Nu Skin Enterprises (NUS) 3 Nov 222022 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Nu Skin Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded. to Scott conference Relations. Pond, like first to now today, speaker VP would hand over your your I of Investor you floor. have Scott, the

believe call call, Napierski, and me Officer; Tang, complete and numbers non-GAAP Stacy, in good assist risks. Please CFO. may a comparable everyone. financial earnings Also be Growth financial that discussed call, on We differ Thanks, from certain our On Lawrence, today's afternoon, these Chief materially statements these and of Global are be in actual uncertainties, numbers will numbers and during President discussion the Ryan obtained and that the statements. Mark in a CEO; non-GAAP comments reconciliation made Connie required Today from discussed consistent the filings risks call those Ryan. involve for more include for refer today's over that, some turn forward-looking manner. of and website investor to refer I'll or SEC our period-to-period to comparing results our anticipated. any numbers. may release statements. with with financial differ to And Please These results

the date as turmoil It's transformation for Thanks, the say today. on and economic now year Day earlier been Investor to at just we least to to Scott. that an year, thanks joining the initiated prior call a interesting strategic Good everybody, afternoon, us global facing. the in we're

primary at to million factors than Four of due finished challenging proved an difficult EPS quarter third The complexities. our shortfall more versus most non-GAAP for of with and $XXX anticipated We guidance. the global increasingly quarter the accounted third a $X.XX. environment geopolitical

execute This the Skin about we treat The journeys. preliminary LumiSpa as that's iO, launch into wellness increases; on and country; the third fourth platform. expectations, towards segments, Nu quarter, COVID-related iO, introduction rollout plans and beauty device of and Korea which persistent together major as we our of the modest personalized with global connected in dynamic price for constant Southeast system. currency individual pressures; by world's and of opportunity continue growth our and data X due Vision across China double-digit and reporting quarter, EmpowerMe Despite input-output a placing by Kong ageLOC and our the XXXX fourth, Americas, the throughout of in wellness the current expanded Taiwan, Mainland our economic and U.S. the to becoming inflationary in South began related company Nu in focused declines progress dollar growth Meta greater as powered new and weaknesses Japan increasing strengthening milestone pressure prime Beauty device lockdowns cleanse as to wellness company drive helped the disruptions, of is Hong we our our pressures insights the and beauty prolonged introducing third, led second, continuing beauty more gains including to customers' marks strategy continued First, LumiSpa chain. the in continued supply Asia environment, In segments. Pacific affiliate we adoption and well integrated leading Collagen+ gain above our

ecosystem, are social advance all strategy the will post that Stella One social we Vera powered with the growth a social quarter. Southeast markets. affiliate continued regarding in to anticipate LumiSpa both by now new productivity affiliate model show especially commerce U.S. Asia and continue and of us achieved retention. commerce iO our of model initiatives We'll like pricing And promoting apps commerce to our further efforts introduced the and digital-first growth. the Price, in that available initiatives in parts also innovate to around Our consecutive progress, helping Taiwan XX adopted with quarters have

provides continue products. as add device with languages, feedback optimize apps. such Vera purchase Connecting LumiSpa to app to products iO customer through the the these efficacy offer, We and of additional and direct product available features to the

and a with and palm customers and additional apps key integrated seamlessly wellness is a goal from will let of a moment. an of in for to the their affiliates to our experience their high-level hands. couple From beauty provide Our me provide geographic virtual share our detail ability our some build viewpoint, perspectives just on businesses Connie these an markets, ultimate then to increased

We ongoing our believe China increasing challenges to our and to strict the We're of diversification lockdowns by be to factors revenue business We improvements XX% representing this ongoing given business with than single today. near to diversification geographic will making in volatility the have to We of in related our beneficial midterm counter more market. the complexities. reported no due the market these economic anticipate enable modifications in factors in greater working to flexibility. model global

to improves. towards work this environment approximately mid- business China represents to the as Mainland business. now of our XX% stability in continue long-term We

business Our inflationary Korea to a setback pressures. price growing we as increase local QX executed a experienced in address in

which currency which We currency -- strong improve of by LumiSpa Southeast excuse market wellness help X to reported on U.S., moderate as segments note, expanding XXXX. Asia the the remain as XXXX posted well currency strong and beauty led results believe Vision weight will market of Pacific, transformation our constant our growth ageLOC we well a forward Kong. experienced becoming Japan into be in double-digit On which Nu growth, iO our introduction focused world's ongoing as quarter leading midterm, driven a double-digit near positive integrated constant further X company. as management we Despite as we the and offering there, me, to uncertainties more will by another environmental moving macro the and the Hong the and Taiwan rollout Meta in

year for reinforce vision. too give want to for that coming While strategic our few highlight the to early specific it's details I XXXX, a imperatives

I focus new even these to the are deploy to the expect partner, a and customer that affiliate LumiSpa agility the focus into challenging and model We'll e-commerce strategy, and progress expand our will and with platform XXXX. our bulk efforts social body we also commerce continue TRMe. through enhancing improve as together retention, year. begin rolling year, up functionality previously leveraging globally. introduce we'll engagement first our the realign this For initiatives the our second strengthen cost in planning insights will the Infosys, TRXX these leaning Vision also From enhancements our called of continue programs affiliate announced deliver digital increased across And evaluate with capabilities business additional on next continue to offerings several We'll year. and speak continue context the resources In that personalized enhance times, core our the in further enhance details lastly, new moment. the more also financial throughout deeper just commerce and quarters overall of cost strategic and in leading to driving across efficiencies with our a Stella the are over capabilities and Body of social productivity half affiliates' to landscape, our and as We'll productivity. to savings $XXX shaping sharpening line such drive and iO making result during to approximately a the brand anticipate management ability a company. to to global Mark reduction position. XXXX ageLOC apps, our to connected ramping device, weight perspective, Vera out million EmpowerMe to be approach half on we upon kit and our next the our strengths to Nu reward next iO plan we'll we of in and in We're

as the So sales our long-term our these remain with precarious we me of and our in times confidence efforts, focused resilient navigate on give these together vision. future force business entrepreneurial

I'll with the to So time that, turn over Connie.

much, you Thank Ryan. so

we Americas by X% in the driven in consecutive the this segment. X% up the to a decline growth our reporting impact to X leading social and U.S. currency, the the grow in selling customers, and a U.S. in a year-over-year of happy the Southeast revenue Taiwan region market U.S. success leaders of tenth in consumer in Overall, of the segment discussed throughout grew grew LumiSpa Americas, Latin currency Asia. offset affiliates to with America, the paid constant quarter our continuing for fourth by momentum. widespread across While issues factors macroeconomic momentum impacting are highlighted segments and We're iO the Ryan forward in with segments, the launch had constant quarter. in revenue macroeconomic In by looking sales

for social practices expanding as market U.S. the and to look to as model validation selling our strategy continue a globally. of We best

and market, the headwinds become growing challenging more are comparisons. has seeing some Although U.S. we largest our economic

macro noted, Ryan business several our China As factors. to Mainland been due has disrupted

We also during made the to compensation the quarter. modifications some plan

Given This term. it but anticipate leader extended also led sales designed segment. implemented did we a environmental currency our We regain growth our momentum. Kong Taiwan the in productivity in ways flexible to was challenging, closely acquisition find we performance long constant promote but introduced, China, impact and structure in have factors to local generate the impact team sales X% a leaders to to of growth more build negative in and Taiwan on helped remain sales are sequential macro it customer modest Strong working environment leaders. to revenue with when Hong

similar COVID which of is the an Kong our impact of customer Hong China, lockdowns to Mainland adoption led successfully acquisition. While social in to faces driving increase selling, market Taiwan

growth LumiSpa of the well distraction conflict currency concerns. X% by as drove result was launches inflation caused the of constant We in the EMEA with and ageLOC down in as revenue region also as a in Taiwan energy Meta and iO.

these region. have spending consumer factors of impacted throughout the All

around have fourth builds in iO. energy early We some encouraging quarter LumiSpa seen results as the

a down pressures currency was and company been a impacted reported price challenged XX% currency, Revenue negative Revenue South currency. in negative Japan and in weighed Korea steady currency, FX increases. with macroeconomic reported pressures. XX% foreign by added down local impact. less currency by impact was by was local has remains and pressure to X% inflationary XX% up corresponding

the Asia first QX years able iO. LumiSpa Southeast some launches We Beauty Asia, momentum in and were to three held built live in we in revenue for of Pacific, constant expo Southeast energized and in Focus which Collagen+ QX our and leaders XX% sales Finally, drive currency. our growth

traction, and we powered customers, revenue generally and we momentum as pressure. in is sales also same from affiliate Indonesia, model Overall, paid decline the social the sustainable. is seeing in recent being this are stemming gaining Our commerce leaders some see particularly segments where affiliates

markets, across look all we XXXX. Vision to we ahead Nu of our on continue As focus

space, device markets of LumiSpa majority will Vera adoption launched the beauty or through consumer preparing just are help our into drive the first enhanced have our launch entry iO, experience. app connected our which of Specifically, product an connected to customer

holiday sales We on customer over our toward targeted train be financial go to details to continue productivity. turn And our affiliates commerce more performance. now our leader social and I it to into promotions to will will Mark acquisition year-end on support model

thanks you, guidance. QX give you to for projections Thank initial today. give review full then QX Connie, and all financial will XXXX joining and a update and I of year

please . Investor visit detail, additional For website. Relations our

restructuring to the negative which quarter, and per dollar currency of the The $X.XX headwind a a $XXX.X will a quarter likely expectations, announced Reported million reallocation. foreign posted QX strategic impairment For year. or X% the charges and earnings the impacted associated negatively revenue of third or for strengthen of with company's $XX previously continues balance resource impact share remain we of was million. negative with excluding the $X.XX, U.S. for ahead

expense business impairment Skin margin geographic on margin basis impacted was was margin Gross core XX.X% the was currency rates the XX.X% basis was the revenue foreign of global excluding the the exchange year revenue gross prior excluding period. reported points or and pressure. Selling or as a Gross restructuring reported and XX% below by aforementioned XX.X% Our XX.X%, percent inflationary XX Nu a charges. mix, for charges.

as expense declined Nu core the year. even General million the XX.X% year-over-year and business, control. we was cost $XX.X selling remain administrative prior on focused expense For Skin with

excluding G&A period of by XX.X% charges. to X.X% As the XX.X% XX.X% or revenue, was mentioned prior Operating was lower this to the previously revenue a negative margin for in the year compares year. the percent in prior driven compared This quarter year. a X.X%

excluding the line investment an million quarter this the other third to for an $X.X adjustment XXXX compared income the Cash reflects quarter million income prior $XX.X the QX item $X.X Tech $X.X a payments expense in unrealized million our year. during million, to adjusted $X.X line expense from or period. the expense reflects exit The million The loss million of to segment. related year or $X.X was restructuring in million from $XX.X prior compared million Grow in $XX.X operations cash

as a and our a provided in We year we and dividends of Our the balance this $XXX.X And million sheet million of in completed the reminder, quarter remains strong. repurchased remaining security. debt further authorization. second paid that million refinance strength current with stock $XX.X on $XX

was charges prior to the year restructuring compared XX.X% for or in excluding and quarter rate the the impairment tax period. Our XX% XX%

Our Rhyz that segment segment, revenue even includes to was year third-party prior quarter. to our partners, only sales compared which represents when Remember this customers. reflected manufacturing in the

lowers speed firm market overall business entities to manufacturing for Skin to Our Nu generate profit rate. increase and that our tax our our by helping core products continue chain, significantly new benefit our up supply U.S.

our XXXX efforts. update Let restructuring me on an give

In track an on million additional $X incurred in charge approximately to in and $XX.X we third million a with our are the $X restructuring. to XXXX. $X million announced the quarter, fourth quarter million We expect previously million $XX with QX

narrow now In product addition, third more sales our we on which portfolio to XXXX, plans the inventory closely and promotional focus align decision the an in hand to to write-off our Shifting guidance. $XX.X offerings, future Nu and product incremental we with million Vision resulted quarter. offerings our made in strategic align as

$X.XX execute prolonged the $X.XX $X.XX expect foreign geopolitical of with We excluding are our or In X% Given billion guidance our X% opportunity company, the integrated uncertainty, our when remains challenging, now XX%. fourth million half $XXX share beauty of approximately and X% $X.XX support $XXX platform. of $X.XX QX $X.XX Vision of revenue assumes strategic fourth that, transformation call to per factors, Tech complexity, or rate XXXX associated are to of the economic share $X to for $XX million becoming exit second to the projecting environment continue and ensuring that adjusted QX XX%. to We exchange earnings of continued summary, revenue earnings anticipate impact to priorities affiliate assuming world's near-term aggressively guidance. from pressure approximately approximately of restructuring annual $X.XX dynamic all of the while your This when our a charge Nu business $X.XX to aligned per to the And We're anticipated our and and the $X.X $X.XX an charges. of XXXX to impairment resources headwind are is by adjusting leading that quarter will operator, Grow to to we XXXX drive to we COVID-related charges restructuring foreign on currency excluding with and wellness XX% a questions. foreign now million powered vision the to tax guidance and we billion. open up negative quarter currency million.

Citi. your question. Jason, Bender Instructions] with [ph] [Operator comes first ahead -- go first question call Jason our from Our with

to Great. guidance. like start on I'd

pretty to of range there. that perhaps guidance, And exists, imagine look uncertainty of as end. the the that the the kind but width an some XQ Just of still at wide the the guidance of assumptions unpack is reflects I the I are all to range leading can you that other speak and at

Jason. Yes,

on and Mark So I'll sec, a can thoughts give that. chat some for

seasons traditionally better, maybe exactly of is be a uncertainties with there understand what tends environment. and anything anyways. of consumer QX range relative you... coming wider lot now obviously out the will typically sentiment wide which you is there. but give We with around, Mark, a uncertainty We're global do be holiday to bit the the impacted certainly, trying to -- the range as right So mentioned, to watching the a

Yes.

that said exactly we the guidance to Ryan environment, thought think a important given we just as was bit important felt uncertainty exists. range In a Jason. and I uncertain little to it maybe I it would, today's economic give range, wider give geopolitical still it

you. the said expectations the had to XQ. you color expecting terms margin, previously front? or similar Got of of And you in for remainder XH were be enough. on of that update on Any year think . kind gross I Fair to

Mark? Yes,

margin the us. last two came expectations, South revenue markets gross the highest our is based really Korea bit impacted our in us. are quarter which little a on And Gross two those were below gross this for Yes. was business and that markets where of for margin China came were by replaced in. US, margin lower

geographic quarter on similar of fourth seeing we're think that our I the business. based expectations for mix

talking here, time Got That's And launched and rate can for spend iO it's the But trending markets how you. you to coming those adoption glad helpful. along. on LumiSpa relative some where of about just then Vera the expectations? that's rollout, just it's

reminder an fact, is a nonconnected LumiSpa so device, an No. which in a have the iO existing and we so as was for X.X And just really LumiSpa very It's also everyone, device. important. iO, of are franchise, first and Stella utilization. The integration, out, is both critical. Vera Vera really and as downloads in you And our to pointed Jason, connected iO expansion important. It's early-stage

So We well. lot uptick I'm good devices see right over as consumers a with still Take to some sure we're those iO. seeing you connect do now, time. time of as

around seeing on. and connection now then as those still use we're of that upticks But a goes who very think I buy, it's XX% early. right

in still As I lot happening launch in QX. our of mentioned, are larger stage. the we're really A launches

progresses. So we'll see that how

I those features we the about the have encouraged languages, future -- language And last in every the think I to on of we're added apps. we've really, we over in now quarters. and now it product but specifically, all as apps. as market, business. focusing key availability it's few really the we're mentioned, really where And by have these Vera on They're important around

of of adoption those, the pleased for we're so with So still far them. both an in but expansion mode

product, I'm has if out, have That's color. of is is be lingering clearing discontinued LumiSpa, Great. sorry, cleaned last not you just the that then that that now but greedy if be will, you've more. doing LumiSpa that things there been just any quarters, super that? sales one And yet And so, one is to curious iO the couple you of of to In X.X X.X, up?

device. to the we're it's both, time, have that of markets, some In And There a in we that see to markets completely still product. space, for our the No, seems seeing transitioned Yes. actually sales least a at we've for where Nu non-iO iO, but in mixed. be both. demand for

so both near having the with we inventories And at transition. the least think at value of of process for a for room stream managing the in job anticipate least while I But term, last. and global our at options, least to and those done But mark team have both, the near there's product managing good together midterm.

next question of Helgans our from And Ashley coming is Jefferies.

ask comp similar to China. like pretty [ph] Blake It versus from is looks in about for Wanted year the on It's QX prior Ashley. the QX.

growth QX, similar So posted about you we in Should just kind there? in of this upcoming something expecting maybe QX? you're what you to of can think talk what

referring -- specifically sequential, you The the are change? so the year-over-year sequential .

constant currency mainland China. Yes,

Yes.

would to last term, saw what year. similar probably I think near the we it's -- in you

slightly would QX, in QX it QX versus flat Mainland to similar I'm is That's performed year-over-year Yes. put China forecast, which what versus rolling QX. range to the really that a the up in down it way sequentially, is

Taiwan launch the And relatively you -- LumiSpa like on talk social versus market super to selling helpful. the of about your quarter? sounds with the off that in performed and benefit. stronger That's Could start it was just expectations how Okay. a

running And years context. maybe practices, good of add of lean provide say the you'd do out Connie and really kind at with we're into they've a our any But social ago, things, a to markets out can continued there. really in It's Connie, actually Taiwan. several I'll of job and one of they, so to Taiwan. and just couple leading began color impressed Yes. longest of more We're least to world, part that pleased.

those strong the Taiwan and commerce the social customers segment of has very to year. customer initiatives expect targeted shape in fundamentally, throughout Taiwan with purchases acquisition We've The XX% led up year-over-year results base continued for really has Really, Kong primarily And are some that adoption customer next subscriptions count. also encouraging in were in take between throughout remained with customer really Taiwan over continue for seen retention their and for and conversions the also Hong we that and bases year. fact, the will second nicely. growth actually to progress year acquisition, of they

last And quarter health up if about And broadly about helpful. was that seeing super X% I I consumer? you're know of talk U.S. maybe about in Can wondering any by then you're trends for Americas constant you commentary for U.S. the currency. October? was we me. the month That's could one the seeing throughout then talk on what and the what maybe

No. Yes.

and really As mentioned, with pleased been we tenth quarter we've consecutive its had growth, U.S. the of that.

I getting think our tough, the market sentiment growing cetera. coming We've guide pressures. inflationary holiday in out, consumer the is seen reflects et reports the

in relative the anything QX. Connie trying So rolls really to guide up to is would market that and or add? form to Mark, we're you what

think No, it. you've I captured

next Our Chao Tristan comes of question Stifel. from

Tristan Mark. on is This for

the help specific improve in leader You real -- to time taken performance? there had Are any targeting promotions other measures some improvements being productivity. in mentioned sales

Yes.

Connie of and have I may things, couple to think a some add. additions

to we've as revenue. commerce well begun our closely and right as productivity productivity transition, which trending now part sales focused. as affiliate of focus to a we're as noticed around There's affiliate report social are generally more leader You the data of lot

promotions mentioned the are flexibility various some China world, in anything Connie, around there there? is we specifically. you'd there including So that highlight that engaging modifications of those we're

leads consumer as retention consumer which in affiliates and leader that that turn success realizing well some as with sales to fundamental strength are behavior purchasing we productivity. the channel, to also leader right, our ensures entire focus So and continue sales starting on productivity

thing. one add only I'd

at talked remember, flexible. we And that remember fast the about monthly you able compensation The I pay, something weekly to If first our operate few industry fast to it we're talked least and industry the were being a first pay, in back, daily when or that the years be could about But we quickly. pay program. in We being the believe we and launch. we Velocity introduced offer around affiliates sales really make and see our and to able as important. and compensation is adjustments more promotions, And that flexible leaders customers things we've to are the we to been interesting programs world the that plan market world that's changes. I part changing. for we last And just as think couple of important our to years, just we've the had take compensation an advantage of the and that

it. Stella know That's iO And current introducing how and market different you to change do Got Okay. on working you're helpful. like just conditions? Is -- for and soon. cadence enhancements innovation Lumi iO given I the and there Vera any Body

Yes. No, and is, on There release I'll the speak innovation more side. great question.

point, tried are focus much very upon deeper. really to So fewer experiences to that intentionally we've your much digital

has will So are features allow critical to XXXX, there, to and down us in which apps allowed more really these put and more global our really Vera deeply us Stella those focusing terms digital apps. consolidation properties efforts to in of of into

operate three course, Lumi slower those in. firmware to have there's Nu Skin that being so has quick. able updates you and to pretty quickly, sprints weeks, Like two dimension a updates a And traditional is to been every do app, new even sprint. a as noted, iO, are historically Nu of

the So that, I pleased company transition that marks with. we're that feel digital-first really

Meta, talked about Collagen+. we I other products we're think at, talked with about we respect looking to and products

more We've due have we're product other Nu the that's been fact into products that multiple products the to put It's have that to releases pipeline, meaningful, release part, able the because Biome. of other have Rhyz can in we that had move model, our partners social We part quickly. we also in effectively. and

more you'll see So And that continue we'll course, rather to macro to cadence than less. the according environment. think given I of resources

would last anticipated it The would anyone economic talked sure and if as reallocation. think to believe our We looks don't the available I to resource through. only We was the about have add into this that really knew it challenging. the restructuring on We have we technology. make resources we I is be our future. remember is started environment that's as is entering connectivity believe funds to strategic as and be But believe was it going to that reason available the this earnings in be. call, invest challenging we you that we we see that and future, our to thing

leverage Great. one debt increase the XQ. one. business optimal Okay. given the in last in and just cash seeing for What's And balance XQ I'm the in reduced

It's fortunate question. to a finish in were We of put quarter a second financial position. in strong that refinance really the great year this us really a

be strong. balance Our sheet continues to

cash We continue to produce basis. on quarterly a

I think we're well positioned.

as I think our those to times from $XXX as tough buybacks, we'll off buying continue We're be cash-to-debt and shares well cash neutrality. balance about the to continue share we'll of themselves. economic preserving ahead opportunistic in back as million trade-offs as opportunities present

and to from tend that to tend not be range. operate too conservative, we we think I far

Okay.

that's question I think the set end of the here. probably

I acutely tailwinds call. for on while either as Skin, Vision or for as Nu So for can companies At is headwinds imperative factors to evolve the operations our uncertainty, to thank the to excellence we the focused we remain emerging just that future. changing everybody it act In joining want times to XXXX operational environment. of ensure Nu adapting

Our company's needed ever it good people as mission has of been. today force better feel as and being live look, by for to empowering is a

with that, call for So joining Have us. good the thanks we'll a again, day. and end

program. today's your in you Thank This for the does conclude conference. participation

disconnect. now You may