

79,223

 

 

(5%)

 

 

(3%)

Japan

 

65,251

 

 

64,113

 

 

2%

 

 

2%

Hong Kong/Taiwan

 

43,712

 

 

52,206

 

 

(16%)

 

 

(14%)

EMEA

 

43,400

 

 

44,010

 

 

(1%)

 

 

5%

Other

 

1,249

 

 

1,030

 

 

21%

 

 

21%

Total Nu Skin

 

591,913

   

681,452

   

(13%)

   

(9%)

Manufacturing

 

31,557

   

22,738

   

39%

   

39%

Grow Tech

 

30

   

   

   

Total

$

623,500

 

$

704,190

 

 

(11%)

 

 

(7%)

The following table sets forth revenue for the six-month periods ended June 30, 2019 and 2018 for each of our reportable segments (U.S. dollars in thousands):

 

Six Months Ended

June 30,

 

 

 

Constant-Currency

 

2019

 

2018

 

Change

 

Change

 

 

 

 

 

 

 

 

Nu Skin

                     

Mainland China

$

393,821

 

$

442,787

 

 

(11%)

 

 

(5%)

Americas/Pacific

 

179,297

 

 

196,279

 

 

(9%)

 

 

(2%)

South Korea

 

168,585

 

 

180,554

 

 

(7%)

 

 

(1%)

Southeast Asia

 

147,890

 

 

150,083

 

 

(1%)

 

 

1%

Japan

 

127,360

 

 

127,337

 

 

 

 

1%

Hong Kong/Taiwan

 

84,270

 

 

93,198

 

 

(10%)

 

 

(7%)

EMEA

 

85,218

 

 

88,991

 

 

(4%)

 

 

3%

Other

 

(177)

 

 

1,265

 

 

(114%)

 

 

(114%)

Total Nu Skin

 

1,186,264

   

1,280,494

   

(7%)

   

(2%)

Manufacturing

 

60,829

   

39,915

   

52%

   

52%

Grow Tech

 

30

   

   

   

Total

$

1,247,123

 

$

1,320,409

 

 

(6%)

 

 

(1%)


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

 

As of

June 30, 2019

 

As of

June 30, 2018

 

% Increase (Decrease)

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

226,877

 

 

24,336

 

 

209,456

 

 

33,378

 

 

8%

 

 

(27%)

Americas/Pacific

 

253,684

 

 

8,161

 

 

265,431

 

 

8,964

 

 

(4%)

 

 

(9%)

South Korea

 

180,365

 

 

7,239

 

 

183,978

 

 

6,875

 

 

(2%)

 

 

5%

Southeast Asia

 

137,450

 

 

7,417

 

 

134,601

 

 

7,597

 

 

2%

 

 

(2%)

Japan

 

127,900

 

 

5,931

 

 

131,593

 

 

5,972

 

 

(3%)

 

 

(1%)

Hong Kong/Taiwan

 

70,089

 

 

4,223

 

 

75,828

 

 

4,196

 

 

(8%)

 

 

1%

EMEA

 

164,055

 

 

4,256

 

 

147,048

 

 

4,355

 

 

12%

 

 

(2%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,160,420

 

 

61,563

 

 

1,147,935

 

 

71,337

 

 

1%

 

 

(14%)


“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)

(U.S. dollars in thousands, except per share amounts)

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

                       

Revenue

$

623,500

 

$

704,190

 

$

1,247,123

 

$

1,320,409

Cost of sales

 

154,028

 

 

168,549

 

 

300,692

 

 

314,830

Gross profit

 

469,472

 

 

535,641

 

 

946,431

 

 

1,005,579

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

245,828

 

 

272,757

 

 

495,536

 

 

530,459

General and administrative expenses

 

149,442

 

 

180,120

 

 

308,040

 

 

333,366

Total operating expenses

 

395,270

 

 

452,877

 

 

803,576

 

 

863,825

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

74,202

 

 

82,764

 

 

142,855

 

 

141,754

Other income (expense), net

 

(3,326)

 

 

(11,165)

 

 

(6,174)

 

 

(9,958)

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

70,876

 

 

71,599

 

 

136,681

 

 

131,796

Provision for income taxes

 

24,527

 

 

20,638

 

 

47,330

 

 

45,296

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

46,349

 

$

50,961

 

$

89,351

 

$

86,500

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.83

 

$

0.92

 

$

1.61

 

$

1.58

Diluted

$

0.83

 

$

0.90

 

$

1.59

 

$

1.53

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

 

 

 

 

 

 

 

 

 

 

 

Basic

 

55,536

 

 

55,608

 

 

55,486

 

 

54,807

Diluted

 

55,943

 

 

56,713

 

 

56,030

 

 

56,430


NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)

 

   June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

360,632

 

$

386,911

Current investments

 

7,733

 

 

11,346

Accounts receivable

 

61,571

 

 

53,282

Inventories, net

 

292,696

 

 

295,821

Prepaid expenses and other

 

65,551

 

 

51,877

 Total current assets

 

788,183

 

 

799,237

 

 

 

 

 

 

Property and equipment, net

 

442,990

 

 

464,535

Right-of-use assets

 

118,507

   

Goodwill

 

196,573

 

 

196,573

Other intangible assets, net

 

84,482

 

 

89,989

Other assets

 

160,363

 

 

144,112

Total assets

$

1,791,098

 

$

1,694,446

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

48,551

 

$

47,617

Accrued expenses

 

306,497

 

 

322,583

Current portion of long-term debt

 

59,500

 

 

69,455

 Total current liabilities

 

414,548

 

 

439,655

 

 

 

 

 

 

           

Operating lease liabilities

 

84,102

 

 

Long-term debt

 

348,986

 

 

361,008

Other liabilities

 

108,512

 

 

111,916

Total liabilities

 

956,148

 

 

912,579

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Class A common stock

 

91

 

 

91

Additional paid-in capital

 

556,294

 

 

552,564

Treasury stock, at cost

 

(1,324,834)

 

 

(1,326,605)

Accumulated other comprehensive loss

 

(81,276)

 

 

(79,934)

Retained earnings

 

1,684,675

 

 

1,635,751

Total stockholders' equity

 

834,950

 

 

781,867

Total liabilities and stockholders’ equity

$

1,791,098

 

$

1,694,446


# # #

 

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

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

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