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Nu Skin Enterprises Reports Fourth-Quarter And 2018 Results And Provides 2019 Guidance

PROVO, Utah, Feb. 13, 2019 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NUS) today announced fourth-quarter and 2018 financial results.

Nu Skin Logo (PRNewsfoto/Nu Skin Enterprises, Inc.)

Executive Summary

Q4 2018 vs. Prior-Year Quarter


Revenue:

$683.3 million, +3%
  • (4%) fx impact or ($26.8 M)

Earnings Per Share (EPS):

($0.32), or $1.05 excluding impairment and restructuring charges, compared to $0.33, or $1.20 excluding the impact of U.S. tax reform in Q4 2017
  • 
($1.37) impairment and restructuring charges

Sales Leaders:

73,400; (10%)
  • 
Up 16% since the end of Q1 2018

Customers:

1,244,000; +16%

2018 Annual


Revenue:

$2.68 billion, +18%
  • 
0.5% fx impact

Earnings Per Share (EPS):

$2.16, or $3.52 excluding the impairment and restructuring charges, compared to $2.36, or $3.23 excluding the impact of U.S. tax reform

"We delivered another strong quarter despite a challenging comparison from the $130 million LumiSpa introduction in the prior year," said Ritch Wood, chief executive officer. "We grew our revenue 18 percent for the year, with growth coming from virtually all of our segments. We were also encouraged that our customer acquisition strategy resulted in 16-percent growth in our customer base. And while our sales leader numbers were down year-over-year due to the LumiSpa introduction, we are pleased with 16 percent growth in sales leaders since the first quarter."

Q4 2018 Year-Over-Year Operating Results


Revenue:

$683.3 million compared to $666.2 million
  • 
(4%) fx impact or ($26.8 M)

Gross Margin:

76.3% compared to 77.7%

    Nu Skin business was 77.9%

Selling Expenses:

39.4% of revenue compared to 39.8%
  • 
Nu Skin business was 40.9%

G&A Expenses:

23.9% of revenue compared to 23.0%

Operating Margin:

2.7% or 14.1% when excluding impairment and restructuring charges, compared to 14.9%

Other Income / (Expense):

($4.3) million expense compared to ($0.4) million expense

Income Tax Rate:

225% or 35.9% excluding impairment and restructuring charges, compared to 81.5% or 33.1% excluding the impact of U.S. tax reform

EPS:

($0.32), or $1.05 excluding impairment and restructuring charges, compared to $0.33, or $1.20 excluding the impact of U.S. tax reform
  • ($1.37) impairment and restructuring charges

Stockholder Value


Dividend Payments:

$20.2 million

Stock Repurchases:

$21.3 million; $471 million remaining in authorization

Q1 and Full-Year 2019 Outlook


Q1 2019 Revenue:

$615 to $635 million, 0 to 3% growth
  • 6 to 8% constant currency growth
  • Approximately (5 to 6%) fx impact

Q1 2019 EPS:

$0.70 to $0.77

2019 Revenue:

$2.76 billion to $2.82 billion,  3 to 5% growth 
  • 5 to 7% constant currency growth
 
  • Approximately (2 to 3%) fx impact

2019 EPS

$3.80 to $4.05

"We are entering 2019 with strong momentum and are projecting meaningful constant-currency top-line growth with continued improvement on the bottom line," said Wood. "We believe 2019 will be a pivotal year as we transform our digital platform to better support customers, while further enabling our sales leaders to leverage the power of social selling. Our product portfolio remains strong, and we plan to build on the breakout success of our LumiSpa skin treatment and cleansing device with the launch of LumiSpa Accent, a specialized eye treatment attachment. On the program front, our Velocity enhanced sales compensation program has now been rolled out in nearly every market, providing us with ongoing flexibility to drive and reward key behaviors from our sales force. We believe we can continue to grow our business and look forward to a strong 2019," Wood concluded.

"Coming off a strong year, we are projecting continued growth in 2019," said Mark Lawrence, chief financial officer. "We project first-quarter revenue of $615 to $635 million, including an approximate 5 to 6 percent negative currency impact, and earnings per share of $0.70 to $0.77. For the year, we are projecting annual revenue of $2.76 to $2.82 billion with a projected 2 to 3 percent negative foreign currency impact and earnings per share of $3.80 to $4.05. We look forward to providing additional details regarding our guidance and 2019 growth initiatives at our investor day event which will be held Feb. 28 at our headquarters," concluded Lawrence.

Conference Call

The Nu Skin management team will host a conference call with the investment community on Feb. 13, 2019, 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 Feb. 27, 2019.

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, 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," "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. Operating margin, income tax rate and earnings per share, each excluding impairment and restructuring charges and/or the impact of tax reform, also are non-GAAP financial measures. Impairment and restructuring charges are not part of the ongoing operations of our underlying business. The U.S. tax reform legislation was enacted in December 2017 and had a material impact on our tax rate and earnings per share. Removing the impact of these items facilitates period-to-period comparisons of the company's performance. Please see the reconciliations of these items to our operating margin, income tax rate and earnings per share calculated under GAAP, below.

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


2018


2017


%

Change


Constant
Currency
% Change









Mainland China

$            217,040


$         222,333


(2%)


2%

Americas/Pacific

95,175


102,335


(7%)


3%

South Korea

102,840


103,066



2%

Southeast Asia

80,500


73,920


9%


13%

Japan

63,953


67,620


(5%)


(6%)

Hong Kong/Taiwan

47,746


46,627


2%


4%

EMEA

50,584


47,890


6%


10%

Other

25,449


2,410


956%


956%

     Total

$            683,287


$         666,201


3%


7%

The Company's revenue results by segment for the year ended December 31 are presented in the following table (in thousands).


2018


2017


%

Change


Constant
Currency
% Change









Mainland China

$            886,472


$         716,991


24%


21%

Americas/Pacific

385,034


342,429


12%


20%

South Korea

373,357


361,692


3%


1%

Southeast Asia

316,890


268,631


18%


18%

Japan

254,939


256,085



(2%)

Hong Kong/Taiwan

185,893


166,696


12%


11%

EMEA

182,394


160,275


14%


10%

Other

94,029


6,300


1,393%


1,393%

     Total

$         2,679,008


$      2,279,099


18%


17%

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


2018


2017


% Increase

(Decrease)



Customers


Sales
Leaders


Customers


Sales
Leaders


Customers


Sales
Leaders














Mainland China


304,000


33,100


193,000


40,600


58%


(18%)

Americas/Pacific


249,000


8,300


244,000


8,900


2%


(7%)

South Korea


182,000


7,600


173,000


8,400


5%


(10%)

Southeast Asia


153,000


8,900


122,000


8,000


25%


11%

Japan


130,000


5,900


132,000


6,600


(2%)


(11%)

Hong Kong/Taiwan


77,000


4,800


71,000


4,700


8%


2%

EMEA


149,000


4,800


135,000


4,700


10%


2%














Total


1,244,000


73,400


1,070,000


81,900


16%


(10%)






"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


Years Ended


December 31,


December 31,


2018


2017


2018


2017









Revenue

$     683,287


$     666,201


$   2,679,008


$   2,279,099

Cost of sales    

161,853


148,459


634,140


502,078









Gross profit

521,434


517,742


2,044,868


1,777,021









Operating expenses:








        Selling expenses

269,052


265,378


1,071,020


938,024

General and administrative expenses

163,265


153,244


662,302


564,514

       Restructuring and impairment expenses

70,686



70,686










Total operating expenses

503,003


418,622


1,804,008


1,502,538









Operating income

18,431


99,120


240,860


274,483

Other income (expense), net

(4,254)


(446)


(21,194)


(8,916)









Income before provision for income taxes      

14,177


98,674


219,666


265,567

Provision for income taxes

31,936


80,439


97,779


136,130









Net income

$     (17,759)


$      18,235


$      121,887


$      129,437









Net income per share:








        Basic

$         (0.32)


$          0.35


$            2.21


$            2.45

        Diluted

$         (0.32)


$          0.33


$            2.16


$            2.36









Weighted-average common shares outstanding (000s):








        Basic

55,453


52,722


55,170


52,806

        Diluted

56,341


55,053


56,476


54,852

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)






December 31,
2018


December 31,
2017

ASSETS




Current assets:




        Cash and cash equivalents

$                386,911


$                426,399

        Current investments

11,346


11,847

        Accounts receivable

53,282


33,196

        Inventories, net

295,821


253,454

        Prepaid expenses and other

51,877


52,893


799,237


777,789





Property and equipment, net

464,535


464,587

Goodwill

196,573


114,954

Other intangible assets, net

89,989


67,647

Other assets

144,112


164,895

                Total assets

$             1,694,446


$             1,589,872





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




        Accounts payable

$                  47,617


$                  50,341

        Accrued expenses

322,583


319,189

        Current portion of long-term debt

69,455


77,840


439,655


447,370





Long-term debt

361,008


310,790

Other liabilities

111,916


127,116

                Total liabilities

912,579


885,276





Stockholders' equity:




        Class A common stock

91


91

        Additional paid-in capital

552,564


466,349

       Treasury stock, at cost

(1,326,605)


(1,304,694)

        Accumulated other comprehensive loss

(79,934)


(66,318)

        Retained earnings

1,635,751


1,609,168


781,867


704,596

                Total liabilities and stockholders' equity

$             1,694,446


$             1,589,872

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share Excluding Impact of Restructuring and Tax Reform to GAAP Earnings Per Share

(in thousands, except per share amounts)



Three Months Ended


Years Ended


December 31,


December 31,


2018


2017


2018


2017









Net income

$     (17,759)


$      18,235


$      121,887


$     129,437

Impact of restructuring and impairment:








        Restructuring and impairment

70,686



70,686


    Inventory write-off

7,240



7,240


       Income tax impact

(1,086)



(1,086)


Impact of tax reform on provision for income taxes

 


 

47,729


 


 

47,729

Adjusted net income

$       59,081


$      65,964


$      198,727


$     177,166









Diluted earnings per share

$         (0.32)


$          0.33


$            2.16


$           2.36

Diluted earning per share, excluding restructuring and tax reform impact

$          1.05


$          1.20


$            3.52


$           3.23









Weighted-average common shares outstanding (000s):

 

56,341


 

55,053


 

56,476


 

54,852

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Operating Margin Excluding Impact of Restructuring to GAAP Operating Margin

(in thousands, except per share amounts)



Three Months Ended


Years Ended


December 31,


December 31,


2018


2017


2018


2017









Operating income

$       18,431


$      99,120


$      240,860


$      274,483

Impact of restructuring and impairment:








        Restructuring and impairment

70,686



70,686


    Inventory write-off

7,240



7,240


Adjusted operating income

$       96,357


$      99,120


$      318,786


$      274,483









Operating margin

2.7%


14.9%


9.0%


12.0%

Operating margin, excluding restructuring impact

14.1%


14.9%


11.9%


12.0%









Revenue

$     683,287


$    666,201


$    2,679,008


$   2,279,099

 

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Effective Tax Rate Excluding Impact of Restructuring and Tax Reform to GAAP Effective Tax Rate

(in thousands, except per share amounts)



Three Months Ended


Years Ended


December 31,


December 31,


2018


2017


2018


2017









Provision for income taxes

$       31,936


$      80,439


$        97,779


$      136,130

Impact of restructuring on tax provision

1,086



1,086


Impact of tax reform on provision for income taxes

 


 

(47,729)


 


 

(47,729)

Provision for income taxes, excluding impact of restructuring and tax reform

$       33,022


$      32,710


$        98,865


$       88,401









Income before provision for income taxes

$        14,177


$      98,674


$      219,666


$      265,567

Impact of restructuring and impairment:








        Restructuring and impairment

70,686



70,686


       Inventory write-off

7,240



7,240


Income before provision for income taxes, excluding impact of restructuring and tax reform

$       92,103


$      98,674


$      297,592


$      265,567









Effective tax rate

225.3%


81.5%


44.5%


51.3%

Effective tax rate, excluding restructuring and tax reform impact

35.9%


33.1%


33.2%


33.3%

Nu Skin Social Media Channels
 fb.com/nuskin    twitter.com/nuskin    instagram.com/nuskin

 

Cision

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