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Nu Skin Enterprises Reports Fourth-Quarter And 2017 Results And Provides Initial 2018 Guidance

PROVO, Utah, Feb. 15, 2018 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced fourth-quarter and 2017 financial results.

Nu Skin Enterprises, Inc. logo (PRNewsFoto/Nu Skin Enterprises, Inc.)

Executive Summary

Q4 2017

Revenue:

$666.2 million, up 25.4%
     
•  +3% fx impact

Earnings Per Share (EPS):

$0.33 or $1.20 when excluding the impact of tax reform, compared to
$0.69 in Q4 2016, which included a $0.10 tax charge.

Sales Leaders:

81,900 – 33% year-over-year increase, benefitting from ageLOC
LumiSpa preview

Customers:

1,070,000 – 8% year-over-year increase

Tax Reform Impact:

Non-cash $47.7 million write-down of net deferred tax assets

2017 Annual

Revenue:

$2.28 billion, up 3%
     
•  less than (1%) fx impact

Earnings Per Share (EPS):

$2.36 or $3.23 when excluding the impact of tax reform, compared to
$2.55 in 2016, which included a $0.36 Japan customs charge

"We concluded 2017 on a high note with solid quarterly results driven by customer and sales leader growth," said Ritch Wood, chief executive officer. "Our growth strategy, which remains focused on three key elements – engaging platforms, enabling products and empowering programs, continues to drive our positive results. According to plan, we introduced ageLOC LumiSpa during the fourth quarter, which contributed to strong results in most of our markets. We also experienced continued momentum surrounding our social selling efforts, which we expect will be a catalyst for continued customer growth in 2018 and beyond."

Q4 2017 Year-Over-Year Operating Results

Revenue:

$666.2 million compared to $531.3 million

Gross Margin:

77.7% compared to 79.6%

Selling Expenses:

39.8% of revenue compared to 41.9%

G&A Expenses:

23.0% of revenue compared to 26.2%

Operating Margin:

14.9% compared to 11.4%

Other Income / (Expense):

($0.4) million compared to $1.4 million

Income Tax Rate:

81.5%, or 33.1% when excluding the tax reform impact

EPS:

$0.33 or $1.20 when excluding the tax reform impact, compared to
$0.69, which included a $0.10 tax charge

Stockholder Value

Dividend Payments:

$19.0 million

Stock Repurchases:

$23.9 million; $128.0 million remaining in authorization

The fourth quarter provision for income taxes included the following amounts related to the Tax Cuts and Jobs Act (TCJA). These amounts, which are provisional, may require adjustments as Internal Revenue Service (IRS) guidance is issued and as additional analysis of the provisions of the TCJA are completed:

  • $52.0 million write-down of our foreign tax credit carryforward.
  • $7.3 million charge related to a tax on permanently reinvested foreign earnings that have not been repatriated to the U.S.
  • $11.6 million benefit related to the remeasurement of U.S. net deferred tax liabilities at the lower statutory rate.

2018 Outlook

Q1 2018 Revenue:

$550 to $570 million, 10 to 14% growth
     
•  +4 to 5% fx impact

Q1 2018 EPS:

$0.65 to $0.70

2018 Revenue:

$2.44 billion to $2.49 billion, 7 to 9% growth
     • 
+2 to 3% fx impact

2018 EPS

$3.45 to $3.65

"Our 2018 guidance reflects optimism about our business prospects for the coming year, with expected top- and bottom-line growth," said Wood. "Our plans are focused on growing our customer base by executing on our 3P – Platforms, Products, Programs – growth strategy. We expect to further leverage the power of social selling and believe this channel will empower our sales leaders to reach a broader audience, helping to enable greater sales growth. On the product front, we are accelerating the introduction of innovative and socially shareable products, led by our recently introduced ageLOC LumiSpa, which is rolling out globally in the first half of 2018. We have also begun implementing sales compensation enhancements to more effectively reward our sales leaders and drive increased productivity.

"We also recently completed the acquisition of two manufacturing partners in which we previously held non-controlling equity ownership, as well as a packaging company. We anticipate these acquisitions will be accretive to our annual results and will be meaningful contributors to our future success," concluded Wood.

"Looking at 2018, we expect first-quarter revenue in the $550 to $570 million range, which includes an approximate 4 to 5 percent positive foreign currency impact," said Mark Lawrence, chief financial officer. "For the full year, we are projecting revenue growth of 7 to 9 percent, or $2.44 to $2.49 billion, including a favorable foreign currency impact of 2 to 3 percent, and earnings per share of $3.45 to $3.65. For 2018, excluding discrete items, we anticipate our effective tax rate will be approximately 34 to 35 percent."

Conference Call

The Nu Skin management team will host a conference call with the investment community on Feb. 15, 2018, at 5 p.m. (ET). Those wishing to access the webcast, as well as the financial information presented during the call, can visit the Investor Relations page on the company's website at ir.nuskin.com. A replay of the webcast will be available at the same URL through March 2, 2018.

About Nu Skin Enterprises, Inc.

Founded more than 30 years ago, Nu Skin Enterprises, Inc. develops and distributes innovative consumer products, offering a comprehensive line of premium-quality beauty and wellness solutions. The company builds upon its scientific expertise in both skin care and nutrition to continually develop innovative product brands that include the Nu Skin® personal care brand, the Pharmanex® nutrition brand, and most recently, the ageLOC® anti-aging brand. The ageLOC brand has generated a loyal following for such products as the ageLOC 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, sales force and customer base, growth, strategies, initiatives and areas of focus, acquisitions and new product introductions; projections regarding revenue, earnings per share, foreign currency fluctuations, tax rates 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," "targets," "likely," "will," "would," "could," "may," "might," the negative of these words and other similar words.

The forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed herein. These risks and uncertainties include, but are not limited to, the following:

  • adverse publicity related to the company's business, products, industry or any legal actions or complaints by the company's sales force or others;
  • risk that direct selling laws and regulations in any of our markets, including the United States and Mainland China, may be modified, interpreted or enforced in a manner that results in negative changes to our business model or negatively impacts our revenue, sales force or business, including through the interruption of sales activities, loss of licenses, imposition of fines, or any other adverse actions or events;
  • any failure of current or planned initiatives or products to generate interest among the company's sales force and customers and generate sponsoring and selling activities on a sustained basis;
  • risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;
  • uncertainties regarding the future financial performance of the company's recent acquisitions;
  • risks related to accurately predicting, delivering or maintaining sufficient quantities of products to support our planned initiatives or launch strategies, and increased risk of inventory write-offs if the company over-forecasts demand for a product or changes its planned initiatives or launch strategies;
  • regulatory risks associated with the company's products, which could require the company to modify its claims or inhibit the company's ability to import or continue selling a product in a market if it is determined to be a medical device or if it is unable to register the product in a timely manner under applicable regulatory requirements;
  • unpredictable economic conditions and events globally;
  • uncertainties related to interpretation of, and forthcoming regulations under, the recently enacted U.S. tax reform legislation; the company's future tax-planning initiatives; any prospective or retrospective increases in duties on the company's products imported into the company's markets outside of the United States; and any adverse results of tax audits or unfavorable changes to tax laws in the company's various markets; and
  • continued competitive pressures in the company's markets.

The company's financial performance and the forward-looking statements contained herein are further qualified by a detailed discussion of associated risks set forth in the documents filed by the company with the Securities and Exchange Commission. The forward-looking statements set forth the company's beliefs as of the date that such information was first provided and the company assumes no duty to update the forward-looking statements contained in this release to reflect any change except as required by law.

Non-GAAP Financial Measures: Constant-currency revenue growth is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the company's performance. It is calculated by translating the current period's revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing this amount to the prior-year period's revenue.

Earnings per share and income tax rate, each excluding the impact of tax reform, also are non-GAAP financial measures. The Tax Cuts and Jobs Act was enacted in December 2017 and had a material impact on the company's earnings per share and tax rate. Removing its impact facilitates period-to-period comparisons of the company's performance. Please see the reconciliations of these items to our earnings per share and income tax rate 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).



2017


2016


%
Change


Constant
Currency
% Change










Mainland China


$             222,333


$               139,095


59.8%


54.3%

South Korea


103,066


98,354


4.8%


(0.3%)

Americas


95,412


71,708


33.1%


34.0%

South Asia/Pacific


83,253


70,016


18.9%


16.8%

Japan


67,620


68,613


(1.4%)


1.5%

Hong Kong/Taiwan


46,627


43,411


7.4%


4.5%

EMEA


47,890


40,132


19.3%


9.7%










Total


$             666,201


$               531,329


25.4%


22.3%

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



2017


2016


%

Change


Constant
Currency
% Change










Mainland China


$             716,991


$               610,414


17.5%


18.9%

South Korea


361,692


413,696


(12.6%)


(14.9%)

Americas


317,380


276,590


14.7%


15.5%

South Asia/Pacific


299,980


296,758


1.1%


1.7%

Japan


256,085


279,042


(8.2%)


(5.2%)

Hong Kong/Taiwan


166,696


183,979


(9.4%)


(12.1%)

EMEA


160,275


147,318


8.8%


5.6%










Total


$          2,279,099


$            2,207,797


3.2%


3.3%

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


2017


2016


% Increase (Decrease)



Customers


Sales
Leaders


Customers


Sales
Leaders


Customers


Sales
Leaders














Mainland China


193,000


40,600


175,000


22,000


10.3%


84.5%

South Korea


173,000


8,400


192,000


9,600


(9.9%)


(12.5%)

Americas


222,000


8,000


166,000


6,700


33.7%


19.4%

South Asia/Pacific


144,000


8,900


116,000


7,600


24.1%


17.1%

Japan


132,000


6,600


137,000


6,700


(3.6%)


(1.5%)

Hong Kong/Taiwan


71,000


4,700


73,000


4,600


(2.7%)


2.2%

EMEA


135,000


4,700


129,000


4,400


4.7%


6.8%














Total


1,070,000


81,900


988,000


61,600


8.3%


33.0%












"Customers" are persons who purchased products directly from the company during the previous three months.


"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)

For the Fourth Quarters Ended December 31, 2017 and 2016

(in thousands, except per share amounts)






2017


2016





Revenue

$                666,201


$                531,329





Cost of sales

148,459


108,520





Gross profit

517,742


422,809





Operating expenses:




        Selling expenses

265,378


222,887

        General and administrative expenses

153,244


139,139

Total operating expenses

418,622


362,026





Operating income

99,120


60,783





Other (expense)/income, net

(446)


1,353

Income before provision for income taxes

98,674


62,136

Provision for income taxes

80,439


23,951





Net income

$                  18,235


$                   38,185





Net income per share:




        Basic

$                     0.35


$                     0.71

        Diluted

$                     0.33


$                     0.69





Weighted average common shares outstanding:




        Basic

52,722


53,769

        Diluted

55,053


55,539

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Years Ended December 31, 2017 and 2016

(in thousands, except per share amounts)






2017


2016





Revenue

$            2,279,099


$            2,207,797





Cost of sales

502,078


500,457





Gross profit

1,777,021


1,707,340





Operating expenses:




        Selling expenses

938,024


922,083

        General and administrative expenses

564,514


554,153

Total operating expenses

1,502,538


1,476,236





Operating income

274,483


231,104





Other (expense)/income, net

(8,916)


(18,265)

Income before provision for income taxes

265,567


212,839

Provision for income taxes

136,130


69,753





Net income

$               129,437


$               143,086





Net income per share:




        Basic

$                     2.45


$                     2.58

        Diluted

$                     2.36


$                     2.55





Weighted average common shares outstanding:




        Basic

52,806


55,412

        Diluted

54,852


56,097

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

As of December 31, 2017 and 2016

(in thousands)






2017


2016

ASSETS




Current assets:




        Cash and cash equivalents

$                426,399


$                357,246

        Current investments

11,847


10,880

        Accounts receivable

33,196


31,199

        Inventories, net

253,454


249,936

        Prepaid expenses and other

52,893


65,076


777,789


714,337





Property and equipment, net

464,587


444,732

Goodwill

114,954


114,954

Other intangible assets, net

67,647


63,553

Other assets

164,895


136,469

                Total assets

$             1,589,872


$             1,474,045





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




        Accounts payable

$                  50,341


$                  41,261

        Accrued expenses

319,189


275,023

        Current portion of long-term debt

77,840


82,727


447,370


399,011





Long-term debt

310,790


334,165

Other liabilities

127,116


76,799

        Total liabilities

885,276


809,975





Stockholders' equity:




        Class A common stock

91


91

        Additional paid-in capital

466,349


439,635

       Treasury stock, at cost

(1,304,694)


(1,250,123)

        Accumulated other comprehensive loss

(66,318)


(84,122)

        Retained earnings

1,609,168


1,558,589


704,596


664,070

                Total liabilities and stockholders' equity

$             1,589,872


$             1,474,045

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Earnings Per Share Excluding Impact of Tax Reform to

GAAP Earnings Per Share

(in thousands, except per share amounts)




2017


Q4 2017

Net income


$         129,437


$              18,235

Impact of tax reform on provision for income taxes


47,729


47,729

Net income, excluding impact of tax reform


$          177,166


$               65,964

Weighted-average common shares outstanding


54,852


55,053

Diluted earnings per share


$                2.36


$                  0.33

Diluted earnings per share, excluding tax reform impact


$                3.23


$                  1.20











NU SKIN ENTERPRISES, INC.

Reconciliation of Effective Tax Rate Excluding Impact of Tax Reform to

GAAP Effective Tax Rate

(in thousands)




2017


Q4 2017

Provision for income taxes


$         136,130


$              80,439

Impact of tax reform on provision for income taxes


(47,729)


(47,729)

Provision for income taxes, excluding impact of tax reform


$           88,401


$              32,710

Income before provision for income taxes


$         265,567


$              98,674

Effective tax rate


51.3%


81.5%

Effective tax rate, excluding tax reform impact


33.3%


33.1%

 

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

 

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SOURCE Nu Skin Enterprises, Inc.

Media: media@nuskin.com, (801) 345-6397, Investors: investorrelations@nuskin.com, (801) 345-3577­­­