Nu Skin Enterprises, Inc. Price & Performance (NUS)

I'm B. G. Hunt and would like to introduce myself as the new Head of Investor Relations at Nu Skin. With nearly twenty years at Nu Skin, I've held positions in our Global Tax Group, led our administrative services, build out our Southeast Asia headquarters and will continue to head up our global treasury team. I've enjoyed my early interactions with you and look forward to working more closely to build our investment community as we continue to transform our business towards becoming the world's leading beauty, wellness and lifestyle ecosystem. With the progress we've made in several areas, I'm excited to turn the time over to Ryan Napierski, President and CEO and James Thomas, CFO to share more on the details. Before I do that, let me point out that on today's call, comments will be made that include forward looking statements. These statements involve risks and uncertainties and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks, Also during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe these non GAAP numbers assist in comparing period to period results in a more consistent manner.

Please refer to our investor website ir.newskin.com Nu, for any required reconciliation of these non GAAP numbers. And with that, I'd now like to turn the call over to Brian. Hey, thanks, BG. Thanks, everyone, for joining the call. From snowy Utah, where we're finally getting the snow that we need.

Much needed here, but thanks for joining the call. I'll begin with an overview on our performance and then discuss our key priorities for 2025. As we continue to transform our journey [indiscernible] becoming the world's leading integrated beauty, wellness and lifestyle ecosystem. Our fourth quarter revenue came in above our guidance range with encouraging our core new skin business, our adjusted earnings per share excluding restructuring and other charges also This momentum combined with the continued strong performance from RISE demonstrates progress in our transformational journey.

In the quarter, we delivered constant currency growth in The Americas, improved profitability and paid down debt of $440,000,000 While persistent headwinds remain in China and South Korea, the growth in Latin America and parts of Southeast Asia was particularly particularly encouraging and demonstrate our developing market strategy is gaining traction. Our Q4 results were driven in part by the launch of our new AgeLock TruFACE Peptide Retinol Complex and the performance of RISE.

Our newest TrueFace product launched in late twenty twenty four and is demonstrating strong market acceptance.

This innovative product leverages AI discovered peptide technology to deliver retinol in a unique way combining two types of retinoids for a powerful result in a gentle formula. The success of this launch reinforces our ability to meet evolving consumer demands in the premium beauty space while maintaining our commitment to innovative formulations. Our Ride segments achieved 28% year on year growth in Q4 In January, we announced the strategic transaction of Mabley with Later and Summit Partners for $250,000,000 This transaction generated a five times return on our investments in 2021, and provides further validation of our RISE ecosystem strategy while also strengthening our balance sheet. Through our ongoing commercial relationship with Later, we'll maintain access to Mableese technology and social commerce capabilities to support our affiliate marketing business. So looking ahead to 2025, we have three strategic priorities as we work towards our long term enterprise vision. Becoming the world's leading beauty, wellness and lifestyle ecosystem. First, strengthen our Nu Skin core business.

Second, accelerate innovation of our IO Intelligent Beauty and Wellness including RISE and third, improve our operational performance and efficiency. Let's dive deeper into each of these. First, strengthening our Nu Skin core business. Over the past few years following COVID, direct selling has seen perhaps the greatest level of disruption as consumers have shifted primarily to social online shopping. Social platforms have evolved their algorithms to maximize paid advertising revenue pushing down authentic product recommendations on their platforms. In addition, the broader declining consumer sentiment in critical markets like China and South Korea has impacted premium beauty and personal care categories. Our teams are acutely aware of these trends and are actively evolving our core business to succeed in the future by enhancing our entrepreneurial business model, to more effectively reward affiliates for building their businesses in a social first manner. While continuing to reward leaders for training and motivating their sales This new business model combines the best of affiliate marketing, with the power of Nu Skin Nu we plan to continue to roll it out with enhancements to various markets around the world throughout 2025. And beyond. We're also refining our product portfolio to better fit today's emerging consumer needs around the world to make room for exciting new product innovations like Mind360, cognitive health, Our cognitive health line which we began to launch in 2024 and will be launching in additional markets throughout 2025 as well as a full restage of our TruFACE Press globally in 2025.

Meeting consumers where they are from a price value perspective is critical particularly as we lean into our developing market segments. With this in mind, we will be increasing our focus on Nu Skin developing markets as we seek out new growth opportunities. Leveraging our simplified and focused business model in Latin America, which is responsible for driving significant year over year growth in Argentina, we will be leaning into these high potential yet underperforming markets in 2025 to accelerate performance. Together with ongoing expansion efforts in India as we continue to we believe the developing markets will play an increasingly significant role in strengthening our new SkinCore business in 2025 and years to come. Our second enterprise priority is to accelerate innovation of of our IO intelligent beauty and wellness platform including RISE. We recognize to truly meet the needs of beauty and wellness consumers around the globe, I company must gather synthesize and provide insights that demonstrate the difference of the products we produce to consumers. For the past several years, we have been building out our IO connected beauty and wellness device systems platform most recently with the launch of WellSpa and Nu in the past two years.

This intelligent platform now contains over 25,000,000 connected treatments from nearly 500,000 connected devices with more than 100,000,000 data points providing insights into behaviors and product usage within our IO platform. In 2025, we will begin integrating these topical insights together with data gathered from our Biofit insights [indiscernible] These insights will power the AI engine behind our next innovation Prism.io. Our truly intelligent wellness device. Our scientists at RISE Labs together with leading spectral imaging researchers have developed a clinically substantiated patent pending technology that can accurately measure micronutrient absorption in the skin.

This non invasive tuck device aims to answer perhaps the biggest question perplexing nutritional supplementation, do my nutritional supplements actually work? [indiscernible] and it provides this information at the touch of a fingertip. Prism.io is scheduled for limited release to top performing sales leaders around the world in the second half of twenty twenty five, with a global launch plan in 2026 as we look to further strengthen our Euromonitor acclaimed physician of being the world's number one company for beauty and wellness device systems. We will dive much deeper into Prism.io and our intelligent wellness journey in our upcoming earnings calls. And third, we will improve operational performance and efficiency around the globe as we align our business to what matters most, innovation, growth and EPS. As we wrap up the previously announced restructuring, we have taken an acute approach evaluating every line item of our business Our team is surgically analyzed our extensive global product portfolio, based upon strategic fit volume and margin as part of our multiyear plan to optimize our global portfolio by more than 50, five-zero, percent by the end of twenty twenty five. Improving inventory holdings, gross margin and our total cost of fulfillment.

Further, our finance and global leadership teams around the world have evaluated every market to optimize operations that will improve focus, execution and profitability around the world. We're leveraging a streamlined model developed for Argentina and which has resulted in both revenue growth and improved profitability across the region. [indiscernible] Our goal is to bring every market around the globe to our profitability targets in 2025. James will dive deeper into our performance optimization plan, which we anticipate will produce meaningful improvements to our overall operating margin in 2025, and the years to come Just before I wrap up, I want to comment briefly on the transaction of Mabley. One of our RISE portfolio businesses announced earlier this year. Mabley represented approximately 4% of the company's revenue last year and transacted for $250,000,000 The sale of Mable has strengthened our balance sheet in many different ways. At a recent investor conference, I was asked how such meaningful value creation was seemingly unnoticed in the market. My answer was that we have been vocal about Rise over the past two years with specific callouts for Mavily However, investors did not ascribe the full value of this asset. The follow-up question was then asked what is most misunderstood about Nu Skin?

My answer in short was that unlike most companies in the beauty and wellness space, our public market valuation is weighted more upon the channel by which our core Nu Skin business distributes our innovative products or or services rather than being value for the full suite of innovation and businesses across our enterprise. To be clear, we are proud of the direct selling heritage that we've built over forty years. And I believe that a company should be viewed for its full suite of value drivers. For us, this includes the value inherent within our core Nu Skin business including our innovative R and D engine, dedicated sales force and our operational infrastructure in nearly 50 markets.

As well as new and emerging businesses within RISE, including like LifeDNA, Wasatch Labs and various other investments. Moving forward, it is incumbent upon us as management to continue highlighting potential breakthrough innovations like Mavily included including providing greater visibility into all other value drivers across the enterprise that propel us towards our vision of becoming the world's leading beauty, wellness and lifestyle ecosystem.

With that, I'll turn the time over to James.

Thank you, Ryan, and thanks to everyone for joining us today. I'll start with a review of our Q4 performance, highlight key takeaways from 2024, and then discuss our outlook for Q1 and full year 2025. Will be speaking to adjusted non GAAP financial measures as it pertains to our financial results. Reconciliations to the most directly comparable GAAP measures are found on our Investor Relations website. For the fourth quarter, delivered revenue of $445,600,000 exceeding our previous guidance range despite a 4% negative foreign currency impact of $20,100,000 Adjusted earnings per share came in at $0.38 surpassing our guidance and slightly ahead of our prior year $0.37 For the full year, generated $1,730,000,000 in revenue landing within our original guidance even as we navigated an unexpected additional FX headwind, of approximately $60,000,000 Our Q4 adjusted gross margin was 71.4% compared to 72.1% in the prior year.

Within our core Nu Skin business, adjusted gross margin was 76.6% down from 77.4% primarily due to a geographic shift in revenue away from China and Korea.

As Ryan mentioned, our strategy to streamline the portfolio focusing on strategic fit, profitability and affordability has successfully reengaged and expanded our opportunity in developing markets with a more targeted product offering. Due to the expanding success in Latin America, and planned rollouts in 2025 in Southeast Asia Pacific, we've made the decision to take more aggressive efforts to reduce our portfolio resulting in a $38,800,000 write down this quarter. These strategic actions are already driving positive momentum, helping us grow our base sales leaders in Latin America and in turn increasing revenue Nu these emerging but high potential markets. Selling expenses remain consistent at 37.1% For the core Nu Skin business, selling expense was 40.3%. Slightly lower than prior year's 40.8% in line with expectations. General and administrative expenses improved as a percentage of revenue declining to 27.1% from 29.7%, reflecting reductions in labor, physical facilities, and more efficient promotional spend. Adjusted operating margin for the quarter was 7.7%, up 130 basis points from 6.4% demonstrating our commitment to operational efficiency, disciplined cost management.

Over the last several years, our business has navigated significant top line pressures. Necessitating a disciplined approach to cost restructuring. Through targeted restructuring efforts, optimized inventory and a migration to a shared services model for technology, we have worked diligently I'm pleased to report that our 2023 restructuring plan is now materially complete.

While these efforts have been challenging, they have positioned us for a more sustainable future as our cost structure is now right sized to support our forecast performance. With this foundation in place, we are focused on driving greater efficiencies and capturing opportunities for long term value creation. I'd like to now shift our focus to our balance sheet and liquidity. Where we've made meaningful progress.

A key priority in 2024 was strengthening our balance sheet. And we took significant steps to delever the business. We reduced our debt by $110,000,000 funded entirely through our cash from operations highlighting our disciplined approach to capital management. We delivered $70,000,000 in free cash flow an increase of $10,000,000 over the prior year. In addition, we returned $12,000,000 to shareholders in the form of dividends, maintaining a yield that remains at the high end of our industry peers. As previously announced on January 3, we sold our Maitland business, which added an approximate $200,000,000 in cash to our balance sheet.

Our credit agreement requires us to use the proceeds from the sale towards our debt or business related capital investments, After the sell in Q1 twenty twenty five, used $115,000,000 of these proceeds to further reduce our outstanding debt, reinforcing our commitment to maintaining a strong financial position as we work towards cash to debt neutrality. We did not repurchase any stock and have $162,400,000 remaining on our current authorization. Looking ahead to 2025, we are encouraged by improving revenue trends across several markets while continuing to navigate challenges in China and Korea.

We project 2025 revenue in the range of $1,480,000,000 to $1,620,000,000 including an estimated exchange headwind of $52,500,000 or 3%. Excluding Mabley from the prior year comparison, we anticipate a revenue decline of 3% to 11%.

Anticipate earnings per share in the range of $3.45 to $3.85 with adjusted earnings between $0.9 and $1.3 This reflects strong growth of 7% to 55% driven by the successful execution of our operational efficiency initiatives.

We project first quarter revenue between $345,000,000 and $365,000,000 factoring in an expected foreign currency headwind of approximately 3%.

Reported earnings per share is anticipated to be in the range of $2.65 to $2.75 of May As a reminder, Q1 is historically our lowest quarter due to the seasonality of our business.

So in review, of 2024, we have taken significant steps strengthen our financial foundation, enhancing our cash position, materially reducing leverage year over year and aligning our inventory portfolio with a renewed brand strategy. Looking ahead, we are forecasting meaningful earnings growth and are well positioned to deliver even in the face of top line pressures in certain markets. We remain committed to executing our strategy with discipline, providing initiatives and driving long term value for our shareholders. We look forward to sharing our continued progress in the quarters ahead. And with that operator, we'll now open up the call for questions. In China. Just wondering if you can elaborate on how those trends in those regions progressed throughout the quarter? And then maybe any kind of incremental detail? It sounds like you're continuing to expect headwinds into 2025, but any extra color there you can share? Thank you.

Yes, Sidney, Nu, great question. Yes, I think we're all probably reading the same materials. And so I'm not sure how much detail to go into there. But economic outlook reports from various banks and and the like continue to be fairly hesitant for both of these markets. And I think a couple of key trends that we're noticing and then maybe I could give you local context as well from our teams there. Is this really as economic challenges occur, spending consumer spending drops, savings rates go up, [indiscernible] And economists right now are expecting that to persist throughout 2025. In our from our point of view, we haven't built into our forecast as not necessarily getting worse. But we're also not seeing the silver lining yet over there. So So our local teams as we work with our teams over there, I think their sentiment is relatively consistent that consumers are hesitant to spend. These days. I think discounts sellers, especially local brands, both in China and Korea, Coupang, for example, Korea, China, obviously, a lot of local branding there. That tends to be a consumer priority as it's going on there. So really just we're forecasting out as we look at the world.

It's consistent or similar to what we over the past year but we'll continue to monitor it. I think on our side from a more proactive point of view, we're really trying to lean into how do we support local consumers During economically challenged times, we look at our product pricing strategy, how those products fit into the market, We look at our emerging opportunity as we obviously are provide a bit of a a gig type of opportunity there. And so we believe we have opportunities for the market. In those places, but I think those macro pressures will you do persist throughout the year.

That's helpful. Thank you. Thanks, Sydney.

Thank you. One moment for the next question. And our next question will be coming from the line of Christine Yu of D. A. Davidson. Your line is open.

Hi, this is Christina. Congrats on the quarter. Just want to ask about I think you mentioned there are going to be certain markets that are expected to return to growth in '25.

So can you talk a little bit about like what markets do you expect potentially return to growth in 2025 notice that Americas had two sequential growth periods. So and what are what do you see as a primary catalyst for that kind of light recovery?

Yes. Hi, Christine. Good to hear from you again. Yes. So I think I'll provide comments and maybe James will have additional thoughts there. Yes, some areas that we're particularly encouraged about leaving 2024 and these are kind of sub segment levels, but Latin America is doing really, really well. A course, we report that up through the Americas segment. But Latin America is doing well. And we do see we do believe the Americas has real potential to grow next year. Looking forward to Southeast Asia Pacific also with good potential. Japan, we believe has potential there. And I think those are kind of some of the key that we're looking at there. Again, as we just discussed, China and Korea continue to be challenged for the upcoming year. And then Europe, as we watch that, we believe there's opportunities in Europe as well. But [indiscernible] color you could provide?

Yes.

You touched most of the markets where we're seeing in our forecast and in our guide where we show those signs of growth. Really with deploying that developing market strategy. We're looking at how can we expand that into other regions So Southeast Asia, we're going out with and then some of our Europe market we're also deploying that. And we've seen good success there.

When we get pricing right. So those are two of them.

Ryan called out Japan where we're seeing growth. And then I will add that the other segments in our guide of down 3% to down 11%, we are seeing reduced declines for those other segments. So we're improving in some of those areas, but we're still facing some top line pressures there. Working our way through it.

Okay. Thank you. Maybe another question. I know you started selling on Amazon in The U. S. Last year, early last year and just wondering like how do you see the self performance on like on Amazon, like can you comment a little on that?

Yes. I think Amazon has been an interesting journey for us. And particularly in The U. S. Where we've been exploring various approaches. Obviously, in our business, it's important that we maintain the premium image of of our brands and the premium positioning of our brands. And unfortunately, in these third party discount reselling that hurts the brand and hurts entrepreneurs' opportunities to build their businesses. And so we began a couple of years back not quite a couple of years, eighteen months or so ago with an exploration with our partners there to really eliminate leveraging the policies and procedures in Amazon eliminate or limit the discount resailing by unauthorized sellers on their platform And it's really been helpful to do that to do that benefit. We've been able to largely minimize that that distraction from our own business and our own brand. In addition to that, as we sell our products there, retail plus those products have done well and we continue to build out that platform. We don't report numbers on it. It's part of our Americas revenue What I will say is I think our strategy there is really a dual benefit On the one side, we're able to offer consumers access to products in a way that only Amazon can from an an accessibility perspective with all the benefits of Amazon like Prime.

But also the additional benefit is then supporting our affiliates who are in the same marketplace seeking out customers as well. And so it creates a more fair playing field than while we build our brand there. We'll continue to explore opportunities. We believe that there are platforms around the world We know there are platforms around the world that have similar both challenges and opportunities. We're going to continue to explore those in 2025 and And as it becomes a more meaningful part of revenue, I think we will plan to provide more detail on those But for now, it's working as we had hoped and we're leaning further into it to understand how we can provide that dual benefit Okay. Thank you. I'll pass it on. Thanks, Christina.

Thank you. And that does end our Q and A session for the day. And I would like to go ahead and turn the call back over to Ryan Naperski. Please go ahead.

Thank you very much and thanks for the questions. We really appreciate that. Appreciate you dialing in and would be happy to answer any additional questions that you have. Please just feel free to reach out to BG James or myself with those. We very much appreciate your paying attention and you're watching Nu Skin. We're excited about what's coming out in the future. I know that the world can continues to be an unsettled place, but we're here at Nu Skin acutely focused on driving value through innovation. With the likes of Prism.io, with our developing markets and continue to build out our rights business, which has great potential. And so we look forward to updating you on further calls. Quarter by quarter as these plans unfold. So look forward to speaking with you in the next ninety days. Take care.

Thank you all for joining today's conference call. You may now disconnect. [indiscernible]