Corey Augenstein
MLM Insider
Editor-In-Chief

Nu Skin Enterprises Reports Fourth-Quarter And 2017 Results And Provides Initial 2018 Guidance
Published: Feb 16, 2018

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

Thu February 15, 2018 4:15 PM|PR Newswire|About: NUS

EPS of $1.2 beats by $0.01

 

Revenue of $666.2M (+ 25.4% Y/Y) beats by $0.76M

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

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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 (TSRMF) 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.