Nu Skin Enterprises Reports Third Quarter 2021 Results

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Nov 03, 2021, 16:06 ET

PROVO, Utah, Nov. 3, 2021 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third quarter 2021 revenue of $641.2 million and earnings per share (EPS) of $0.97.

Executive Summary
Q3 2021 vs. Prior-year Quarter

Revenue:	$641.2 million; (9)% · +2% fx impact or $11.8 million
Earnings Per Share (EPS):	$0.97; (10)%
Sales Leaders:	58,565; (15)%
Customers:	1,395,271; (9)%

"As we previously announced, our third quarter revenue was lower than anticipated due to COVID delta variant disruptions as unexpected government restrictions interrupted selling and promotional activities in several markets, specifically in Mainland China and Southeast Asia," said Ryan Napierski, Nu Skin president and CEO. "Despite these short-term impacts, we are encouraged by our continued growth in the U.S., which was driven by our Beauty Focus Collagen+ launch and double-digit growth in Korea due to successful product promotions and sales leader initiatives.

"Looking ahead, we anticipate the ongoing rollout of our Collagen+ and ageLOC Meta products in Q4 will build momentum going into next year. For 2022 and beyond, we remain focused on our vision of becoming the world's leading beauty and wellness company, powered by our dynamic affiliate opportunity platform. We will work toward this by introducing our EmpowerMe personalized beauty and wellness strategy with connected beauty devices, increasing adoption of our affiliate-powered social commerce business model and expanding our digital platform. Amidst global uncertainty, we are confident in this strategy as we transform our company toward our vision for the future."

Q3 2021 Year-over-year Operating Results

Revenue:	$641.2 million compared to $703.3 million · +2% fx impact
Gross Margin:	75.2% compared to 73.9% · Nu Skin business was 78.6% compared to 76.3%
Selling Expenses:	39.9% compared to 39.9% · Nu Skin business was 42.7% compared to 42.4%
G&A Expenses:	25.1% compared to 23.5%
Operating Margin:	10.2% compared to 10.6%
Other Income / (Expense):	$2.8 million compared to $0.5 million
Income Tax Rate:	27.0% compared to 24.7%
EPS:	$0.97 compared to $1.08

Stockholder Value

Dividend Payments:

$19.0 million

Stock Repurchases:

$10.0 million

· $255.4 million remaining in authorization

Q4 and Full-year 2021 Outlook

Q4 2021 Revenue:	$645 to $675 million; (10) to (14)% · Approximately (1)% fx impact
Q4 2021 EPS:	$0.90 to $1.00; (29) to (36)% · Prior year benefitted by 19.6% tax rate
2021 Revenue:	$2.67 to $2.70 billion; +3 to 5% · Approximately +2 to 3% fx impact
2021 EPS:	$3.93 to $4.03; +8 to 11%

Mark Lawrence, chief financial officer, added, "We are adjusting our 2021 forecast based on third quarter results and continued COVID uncertainty. Despite the difficult operating environment, we anticipate annual revenue growth of 3 to 5 percent on top of strong growth in 2020, with earnings per share growth of 8 to 11 percent."

About Nu Skin Enterprises, Inc.
Nu Skin Enterprises, Inc. (NYSE: NUS) is a leading beauty and wellness company, powered by a dynamic affiliate opportunity platform. The company helps people live, look and feel their best with products that combine the best of science, technology and nature. Backed by more than 35 years of scientific research, Nu Skin develops innovative products including Nu Skin® personal care, Pharmanex® nutrition and the ageLOC® anti-aging brand which includes an award-winning line of beauty device systems. Nu Skin operates in approximately 50 markets worldwide in the Americas, Asia, Europe, Africa and the Pacific. Rhyz Inc. is the company's strategic investment arm that includes a collection of technology and manufacturing companies to support growth in the core Nu Skin business. Nu Skin is committed to sustainability, including global initiatives such as transitioning to reduced and sustainable packaging for all products by 2030. The Nu Skin Force for Good Foundation also strives to improve children's health, education and economic circumstances throughout the world. For more information, visit 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, shareholder value, vision, initiatives, product pipeline and product introductions, digital tools, customers and sales leaders, affiliates, 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," "anticipate," "project," "outlook," "guidance," "remain," "become," "plan," "forecast," "expand," "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 ongoing COVID-19 pandemic, 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, 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 associated with operating in international markets, including Mainland China;
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;
unpredictable economic conditions and events globally, including trade policies and tariffs;
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 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 following table sets forth revenue for the three-month periods ended September 30, 2021 and 2020 for each of our reportable segments (U.S. dollars in thousands):

	Three Months Ended September 30,						Constant- Currency
	2021		2020		Change		Change
Nu Skin
Mainland China	$	134,291	$	169,068		(21)%		(26)%
Americas		131,482		133,618		(2)%		(2)%
South Korea		91,989		83,460		10%		8%
Southeast Asia/Pacific		79,081		101,949		(22)%		(23)%
EMEA		55,839		61,411		(9)%		(11)%
Japan		65,117		70,958		(8)%		(5)%
Hong Kong/Taiwan		39,921		42,265		(6)%		(8)%
Nu Skin other		889		(314)		383%		382%
Total Nu Skin		598,609		662,415		(10)%		(11)%
Rhyz Investments
Manufacturing		41,635		40,910		2%		2%
Grow Tech		783		22		3,459%		3,459%
Rhyz other		125		—
Total Rhyz Investments		42,543		40,932		4%		4%
Total	$	641,152	$	703,347		(9)%		(11)%

The following table sets forth revenue for the nine-month periods ended September 30, 2021 and 2020 for each of our reportable segments (U.S. dollars in thousands):

	Nine Months Ended September 30,						Constant- Currency
	2021		2020		Change		Change
Nu Skin
Mainland China	$	438,066	$	453,096		(3)%		(11)%
Americas		403,755		312,436		29%		28%
South Korea		261,724		236,094		11%		5%
Southeast Asia/Pacific		246,338		262,038		(6)%		(9)%
EMEA		215,134		147,590		46%		36%
Japan		203,001		200,549		1%		2%
Hong Kong/Taiwan		114,795		115,253		—		(4)%
Nu Skin other		2,350		374		528%		530%
Total Nu Skin		1,885,163		1,727,430		9%		5%
Rhyz Investments
Manufacturing		135,760		105,975		28%		28%
Grow Tech		1,147		336		241%		241%
Rhyz other		163		—
Total Rhyz Investments		137,070		106,311		29%		29%
Total	$	2,022,233	$	1,833,741		10%		6%

The company's Customers and Sales Leaders statistics by segment as of September 30, 2021 and 2020 are presented in the following table:

	As of September 30, 2021				As of September 30, 2020				% Increase (Decrease)
	Customers		Sales Leaders		Customers		Sales Leaders		Customers		Sales Leaders
Mainland China		355,256		13,838		341,386		20,970		4%		(34)%
Americas		324,880		12,127		397,936		12,798		(18)%		(5)%
South Korea		156,439		9,448		164,256		7,973		(5)%		18%
Southeast Asia/Pacific		162,048		7,607		204,489		9,959		(21)%		(24)%
EMEA		210,705		5,726		235,202		6,226		(10)%		(8)%
Japan		123,453		6,029		126,896		6,523		(3)%		(8)%
Hong Kong/Taiwan		62,490		3,790		69,346		4,067		(10)%		(7)%
Total		1,395,271		58,565		1,539,511		68,516		(9)%		(15)%

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Revenue	$	641,152	$	703,347	$	2,022,233	$	1,833,741
Cost of sales		158,907		183,374		501,448		463,277
Gross profit		482,245		519,973		1,520,785		1,370,464

Operating expenses:
Selling expenses		255,719		280,695		807,358		735,365
General and administrative expenses		161,142		165,050		499,754		466,232
Total operating expenses		416,861		445,745		1,307,112		1,201,597

Operating income		65,384		74,228		213,673		168,867
Other income (expense), net		2,781		525		351		(4,068)

Income before provision for income taxes		68,165		74,753		214,024		164,799
Provision for income taxes		18,436		18,446		57,527		46,911

Net income	$	49,729	$	56,307	$	156,497	$	117,888

Net income per share:
Basic	$	0.99	$	1.10	$	3.11	$	2.24
Diluted	$	0.97	$	1.08	$	3.03	$	2.23

Weighted-average common shares outstanding (000s):
Basic		50,098		51,308		50,304		52,741
Diluted		51,260		52,243		51,629		52,906

NU SKIN ENTERPRISES, INC. Consolidated Balance Sheets (Unaudited) (U.S. dollars in thousands)

	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	282,412	$	402,683
Current investments		19,190		21,216
Accounts receivable, net		52,441		63,370
Inventories, net		415,203		314,366
Prepaid expenses and other		121,626		101,563
Total current assets		890,872		903,198

Property and equipment, net		464,049		468,181
Operating lease right-of-use assets		128,887		155,104
Goodwill		215,582		202,979
Other intangible assets, net		88,497		89,532
Other assets		186,522		138,082
Total assets	$	1,974,409	$	1,957,076

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	52,023	$	66,174
Accrued expenses		378,573		446,682
Current portion of long-term debt		110,000		30,000
Total current liabilities		540,596		542,856

Operating lease liabilities		95,741		112,275
Long-term debt		278,563		305,393
Other liabilities		123,032		102,281
Total liabilities		1,037,932		1,062,805

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		590,678		579,801
Treasury stock, at cost – 40.5 million and 39.7 million shares		(1,518,535)		(1,461,593)
Accumulated other comprehensive loss		(75,658)		(64,768)
Retained earnings		1,939,901		1,840,740
Total stockholders' equity		936,477		894,271
Total liabilities and stockholders' equity	$	1,974,409	$	1,957,076