Nu Skin Enterprises Reports Strong Third-Quarter Results With 20 Percent Revenue Growth And 24 Percent Earnings Growth

 

FOR IMMEDIATE RELEASE

 

Nu Skin Enterprises Reports Strong Third-Quarter Results With 20 Percent Revenue Growth And 24 Percent Earnings Growth

 

PROVO, Utah — Nov. 7, 2018 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced strong third-quarter financial results with revenue of $675.3 million, an increase of 20 percent over the prior-year period. Earnings per share were $0.94, an increase of 24 percent over the prior-year period, or $1.01, an increase of 33 percent, when excluding a foreign currency translation loss of $0.07.

 

Executive Summary

Q3 2018 vs. Prior-Year Quarter

Revenue:

$675.3 million, +20%

·         (3%) fx impact

Earnings Per Share (EPS):

$0.94, +24% or $1.01, + 33% when excluding fx loss

·         ($0.07) foreign currency translation loss

·         ($0.04) purchase accounting charge

Sales Leaders:

73,100; +14%

Customers:

1,166,000; +9%

“We delivered strong year-over-year financial results with reported revenue growth in every region, highlighted by double-digit increases in Mainland China and Southeast Asia,” said Ritch Wood, chief executive officer. “This is our fourth consecutive quarter of revenue growth of 20 percent or more, driven by the continued execution of our growth strategy focused on engaging platforms, enabling products and empowering programs which led to solid customer growth of 9 percent and sales leader growth of 14 percent.”

 

Q3 2018 Year-Over-Year Operating Results

Revenue:

$675.3 million compared to $563.7 million

Gross Margin:

76.7% compared to 78.6%

·         Nu Skin business was 78.7%

Selling Expenses:

40.2% of revenue compared to 41.7%

·         Nu Skin business was 41.8%

G&A Expenses:

24.5% of revenue compared to 25.4%

Operating Margin:

11.9% compared to 11.4%

Other Income / (Expense):

($7.0) million expense compared to ($1.2) million expense

Income Tax Rate:

27.9% compared to 34.1%

EPS:

$0.94, which includes a ($0.07) foreign currency translation loss and a ($0.04) purchase accounting charge, compared to $0.76

Stockholder Value

Dividend Payments:

$20.3 million

Stock Repurchases:

$12.4 million; $492 million remaining in authorization

Q4 and Full-Year 2018 Outlook

Q4 2018 Revenue:

$665 to $685 million, 0% to 3% growth

·         Approximately (4 to 5%) negative fx impact

Q4 2018 EPS:

$1.00 to $1.07 which includes an estimated $0.04 purchase accounting charge

2018 Revenue:

$2.66 billion to $2.68 billion, 17% to 18% growth

·         Neutral fx impact

2018 EPS

$3.48 to $3.55 including ($0.20) fx and ($0.16) purchase accounting charges

“We continue to empower our sales leaders to effectively acquire customers through enabling social sharing, providing innovative products like ageLOC LumiSpa, and implementing our enhanced sales compensation program, Velocity. We are on pace to generate a very strong finish to this year which we believe sets us up well for 2019,” Wood concluded.

 

“We generated 20 percent year-over-year revenue growth and 24 percent improvement in earnings in the quarter,” said Mark Lawrence, chief financial officer. “For the year, we are increasing our annual revenue guidance to $2.66 billion to $2.68 billion with earnings per share of $3.48 to $3.55. This earnings guidance reflects the $0.20 foreign currency translation loss from the second and third quarters and the $0.16 purchase accounting charge. We are projecting fourth-quarter revenue of $665 to $685 million, including a 4 to 5 percent negative currency impact, and earnings per share of $1.00 to $1.07, or $1.04 to $1.11 when excluding the estimated $0.04 purchase accounting charge. As a reminder, in the fourth quarter of 2017, we held an ageLOC LumiSpa global introduction which generated $130 million in sales,” concluded Lawrence.

 

Conference Call

The Nu Skin management team will host a conference call with the investment community on November 7, 2018, 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 Nov 21, 2018.

 

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, 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. Earnings per share excluding foreign-currency translation loss and projected earnings per share excluding purchase-accounting charge also are non-GAAP financial measures. Removing the impact of these items facilitates period-to-period comparisons of the company’s performance.

 

The Company’s revenue results by segment for the three-month periods ended September 30 are presented in the following table (in thousands).

 

 

 

%

Change

 

Constant Currency

% Change

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

$  226,645

 

$ 172,556

 

    31%

 

    34%

 

Americas/Pacific

     93,580

 

85,672

 

      9%

 

    20%

 

South Korea

 89,963

 

89,238

 

      1%

 

       —

 

Southeast Asia

   86,307

 

  71,141

 

    21%

 

     24%

 

Japan

  63,649

 

62,513

 

      2%

 

      2%

 

Hong Kong/Taiwan

    44,949

 

41,050

 

    9%

 

    10%

 

EMEA

  42,819

 

 40,133

 

      7%

 

       8%

 

Other

  27,400

 

 1,395

 

1,864%

 

1,864%

 

     Total

$  675,312

 

$ 563,698

 

    20%

 

    23%

 

 

 

 

 

 

 

 

 

 

 

The Company’s revenue results by segment for the nine-month periods ended September 30 are presented in the following table (in thousands).

 

 

 

%

Change

 

Constant Currency

% Change

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

$ 669,432

 

$ 494,658

 

    35%

 

    30%

 

Americas/Pacific

   289,859

 

240,094

 

    21%

 

    27%

 

South Korea

  270,517

 

258,626

 

      5%

 

      —

 

Southeast Asia

 236,390

 

194,711

 

    21%

 

     20%

 

Japan

   190,986

 

188,465

 

      1%

 

      (1%)

 

Hong Kong/Taiwan

 138,147

 

120,069

 

    15%

 

    14%

 

EMEA

    131,810

 

 112,385

 

    17%

 

    10%

 

Other

  68,580

 

   3,890

 

1,663%

 

1,663%

 

     Total

$  1,995,721

 

$  1,612,898

 

    24%

 

    21%

 

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

 

2018

 

2017

 

% Increase

(Decrease)

 

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

Customers

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

 

210,000

 

33,300

 

190,000

 

25,600

 

11%

 

30%

Americas/Pacific

 

277,000

 

  8,500

 

237,000

 

8,000

 

17%

 

  6%

South Korea

 

180,000

 

  7,700

 

185,000

 

 8,400

 

  (3%)

 

  (8%)

Southeast Asia

 

 147,000

 

8,700

 

127,000

 

7,100

 

16%

 

 23%

Japan

 

131,000

 

   6,200

 

 131,000

 

 6,500

 

  —

 

  (5%)

Hong Kong/Taiwan

 

  76,000

 

4,400

 

  71,000

 

4,300

 

  7%

 

  2%

EMEA

 

 145,000

 

  4,300

 

  128,000

 

   4,300

 

13%

 

              

 

 

 

 

 

      

 

     

 

 

 

 

Total

 

 1,166,000

 

   73,100

 

  1,069,000

 

 64,200

 

  9%

 

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)

(in thousands, except per share amounts)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Revenue

$    675,312

 

$     563,698

 

$   1,995,721

 

$   1,612,898

Cost of sales

       157,457

 

       120,832

 

        472,287

 

        353,619

 

 

 

 

 

 

 

 

Gross profit

       517,855

 

       442,866

 

     1,523,434

 

     1,259,279

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

       Selling expenses

      271,509

 

      235,285

 

        801,968

 

        672,646

       General and administrative expenses

      165,671

 

      143,219

 

        499,037

 

        411,270

 

 

 

 

 

 

 

 

Total operating expenses

      437,180

 

      378,504

 

     1,301,005

 

     1,083,916

 

 

 

 

 

 

 

 

Operating income

        80,675

 

        64,362

 

       222,429

 

        175,363

Other income (expense), net

        (6,982)

 

        (1,172)

 

        (16,940)

 

          (8,470)

 

 

 

 

 

 

 

 

Income before provision for income taxes

        73,693

 

        63,190

 

       205,489

 

        166,893

Provision for income taxes

        20,547

 

        21,518

 

          65,843

 

          55,691

 

 

 

 

 

 

 

 

Net income

$      53,146

 

$      41,672

 

$      139,646

 

$        111,202

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

       Basic

$          0.96

 

$          0.79

 

$            2.54

 

$            2.10

       Diluted

$          0.94

 

$          0.76

 

$            2.47

 

$            2.04

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding (000s):

 

 

 

 

 

 

 

       Basic

       55,603

 

        52,873

 

          55,075

 

          52,834

       Diluted

        56,704

 

        54,834

 

         56,539

 

          54,519

 

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

September 30,

 2018

 

December 31, 2017

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                390,066

 

$                426,399

        Current investments

                    11,388

 

                    11,847

        Accounts receivable

                    57,175

 

                    33,196

        Inventories, net

                  289,291

 

                  253,454

       Prepaid expenses and other

                    78,395

 

                    52,893

 

                  826,315

 

                  777,789

 

 

 

 

Property and equipment, net

                  496,704

 

                  464,587

Goodwill

                  187,423

 

                  114,954

Other intangible assets, net

                    91,957

 

                    67,647

Other assets

                  143,838

 

                  164,895

               Total assets

$             1,746,237

 

$             1,589,872

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$          52,843     

 

$   50,341     

        Accrued expenses

                  292,962

 

                  319,189

        Current portion of long-term debt

                    82,455

 

                    77,840

 

                  428,260          

 

                  447,370           

 

 

 

 

Long-term debt

                  365,767

 

                  310,790

Other liabilities

                  120,076

 

                  127,116

                Total liabilities

                  914,103

 

                  885,276

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                 91        

 

           91        

       Additional paid-in capital

                  545,234

 

                  466,349

       Treasury stock, at cost

              (1,306,012)

 

             (1,304,694)

       Accumulated other comprehensive loss

                   (82,555)

 

                  (66,318)

       Retained earnings

               1,675,376

 

               1,609,168

 

                  832,134

 

                  704,596

              Total liabilities and stockholders’ equity

$             1,746,237

 

$             1,589,872

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share
Excluding Foreign-Currency Translation Loss to

GAAP Earnings Per Share

(in thousands, except per share amounts)

 
   

 Q3 2018            

Net income

 

$               53,146

Foreign-currency translation loss

 

                  4,766

Tax impact of foreign-currency translation loss

 

                    (548)

Net income, excluding foreign-currency translation loss

 

$               57,364

Weighted-average common shares outstanding

 

                56,704

Diluted earnings per share

 

$                   0.94

Diluted earnings per share, excluding foreign-currency translation loss

 

$                   1.01

 

 

 

Q3 2017 diluted earnings per share

 

$                   0.76

Year-over-year earnings per share increase

 

                     24%

Year-over-year earnings per share increase, excluding Q3 2018 foreign-currency translation loss

 

                     33%

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

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

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