Nu Skin Enterprises Reports Fourth-Quarter And 2016 Results, Reiterates 2017 Growth Projections

 

FOR IMMEDIATE RELEASE

 

CONTACTS:

Investors — Scott Pond (801) 345-2657, spond@nuskin.com
Media — Kara Schneck (801) 345-2116, kschneck@nuskin.com

 

 

NU SKIN ENTERPRISES REPORTS FOURTH-QUARTER AND 2016 RESULTS,

REITERATES 2017 GROWTH PROJECTIONS

 

PROVO, Utah — Feb. 16, 2017 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced fourth-quarter results with revenue of $531.3 million, compared to $572.2 million in the prior-year period. Quarterly revenue was negatively impacted 1 percent by foreign currency fluctuations. Earnings per share for the quarter were $0.69, compared to $0.62 in the prior-year period. The company’s earnings per share in the fourth quarter included a negative $0.10 impact from a tax charge related to the enactment of a new U.S. tax regulation in December.

 

The company also reported full-year 2016 revenue of $2.21 billion, compared to $2.25 billion in 2015. Annual revenue was approximately even on a local-currency basis but was negatively impacted 2 percent by a strong U.S. dollar. Earnings per share for 2016 were $2.55, compared to $2.25 in 2015.

 

The company also reiterated guidance provided at its 2016 investor day in December with anticipated revenue of $2.26 to $2.30 billion and earnings per share of $3.10 to $3.25, assuming a 3 to 4 percent negative foreign currency impact.

 

“The fourth quarter of 2016 showed a decline against 2015 due to approximately $50 million of product launch revenue in the fourth quarter of 2015,” said Truman Hunt, president and chief executive officer. “Revenue in the fourth quarter of 2016 was also negatively impacted by $7 million of deferred revenue, primarily from a stronger-than-anticipated response to a promotion of ageLOC Me cartridges in China where orders outstripped our supply.

 

“For the year, we were pleased to generate continued improvement in local currency revenue results. We made significant progress executing our 2016 priorities, including growing in China, successfully launching our ageLOC Me and ageLOC Youth products, and finalizing development of our upcoming LumiSpa product. We believe these steps have positioned us for growth in 2017 and beyond. We are excited by the opportunities ahead, which we believe will create value for our shareholders.”

 

Regional Results

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

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$   182,506

 

$   195,495

 

 (7%)

 

  (2%)

North Asia

 

               166,967

 

               173,798

 

 (4%)

 

  (8%)

South Asia/Pacific

 

                 70,016

 

                 74,274

 

  (6%)

 

  (7%)

Americas

 

                 71,708

 

                 95,553

 

(25%)

 

(23%)

EMEA

 

    40,132

 

     33,078

 

 21%

 

23%

 

 

 

 

 

 

 

 

 

Total

 

$  531,329

 

$  572,198

 

  (7%)

 

  (6%)

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

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$    794,393

 

$     771,667

 

  3%

 

 8%

North Asia

 

      692,738

 

       686,555

 

  1%

 

 (2%)

South Asia/Pacific

 

       296,758

 

       321,971

 

  (8%)

 

 (6%)

Americas

 

       276,590

 

        329,668

 

(16%)

 

(13%)

EMEA

 

    147,318

 

    137,186

 

  7%

 

  8%

 

 

 

 

 

 

 

 

 

Total

 

$ 2,207,797

 

$    2,247,047

 

  (2%)

 

  ---*


*Less than a 1% change.

 

The company’s regional customers and sales leaders statistics are presented in the following table.

 

 

2016

 

2015

 

% Increase (Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

        248,000

 

          26,625

 

        223,000

 

          27,064

 

11.2%

 

  (1.6%)

North Asia

 

        329,000

 

          16,330

 

        366,000

 

          17,415

 

(10.1%)

 

  (6.2%)

South Asia/Pacific

 

        116,000

 

            7,584

 

        119,000

 

          10,476

 

  (2.5%)

 

(27.6%)

Americas

 

        166,000

 

            6,683

 

        176,000

 

            8,708

 

  (5.7%)

 

(23.3%)

EMEA

 

     129,000

 

  4,405

 

     110,000

 

 3,912

 

17.3%

 

12.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

     988,000

 

 61,627

 

    994,000

 

 67,575

  

  (0.6%)

 

  (8.8%)


“Customers,”
previously referred to as “Actives,” 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.

 

 

Operational Performance

 

The company’s operating margin improved to 11.4 percent, compared to 10.8 percent in the prior-year period. Gross margin for the quarter was 79.6 percent, compared to 78.8 percent in the prior-year quarter. Selling expenses, as a percent of revenue, were 42.0 percent, compared to 41.5 percent in the fourth quarter of 2015. General and administrative expenses, as a percent of revenue, were 26.2 percent, compared to 26.5 percent in the prior-year period. The company’s effective income tax rate for the quarter was 38.5 percent, compared to 38.7 percent in the fourth quarter of last year, with the fourth quarter of 2016 being negatively impacted by the enactment of a new U.S. tax regulation in December, but was partially offset by other tax benefits. The company does not anticipate that these adjustments will materially impact its tax rate in future periods. Dividend payments during the quarter were $18.9 million, and the company repurchased $205.5 million of its outstanding shares, leaving approximately $200 million authorized to repurchase shares.

 

Management Transition

 

The company also provided an update on its previously announced management transition. The company expects to name a new chief financial officer in the next few weeks. At that time, Truman Hunt will become vice chairman of the board of directors. On the same date, Ritch Wood will assume the position of chief executive officer, and Ryan Napierski will become the company’s president.

 

“I am optimistic about the future of Nu Skin,” said Hunt. “I have worked closely with Ritch and Ryan for the past 15 years and have complete confidence that they have the experience, leadership and vision to take our business to the next level.”

 

 Outlook

 

“Moving into 2017, we remain focused on executing the initiatives we outlined in our investor day presentation,” said Ritch Wood, chief financial officer. “We have refined our product launch strategy to grow our sales leaders and customer base with our latest ageLOC products. We are confident that this approach will allow us to generate improved results, with projected local currency revenue growth of 4 to 6 percent in 2017. Given our success with at-home treatment devices, we are particularly optimistic about the launch of our new cleansing and treatment device, LumiSpa, which we will introduce at our global convention in October.

“For the first quarter, we anticipate revenue of $480 to $500 million, assuming a 1 to 2 percent negative impact from foreign currency,” continued Wood. “We project first quarter earnings per share of $0.47 to $0.51. For 2017, we reiterate our guidance, with revenue of $2.26 to $2.30 billion and earnings per share of $3.10 to $3.25, assuming a 3 to 4 percent negative foreign currency impact.”

 

The Nu Skin management team will host a conference call with the investment community on Feb. 16 at 5 p.m. (EST). 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 March 3, 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.

 

Please Note: 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 future management, performance, sales force and customer base, growth, initiatives 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 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;
  • inability to retain our management due to personal reasons or competitive pressures;
  • 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.

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Fourth Quarters Ended December 31, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

$                531,329

 

$                572,198

 

 

 

 

Cost of sales

                  108,520

 

                  121,437

 

 

 

 

Gross profit

                  422,809

 

                  450,761

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  222,887

 

                  237,658

        General and administrative expenses

                  139,139

 

                  151,389

Total operating expenses

                  362,026

 

                  389,047

 

 

 

 

Operating income

                    60,783

 

                    61,714

 

 

 

 

Other (expense)/income, net

                      1,353

 

                     (3,289)

Income before provision for income taxes

                    62,136

 

                    58,425

Provision for income taxes

                    23,951

 

                    22,585

 

 

 

 

Net income

$                   38,185

 

$                  35,840

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     0.71

 

$                      0.63

        Diluted

$                     0.69

 

$                      0.62

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                    53,769

 

                    56,792

        Diluted

                    55,539

 

                    57,524

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Years Ended December 31, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

$            2,207,797

 

$            2,247,047

 

 

 

 

Cost of sales

                 500,457

 

                 489,510

 

 

 

 

Gross profit

              1,707,340

 

              1,757,537

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 922,083

 

                 951,372

        General and administrative expenses

                 554,153

 

                 561,463

Total operating expenses

              1,476,236

 

              1,512,835

 

 

 

 

Operating income

                 231,104

 

                 244,702

 

 

 

 

Other (expense)/income, net

                  (18,265)

 

                  (32,743)

Income before provision for income taxes

                 212,839

 

                 211,959

Provision for income taxes

                   69,753

 

                   78,913

 

 

 

 

Net income

$               143,086

 

$               133,046

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     2.58

 

$                     2.29

        Diluted

$                     2.55

 

$                     2.25

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   55,412

 

                   57,997

        Diluted

                   56,097

 

                   59,057

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

As of December 31, 2016 and 2015

(in thousands)

 

 

 

 

 

2016

 

2015

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                357,246

 

$                289,354

        Current investments

                    10,880

 

                    14,371

       Accounts receivable

                    31,199

 

                    35,464

        Inventories, net

                  249,936

 

                  265,256

       Prepaid expenses and other

                    65,076

 

                  101,947

 

                  714,337

 

                  706,392

 

 

 

 

Property and equipment, net

                  444,732

 

                  454,537

Goodwill

                  114,954

 

                  112,446

Other intangible assets, net

                    63,553

 

                    67,009

Other assets

                  136,469

 

                  165,459

               Total assets

$             1,474,045

 

$             1,505,843

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$              41,261     

 

$              28,832     

        Accrued expenses

                  275,023

 

                  310,916

        Current portion of long-term debt

                    82,727

 

                    67,849

 

                  399,011           

 

                  407,597           

 

 

 

 

Long-term debt

                  334,165

 

                  181,745

Other liabilities

                    76,799

 

                    90,880

        Total liabilities

                  809,975

 

                  680,222

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                                    91        

 

                           91        

       Additional paid-in capital

                  439,635

 

                  419,921

       Treasury stock, at cost

              (1,250,123)

 

              (1,017,063)

       Accumulated other comprehensive loss

                   (84,122)

 

                   (71,269)

       Retained earnings

               1,558,589

 

               1,493,941

 

                  664,070

 

                  825,621

              Total liabilities and stockholders’ equity

$             1,474,045

 

$             1,505,843

 

# # #

 

 

 

 

Divider