Nu Skin Enterprises Reports First-Quarter 2020 Results

Nu Skin Enterprises Reports First-Quarter 2020 Results

 

PROVO, Utah — May 6, 2020 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced first-quarter 2020 results above guidance.

 

Executive Summary

Q1 2020 vs. Prior-Year Quarter

Revenue:

$ 518.0 million; (17%)

·       (2%) fx impact or ($14.3) million

Earnings Per Share (EPS):

$0.36; (53%)

Sales Leaders:

49,551; (22%)

Customers:

1,130,947; (5%)

 

“The efforts and resiliency of our sales leaders and global teams helped us achieve revenue and earnings above guidance in the first quarter,” said Ritch Wood, chief executive officer. “While COVID-19 continues to present significant challenges globally, we are grateful for the heroic efforts of healthcare workers, first responders and other essential workers around the world. From a Nu Skin perspective, our entire organization has mobilized to protect the health and safety of our teams and ensure business continuity for our customers. As a result, we have been able to maintain support for our sales leaders, leverage our supply chain to meet consumer demand for our products and utilize technology to facilitate remote work for both our sales leaders and employees.”

 

“Our first quarter results demonstrated continued stability in the Nu Skin business with strong customer activity. More than 80 percent of our revenue comes through our digital properties which have been enhanced by our strategic investments in technology infrastructure and digital tools. Additionally, our manufacturing and supply chain investments have enabled us to effectively manage inventory and fulfill customer orders worldwide through very challenging circumstances. Our manufacturing segment performed well considering the supply chain disruptions related to certain ingredients and packaging materials due to the pandemic. We generated solid cash flow during the quarter, increased our dividend for the 19th consecutive year and utilized our cash to repurchase shares in a way that we believe will benefit shareholders going forward,” continued Wood.

 

Q1 2020 Year-Over-Year Operating Results                                                                             

Revenue:

$518.0 million compared to $623.6 million

·       (2%) fx impact or ($14.3) million

Gross Margin:

75.7% compared to 76.5%

·       Nu Skin business was 78.1% compared to 78.7%

Selling Expenses:

39.8% of revenue compared to 40.0%

·       Nu Skin business was 42.0% compared to 42.0%

G&A Expenses:

28.9% of revenue compared to 25.4%

Operating Margin:

7.1% compared to 11.0%

Other Income / (Expense):

($6.2) million compared to ($2.8) million

·       ($3.1) million due to fx

Income Tax Rate:

35.1% compared to 34.7%

EPS:

$0.36 compared to $0.77


Stockholder Value

Dividend Payments:

$20.7 million

Stock Repurchases:

$60.9 million

·       $409.3 million remaining in authorization

Q2 and Full-Year 2020 Outlook

Q2 2020 Revenue:

$520 to $550 million; (12 to 17%)

·       Approximately (3 to 4%) fx impact

Q2 2020 EPS:

$0.42 to $0.52

2020 Revenue:

$2.17 billion to $2.26 billion; (7 to 10%)

·       Approximately (2 to 3%) fx impact

2020 EPS

$2.05 to $2.35

“While there is a great deal of uncertainty in the broader economy, we are optimistic our business will perform well as sales leaders leverage our technology investments to drive product demand and interest in the business opportunity,” said Wood. “The situation in Mainland China is stabilizing with the country returning to work, a key development we believe will translate into improvement throughout the year. We anticipate similar trends in most of our other markets as pandemic restrictions begin to ease elsewhere across the globe. We continue to believe this trend, paired with the global preview of our newest beauty device late in 2020, sets our business up for a return to growth toward the end of the year,” Wood concluded.

 

Mark Lawrence, chief financial officer, added, “We are encouraged with our first-quarter results, despite the economic challenges. During the quarter, we generated strong cash from operations and leveraged the strength of our balance sheet to pay an increased dividend and repurchase $61 million of our stock. As we look ahead to the second quarter, our revenue guidance is $520 to $550 million, which includes an approximate 3 to 4 percent unfavorable foreign currency impact, and an earnings per share outlook of $0.42 to $0.52. Our 2020 revenue guidance of $2.17 to $2.26 billion reflects a negative foreign currency impact of 2 to 3 percent, an increased fx headwind of more than 1 percent from our previous guidance, and we anticipate annual earnings per share of $2.05 to $2.35.”

 

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 May 20, 2020.

 

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 Rhyz, our strategic investment arm that includes 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, benefits to shareholders, strategies and initiatives; statements of management’s expectations regarding the future status of the COVID-19 pandemic globally and across the company’s markets, and government and public behavior in response to such status; 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,” “benefit,” “project,” “outlook,” “guidance,” “plan,” “continue,” “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:

  • risk that epidemics, including the recent outbreak of coronavirus, and other crises could negatively impact our business;
  • 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, including the Form 10-K for the fiscal year ending December 31, 2019, the Forms 8-K filed on March 18, 2020 and April 21, 2020, and the Form 10-Q for the fiscal quarter ending March 31, 2020. 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 that 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 Company’s revenue results by segment for the three-month periods ended March 31 are presented in the following table (in thousands).

 

Three Months Ended

March 31,

 

 

 

Constant-Currency

 

2020

 

2019

 

Change

 

Change

 

 

 

 

 

 

 

 

Nu Skin

                     

Mainland China

$

137,696

 

$

208,488

 

 

(34)%

 

 

(31)%

South Korea

 

75,719

 

 

83,853

 

 

(10)%

 

 

(4)%

Americas/Pacific

 

74,573

 

 

86,456

 

 

(14)%

 

 

(9)%

Southeast Asia

 

69,586

 

 

72,495

 

 

(4)%

 

 

(3)%

Japan

 

61,300

 

 

62,109

 

 

(1)%

 

 

(2)%

Hong Kong/Taiwan

 

35,827

 

 

40,558

 

 

(12)%

 

 

(13)%

EMEA

 

35,403

 

 

41,818

 

 

(15)%

 

 

(13)%

Other

 

773

 

 

(1,426)

 

 

154%

 

 

154%

Total Nu Skin

 

490,877

   

594,351

   

(17)%

   

(15)%

Manufacturing

 

27,147

   

29,272

   

(7)%

   

(7)%

Grow Tech

 

4

   

   

 

 

Total

$

518,028

 

$

623,623

 

 

(17)%

 

 

(15)%


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

 

 

As of

March 31, 2020

 

As of

March 31, 2019

 

% Increase (Decrease)

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

271,536

 

 

16,159

 

 

272,053

 

 

26,986

 

 

 

 

(40)%

South Korea

 

174,004

 

 

6,608

 

 

181,150

 

 

6,671

 

 

(4)%

 

 

(1)%

Americas/Pacific

 

214,139

 

 

6,930

 

 

242,925

 

 

7,862

 

 

(12)%

 

 

(12)%

Southeast Asia

 

145,116

 

 

6,634

 

 

138,112

 

 

7,071

 

 

5%

 

 

(6)%

Japan

 

119,784

 

 

5,635

 

 

126,526

 

 

5,840

 

 

(5)%

 

 

(4)%

Hong Kong/Taiwan

 

66,024

 

 

3,348

 

 

70,354

 

 

3,959

 

 

(6)%

 

 

(15)%

EMEA

 

140,344

 

 

4,237

 

 

162,086

 

 

4,859

 

 

(13)%

 

 

(13)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,130,947

 

 

49,551

 

 

1,193,206

 

 

63,248

 

 

(5)%

 

 

(22)%

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

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

 

Three Months Ended

March 31,

 

2020

 

2019

           

Revenue

$

518,028

 

$

623,623

Cost of sales

 

125,793

 

 

146,664

Gross profit

 

392,235

 

 

476,959

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Selling expenses

 

206,042

 

 

249,708

General and administrative expenses

 

149,628

 

 

158,598

Total operating expenses

 

355,670

 

 

408,306

 

 

 

 

 

 

Operating income

 

36,565

 

 

68,653

Other income (expense), net

 

(6,174)

 

 

(2,848)

 

 

 

 

 

 

Income before provision for income taxes

 

30,391

 

 

65,805

Provision for income taxes

 

10,661

 

 

22,803

 

 

 

 

 

 

Net income

$

19,730

 

$

43,002

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

Basic

$

0.36

 

$

0.78

Diluted

$

0.36

 

$

0.77

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

 

 

 

 

 

Basic

 

55,059

 

 

55,436

Diluted

 

55,101

 

 

56,128

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)

 

   March 31, 2020

 

December 31, 2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

352,578

 

$

335,630

Current investments

 

9,087

 

 

8,413

Accounts receivable

 

43,973

 

 

50,378

Inventories, net

 

257,474

 

 

275,891

Prepaid expenses and other

 

66,457

 

 

69,854

 Total current assets

 

729,569

 

 

740,166

 

 

 

 

 

 

Property and equipment, net

 

449,486

 

 

453,604

Right-of-use assets

 

147,678

   

144,326

Goodwill

 

196,573

 

 

196,573

Other intangible assets, net

 

77,796

 

 

80,321

Other assets

 

145,217

 

 

154,016

Total assets

$

1,746,319

 

$

1,769,006

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

39,891

 

$

38,979

Accrued expenses

 

285,213

 

 

290,281

Current portion of long-term debt

 

95,000

 

 

27,500

 Total current liabilities

 

420,104

 

 

356,760

 

         

Operating lease liabilities

 

108,145

 

 

105,701

Long-term debt

 

327,197

 

 

334,461

Other liabilities

 

90,375

 

 

96,795

Total liabilities

 

945,821

 

 

893,717

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Class A common stock

 

91

 

 

91

Additional paid-in capital

 

557,916

 

 

557,544

Treasury stock, at cost

 

(1,384,036)

 

 

(1,324,826)

Accumulated other comprehensive loss

 

(100,289)

 

 

(85,292)

Retained earnings

 

1,726,816

 

 

1,727,772

Total stockholders' equity

 

800,498

 

 

875,289

Total liabilities and stockholders’ equity

$

1,746,319

 

$

1,769,006


# # #

 

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

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

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