Nu Skin Enterprises (NUS) 3 May 232023 Q1 Earnings call transcript

Good day and thank you for standing by. Welcome to the Quarter One Nu Skin Enterprises Earnings Conference Call. At this time, all participants are in a listen mode only. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please

hand over And to would all now speaker conference to like Pond. I your the today, set. you're Scott

Today me Thanks, the Chief Global James and afternoon, and and Mackellar Tang, everyone. Officer; Interim [ph] CEO; Connie call Ryan are Thomas, with Growth Napierski, President good on CFO.

Please call, statements. results risks anticipated. involve and actual to These may discussed comments materially refer and for be those discussion of that made release SEC will today's these earnings statements On include risks. forward-looking from differ and some today's filings complete uncertainties, or our a

comparing Also from results consistent more Please certain comparable financial statements. of in call, refer during in manner. investor website numbers. to obtained reconciliation may in our required financial the non-GAAP be for period-to-period differ numbers non-GAAP these any We a discussed that believe our numbers assist numbers

to I'll with it Ryan. over And turn that,

everybody. Vision wellness to opportunity Hello, world's Scott. powered multiyear Thanks transformation integrated Since becoming us year, today. dynamic our by engaged that's our platform. actively and beauty last Thanks, been leading XXXX introduced in joining Nu company the for affiliate we we've

despite performance anticipate line in QX our ongoing year. with we Our challenges, macro and steady expectations the was throughout improvements the

impacted results of While macroeconomic We better-than-expected and EPS. revenue in Korea and QX the last comparisons were year-over-year for year, range the and inflation macroeconomic our recessionary factors, China, by achieved Americas and first South quarter performed both COVID due with Southeast from was we Asia difficult including concerns. Mainland while largely headwinds China associated down to the lockdowns and guidance strict within

where encouraging key Mainland we to markets, remain expect growth and we macro China, the sequential in several While experienced customers see in signs affiliates. including challenging, near-term we environment

on year a the guidance our growth enabling full return of progress the in the continued initiatives, We Vision we are and our with where balance steady in results key New over year reiterating fourth quarter. XXXX to anticipate make also continue improvement to

wellness balances management strategy select during system continue empower We weight advance introduction in that supplements, core and the during to the markets This We with personalized our results beauty a first in are exercise. unique and quarter. TRMe previewed QX including provides successful a diet expectations. Korea regular of and TRMe program, South and me our approach personalized of the early elements Asian exceeding

In markets additional it the we'll introducing with TRMe general to and China in in out be rolling program to the key public Korea South Mainland quarters. follow QX, subsequent and

Empower device future Me proprietary foundational million growth LumiSpa over are connected our which X.X experience customers iO's have our results. better Another is to key that to insights that completed of enable treatments, consumers valuable is iO component systems. providing Since introduction,

experience. enhance users LumiSpa IO and plans. XX% customizable their beauty customers also of iO and our that road first to Beginning reporting iO features we their body. device, inform restore, QX, With is wellness and our preview app holistic WellSpa future features portfolio will revitalize iO, in systems which helping helps recover device our map

generate to approximately from device our IO XXXX. on systems to XX% XX% is goal of way our XXXX, For revenue by connected

easier that nano Next, influencers We for businesses. scale let commerce. go-to-market make their continually social for evolve second core about New opportunity to Vision in affiliate model micro and XXXX, element our them me speak of our ways our the powered to enhance it potential

other QX QX globe. program new powered recognition affiliate includes rewards America affiliate enhanced programs model for in in America and Latin and in the around This introduced the business North and

in and with in in also Japan beauty-focused second in Collagen continue new the Multi-beauty QX, along several EMEA to in We lash beauty-focused color and North EMEA social selling Plus serum quarter. introduce products, brow including America and and

of leaders model. their sales outpaced affiliate paid our demonstrating see adoption to social a commerce margin, continue We by healthy

digital is third New Vision XXXX. ecosystem pillar Our the of

the first app, attribution app affiliate sharing of experience and During features Vera and consumer user we to Stella apps. the of including the our elevate to continued quarter, drive adoption

quarter outlined of user our for increased Vera customers active that active or last goal. XX% average to monthly monthly Our of stated XX% ratios we annual

One of seen that website rate consultation app. things conversion about the the versus Xx a the higher exciting is in our the most Vera completes skin when consumer we've personal

of Also, monthly initial gig our business average platform, of to our or about stated America the active in of as with the of more beginning to For annual new XX% social role well Stella, economy. XXXX. our we're goal, and apps commerce e-commerce XX% North increasingly our in and us important are deployment we These transformation paid playing start into user ahead QX. affiliates increased schedule monthly dive for deeper putting global an ratio

I'm will recently the digital on enable published about that operational drive and significant a provide our call dynamic our making. this of This and focus finally, website. impact experience and user we're social our force report global like progress to I'd good website excited sustainability more work briefly for our to core seamless and and scalability greater a out across apps annual And on mission is our being efficiencies.

For example, tons than were from alone. to packaging plastic able our last save year XX XX of to of tons paper product we alone, more changes and

new headwinds. good against start that key summary, continue execute to in despite the XXXX XXXX well we're off a in persistent So Vision underpin priorities to and macro

we're like continue South In conservatively to respect structure key markets to starting cost setting encouraging China remain Korea thoughtful in addition, signs and and with expectations. see and our manage to

market will you growth to Connie? been out about Connie the has and So provide past few Connie channel months, that, take through the for in further the the market time with and more plan. with let me speak color over our performance and you turn context. to

overall discussed. Ryan. Ryan Thank of results you, our were X, We with quarter pleased as

we key the seeing for While to customers' to due are and and continue trends growth on the comparisons, channel, in are difficult leaders regenerating affiliates we year year-over-year down improving focus in markets.

In past couple inflationary each consumer segments. revenue spending. of new other on reporting the a comps were reported in and price years. the me for after in iO little the acquisition. against growth let month-over-month an LumiSpa So KPIs the strong US down for An Americas, quarter, tougher the At share pressures of our increase drove promotions unit end of increases strong adjustments sales also impact and and our customer had in on insight

In quarter device next and later leadership aligning is is introduction launching on color the region to and in new channel grow sales two, build The year. the the serum momentum to the also of connected social Americas help commerce. focused our brow drive for launch and lash

a of and signs comparison, related some activities. with Mainland of are of customer growth. paid we has China restrictions led year-over-year sequential government performed early a above the our expectations encouraged COVID affiliate positive and spite business of difficult lifting renewed to to in The

We our are virtual seeing reach. many with attendees our also leaders hybrid to in sales enhancing meetings make China the transition

our sales promotion TRXX among some ageLOC TRMe. going energy created us and leaders momentum QX preview the A into gives leader sales of

do iO As to end the we rebuild as remain some momentum. and work return we revitalize force are WellSpa connected the the sales China projecting growth to noted quarter, our year a our to last still and year-over-year in potential by system. have We of device of introduce optimistic

March by to challenges Hong campaign revenue Kong, prolonged quarter. was lockdowns. In and Hong the TRMe currency are had offset working successful following rebuild ageLOC In Taiwan the impact Kong. in COVID in launched a we local Taiwan, continued in momentum an during increase of Meta

LumiSpa quarter we and launch driving device are ahead expos next adoption on both ahead, sales and this focused in half our customer connected iO several the Looking and leader of sales the planning are markets the to engagement app of back Vera of year. in drive acquisition of

to this which is year-over-year in overall region. pressure a the spot this price Southeast in and strongest was Asia social a in The slowdown commerce largest of revenue Indonesia, revenue bright growth. increases inflation with market the Pacific and adoption in and contributed market

growing We an upcoming campaign with and ageLOC our are for on Collagen Plus LumiSpa beauty-focused focused iO. channel

decline expanding of currency of good LumiSpa providing building with the been our momentum. for bright iO EMEA X% as in launch of EMEA connected continues strongest in the devices consistent WellSpa They now on ahead challenged iO and in release is a the has revenue by Rolls focus a resulting year-over-year. external to of be constant ageLOC were Gold region a revenue, limited the spots of fall. channel foundation the and our percent disruptions

growth currency well local well sales in as as Korea South with X% leaders. in performed

for full June. market Korea in a A solid key in alignment, successful driver which South lead a a serves with sales in TRMe, resulting strong leader for launch of preview as highly

a of leaders sales at uptick preview, a end quarter. As large result TRMe the in there the new of was the

later momentum the in leaders in core During my leaders, it full was launch and year. TRMe and Wella to week last evident continued with for preparation build Seoul the that the meetings

I Japan this was Japan, in remained the in and saw constant a event excitement stable and great with in affiliates firsthand currency week, anniversary attendance. at X,XXX live decline a celebrate energy to revenue, relatively I the modest from our XXth past

are on of iO. us of of in Collagen advance launch We focused and Beauty leader the upcoming growth focused customer engagement with WellSpa launch the

turn and product you, increased tools model. it and affiliates. expansion quarter, digital XXXX commerce to of and are social we of met We offerings for we track challenging strategy on remain a Despite our as consumers of new to the for I'll personalized projections now adoption Ryan. make our our launch through continue our and And the Vision back progress in confident the year.

Thanks, New has with who through XX resource over PricewaterhouseCoopers, with is stint of James in capacity wellness ground Connie. the his our outstanding I has a Accounting in to serve XXXX interim wanted James for been years. an our serves currently primed the followed to company. He's spent running. He engaged partner the been been by and James this as Thomas, and serving is enabling efforts at allocation strategic our introduce hitting and technology-enabled the directly Officer. has quickly career another first Vision company CFO as part years Chief

So take James, away. that, with it

thanks I'm in we and to for strategic invest drive imperatives value. you, to this I getting excited and today. you, team more an role of closely joining with help all Ryan, work expanded shareholder key to Thank to look know and incredible us forward as

and I'll give XXXX provide financial review initial QX full speak QX year then brief a and to projections. our guidance

our visit Investor please information, website. more Relations For

of U.S. revenue foreign quarter, generated end which negatively the impact the X% results. $XXX.X strengthen, a impacted near at with to or million, million. guidance negative our currency dollar $XX our we The high continued prior For first of

the was $X.XX of restructuring excluding Our in when $X.X million charges and reported earnings impairment per share or quarter. $X.XX

of margins a however, Our XX was inflation. by manufacturing did, which target focus less We to declining on we stated sequential QX geographic our margin-accretive our driving point XX.X% reported margin partners cost-saving part to was mix and XX%. and our revenue basis large in improvement to experience initiatives due on gross improvement in $XX with as margin our way on million products revenue XX.X%, negatively previously impacted

Gross margin XXXX. an Skin below revenue basis of for to period. XX.X%, of the as a basis the compared was Selling expense improvement of business percentage core points year XX.X% Nu XXX was prior and points QX XXX

business, For expense the XX.X%. core Skin selling Nu was

on million and efficiencies our year-over-year, operational a of and $XXX.X to of focus part million. General million was compared expense As $XX.X $XXX.X administrative decline

quarter, $X.X During the in announced amount remaining New Vision a in support of incurred reallocation we the our restructuring million capabilities strategic was XXXX. first and previously resources our charge, of which

the Operating mentioned to period. compares previously prior was This excluding in margin X.X% X.X%, the charges. the or quarter for year X.X% restructuring

the $X.X expense income reflects other with period. expense million flat The prior line a year

any dividends in stock. quarter, the million During $XX.X and repurchase did paid not we

Our which quarter and compared includes was was inflationary prior Rhyz year the to impacted pressures. when down manufacturing by negatively segment, our partners, XX%

continue entities for manufacturing chain to up market supply firm increase Our Nu our new by business core Skin and significantly our products. benefit speed to helping

initial provide QX EPS. revenue now annual ranges projections reiterate guidance me Let for and XXXX and

X% projecting For impact sequential sequential this challenges to including QX currency projection a X%, improvements million, revenue largely and from we $XXX reflects historical approximately with negative of our to XXXX, are reflects $XXX foreign million continued average macro improvement QX. of

Our of a XX%. and XX% QX tax guidance assumes projected rate to is EPS $X.XX $X.XX to QX

includes billion to For we projections the $X.XX impact. billion, February which revenue year a foreign reiterating unfavorable $X.XX currency XXXX, X% with to X% our full are of

excludes reiterating We $X.X are which per to $X.XX, $X.XX first charge share share restructuring are the $X.XX increasing quarter non-GAAP earnings reported of $X.XX million. earnings of per and to to

Our to assumes XX% tax rate guidance of XX%. a

our uncertain, future near-term we accelerate that key the current macro expand impacting projections, in continue environment New remains to XXXX. our we imperatives, our will supporting While opportunities Vision to as business believe strategic invest the

balance well are operational proven management our and success. to We continuing committed improvement our journey believe discipline sheet strong long-term and for position expense us

the open now will we questions. operator, call that, with for And

Citi. have Bender Chasen now We from

of kind on start to recruitment like and just the I'd sales leaders.

notable compared Just sales bit of how worse quarter-over-quarter I'm quarter and guide? little being a year the X to the context you're basis, China reiterated that But just on seem paid last, affiliates this with about thinking trends look affiliates in a curious leader to full just exception. having

your view currently and about more enough in of see improvement really in products Or it the It's to trends is some full and that And are out? productivity an network? those do people those year folks the to you behind there improving Skin Nu have rolling affiliates for of you're we leader numbers? activity sales new reach

question. great Chasen, Yes,

QX specifically, business So issue to cetera. way all, to for remember with think I the your through to key always seasonality patterns QX, question us of is, the QX QX point, first step, et cetera, or to the being your move our et the X to of

the in to -- on way is and the execution cyclical half about channel which drive half, we of second concerned typically cycle annual the with our that that. is customers. second basis, the we're planned the not grows wellSpa where where kind So of

really affiliates, I to think really which, time first mentioned, as we customers forward. leaders due progression sequentially. and there. we're pleased move are all continues being focused many And customers the past Most to in to in affiliates ensuring affiliates we that over years China kind now in be notably, the is right you would know, the with up from to lockdowns the of as where

as looking throughout patterns -- year. we the as We not those Korea concerned see So move that. We well worried favorable not about see happening.

staying So guidance. on

Got essentially there. even considering though just obviously, was expected viral wasn't coming that in especially China, wasn't better you. those hear zero-COVID than locked February, it's it And on to infection rates then in you policy and great a effectively down, it spiked

kind trends to growth any how wrap the as kind just by around quarter color the of exited? of return end about And Just of year? and can how progressed curious the we through think there the you you the

know, Yes. Chinese the China because January. of calendar. you year, New of fluctuates on it quarter. Year to be year-to-year it always happened the in is interesting beginning as lunar at the This And

through end So quarter. of January slower accelerating is the the

have [ph]. [Operator we Instructions] Mark next Up now

hear you Can me?

Yes, Mark.

of China. sales I What historically, improved all you sequential paid guess kind leaders in on about Great. just to do there metric as trends talked should think to affiliates indicators. -- paying of be customer start attention you've we sequentially But obviously terms leading mix well.

you of curious I'm in has at guess there nice last question what year the be growth if China. get and same obviously kind end year in sort that general looking in was you're XQ of I to you're of if terms change that where the same to back a seeing take anything the just relative necessarily because really seeing weakness a for to look over metrics should you the changed by China, we that then not there, sequential same of for leading indicators anticipated Korea the and

we Korea that guess be sales sort same leaders in example, but improving of as at an there Sequentially, looking So read-through China. the there. in should I is wasn't

as of leading kind sort any at on helpful. business can look color So of you directional would you give be the indicators

Yes, Mark, great question.

such that's it's a past we've as we the and start the for talked through the to So few because depletion regrowth, past, to channel been in China years. needs see start China it that is where over critical -- issue

ultimately, have looking leaders from grow. forward need to the channel they ensure that from to at is turn affiliates to grow. growth, Obviously, for into And customers healthy, there sales so and perspective, to where we base a leadership see do need we're we affiliate count sustainable the And

in that came part to a will followed there, which mean, then consumer to affiliates bring a required typically if you'll you Korea, that preview that a we launch is in by with associated sales need and time in case. translate But customers with to TRMe force I the to the in really over QX limited leaders. happen recall, I'd Korea's this do sales Korea the On to would start introduction as said, growth

We the for customer that sellout volumes to the we and there. And don't the growth come in QX. introductions see see typically with primes from then sales going strategy average up so these force the typically sell-in

little nature PaaS so impact from a dissimilar they the the look because of what's there do the bit the KPI And of growth. and just driving

happens the last I would -- purchase in they're with And though, that week, et that? what was add there's Korea. speaking all economic was kind to is does -- But environment note, Korea, Connie, of of week having know, I question, with just temper her over as level I question or and consumer cetera. you how there pressures, in Head expectations housing our and some anything at Japan spending, the macro that's last was the the and you'd Connie the the and

No.

us, I in leader the you're think some count that in our and example is from public expectation of understanding channel is development growth In is this seeing as as for consumer well. through sequential sighted where the with which TRMe, numbers the generation the Ryan sequence that that drives consumer of use revenue I what programs. process positive sales core if and improvement therefore, launch, the case, bringing the we drive

challenges these to -- a is level, inflationary what in markets real observed but and the like. macro in that we're So looks extremely

we've the the customers about the I about And beauty, to what doesn't you sounds the rate sequentially been personal bigger related it it, from like of sustain and a time picture, in the spending revenue think the want quarter be think And launch? is I category kind introduction change the care kind that that at of and at like of right versus the was forward nutritional that a TRMe improvement of necessarily TRMe because guess or split so however the of split thinking between, of the the you amount path you're call from maybe your just how what to some Korea, least things offerings, that, of guess standpoint of offering about for do business? side, one

And offering it is to categories forward. meaning last was consumer pre-cut growth you Again, platform this a the has be just few that. how beauty making big up, years, I'm anything, sell acceptance the to stuff I'm as curious you're over nutritional about or to think want of changed move of could that driver that what going a but

I'm Yes. because the Korea. asking helpful Korea follow-up that's And you're on glad thing really Mark, one in

we about things when talk were important QX and So one. was -- growth in were X in there notable that TRMe

in the We mentioned that change and kind leader midrange business of emphasis to the a also put greater affiliates. I put as was as Connie sales in minimum a her would was made and it model, there -- define portion of on requirement what on a

see the you And affiliates so underpacing sales Korea in leader that's why situation there. the

leaders business well that locally, according It's So is of we is that that's there. force resonating make believe something model the no. that really to change But to affiliates of to more designations and sales just there. the and sales

So it improves the with those leaders that earnings potential sales of early change.

helpful So into have where moving in that affiliates improve will that's and there X a X, comparison minimum. year-over-year healthy but a is issue a and change QX, affiliates,

the weren't ones low the anymore. low-performing -- included aren't in that And number so

Korea. So just note that's the on

has know, a our business platform, generally the wellness nutrition. really we other -- and that, we care a been XX-XX mix as as are Regarding historically way you we personal you at beauty the said, and and product and one look how between or look

I isn't unlike are focused should Asia on markets one U.S. much these that been at focused management which well, very say business, -- all really our has Korea Southeast both that. unique today. we and and Korea a Korea really of Asia, according weight And we're business there Southeast does well. one that management management TRMe in strong Korea and in weight number in to lifestyle Euromonitor, fact, But have the business weight

time. do But approach to expansion and beauty Thank you. that markets goal the balanced moving as over forward said, you And see our so a of is and different the differently. we balancing wellness, portfolio we and portfolio see even

Yes.

in I the queue. doesn't think like other look there's it questions any

wrap here. everyone waters We're I being to the in. as ongoing think contributions the we ahead call the continue we'll we up navigate So today. call of appreciate uncertain on go and But appreciative your we're

and return to optimistic we're optimistic of we half the and We're appreciate Southeast second Korea, to and As Bye-bye. that again about as We're go. updating just our to But quarter. next trends future. also in forward we and Thank you we growth quarter Asia half to our we're fourth said, look of seeing the we all. in as we'll Americas in improvements back the there. looking China, partnership, you work ferociously year continue and look your a again, forward to

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