☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________ |
NU SKIN ENTERPRISES, INC. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 87-0565309 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
75 West Center Street Provo, Utah 84601 | ||
(Address of principal executive offices, including zip code) |
(801) 345-1000 | ||
(Registrant’s telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock, $.001 par value | NUS | New York Stock Exchange |
Large accelerated filer ☑ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth company ☐ |
Page | |||
Part I. | Financial Information | ||
Item 1. | |||
1 | |||
2 | |||
3 | |||
4 | |||
6 | |||
7 | |||
Item 2. | 19 | ||
Item 3. | 28 | ||
Item 4. | 28 | ||
Part II. | Other Information | ||
Item 1. | 29 | ||
Item 1A. | 29 | ||
Item 2. | 30 | ||
Item 3. | 30 | ||
Item 4. | 30 | ||
Item 5. | 30 | ||
Item 6. | 31 | ||
32 |
September 30, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 233,314 | $ | 264,725 | ||||
Current investments | 16,673 | 13,784 | ||||||
Accounts receivable, net | 77,251 | 47,360 | ||||||
Inventories, net | 291,103 | 346,183 | ||||||
Prepaid expenses and other | 82,781 | 87,816 | ||||||
Total current assets | 701,122 | 759,868 | ||||||
Property and equipment, net | 428,932 | 444,806 | ||||||
Operating lease right-of-use assets | 86,315 | 98,734 | ||||||
Goodwill | 229,469 | 206,432 | ||||||
Other intangible assets, net | 108,972 | 66,701 | ||||||
Other assets | 238,281 | 244,429 | ||||||
Total assets | $ | 1,793,091 | $ | 1,820,970 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 48,583 | $ | 53,963 | ||||
Accrued expenses | 245,432 | 280,280 | ||||||
Current portion of long-term debt | 140,000 | 25,000 | ||||||
Total current liabilities | 434,015 | 359,243 | ||||||
Operating lease liabilities | 68,208 | 76,540 | ||||||
Long-term debt | 362,896 | 377,466 | ||||||
Other liabilities | 105,785 | 110,425 | ||||||
Total liabilities | 970,904 | 923,674 | ||||||
Commitments and contingencies (Notes 5 and 11) | ||||||||
Stockholders’ equity: | ||||||||
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued | 91 | 91 | ||||||
Additional paid-in capital | 619,193 | 613,278 | ||||||
Treasury stock, at cost – 41.2 million and 41.1 million shares | (1,570,718 | ) | (1,569,061 | ) | ||||
Accumulated other comprehensive loss | (108,836 | ) | (86,509 | ) | ||||
Retained earnings | 1,882,457 | 1,939,497 | ||||||
Total stockholders’ equity | 822,187 | 897,296 | ||||||
Total liabilities and stockholders’ equity | $ | 1,793,091 | $ | 1,820,970 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenue | $ | 498,772 | $ | 537,805 | $ | 1,480,491 | $ | 1,703,319 | ||||||||
Cost of sales | 206,505 | 173,500 | 475,635 | 483,099 | ||||||||||||
Gross profit | 292,267 | 364,305 | 1,004,856 | 1,220,220 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling expenses | 187,750 | 216,478 | 561,039 | 678,603 | ||||||||||||
General and administrative expenses | 130,882 | 137,987 | 401,825 | 428,105 | ||||||||||||
Restructuring and impairment expenses | — | 30,124 | 9,787 | 30,124 | ||||||||||||
Total operating expenses | 318,632 | 384,589 | 972,651 | 1,136,832 | ||||||||||||
Operating income (loss) | (26,365 | ) | (20,284 | ) | 32,205 | 83,388 | ||||||||||
Other expense, net | (8,086 | ) | (8,680 | ) | (14,955 | ) | (18,773 | ) | ||||||||
Income (loss) before provision for income taxes | (34,451 | ) | (28,964 | ) | 17,250 | 64,615 | ||||||||||
Provision (benefit) for income taxes | 2,504 | (3,574 | ) | 15,937 | 17,052 | |||||||||||
Net income (loss) | $ | (36,955 | ) | $ | (25,390 | ) | $ | 1,313 | $ | 47,563 | ||||||
Net income (loss) per share (Note 6): | ||||||||||||||||
Basic | $ | (0.74 | ) | $ | (0.51 | ) | $ | 0.03 | $ | 0.95 | ||||||
Diluted | $ | (0.74 | ) | $ | (0.51 | ) | $ | 0.03 | $ | 0.94 | ||||||
Weighted-average common shares outstanding (000s): | ||||||||||||||||
Basic | 49,859 | 50,199 | 49,812 | 50,187 | ||||||||||||
Diluted | 49,859 | 50,199 | 50,029 | 50,822 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income (loss) | $ | (36,955 | ) | $ | (25,390 | ) | $ | 1,313 | $ | 47,563 | ||||||
Other comprehensive loss, net of tax: | ||||||||||||||||
Foreign currency translation adjustment, net of taxes of zero and $(10) for the three months ended September 30, 2023 and 2022, respectively, and $(68) and $19 for the nine months ended September 30, 2023 and 2022, respectively | (6,518 | ) | (22,502 | ) | (20,196 | ) | (46,914 | ) | ||||||||
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(328) and $(1,262) for the three months ended September 30, 2023 and 2022, respectively and $(990) and $(3,441) for the nine months ended September 30, 2023 and 2022, respectively | 1,187 | 4,570 | 3,583 | 12,462 | ||||||||||||
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $569 and $225 for the three months ended September 30, 2023 and 2022, respectively and $1,577 and $286 for the nine months ended September 30, 2023 and 2022, respectively | (2,059 | ) | (815 | ) | (5,714 | ) | (1,037 | ) | ||||||||
(7,390 | ) | (18,747 | ) | (22,327 | ) | (35,489 | ) | |||||||||
Comprehensive income (loss) | $ | (44,345 | ) | $ | (44,137 | ) | $ | (21,014 | ) | $ | 12,074 |
For the Three Months Ended September 30, 2023 | ||||||||||||||||||||||||
Class A Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||
Balance at July 1, 2023 | $ | 91 | $ | 615,579 | $ | (1,557,777 | ) | $ | (101,446 | ) | $ | 1,938,898 | $ | 895,345 | ||||||||||
Net loss | — | — | — | — | (36,955 | ) | (36,955 | ) | ||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | (7,390 | ) | — | (7,390 | ) | ||||||||||||||||
Repurchase of Class A common stock (Note 6) | — | — | (13,011 | ) | — | — | (13,011 | ) | ||||||||||||||||
Exercise of employee stock options (0.1 million shares)/vesting of stock awards | — | (111 | ) | 70 | — | — | (41 | ) | ||||||||||||||||
Stock-based compensation | — | 3,725 | — | — | — | 3,725 | ||||||||||||||||||
Cash dividends | — | — | — | — | (19,486 | ) | (19,486 | ) | ||||||||||||||||
Balance at September 30, 2023 | $ | 91 | $ | 619,193 | $ | (1,570,718 | ) | $ | (108,836 | ) | $ | 1,882,457 | $ | 822,187 |
For the Three Months Ended September 30, 2022 | ||||||||||||||||||||||||
Class A Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||
Balance at July 1, 2022 | $ | 91 | $ | 606,349 | $ | (1,520,769 | ) | $ | (90,638 | ) | $ | 1,946,002 | $ | 941,035 | ||||||||||
Net loss | — | — | — | — | (25,390 | ) | (25,390 | ) | ||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | (18,747 | ) | — | (18,747 | ) | ||||||||||||||||
Repurchase of Class A common stock (Note 6) | — | — | (40,028 | ) | — | — | (40,028 | ) | ||||||||||||||||
Exercise of employee stock options (0.1 million shares)/vesting of stock awards | — | 366 | 830 | — | — | 1,196 | ||||||||||||||||||
Stock-based compensation | — | 3,171 | — | — | — | 3,171 | ||||||||||||||||||
Cash dividends | — | — | — | — | (19,303 | ) | (19,303 | ) | ||||||||||||||||
Balance at September 30, 2022 | $ | 91 | $ | 609,886 | $ | (1,559,967 | ) | $ | (109,385 | ) | $ | 1,901,309 | $ | 841,934 |
For the Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||
Class A Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||
Balance at January 1, 2023 | $ | 91 | $ | 613,278 | $ | (1,569,061 | ) | $ | (86,509 | ) | $ | 1,939,497 | $ | 897,296 | ||||||||||
Net income | — | — | — | — | 1,313 | 1,313 | ||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | (22,327 | ) | — | (22,327 | ) | ||||||||||||||||
Repurchase of Class A common stock (Note 6) | — | — | (13,011 | ) | — | — | (13,011 | ) | ||||||||||||||||
Exercise of employee stock options (0.5 million shares)/vesting of stock awards | — | (6,613 | ) | 11,354 | — | — | 4,741 | |||||||||||||||||
Stock-based compensation | — | 12,528 | — | — | — | 12,528 | ||||||||||||||||||
Cash dividends | — | — | — | — | (58,353 | ) | (58,353 | ) | ||||||||||||||||
Balance at September 30, 2023 | $ | 91 | $ | 619,193 | $ | (1,570,718 | ) | $ | (108,836 | ) | $ | 1,882,457 | $ | 822,187 |
For the Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
Class A Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||
Balance at January 1, 2022 | $ | 91 | $ | 601,703 | $ | (1,526,860 | ) | $ | (73,896 | ) | $ | 1,911,734 | $ | 912,772 | ||||||||||
Net income | — | — | — | — | 47,563 | 47,563 | ||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | (35,489 | ) | — | (35,489 | ) | ||||||||||||||||
Repurchase of Class A common stock (Note 6) | — | — | (60,038 | ) | — | — | (60,038 | ) | ||||||||||||||||
Exercise of employee stock options (1.2 million shares)/vesting of stock awards | — | (1,137 | ) | 26,931 | — | — | 25,794 | |||||||||||||||||
Stock-based compensation | — | 9,320 | — | — | — | 9,320 | ||||||||||||||||||
Cash dividends | — | — | — | — | (57,988 | ) | (57,988 | ) | ||||||||||||||||
Balance at September 30, 2022 | $ | 91 | $ | 609,886 | $ | (1,559,967 | ) | $ | (109,385 | ) | $ | 1,901,309 | $ | 841,934 |
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 1,313 | $ | 47,563 | ||||
Adjustments to reconcile net income to cash flows from operating activities: | ||||||||
Depreciation and amortization | 52,339 | 53,935 | ||||||
Non-cash lease expense | 24,967 | 33,250 | ||||||
Stock-based compensation | 12,528 | 9,320 | ||||||
Inventory write-down (1) | 83,642 | 37,862 | ||||||
Foreign currency losses | 169 | 7,077 | ||||||
Loss on disposal of assets | 626 | 568 | ||||||
Deferred taxes | (9,969 | ) | 2,483 | |||||
Impairment of fixed assets and other intangibles | — | 9,916 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (27,829 | ) | (15,523 | ) | ||||
Inventories, net | (25,901 | ) | 10,560 | |||||
Prepaid expenses and other | 4,227 | (6,801 | ) | |||||
Other assets | (432 | ) | 8,030 | |||||
Accounts payable | (4,667 | ) | (1,224 | ) | ||||
Accrued expenses | (43,062 | ) | (95,928 | ) | ||||
Other liabilities | (3,479 | ) | (18,551 | ) | ||||
Net cash provided by operating activities | 64,472 | 82,537 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (38,105 | ) | (45,274 | ) | ||||
Proceeds on investment sales | 13,160 | 5,535 | ||||||
Purchases of investments | (16,883 | ) | (13,955 | ) | ||||
Acquisitions (net of cash acquired) | (77,275 | ) | — | |||||
Net cash used in investing activities | (119,103 | ) | (53,694 | ) | ||||
Cash flows from financing activities: | ||||||||
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards | 4,741 | 25,794 | ||||||
Payment of cash dividends | (58,353 | ) | (57,988 | ) | ||||
Repurchases of shares of common stock | (13,011 | ) | (60,038 | ) | ||||
Finance lease principal payments | (2,382 | ) | (1,401 | ) | ||||
Payment of debt issuance costs | — | (5,077 | ) | |||||
Payments of debt | (10,000 | ) | (410,000 | ) | ||||
Proceeds from debt | 110,000 | 460,000 | ||||||
Net cash provided by / (used in) financing activities | 30,995 | (48,710 | ) | |||||
Effect of exchange rate changes on cash | (7,775 | ) | (25,590 | ) | ||||
Net decrease in cash and cash equivalents | (31,411 | ) | (45,457 | ) | ||||
Cash and cash equivalents, beginning of period | 264,725 | 339,593 | ||||||
Cash and cash equivalents, end of period | $ | 233,314 | $ | 294,136 |
(1) | The nine months ended September 2022 has been recast from Inventories, net to comply with the current presentation. |
1. | The Company |
2. | Summary of Significant Accounting Policies |
September 30, 2023 | December 31, 2022 | |||||||
Raw materials | $ | 159,807 | $ | 163,797 | ||||
Finished goods | 131,296 | 182,386 | ||||||
Total Inventory, net | $ | 291,103 | $ | 346,183 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Beginning balance | $ | 41,017 | $ | 20,211 | $ | 37,267 | $ | 18,643 | ||||||||
Additions(1) | 68,563 | 26,985 | 83,642 | 37,862 | ||||||||||||
Disposals | (7,347) | (7,306) | (18,676) | (16,615) | ||||||||||||
Ending Balance | $ | 102,233 | $ | 39,890 | $ | 102,233 | $ | 39,890 |
(1) | During the third quarter of 2023, the Company made the strategic decision to re-balance and narrow their product portfolio, which resulted in an incremental adjustment to the inventory carrying value. This resulted in an incremental reserve of $65.7 million. During the third quarter of 2022, the Company reserved an incremental $26.9 million of inventory. |
3. | Goodwill |
September 30, 2023 | December 31, 2022 | |||||||
Nu Skin | ||||||||
Americas | $ | 9,449 | $ | 9,449 | ||||
Mainland China | 32,179 | 32,179 | ||||||
Southeast Asia/Pacific | 18,537 | 18,537 | ||||||
South Korea | 29,261 | 29,261 | ||||||
Japan | 16,019 | 16,019 | ||||||
Europe & Africa | 2,875 | 2,875 | ||||||
Hong Kong/Taiwan | 6,634 | 6,634 | ||||||
Rhyz Investments | ||||||||
Manufacturing | 78,875 | 78,875 | ||||||
Rhyz other(1) | 35,640 | 12,603 | ||||||
Total | $ | 229,469 | $ | 206,432 |
(1) | The increase in Rhyz other goodwill relates to the second quarter of 2023 acquisitions. See Note - 12 Acquisitions for additional information. |
4. | Debt |
Facility or Arrangement | Original Principal Amount | Balance as of September 30, 2023 (1)(2) | Balance as of December 31, 2022 (1)(2) | Interest Rate | Repayment Terms | |||||
Credit Agreement term loan facility | $400.0 million | $385.0 million | $395.0 million | Variable 30 day: 7.42% | 21% of the principal amount is payable in increasing quarterly installments over a five-year period that began on September 30, 2022, with the remainder payable at the end of the five-year term. | |||||
Credit Agreement revolving credit facility | $120.0 million | $10.0 million | Variable 30 day: 7.43% | Revolving line of credit expires June 14, 2027. |
(1) | As of September 30, 2023 and December 31, 2022, the current portion of the Company’s debt (i.e., becoming due in the next 12 months) included $20.0 million and $15.0 million, respectively, of the balance of its term loan under the Credit Agreement. |
(2) | The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of $2.1 million and $2.5 million as of September 30, 2023 and December 31, 2022, respectively, related to the Credit Agreement, which are not reflected in this table. |
5. | Leases |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating lease expense | ||||||||||||||||
Operating lease cost | $ | 6,762 | $ | 9,479 | $ | 22,945 | $ | 30,179 | ||||||||
Variable lease cost | 1,923 | 1,572 | 3,410 | 4,223 | ||||||||||||
Short-term lease cost | — | 84 | — | 181 | ||||||||||||
Finance lease expense | ||||||||||||||||
Amortization of right-of-use assets | 1,240 | 530 | 3,843 | 1,632 | ||||||||||||
Interest on lease liabilities | 123 | 53 | 380 | 178 | ||||||||||||
Total lease expense | $ | 10,048 | $ | 11,718 | $ | 30,578 | $ | 36,393 |
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Operating cash outflow from operating leases | $ | 21,975 | $ | 28,880 | ||||
Operating cash outflow from finance leases | $ | 360 | $ | 170 | ||||
Financing cash outflow from finance leases | $ | 2,382 | $ | 1,401 | ||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | 14,351 | $ | 28,785 | ||||
Right-of-use assets obtained in exchange for finance lease obligations | $ | 782 | $ | 203 |
Year Ending December 31 | Operating Leases | Finance Leases | ||||||
2023 | $ | 5,967 | $ | 903 | ||||
2024 | 20,769 | 3,479 | ||||||
2025 | 14,696 | 3,293 | ||||||
2026 | 10,227 | 3,197 | ||||||
2027 | 7,658 | 2,844 | ||||||
Thereafter | 43,097 | — | ||||||
Total | 102,414 | 13,716 | ||||||
Less: Finance charges | 14,204 | 986 | ||||||
Total principal liability | $ | 88,210 | $ | 12,730 |
6. | Capital Stock |
7. | Fair Value and Equity Investments |
■ | Level 1 – quoted prices in active markets for identical assets or liabilities; |
■ | Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
■ | Level 3 – unobservable inputs based on the Company’s own assumptions. |
Fair Value at September 30, 2023 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets (liabilities): | ||||||||||||||||
Cash equivalents and current investments | $ | 45,949 | $ | — | $ | — | $ | 45,949 | ||||||||
Derivative financial instruments asset | — | 17,020 | — | 17,020 | ||||||||||||
Life insurance contracts | — | — | 41,913 | 41,913 | ||||||||||||
Contingent consideration | — | — | (6,422 | ) | (6,422 | ) | ||||||||||
Total | $ | 45,949 | $ | 17,020 | $ | 35,491 | $ | 98,460 |
Fair Value at December 31, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets (liabilities): | ||||||||||||||||
Cash equivalents and current investments | $ | 55,356 | $ | — | $ | — | $ | 55,356 | ||||||||
Derivative financial instruments asset | — | 19,738 | — | 19,738 | ||||||||||||
Life insurance contracts | — | — | 40,055 | 40,055 | ||||||||||||
Contingent consideration | — | — | (6,364 | ) | (6,364 | ) | ||||||||||
Total | $ | 55,356 | $ | 19,738 | $ | 33,691 | $ | 108,785 |
2023 | 2022 | |||||||
Beginning balance at January 1 | $ | 40,055 | $ | 49,851 | ||||
Actual return on plan assets | 2,341 | (11,549 | ) | |||||
Sales and settlements | (483 | ) | — | |||||
Ending balance at September 30 | $ | 41,913 | $ | 38,302 |
2023 | 2022 | |||||||
Beginning balance at January 1 | $ | (6,364 | ) | $ | (10,341 | ) | ||
Changes in fair value of contingent consideration | (58 | ) | 1,969 | |||||
Ending balance at September 30 | $ | (6,422 | ) | $ | (8,372 | ) |
8. | Income Taxes |
9. | Derivatives and Hedging Activities |
Fair Values of Derivative Instruments | ||||||||||
Derivatives in Cash flow Hedging Relationships: | Balance Sheet Location | September 30, 2023 | December 31, 2022 | |||||||
Interest Rate Swap - Asset | Prepaid expenses and other | $ | 10,201 | $ | 9,156 | |||||
Interest Rate Swap - Asset | Other assets | $ | 6,819 | $ | 10,582 |
Amount of Gain Recognized in OCI on Derivatives | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Derivatives in Cash flow Hedging Relationships: | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Interest Rate Swaps | $ | 1,515 | $ | 5,832 | $ | 4,573 | $ | 15,903 |
Amount of Gain Reclassified from Accumulated Other Comprehensive Loss into Income | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
Derivatives in Cash flow Hedging Relationships: | Income Statement Location | 2023 | 2022 | 2023 | 2022 | |||||||||||||
Interest Rate Swaps | Other expense, net | $ | 2,628 | $ | 1,040 | $ | 7,291 | $ | 1,323 |
10. | Segment Information |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(U.S. dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Nu Skin | ||||||||||||||||
Americas | $ | 91,671 | $ | 131,591 | $ | 300,469 | $ | 379,616 | ||||||||
Mainland China | 70,225 | 75,151 | 226,563 | 286,454 | ||||||||||||
Southeast Asia/Pacific | 68,743 | 83,502 | 200,317 | 267,805 | ||||||||||||
South Korea | 63,709 | 67,237 | 187,719 | 208,678 | ||||||||||||
Japan | 53,399 | 53,276 | 156,867 | 171,019 | ||||||||||||
Europe & Africa | 50,048 | 45,099 | 144,460 | 148,938 | ||||||||||||
Hong Kong/Taiwan | 40,724 | 39,587 | 112,380 | 117,408 | ||||||||||||
Nu Skin other | (274 | ) | 496 | 208 | 2,434 | |||||||||||
Total Nu Skin | 438,245 | 495,939 | 1,328,983 | 1,582,352 | ||||||||||||
Rhyz Investments | ||||||||||||||||
Manufacturing (1) | 49,714 | 41,328 | 131,032 | 119,898 | ||||||||||||
Rhyz other | 10,813 | 538 | 20,476 | 1,069 | ||||||||||||
Total Rhyz Investments | 60,527 | 41,866 | 151,508 | 120,967 | ||||||||||||
Total | $ | 498,772 | $ | 537,805 | $ | 1,480,491 | $ | 1,703,319 |
(1) | The Manufacturing segment had $16.2 million and $17.5 million of intersegment revenue for the three months ended September 30, 2023 and 2022, respectively, and $44.3 million and $48.9 million for the nine months ended September 30, 2023 and 2022, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table above. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(U.S. dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Nu Skin | ||||||||||||||||
Americas | $ | 16,627 | $ | 19,644 | $ | 61,730 | $ | 68,324 | ||||||||
Mainland China | 15,223 | 12,933 | 48,192 | 54,873 | ||||||||||||
Southeast Asia/Pacific | 13,190 | 18,098 | 37,057 | 61,091 | ||||||||||||
South Korea | 19,433 | 19,671 | 60,399 | 61,497 | ||||||||||||
Japan | 14,617 | 12,295 | 40,033 | 39,382 | ||||||||||||
Europe & Africa | 6,562 | 2,047 | 15,145 | 9,536 | ||||||||||||
Hong Kong/Taiwan | 10,146 | 7,737 | 28,128 | 24,337 | ||||||||||||
Nu Skin contribution | 95,798 | 92,425 | 290,684 | 319,040 | ||||||||||||
Rhyz Investments | ||||||||||||||||
Manufacturing | 4,838 | 1,755 | 7,683 | 6,235 | ||||||||||||
Rhyz other | (5,966 | ) | (1,724 | ) | (11,318 | ) | (4,069 | ) | ||||||||
Rhyz Investments contribution | (1,128 | ) | 31 | (3,635 | ) | 2,166 | ||||||||||
Total segment contribution | 94,670 | 92,456 | 287,049 | 321,206 | ||||||||||||
Corporate and other | (121,035 | ) | (112,740 | ) | (254,844 | ) | (237,818 | ) | ||||||||
Operating income (loss) | (26,365 | ) | (20,284 | ) | 32,205 | 83,388 | ||||||||||
Other expense, net | (8,086 | ) | (8,680 | ) | (14,955 | ) | (18,773 | ) | ||||||||
Income (loss) before provision for income taxes | $ | (34,451 | ) | $ | (28,964 | ) | $ | 17,250 | $ | 64,615 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(U.S. dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Nu Skin | ||||||||||||||||
Americas | $ | 115 | $ | 89 | $ | 307 | $ | 480 | ||||||||
Mainland China | 2,742 | 3,528 | 8,127 | 9,088 | ||||||||||||
Southeast Asia/Pacific | 257 | 382 | 813 | 1,144 | ||||||||||||
South Korea | 310 | 377 | 1,062 | 1,137 | ||||||||||||
Japan | 93 | 148 | 1,241 | 670 | ||||||||||||
Europe & Africa | 271 | 125 | 810 | 599 | ||||||||||||
Hong Kong/Taiwan | 715 | 743 | 1,990 | 2,152 | ||||||||||||
Total Nu Skin | 4,503 | 5,392 | 14,350 | 15,270 | ||||||||||||
Rhyz Investments | ||||||||||||||||
Manufacturing | 3,297 | 3,161 | 10,050 | 9,773 | ||||||||||||
Rhyz other | 2,048 | 592 | 3,816 | 1,776 | ||||||||||||
Total Rhyz Investments | 5,345 | 3,753 | 13,866 | 11,549 | ||||||||||||
Corporate and other | 8,344 | 9,025 | 24,123 | 27,116 | ||||||||||||
Total | $ | 18,192 | $ | 18,170 | $ | 52,339 | $ | 53,935 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(U.S. dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Nu Skin | ||||||||||||||||
Americas | $ | 18 | $ | 23 | $ | 209 | $ | 152 | ||||||||
Mainland China | 3,496 | 2,946 | 12,265 | 9,066 | ||||||||||||
Southeast Asia/Pacific | 130 | 19 | 321 | 143 | ||||||||||||
South Korea | 361 | 35 | 522 | 613 | ||||||||||||
Japan | 81 | 16 | 84 | 200 | ||||||||||||
Europe & Africa | 46 | 183 | 322 | 961 | ||||||||||||
Hong Kong/Taiwan | 90 | 587 | 698 | 1,386 | ||||||||||||
Total Nu Skin | 4,222 | 3,809 | 14,421 | 12,521 | ||||||||||||
Rhyz Investments | ||||||||||||||||
Manufacturing | 2,621 | 1,923 | 8,318 | 4,353 | ||||||||||||
Rhyz other | 20 | — | 20 | — | ||||||||||||
Total Rhyz Investments | 2,641 | 1,923 | 8,338 | 4,353 | ||||||||||||
Corporate and other | 5,043 | 19,723 | 15,346 | 28,400 | ||||||||||||
Total | $ | 11,906 | $ | 25,455 | $ | 38,105 | $ | 45,274 |
11. | Commitments and Contingencies |
12. | Acquisitions |
13. | Restructuring |
(U.S. dollars in thousands) | Three Months Ended March 31, 2023 | |||
Nu Skin | ||||
Americas | $ | 918 | ||
South Korea | 422 | |||
Mainland China | 1,352 | |||
Southeast Asia/Pacific | 131 | |||
Japan | 1,515 | |||
Europe & Africa | (113 | ) | ||
Hong Kong/Taiwan | (201 | ) | ||
Total Nu Skin | 4,024 | |||
Rhyz Investments | ||||
Manufacturing | 13 | |||
Rhyz other | — | |||
Total Rhyz Investments | 13 | |||
Corporate and other | 5,750 | |||
Total | $ | 9,787 |
14. | Subsequent Events |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended September 30, | Constant- Currency | Nine Months Ended September 30, | Constant- Currency | |||||||||||||||||||||||||||||
2023 | 2022 | Change | Change(1) | 2023 | 2022 | Change | Change(1) | |||||||||||||||||||||||||
Nu Skin | ||||||||||||||||||||||||||||||||
Americas | $ | 91,671 | $ | 131,591 | (30 | )% | (27 | )% | $ | 300,469 | $ | 379,616 | (21 | )% | (17 | )% | ||||||||||||||||
Mainland China | 70,225 | 75,151 | (7 | )% | (1 | )% | 226,563 | 286,454 | (21 | )% | (16 | )% | ||||||||||||||||||||
Southeast Asia/Pacific | 68,743 | 83,502 | (18 | )% | (16 | )% | 200,317 | 267,805 | (25 | )% | (23 | )% | ||||||||||||||||||||
South Korea | 63,709 | 67,237 | (5 | )% | (7 | )% | 187,719 | 208,678 | (10 | )% | (8 | )% | ||||||||||||||||||||
Japan | 53,399 | 53,276 | — | 5 | % | 156,867 | 171,019 | (8 | )% | (1 | )% | |||||||||||||||||||||
Europe & Africa | 50,048 | 45,099 | 11 | % | 3 | % | 144,460 | 148,938 | (3 | )% | (4 | )% | ||||||||||||||||||||
Hong Kong/Taiwan | 40,724 | 39,587 | 3 | % | 6 | % | 112,380 | 117,408 | (4 | )% | (1 | )% | ||||||||||||||||||||
Nu Skin other | (274 | ) | 496 | (155 | )% | (155 | )% | 208 | 2,434 | (91 | )% | (91 | )% | |||||||||||||||||||
Total Nu Skin | 438,245 | 495,939 | (12 | )% | (10 | )% | 1,328,983 | 1,582,352 | (16 | )% | (13 | )% | ||||||||||||||||||||
Rhyz Investments | ||||||||||||||||||||||||||||||||
Manufacturing | 49,714 | 41,328 | 20 | % | 20 | % | 131,032 | 119,898 | 9 | % | 9 | % | ||||||||||||||||||||
Rhyz other | 10,813 | 538 | 1,910 | % | 1,910 | % | 20,476 | 1,069 | 1,815 | % | 1,815 | % | ||||||||||||||||||||
Total Rhyz Investments | 60,527 | 41,866 | 45 | % | 45 | % | 151,508 | 120,967 | 25 | % | 25 | % | ||||||||||||||||||||
Total | $ | 498,772 | $ | 537,805 | (7 | )% | (6 | )% | $ | 1,480,491 | $ | 1,703,319 | (13 | )% | (10 | )% |
(1) | Constant-currency revenue change is a non-GAAP financial measure. See “Non-GAAP Financial Measures,” below. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
Nu Skin | ||||||||||||||||||||||||
Americas | $ | 16,627 | $ | 19,644 | (15 | )% | $ | 61,730 | $ | 68,324 | (10 | )% | ||||||||||||
Mainland China | 15,223 | 12,933 | 18 | % | 48,192 | 54,873 | (12 | )% | ||||||||||||||||
Southeast Asia/Pacific | 13,190 | 18,098 | (27 | )% | 37,057 | 61,091 | (39 | )% | ||||||||||||||||
South Korea | 19,433 | 19,671 | (1 | )% | 60,399 | 61,497 | (2 | )% | ||||||||||||||||
Japan | 14,617 | 12,295 | 19 | % | 40,033 | 39,382 | 2 | % | ||||||||||||||||
Europe & Africa | 6,562 | 2,047 | 221 | % | 15,145 | 9,536 | 59 | % | ||||||||||||||||
Hong Kong/Taiwan | 10,146 | 7,737 | 31 | % | 28,128 | 24,337 | 16 | % | ||||||||||||||||
Total Nu Skin | 95,798 | 92,425 | 4 | % | 290,684 | 319,040 | (9 | )% | ||||||||||||||||
Rhyz Investments | ||||||||||||||||||||||||
Manufacturing | 4,838 | 1,755 | 176 | % | 7,683 | 6,235 | 23 | % | ||||||||||||||||
Rhyz other | (5,966 | ) | (1,724 | ) | (246 | )% | (11,318 | ) | (4,069 | ) | (178 | )% | ||||||||||||
Total Rhyz Investments | $ | (1,128 | ) | $ | 31 | (3,739 | )% | $ | (3,635 | ) | $ | 2,166 | (268 | )% |
● | “Customers” are persons who have purchased directly from the Company during the three months ended as of the date indicated. Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force. |
● | “Paid Affiliates” are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the three-month period. In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates” because their primary role is to promote our brand and products through their personal social networks. |
● | “Sales Leaders” are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who achieved certain qualification requirements as of the end of each month of the quarter. |
Three Months Ended September 30, | ||||||||||||
2023 | 2022 | Change | ||||||||||
Customers | ||||||||||||
Americas | 231,215 | 316,123 | (27 | )% | ||||||||
Mainland China | 189,221 | 256,183 | (26 | )% | ||||||||
Southeast Asia/Pacific | 111,151 | 153,432 | (28 | )% | ||||||||
South Korea | 109,550 | 134,549 | (19 | )% | ||||||||
Japan | 114,316 | 121,202 | (6 | )% | ||||||||
Europe & Africa | 169,320 | 187,906 | (10 | )% | ||||||||
Hong Kong/Taiwan | 54,134 | 69,989 | (23 | )% | ||||||||
Total Customers | 978,907 | 1,239,384 | (21 | )% | ||||||||
Paid Affiliates | ||||||||||||
Americas | 32,769 | 44,745 | (27 | )% | ||||||||
Mainland China | 27,509 | 23,088 | 19 | % | ||||||||
Southeast Asia/Pacific | 33,574 | 40,624 | (17 | )% | ||||||||
South Korea(1) | 24,110 | 47,852 | (50 | )% | ||||||||
Japan | 37,695 | 38,119 | (1 | )% | ||||||||
Europe & Africa(1) | 19,254 | 31,409 | (39 | )% | ||||||||
Hong Kong/Taiwan(1) | 11,251 | 17,439 | (35 | )% | ||||||||
Total Paid Affiliates | 186,162 | 243,276 | (23 | )% | ||||||||
Sales Leaders | ||||||||||||
Americas | 7,537 | 9,545 | (21 | )% | ||||||||
Mainland China | 12,647 | 11,897 | 6 | % | ||||||||
Southeast Asia/Pacific | 6,351 | 7,618 | (17 | )% | ||||||||
South Korea | 6,436 | 6,992 | (8 | )% | ||||||||
Japan | 7,087 | 6,063 | 17 | % | ||||||||
Europe & Africa | 4,105 | 4,777 | (14 | )% | ||||||||
Hong Kong/Taiwan | 2,868 | 2,932 | (2 | )% | ||||||||
Total Sales Leaders | 47,031 | 49,824 | (6 | )% |
(1) | The September 30, 2023 number is affected by a change in eligibility requirements for receiving certain rewards within our compensation structure, to more narrowly focus on those affiliates who are actively building a consumer base. See “South Korea,” “Europe & Africa,” and “Hong Kong/Taiwan,” below. We plan to implement these changes in additional segments over the next several quarters. |
● | purchases and expenditures for computer systems and equipment, software, and application development; |
● | the expansion and upgrade of facilities in our various markets; and |
● | a new manufacturing plant in Mainland China. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
(a) | (b) | (c) | (d) | |||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(1) | ||||||||||||
July 1 - 31, 2023 | — | $ | — | — | $ | 175.4 | ||||||||||
August 1 - 31, 2023 | 50,462 | 23.80 | 50,462 | $ | 174.2 | |||||||||||
September 1 - 30, 2023 | 503,004 | 23.48 | 503,004 | $ | 162.4 | |||||||||||
Total | 553,466 | $ | 23.51 | 553,466 |
(1) | In August 2018, we announced that our board of directors approved a stock repurchase plan. Under this plan, our board of directors authorized the repurchase of up to $500 million of our outstanding Class A common stock on the open market or in privately negotiated transactions. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
Exhibits Regulation S-K Number | Description | |
Nu Skin Enterprises, Inc. Amended and Restated 2009 Key Employee Death Benefit Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed August 2, 2023). | ||
Amendment 1 to Fourth Amended and Restated Nu Skin Enterprises, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed August 2, 2023). | ||
Certification by Ryan S. Napierski, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification by James D. Thomas, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification by Ryan S. Napierski, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification by James D. Thomas, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
NU SKIN ENTERPRISES, INC. | ||
By: | /s/ James D. Thomas | |
James D. Thomas | ||
Chief Financial Officer | ||
(Duly Authorized Officer and Principal Financial Officer) |