Nu Skin Enterprises Reports Third Quarter 2023 Financial Results
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Nu Skin Enterprises Reports Third Quarter 2023 Financial Results
  • By THE K BEAUTY SCIENCE
  • Accepted 2023.11.02 05:06
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PROVO, Utah, Nov. 1, 2023 /PRNewswire/ -- Nu Skin Enterprises Inc. (NYSE: NUS) today announced third quarter 2023 results.

Executive Summary

Q3 2023 vs. Prior-year Quarter

Revenue

$498.8 million; (7)%

   •   (1)% FX impact or $(8.1) million

Earnings Per Share

(EPS)

$(0.74) or $0.56 excluding an inventory write-off compared to

$(0.51) or $0.47 excluding restructuring and impairment charges

Customers

978,907; (21)%

Paid Affiliates

186,162; (23)% or (13)% excluding an adjustment to eligibility

requirements

Sales Leaders

47,031; (6)%

"Our third quarter results were softer than expected as persistent macro-economic challenges in several of our key markets negatively affected consumer spending and customer acquisition, particularly in our Mainland China and Americas segments, along with a continued strong U.S. dollar," said Ryan Napierski, Nu Skin president and CEO. "Although we are disappointed in the third quarter results of our Nu Skin business, we are encouraged by stabilization and modest growth in three of our Nu Skin reporting segments, highlighted by double-digit gains in Europe/Africa. We are also pleased with accelerated growth of our Rhyz businesses as we lean further into our synergistic enterprise ecosystem.

"We continued to advance key initiatives aimed at driving long-term success, such as introducing ageLOC® WellSpa iO™, a smart device system focused on holistic wellness and beauty; rolling out a new channel growth incentive; and gaining additional traction in monthly active users of our Vera® and Stela apps," continued Napierski. "Given the current global headwinds and their impact, we are strategically re-evaluating several aspects of our Nu Skin business, including our product portfolio, global processes and organization, and operational footprint. This is to ensure we continue executing on the transformational initiatives that will shape Nu Skin's future, including the introduction of a new mental wellness category in 2024. We are also aggressively managing costs to help drive growth and profitability as we work toward our long-term vision."

Q3 2023 Year-over-year Operating Results                

Revenue

$498.8 million compared to $537.8 million

   •   (1)% FX impact or $(8.1) million

Gross Margin

58.6% or 71.8% excluding an inventory write-off compared to

67.7% or 72.7% excluding restructuring and impairment charges

   •   Nu Skin business was 61.8% or 76.8% excluding inventory

       write-off compared
to 73.0% or 76.7% excluding

       restructuring and impairment charges

Selling Expenses

37.6% compared to 40.3%

   •   Nu Skin business was 41.7% compared to 43.5%

G&A Expenses

26.2% compared to 25.7%

Operating Margin

(5.3)% or 7.9% excluding an inventory write-off compared to

(3.8)% or 6.8% excluding restructuring and impairment charges

Other Expense

$(8.1) million compared to $(8.7) million or $(5.4) million

excluding restructuring and impairment charges

Income Tax Rate

(7.3)% or 10.1% excluding an inventory write-off compared to

12.3% or 24.0% excluding restructuring and impairment charges

EPS

($0.74) or $0.56 excluding an inventory write-off compared to

$(0.51) or $0.47 excluding restructuring and impairment charges

Stockholder Value

Dividend Payments

$19.5 million

Stock Repurchases

$13.0 million

   •   $162.4 million remaining in authorization

Q4 and Full-year 2023 Outlook

Q4 2023 Revenue

$440 to $480 million; (16)% to (8)%

   •   Approximately (3) to (2)% FX impact

Q4 2023 EPS

$(0.14) to $0.01 or $0.15 to $0.30 non-GAAP

2023 Revenue

$1.92 to $1.96 billion; (14)% to (12)%

   •   Approximately (3) to (2)% FX impact

2023 EPS

$(0.10) to $0.05 or $1.62 to $1.77 non-GAAP

"Given the state of our business and in line with our global strategic review, we made the decision to accelerate our product portfolio optimization resulting in a $65.7 million Q3 inventory write-off and are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of $15 to $25 million," added James D. Thomas, chief financial officer. "Our 2023 revenue is now expected to be $1.92 to $1.96 billion, with an approximate 3 percent foreign currency headwind. We anticipate reported EPS of $(0.10) to $0.05 or adjusted EPS of $1.62 to $1.77, which excludes inventory write-off and restructuring charges. For the fourth quarter, we project revenue of $440 to $480 million, assuming a negative foreign currency impact of approximately 3 percent, with reported earnings per share of $(0.14) to $0.01 or $0.15 to $0.30 when excluding the fourth quarter charge." 

Conference Call

The Nu Skin Enterprises 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 on the same page through Nov. 15, 2023.

About Nu Skin Enterprises Inc.

The Nu Skin Enterprises Inc. (NYSE: NUS) family of companies includes Nu Skin and Rhyz Inc. Nu Skin is an integrated beauty and wellness company, powered by a dynamic affiliate opportunity platform, which operates in nearly 50 markets worldwide. Backed by nearly 40 years of scientific research, the company's products help people look, feel and live their best with brands including Nu Skin® personal care, Pharmanex® nutrition and ageLOC® anti-aging, which includes an award-winning line of beauty device systems. Rhyz is the strategic investment arm of Nu Skin Enterprises. Formed in 2018, Rhyz is a synergistic ecosystem of consumer, technology and manufacturing companies focused on innovation within the beauty, wellness and lifestyle categories.

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 macro-environment and the company's performance, growth, shareholder value, strategies, transformation, initiatives, product pipeline and product introductions/launches, digital and social-commerce tools and initiatives, customers, sales leaders, and affiliates; projections regarding revenue, expenses, future restructuring and impairment charges, operating income, earnings per share, foreign currency fluctuations, uses of cash 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," "aim," "anticipate," "project," "continue," "outlook," "guidance," "remain," "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 COVID-19 and related disruptions, or 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, increased scrutiny of sales force actions, 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;
  • political, legal, tax and regulatory uncertainties, including trade policies, associated with operating in Mainland China and other international markets;
  • uncertainty regarding meeting restrictions and other government scrutiny in Mainland China, as well as 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;
  • economic conditions and events globally;
  • the company's future tax-planning initiatives; any prospective or retrospective increases in duties or tariffs 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 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.

Earnings per share, gross margin, operating margin, other expense and income tax rate, each excluding inventory write-off charges and/or restructuring and impairment charges, also are non-GAAP financial measures. Inventory write-off charges and restructuring and impairment charges are not part of the ongoing operations of our underlying business. The company believes that these non-GAAP financial measures are useful to investors, lenders and analysts because removing the impact of inventory write-off charges and restructuring and impairment charges facilitates period-to-period comparisons of the company's performance. Please see the reconciliations of these items to our earnings per share, gross margin, operating margin, other expense and income tax rate calculated under GAAP, below.

The following table sets forth revenue for the three-month periods ended September 30, 2023, and 2022 for each of our reportable segments (U.S. dollars in thousands):



Three Months Ended

September 30,







Constant-

Currency



2023



2022



Change



Change

Nu Skin























Americas

$

91,671



$

131,591





(30) %





(27) %

Mainland China



70,225





75,151





(7) %





(1) %

Southeast Asia/Pacific



68,743





83,502





(18) %





(16) %

South Korea



63,709





67,237





(5) %





(7) %

Japan



53,399





53,276









5 %

Europe & Africa



50,048





45,099





11 %





3 %

Hong Kong/Taiwan



40,724





39,587





3 %





6 %

Nu Skin other



(274)





496





(155) %





(155) %

Total Nu Skin



438,245





495,939





(12) %





(10) %

Rhyz Investments























Manufacturing



49,714





41,328





20 %





20 %

Rhyz other



10,813





538





1910 %





1910 %

Total Rhyz Investments



60,527





41,866





45 %





45 %

Total

$

498,772



$

537,805





(7) %





(6) %

The following table sets forth revenue for the nine-month periods ended September 30, 2023, and 2022 for each of our reportable segments (U.S. dollars in thousands):



Nine Months Ended

September 30,







Constant-

Currency



2023



2022



Change



Change

Nu Skin























Americas

$

300,469



$

379,616





(21) %





(17) %

Mainland China



226,563





286,454





(21) %





(16) %

Southeast Asia/Pacific



200,317





267,805





(25) %





(23) %

South Korea



187,719





208,678





(10) %





(8) %

Japan



156,867





171,019





(8) %





(1) %

Europe & Africa



144,460





148,938





(3) %





(4) %

Hong Kong/Taiwan



112,380





117,408





(4) %





(1) %

Nu Skin other



208





2,434





(91) %





(91) %

Total Nu Skin



1,328,983





1,582,352





(16) %





(13) %

Rhyz Investments























Manufacturing



131,032





119,898





9 %





9 %

Rhyz other



20,476





1,069





1815 %





1815 %

Total Rhyz Investments



151,508





120,967





25 %





25 %

Total

$

1,480,491



$

1,703,319





(13) %





(10) %

The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business for the three-month periods ended September 30, 2023, and 2022: 



Three Months Ended

September 30,







2023



2022



Change

Customers















Americas



231,215





316,123



(27) %

Mainland China



189,221





256,183



(26) %

Southeast Asia/Pacific



111,151





153,432



(28) %

South Korea



109,550





134,549



(19) %

Japan



114,316





121,202



(6) %

Europe & Africa



169,320





187,906



(10) %

Hong Kong/Taiwan



54,134





69,989



(23) %

Total Customers



978,907





1,239,384



(21) %

















Paid Affiliates















Americas



32,769





44,745



(27) %

Mainland China



27,509





23,088



19 %

Southeast Asia/Pacific



33,574





40,624



(17) %

South Korea(1)



24,110





47,852



(50) %

Japan



37,695





38,119



(1) %

Europe & Africa(1)



19,254





31,409



(39) %

Hong Kong/Taiwan(1)



11,251





17,439



(35) %

Total Paid Affiliates



186,162





243,276



(23) %

















Sales Leaders















Americas



7,537





9,545



(21) %

Mainland China



12,647





11,897



6 %

Southeast Asia/Pacific



6,351





7,618



(17) %

South Korea



6,436





6,992



(8) %

Japan



7,087





6,063



17 %

Europe & Africa



4,105





4,777



(14) %

Hong Kong/Taiwan



2,868





2,932



(2) %

Total Sales Leaders



47,031





49,824



(6) %



(1)  The September 30, 2023, number is affected by a change in eligibility requirements for receiving certain rewards within our compensation structure. We plan to implement these changes in additional segments over the next several quarters.

  • "Customers" are persons who have purchased directly from the Company during the three months ended as of the date indicated. Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force.
  • "Paid Affiliates" are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the three-month period. In all of our markets besides Mainland China, we refer to members of our independent sales force as "Brand Affiliates" because their primary role is to promote our brand and products through their personal social networks.
  • "Sales Leaders" are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who achieved certain qualification requirements as of the end of each month of the quarter.

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

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











Three Months Ended

September 30,



Nine Months Ended

September 30,



2023



2022



2023



2022

Revenue

$

498,772



$

537,805



$

1,480,491



$

1,703,319

Cost of sales



206,505





173,500





475,635





483,099

Gross profit



292,267





364,305





1,004,856





1,220,220

























Operating expenses:























   Selling expenses



187,750





216,478





561,039





678,603

   General and administrative expenses



130,882





137,987





401,825





428,105

   Restructuring and impairment expenses 







30,124





9,787





30,124

Total operating expenses



318,632





384,589





972,651





1,136,832

























Operating income (loss)



(26,365)





(20,284)





32,205





83,388

Other expense, net



(8,086)





(8,680)





(14,955)





(18,773)

























Income (loss) before provision for income taxes



(34,451)





(28,964)





17,250





64,615

Provision (benefit) for income taxes



2,504





(3,574)





15,937





17,052

























Net income (loss)

$

(36,955)



$

(25,390)



$

1,313



$

47,563

























Net income (loss) per share:























Basic

$

(0.74)



$

(0.51)



$

0.03



$

0.95

Diluted

$

(0.74)



$

(0.51)



$

0.03



$

0.94

























Weighted-average common shares outstanding (000s):























Basic



49,859





50,199





49,812





50,187

Diluted



49,859





50,199





50,029





50,822

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)











September 30,

2023



December 31,

2022

ASSETS







Current assets:







Cash and cash equivalents

$

233,314



$

264,725

Current investments



16,673





13,784

Accounts receivable, net



77,251





47,360

Inventories, net



291,103





346,183

Prepaid expenses and other



82,781





87,816

 Total current assets



701,122





759,868













Property and equipment, net



428,932





444,806

Operating lease right-of-use assets



86,315





98,734

Goodwill



229,469





206,432

Other intangible assets, net



108,972





66,701

Other assets



238,281





244,429

Total assets

$

1,793,091



$

1,820,970













LIABILITIES AND STOCKHOLDERS' EQUITY











Current liabilities:











Accounts payable

$

48,583



$

53,963

Accrued expenses



245,432





280,280

Current portion of long-term debt



140,000





25,000

 Total current liabilities



434,015





359,243













Operating lease liabilities



68,208





76,540

Long-term debt



362,896





377,466

Other liabilities



105,785





110,425

Total liabilities



970,904





923,674













Commitments and contingencies























Stockholders' equity:











Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares

   issued



91





91

Additional paid-in capital



619,193





613,278

Treasury stock, at cost – 41.2 million and 41.1 million shares



(1,570,718)





(1,569,061)

Accumulated other comprehensive loss



(108,836)





(86,509)

Retained earnings



1,882,457





1,939,497

Total stockholders' equity



822,187





897,296

Total liabilities and stockholders' equity

$

1,793,091



$

$1,820,970

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Gross Margin Excluding Impact of Inventory Write-off to GAAP Gross Margin

(in thousands, except for per share amounts)

































Three months ended

September 30,



Nine months ended

September 30,







2023



2022



2023



2022



Gross Profit



$

292,267



$

364,305



$

1,004,856



$

1,220,220



Impact of inventory write-off





65,728





26,905





65,728





26,905



Adjusted Gross Profit



$

357,995



$

391,210



$

1,070,584



$

1,247,125































Gross Margin





58.6 %





67.7 %





67.9 %





71.6 %



Gross Margin, excluding inventory

write-off impact





71.8 %





72.7 %





72.3 %





73.2 %































Revenue



$

498,772



$

537,805



$

1,480,491



$

1,703,319



 

NU SKIN ENTERPRISES, INC.

Reconciliation of Core Nu Skin Business Gross Margin Excluding Impact of Inventory Write-off to GAAP

Gross Margin

(in thousands, except for per share amounts)





































Three months ended

September 30,















2023



2022



Gross Profit















$

270,630



$

361,895



Impact of inventory write-off

















65,728





18,549



Adjusted Gross Profit















$

336,358



$

380,444































Gross Margin

















61.8 %





73.0 %



Gross Margin, excluding inventory

write-off impact

















76.8 %





76.7 %































Revenue















$

438,245



$

495,939



 

NU SKIN ENTERPRISES, INC.

Reconciliation of Operating Margin Excluding Impact of Restructuring and Inventory Write-off to GAAP

Operating Margin

(in thousands, except for per share amounts)

































Three months ended

September 30,



Nine months ended

September 30,







2023



2022



2023



2022



Operating Income



$

(26,365)



$

(20,284)



$

32,205



$

83,388



Impact of restructuring and

impairment





-





30,124





9,787





30,124



Impact of inventory write-off





65,728





26,905





65,728





26,905



Adjusted operating income



$

39,363



$

36,745



$

107,720



$

140,417



























































Operating margin





-5.3 %





-3.8 %





2.2 %





4.9 %



Operating margin, excluding

restructuring and inventory write-

off impact





7.9 %





6.8 %





7.3 %





8.2 %































Revenue



$

498,772



$

537,805



$

1,480,491



$

1,703,319



 

NU SKIN ENTERPRISES, INC.

Reconciliation of Other Income (Expense), Net Excluding Impact of Q4 2021 Exit from Grow Tech to

GAAP Other Income (Expense), Net
 

(in thousands, except for per share amounts)

































Three months ended

September 30,



Nine months ended

September 30,





2023



2022



2023



2022



Other income (expense), net



$

(8,086)



$

(8,680)



$

(14,955)



$

(18,773)



Impact of charges associated with our

Q4 2021 exit from Grow Tech:



























Unrealized investment loss





-





3,298





-





9,009



Adjusted other income (expense), net



$

(8,086)



$

(5,382)



$

(14,955)



$

(9,764)



 

NU SKIN ENTERPRISES, INC.

Reconciliation of Effective Tax Rate Excluding Impact of Restructuring and Inventory Write-off to

GAAP Effective Tax Rate

(in thousands, except for per share amounts)

































Three months ended

September 30,



Nine months ended

September 30,







2023



2022



2023



2022



Provision (benefit) for income taxes



$

2,504



$

(3,574)



$

15,937



$

17,052



Impact of restructuring and

inventory write-off on provision for

income taxes





650





11,095





3,243





11,554



Provision for income taxes,

excluding impact of restructuring

and inventory-write-off



$

3,154



$

7,521



$

19,180



$

28,606































Income before provision for income

taxes





(34,451)





(28,964)





17,250





64,615



Impact of inventory write-off





65,728





26,905





65,728





26,905



Impact of restructuring and impairment





-





30,124





9,787





30,124



Impact of charges associated with

our exit from Grow Tech:



























Unrealized investment loss





-





3,298





-





9,009



Income before provision for income

taxes, excluding impact of

restructuring and inventory write-off



$

31,277



$

31,363



$

92,765



$

130,653































Effective tax rate





-7.3 %





12.3 %





92.4 %





26.4 %



Effective tax rate, excluding

restructuring and inventory write-off

impact





10.1 %





24.0 %





20.7 %





21.9 %



 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share Excluding Impact of Restructuring and Inventory Write-off to GAAP

Earnings Per Share

(in thousands, except for per share amounts)































Three months ended

September 30,



Nine months ended

September 30,





2023



2022



2023



2022

Net income



$

(36,955)



$

(25,390)



$

1,313



$

47,563

Impact of restructuring and inventory

write-off expense:

























Restructuring and impairment





-





30,124





9,787





30,124

Inventory write-off





65,728





26,905





65,728





26,905

Tax impact





(650)





(10,469)





(3,243)





(10,469)

Impact of charges associated with our

exit from Grow Tech:

























Unrealized loss on investment





-





3,298





-





9,009

Tax impact





-





(626)





-





(1,085)

Tax impact





-





-





-





-

Adjusted net income



$

28,123



$

23,842



$

73,585



$

102,047





















































Diluted earnings per share



$

(0.74)



$

(0.51)



$

0.03



$

0.94

Diluted earnings per share, excluding

restructuring and inventory write-off

impact



$

0.56



$

0.47



$

1.47



$

2.01



























Weighted-average common shares

outstanding (000)





49,859





50,199





50,029





50,822

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share Excluding Impact of Restructuring and Inventory Write-off to GAAP

Earnings Per Share































Three months ended

December 31,



Year ended December 31,





2023 - Low-

end



2023 High-

end



2023 - Low-

end



2023 High-

end

Earnings Per Share



$

(0.14)



$

0.01



$

(0.10)



$

0.05

Impact of restructuring expense:

























Restructuring





0.40





0.40





0.60





0.60

Tax impact





(0.11)





(0.11)





(0.18)





(0.18)

Impact of inventory write-off:

























Inventory write-off

















1.31





1.31

Tax impact

















(0.01)





(0.01)

Adjusted EPS



$

0.15



$

0.30



$

1.62



$

1.77

 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/nu-skin-enterprises-reports-third-quarter-2023-financial-results-301974762.html

SOURCE Nu Skin Enterprises


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