• Revenue: $430.1 million, within guidance range, with a negative foreign currency impact of 3.4% or $16.7 million.
• Prior Year Revenue: $498.8 million.
• Earnings Per Share (EPS): $0.17, within previous guidance range.
• Gross Margin: 70.1%, compared to 58.6% or 71.8% excluding an inventory write-off in the prior year quarter.
• Core Business Gross Margin: 76.5%, compared to 61.8% or 76.8% excluding the inventory write-off.
• Selling Expense: 39% of revenue, compared to 37.6% in the prior year quarter.
• Core Business Selling Expense: 43.5%, elevated due to the first in-person sales convention since COVID, compared to 41.7% in the prior year period.
• General & Administrative Expenses: Declined approximately $15 million year over year.
• Operating Margin: 4.2%, compared to negative 5.3% or 7.9% excluding an inventory write-off.
• Interest Expense: $6.5 million, compared to $7.5 million in the prior year.
• Operating Cash Flow: $31.4 million.
• Debt Reduction: Reduced outstanding debt by $25 million.
• Dividends Paid: $3 million.
• Stock Repurchase: No stock repurchased this quarter, with $162.4 million remaining under current authorization.
• Tax Rate: 37.6%, compared to negative 7.3% or 10.1% excluding the inventory write-off.
• 2024 Revenue Guidance: $1.70 to $1.73 billion.
• 2024 EPS Guidance: Negative $2.32 to negative $2.22, or adjusted earnings of $0.65 to $0.75.
• Foreign Currency Headwind: Increased to approximately 3 to 4% for 2024.
• Q4 Revenue Guidance: $410 million to $445 million.
• Q4 EPS Guidance: Negative $0.09 or adjusted earnings of $0.19 to $0.29, excluding a planned cash restructuring charge of $15 to $20 million.

• Warning! GuruFocus has detected 6 Warning Signs with NUS.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nu Skin Enterprises Inc (NYSE:NUS) reported third-quarter results in line with guidance, driven by strong performance from the Rise segments.
• The company achieved impressive growth in Latin America and Southeast Asia markets, as well as through its affiliate marketing platform, Mai.
• Nu Skin Enterprises Inc (NYSE:NUS) is accelerating product portfolio optimization, aiming for a 50% consolidation by the end of 2025, which is expected to improve gross margins by 150 to 200 basis points.
• The Rise segments exceeded forecasts, with a record quarter showing over 20% year-over-year growth, led by the affiliate marketing platform Maly.
• Nu Skin Enterprises Inc (NYSE:NUS) is exploring market expansion into India, a significant opportunity given its large and growing economy.

Negative Points

• Nu Skin Enterprises Inc (NYSE:NUS) continues to face pressures in major markets like South Korea and China due to macroeconomic factors impacting consumer spending.
• The direct selling industry in the US is under pressure, prompting the company to evolve its business model towards social media-driven product discovery.
• Selling expenses have risen due to shifts in geographic market and salesforce mix, impacting profitability.
• The company's core direct selling gross margin is down 30 basis points year-over-year, despite efforts to reduce costs and manage promotions more efficiently.
• Nu Skin Enterprises Inc (NYSE:NUS) reported a decline in revenue from $498.8 million in the prior year quarter to $430.1 million, with a negative foreign currency impact.

Q & A Highlights

Q: How should we be thinking about the timeline for stabilizing the core Nu Skin business given the challenging macro environment and ongoing initiatives? A: Ryan Napierski, President and CEO, explained that the near-term focus is on operational simplification and cost optimization. While the macro environment remains uncertain, they are cautiously optimistic about improvements in late 2025, driven by new initiatives and economic stabilization.

Q: Can you provide additional context on the performance and growth prospects of the RISE segment, particularly non-manufacturing components like Maybelline and Beautybio? A: Ryan Napierski highlighted that RISE is performing well, with strategic investments in platforms like Maybelline. The segment benefits from insights into market trends and innovation, and while growth has been driven by investments, there is potential for organic brand launches in the future.

Q: Despite cost reduction efforts, why is the core direct selling gross margin still down, and when can improvements be expected? A: Ryan Napierski and James Thomas, CFO, noted that geographic revenue shifts, particularly in China and South Korea, have impacted margins. However, they are optimistic about achieving a 150 to 200 basis point improvement by focusing on higher-margin products and further portfolio optimization in 2025.

Q: What updates can you provide on affordable luxury product launches and the expansion of the nutrition segment? A: Ryan Napierski stated that new product lines like Mine 360 are priced in the masstige to prestige range, aligning with affordable luxury. The nutrition segment, with higher customer retention, is a focus for innovation in 2025, aiming to balance the portfolio and enhance customer acquisition.

Q: What are your expectations for the Chinese market given recent government stimulus efforts? A: Ryan Napierski expressed cautious optimism, noting that while government investments are primarily in non-consumer sectors, there is hope that consumer sentiment will improve, leading to increased spending in premium beauty. However, they remain cautious about China's contribution in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.