NUS - Earnings call transcript Q2 2018 | Nu Skin Enterprises, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2018 Nu Skin Enterprises Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions for how to participate will follow at that time.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. of President Vice Pond, Investor Relations. Scott may you begin. Sir,

Scott Pond

for Thanks, everybody. you and Thank joining us. welcome,

Dr. with call Executive Mark Officer; Officer. Napierski, the today Officer; President; Chief and Financial Chief On Lawrence, me Ryan Chief are Chang, Scientific Joe Ritch Wood,

may will from call, that made a refer anticipated. these be today's I'll during differ refer those non-GAAP statements discussed comments to to statements. actual at results ir.nuskin.com earnings include our uncertainties, numbers more to required period-to-period our comparable for believe assist risks our over Ritch. or numbers complete and financial a obtained comparing Investors of During that, in these and forward-looking SEC page in release may discussed With These risks. be call, this that any non-GAAP the numbers. financial results turn for We some involve numbers Please of differ financial reconciliation filings time manner. statements. and the materially discussion Please Also, certain in from consistent

Ritch N. Wood

us and Thank joining all for today's call. Thank you Scott, good afternoon. you, on

credit a in these to capable growth work making and and seeing been For the months. Let the CEO [Technical that the as difference by I reflecting our now with it leaders we Nu meaningful of sales and groups our we around be privilege It for team. Force amazing of with is this management to I we people XX both the love execute start effort and and business. privilege [Technical the (XX:XX:XX). Difficulty] world are give our business mission I've great (XX:XX:XX) me Skin Good. for my to Difficulty] are our doing the me is to on the talented good are

we to read in release strong our press very continued growth. accelerate you quarter, a QX our today, was as As

second than quarter $XXX offering. our marks of more without is highest XX% Our year-over-year quarter XXXX. ever product the million higher revenue of time million and revenue This than up $XXX.X limited a

by growth of XX%. growth was X% revenue customer and driven of Our solid sales leader

We over the year also up delivered of $X.XX, quarter. earnings share strong XX% per prior

our in impact earnings expense translation accounting. included a currency a and loss related negative a from non-cash foreign $X.XX X% to noted As share release, purchase per

two these (XX:XX:XX) Excluding and would been of our illustrating [Technical business strength for unique than the have items, power model. XX% business Difficulty] of the more our underlying quarter,

on provide confident results We a are that on seeing our we're a [Technical to products (XX:XX:XX). Ryan Difficulty] platforms will quarter focused programs continue consumer powerful that second growth this confirm and platform, and (XX:XX:XX) moment. in Difficulty] our details [Technical more

region second with every raising and Given the our Americas quarter the we nearly guidance, highlight our our which a growth few Mainland that Pacific. Southeast double-digit annual came and Mark results, from minutes. are in growth We're again will pleased particularly strong revenue world, China, in of Asia,

adoption Our our results world. sales the selling around initiatives benefiting from were social leader of

We our is Velocity of of playing sales and Difficulty] both benefiting ageLOC driving social our role strategy. middle And us Galvanic driving with to channel. see and is innovation technology our rollout in of ageLOC platform changer we customer believe the our social a continue and for game for to significant the growth we sharing in activity product continue Spa. Me in We it optimized [Technical this were (XX:XX:XX). a recent the products most LumiSpa, plan device that

Difficulty] acquired through and by Difficulty] in with in activity our platform exceeding in select innovations. game forward, additional will manufacturing expansion initiatives, has changer on Skin us this and made potential We customers. sustainably and is and guidance. we're the we're to provide track XP improvements market, another growth Ryan? introduced. quality, to and of our very our acquisition this our the more from see broader technology chain now our XXXX. set (XX:XX:XX) that innovation this Mark XXXX leaders businesses We [Technical of product and and are capability (XX:XX:XX). expectations development In that insight indoor acquisition. Difficulty] product by the turn (XX:XX:XX) summary, product partners progress strategy sales products increased also making the global encouraged [Technical been program consumer have is good us the innovation growing these quality I'll produce we going (XX:XX:XX) sales strong high on with and and results (XX:XX:XX) year which [Technical our where ingredients which into customer stronger provide with the pure Each to facilitating detail [Technical over of for is [Technical markets potential technology we're excited (XX:XX:XX) believe [Technical We're contributing and to supply Difficulty] and our also encouraged building We Nu apart for accelerated call Difficulty] end Difficulty] about between to after products financials leader this

Ryan S. Napierski

afternoon, Thanks, everyone. Ritch. Good

the continued and Difficulty] those driving our growth accelerated around this our strategy programs the growing Difficulty] platforms, focused directly the [Technical (XX:XX:XX) as (XX:XX:XX) sales categories. leaders. world. empowering We're with and X% growth product growth purchasing Difficulty] well (XX:XX:XX) trends company the economy, in macro confident personal growth registered opportunity Difficulty] customer the with engaging aligned Ritch results care is is is As [Technical of nutrition implementation as are in mentioned, (XX:XX:XX) This on of right [Technical enabling from who [Technical products and our the

of pillar make progress to We strategy. continue each our growth in

more platforms, [Technical on leveraging these sharing expand We reach. (XX:XX:XX) primary technology. [Technical well a heavily engaging our Difficulty] acquiring as social customers supporting we remain and social for tools, as medium by For leaders sales training focused to Difficulty] on in media (XX:XX:XX) as to our focus continue efforts

facilitate have China with sales [Technical easily Difficulty] sales a more For their our introduced directly we transactions platform to (XX:XX:XX) in [Technical Difficulty] allows example, sales (XX:XX:XX). that leaders

Difficulty] continues become a front, for powerful to On accounting Difficulty] proprietary (XX:XX:XX) revenue. the enabling expectations has platform This [Technical (XX:XX:XX) our demand, customer excited to global additional cleansers to Difficulty] our very to and contributor next (XX:XX:XX) LumiSpa continue year Difficulty] [Technical enhance this exceed including addition Difficulty] (XX:XX:XX) (XX:XX:XX) throughout new a colors, that device increased [Technical We'll we're quarter [Technical second with (XX:XX:XX) about. [Technical [indiscernible] products acquisition. ageLOC

our [Technical Difficulty] social are including several sunless generating Insta we seeing Additionally, new media lip-wear support which is social positive innovative and (XX:XX:XX) [indiscernible] results new innovations product sharing from (XX:XX:XX) (XX:XX:XX) Difficulty] Glow, tanner, [Technical buzz. to long-lasting

sports more this than shaping projected with a year. category, of $XXX be continues On system and management the strong sales our nutrition million TRXX to weight body in front, the performer nutrition

enhancement Finally, empowering program focused second quickly and North our in Velocity, America we programs, regarding introduced enhanced sales the This compensation compensation in quarter. leaders more and rewarding on is sales which acceleration providing (XX:XX:XX) acquisition markets, additional flexibility to earnings sales the as in the [Technical entrepreneurs. leader the the strong of of well. growth Difficulty] customer positive opportunity our translates Taiwan micro

each market. We XX% and fully be will Difficulty] most markets, launch driven by In with (XX:XX:XX) [[Technical Mainland sales [Technical effective grew by and year LumiSpa the quarter growth growth XX% into also in by strong continue this of (XX:XX:XX) Hong Kong. the translates our move LumiSpa, Taiwan in Difficulty] X%. growth, Taiwan of [Technical to Difficulty] meaningful was sales leader the our is (XX:XX:XX) [Technical the customer These to driven Velocity [Technical in quarter Asia world. growth our which and (XX:XX:XX) acquisition U.S. dollar are be and was Southeast generating continued also broad we furred in global focus of Revenue seeing expect and Difficulty] XX%, the in revenue We sales contributed We're up introduced July, strong interest in Velocity middle This growth growth, market. by forward globally to of during and China, to which second of we (XX:XX:XX) resulting a customer that results results on believe leader improved it and in the in as of XX% year. implemented Difficulty] by we Velocity In incentives. the Japan contributor pleased next in introduced future. the positive

In to introduction the currency. of by benefiting with both positive upX by sharing as including customers of response in dollar we're Insta products in segment the XX% contributed addition, of as continue Korea, or seeing In Hong Glow, % we to reported base new growth a was and regional in we to market. continued the Kong the held America, the local growth, these as with performing is invest sales in In U.S. of North leaders. pleased expansion Pacific, currency. dollar well this X% Latin growth in revenue America with XX% which rollout constant social driven We're Greater Velocity and China U.S. convention our Americas we XX%. XX% emerging ticket growth sales well, significant

reverses and in strategy trend slowing numbers appear greater these in there, stabilization for a the confidence While modest surface, it a market. we're us this Korea our our giving of business seeing on

down strong Southeast dollars and they and Southeast take Asia of U.S. leader each of of in LumiSpa grew force, held convention activity July, had advantage our a environmental ongoing now and in X% U.S. in driven in Asian sales as social economic which local it sales was as and Most boosted grew amidst Velocity. to regional markets response enthusiasm growth XX% sharing we XX%. of our challenges. quarter, Singapore, in XX% great notably, dollars local customer currency, an growth successful a launch. X% and as outstanding our Japan by XX% result strong among In of a particularly can currency

And support in like our grew will we (XX:XX:XX) seeing as July, growth in key XX% by the to throughout U.S. driven in improvements acquisition X% However, growth. continue local further rollout as other as well Customer which begun dollars (XX:XX:XX). three in to social currency, including Difficulty] EMEA was believe Velocity adoption customer well, expand sharing markets we as we've strategies, of [Technical selling Difficulty] the customer France. larger XX% [Technical related social or launched finally, direct region, initial of

our program from by a driven strategy. summary, it product in solid each quarter with markets platforms, So our and was very strong results of

rollout the turn with to the and social expect sustain this most platform in flexible enhance provide in the sharing, by to fast the I'll device proprietary Mark. technology to We completing that, investment Velocity opportunity of to our And and marketplace. time fulfilling our momentum expanding increasing

Mark H. Lawrence

Ryan. Thanks,

me quarter for revised a Let the through update to walk highlights moment take year. second an and our provide our guidance to

and a our As in financial find on information you release section of additional Investor the can our reminder, website.

Second came from consisted XX% acquisitions. recent impact core of million, strong very XX%, our in and revenue foreign and included favorable growth a which quarter Nu of growth currency up X% at revenue $XXX.X Skin X%

net [Technical primarily year RMB from remain quarter. the our our loss guided in Difficulty] against line will income earnings for rate And were per to earnings and $X.XX, intercompany the these through loss. a Nu statement. other Without U.S. our Gross XX% [Technical particularly the of improve XX% Chinese the reflected at We Skin at was quarter foreign peso. than part would translation the were (XX:XX:XX) improving foreign of the Argentina reasons. expense is and modestly the quarter. compared strengthening XX.X%, for $X.XX in XX.X%. the comes share over year. by XX.X% Second last translate (XX:XX:XX) the dollar share currency our $X.XX $X.XX, currency margin per Gross our more end the based the We The earnings anticipate margin of two currency Difficulty] balances the gross previously core income foreign year prior prior balance margin the have the charge items, on Quarterly in by of of of quarter, improvement the steady year-over-year. been quarter two

decrease Korea from see year to we will of manufacturing prior year, were revenue sell-through administrative cost non-commissionable largely initiatives Selling our percent manufacturing note at XX.X% the will to we including as approximately compared a we and entities. saving XX.X%, revenue acquired and quarter quarter. the XX.X% quarter. as expenses that in from compared begin supplied year LumiSpa were of benefit Please XX.X% in General was of expenses the of in Greater prior $XX our And The product second percent the cost held First, due companies. to conventions million. a in recently a China second, by this manufacturing revenue efficiencies. benefits to see

Our with year prior operating constant margin held XX.X%. the at

reflects line due foreign loss to expense an largely other $X.X The million mentioned. expense, million previously translation income currency $XX.X the

During in the paid quarter, $XX.X million dividends our repurchased we million $XX.X and stock. of

repurchase authorization directors of strength increase our our to board In million. $XXX addition, based to on our the approved business, of stock an

in our so. Our to and rate period. cash. withholding positively in as by tax XX.X% funds the was manufacturing this no facility permanently decision rate for XX.X% allows a compared was tax decision new longer to the This impacted repatriate build the prior-year to required tax, do quarter potential The plan reinvest the to disregard we us to China,

As to U.S. previously continue our fluctuate to mentioned, tax due are tax rates expected reform. to

Difficulty] For quarter a incurred of [Technical $X.XX the (XX:XX:XX). due second XXXX, charge we of

We $X.XX and charge fourth in a third continue in the quarter the to expect a impact charge XXXX. immaterial in quarter, $X.XX the becoming in

revenue quarter Our $X.XX XX% project (XX:XX:XX) guidance the growth, of share is Difficulty] the [Technical QX $X.XX, X% representing earnings includes to purchase to currency per which foreign $XXX charge. accounting for headwind. $X.XX third million $XXX and XX% million, We to

X% currency for of and our impact financial If quarter billion, not dollar. raise translation a $XXX guidance, been (XX:XX:XX) a from note at due guidance second anticipate a $X.XX Currently, we Difficulty] the currency million impact benefit be $XXX operations are $X.XX For increasing unexpected to Earnings approximately XXXX, X%. potential our charges. now (XX:XX:XX) tariffs prior the which Difficulty] charge the Difficulty] range billion we the the to of in not year. includes inactive or held end are by million. share our materially did foreign $X.XX foreign We to (XX:XX:XX) assumed foreign guidance for year would projected to had of approximately favorable to Please accounting impact prior [Technical to currency recently in including our have losses strengthening range to revenue revenue currency $X.XX our [Technical due purchase top to results. $X.XX a this [Technical per do

is result global negatively recent trade does a and impact have guidance. our as reflected reported However, results our seen in strengthen, disputes we which dollar of U.S.

questions. be the anticipate up range. call to that the our that, XX% we rate will Finally, annual XX% With for we open in now tax will

Operator

you. Thank

Our first question Pivotal comes Research. from Tim Ramey with

Your line now is open.

Timothy S. Ramey

or so much. foreign currency that's the I we that going translation difficult forecast likely The know to zero to very impossible go in be Thanks should impact – that should see to rates on the on an it's where the third on based know hard rates based quarter current you on any of to that? thoughts outsider the quarter. as close have or Do were

Ritch N. Wood

Yeah.

speak. hopefully okay, that, breakout Tim. take you that Thank the line you us, we there can understanding the a me hear at for some question, in Let shot we're is as

sorry, So, for to the apologize And at QX at closer really X. that. hard RMB – was just it depends has The time, where it project. end this of it moved I the closer to September rate $X.XX moved in It's for I'm just on over what's finishes and at point that's $X.X, $X.X. to

might model have where time We Difficulty] hard a (XX:XX:XX) that really expect we be. [Technical

Timothy S. Ramey

I your Great. And the purchase to again, that? the think, the direct charge accounting And reason related is maybe I for inventory or non-cash. what was recall, step-up, for as

Mark H. Lawrence

It's roughly amortization backlog million it's not had the to $X it. split shipped, we $X that revenue and pieces two of million the and G&A. is of a There and to Yeah. intangibles,

Timothy S. Ramey

Sounds much. great. so Thanks

Ritch N. Wood

you, Thank Tim. Okay.

Operator

Jefferies. Thank from question you. next And Steph our with comes Wissink

Your open. line now is

Stephanie Wissink

really Good afternoon, everyone. quick questions. Two

some question sellers The LumiSpa within your product, that you first the bit for to is I related size of viral Thank full wonder the of And product. about might of markets of have of sense one markets an give tools, suite little second treatment talk potential younger a you've Acne maybe is, the Can the that with How of what to bit world? acne full our social some is package, about talk the can you. on network. if deployment mean just created. different or tools utilization and us then, the the or those digital the world? and some market little and around you that your a many this

Ritch N. Wood

LumiSpa that me applies to broad the take millennials really seeing we're acne something Ryan is fact of about the demographic. finish then think shot the The really it the really a What what quick demographic. question. and we like we and you which with Let mentioned benefit touches younger the line, will the up is

So, that a we lot. like

product, well will different rolled long-lasting have lip-wear, of Europe, Americas Asian the those the In it's social two to most now a in fall. Powerlips, be selling as then terms of other and which products, as Glow, Insta primarily out and the and rolling our into is markets

me Let Ryan to to specifically turn it these. some of more speak on

Ryan S. Napierski

on Steph Yeah. no this. great No, question,

target of about product about of product [Technical millennial LumiSpa, lot segment excited Difficulty] though in a particular, large market well, very reach For a participate excited to was because across that we're particularly brands a I boomers the baby know, Gen demographics the younger popular acne the it there. the point as we your Difficulty] X, as and (XX:XX:XX) we is of because [Technical toward its leading as (XX:XX:XX)

However, – cleanse our and to makes approach treatment the with experiential approach the we're acne. kind of proprietary nature innovative very device of together it

out it excited be beginning half year. So, next market market by product, early from second about very and into rolled that will the and

the On we [Technical (XX:XX:XX), [Technical you're digital I'm that tools. but if sure asking you're are Difficulty] not Difficulty] that providing about, Difficulty] (XX:XX:XX) (XX:XX:XX) themselves, you're [Technical digital referring

Difficulty] (XX:XX:XX) As I platform mentioned, a one. is good [Technical

since rest Difficulty] continue (XX:XX:XX) form a Difficulty] and very agile (XX:XX:XX) We on [Technical local [Technical series of or very will we've in launched been then, forward. tool (XX:XX:XX) have [Technical And effective tests platform moving iteratively another the Korea an the well. in tools. doing of Difficulty] that world those And

So, here know continue there's they go forward. really detail, do we will and no that in are currently implemented to but being will specific schedule through moving that so

Stephanie Wissink

great quarter. a on congrats you Thank and

Ritch N. Wood

you. Thank

Ryan S. Napierski

Thank Steph. you,

Operator

from Bank. you. Faiza with question Deutsche Thank comes And Alwy next our

now is line open. Your

Faiza Alwy

Hi. Yes. morning. Good

Sorry, good evening.

Ritch N. Wood

Faiza. Hi,

Faiza Alwy

there prepared of renminbi, a of much given you how in Maybe might you you in you're you And is like any the Are then, trends or sort have China. – quantify remarks, the great If in question if any My it missed seeing I quarter. it in that. seeing could weeks on movements I was recent most said had LumiSpa? change just first the month? know

Ritch N. Wood

you the repeat your Can second about of question part renminbi? the

Faiza Alwy

Yeah.

like concern or – renminbi going Just the get confidence – consumer the there's might Chinese spending just just like China in impacted. in of that movements to impacted like given, the sort is get given some China in the

are you kind few just trends So – last the what like seeing in weeks? of

Ritch N. Wood

Yeah. We have and our this been for (XX:XX:XX) quarters. trending business Difficulty] really [Technical last trending (XX:XX:XX) way Difficulty] is China [Technical in way the several

maybe And it's was we RMB consumption the move. in last, Chinese let's [ph] or year seen it a Difficulty] in [Technical So, that the today. made strengthening in in and has bit throughout really our we the LumiSpa we've necessarily has follow on We're China. dollars. a consumer, quarter, our impacting numbers. weeks and launched about remains (XX:XX:XX) (XX:XX:XX) ago lot a today And I adoption so a our a Difficulty] very, the boosted our (XX:XX:XX) with now [Technical over report it see it U.S. as the see been don't model growth a strong driver. of customer but around but base. back little April seeing more, in way interest continued really business quite call sales very it's or of the which product, solid The leader eight in X.X

Mark H. Lawrence

business, sales roughly our were total million. LumiSpa of $XX then XX% about And

Faiza Alwy

about sort acquisition little bit of manufacturing recently Okay, facilities okay. acquired. you could the then, talk Great. the that a you And

ratio going what how impact forward? selling impact the it's going expense Sort was to curious I'm because sales the from that of

Ritch N. Wood

that have think because innovation manufacturing perfect. Yeah, allows capability potential And product good (XX:XX:XX) forward. growth growing. there. additional and we than partners in some Difficulty] Difficulty] very get $XX.X these good really going quicker doing Difficulty] [Technical (XX:XX:XX) really and us are about these us We to acquired that give market the to past businesses We to businesses you. Thank grow. companies million, [Technical $XX we well we see as they're (XX:XX:XX) [Technical it see business we see opportunities was million,

has to our and both the expense. And it on the on gross will on our total so, be ratio our is sales impact depending margin it selling

have very these operating margin However, margin operating a businesses through similar the our of company.

So, margin on purchase at is don't done year. the accounting drag end overall operating anticipate the once this our a of we really

Faiza Alwy

in may one I we've years. Okay. TRXX And then about of time first number if a on it's the just heard TRXX that

that little So, you it would a different, could about helpful. might the a talk Anymore how maybe different. if positioning sounded bit around is product be like bit the be color

Ryan S. Napierski

Faiza. Sure, Yes.

In space. predominantly our to it – very business. fact nutrition of the as The mentioning we the care on in with pleased been it of here, wanted side include years last personal device be couple to continue we the because we discussed platform, we've focused

a nutrition. the And It lead to So, well the TRXX. playing well, demand. terms very nutrition do largest we key wanted out in category, in continues speaks very it trends fastest playing there, in growth to indicate rest is of TRXX of business very consumer that category the and which nutrition our world is we the the see sports in and product Asia to with that well. being

As as and formulae such, enhance markets the continue complements. we in product with offering different to far new various

focus weight not as core have changed We (XX:XX:XX). a [Technical Difficulty] body shaping the and

very strong the nutrition growth space. introduced, a So [indiscernible] product Difficulty] we but very (XX:XX:XX) keep (XX:XX:XX) [Technical [Technical powerful (XX:XX:XX) in Difficulty]

Faiza Alwy

Great. Okay.

could about much us and little be Just for will of a the expect Mark, give year? one can – share guidance you you – last cash will one maybe talk you bit if do for do this you Mark. flow a repurchase year how the happen

Mark H. Lawrence

Sure.

to – historically use cash Our continue the believe same sense repurchase use consistent best more shares. we of done and see in fund the is cash first to debt remain will down look what the or bought past. it look we back. I that that We X% we've X% along between to does shares path. would always and as business what We for of pay will then make of us our with

Faiza Alwy

Thank Okay. you.

Operator

America comes Merrill question of Lynch. Bank And from Tong Olivia with you. our Thank next

is line open. Your now

Olivia Tong

you. Thank Great.

of within range. the flow-through sales ahead expectations, just because a you the minus EPS help or quarter. First quite was clearly but bit Can understand was me the plus your on

I the line – what FX how to that top obviously how FX some assume quarter? the Thank to were you probably much of had had revenue higher this you which the you. And was than surprises So, impact? impact, anticipated, you but of contribute much irrespective non-commissionable expected sales

Ritch N. Wood

Yeah. Great thank and to few we question, the came fact Olivia, quarter. that. benefit really the weeks a primarily from X% only that for at you strong in million projected currency U.S. had due $XXX the quarter. dollar, last Really, actually of in X% actually in And strengthening of the the

So, million $XXX in The factor very in it I was income million guess when this Korea we convention the operating even $XX China. and business you stronger the have that $XX million. the particularly expense quarter of of strong, or in was

Difficulty] the below Difficulty] Difficulty] without very income strong. line (XX:XX:XX). identify [Technical It [Technical operating P&L to [Technical (XX:XX:XX) it's on because generally, [Technical the So (XX:XX:XX) easy produced Difficulty] (XX:XX:XX) operating

was did it which business would really ahead strong have that very to well we quarter, take out do. you guidance. of – as when So, it our The anticipated

so, very with concerned the works. model from the I standpoint. Are a not say there We're encouraged should way And we're you Olivia? profitability

Olivia Tong

to forgot The classic problems. unmute myself. – I

G&A And causing or were two between are conventions is then that shift being you there obviously this the mentioned you then on the the higher, the that. that non-commissionable in between quarter there in items that line and conventions shifting ago. selling year just expenses don't of the revenue, expense? get selling kind G&A the conventions, And First, expense is any

Mark H. Lawrence

that Yeah. one. I Thanks, take Olivia. can

So, in there significant in the prior weren't spend conventions any year.

had think I year was that that convention. our global we the

So, revenue partner. that had the mentioned manufacturing the in We that $XX incremental. million will in is of our $XX.X non-commissionable line shifting million we largely P&L. be from There

see the would of line. And of part selling you you our G&A partners line. expense and that impacting you the our increase manufacturing that see the do of So, and see inclusion then

Olivia Tong

clarification housekeeping Got And one then, it. sort actually. or of

on do you a year-over-year, gross when a decline margin improved a more give first less little you what what Do in could – the just in bit modestly you sequentially basis saw half, could mean actually or you color year-over-year will up to by you on of mean second you be just half? it On say be up that? relative

Mark H. Lawrence

Yeah. first couple (XX:XX:XX) year, will we up sequentially where this Difficulty] both above of were the of [Technical be Difficulty] QX [Technical half reasons. what in It a saw in (XX:XX:XX) from we for

will been we some some into (XX:XX:XX) as manufacturing we we've take on see as sell-through work that doing product account from entities. will We Difficulty] of [Technical will which the of other have well that our products. (XX:XX:XX), our manufacturing product purchased benefits then, [indiscernible] And the

Olivia Tong

And me QX have we would and figure growth it. QX. you obviously you would to outlook lastly then guidance, just then expect can the any be Got essentially QX, surprising don't and sales that (XX:XX:XX) that that suggests it And QX. so it in momentum slow dramatically by

that comps you that's little is a it how – something that see conservatism tough a that QX muted is outlook? bit can driving versus give color you much of So, more versus

Ritch N. Wood

we fourth LTL Good (XX:XX:XX) of a against [ph] LumiSpa million Difficulty] for (XX:XX:XX) question, comparing (XX:XX:XX) had our $XXX [Technical because guidance that know [Technical and in showing in quarter the QX you're we're we forecast in the growth right, Difficulty] as as were you we XXXX. decline

[indiscernible] strong We're very prior an encouraged by in he so quarter, of things growth provided range local now really quarter, that's to are also I fairly for X% quarter. the in (XX:XX:XX) comparing heavy both showing year business with a in trending against actually that. the We FX And the we're fact that those growth. the showing play headwind fourth the fourth the guidance Mark's currency that is to X% think

way trend and that's continues the we provided. reflected it by encouraged business to guidance strong, we're in that So, the is our

Olivia Tong

you. Thank Great.

Ritch N. Wood

Thank you.

Operator

Doug from comes question next our And you. Thank with research. Lane Lane

now is line open. Your

Ritch N. Wood

on we hear mute? Doug, can't Are you you.

Operator

our with again, from Lane question next Doug research. Once comes Lane

open. line is Your now

Ritch N. Wood

to we Doug Maybe next can see and in. one go come if back the

Operator

Understood.

from with Beth comes Citigroup. question Kite next Our

Your line open. is now

Beth N. Kite

Terrific. everyone. Hi,

Ritch N. Wood

Hi Beth.

Beth N. Kite

largely if wondering it with that I chat Difficulty] specifically we was about we looking I And of know more But you portfolio. starting at Ryan, in year. PowerLips could like I products mentioned XX kind European a Hello. kind maybe the a (XX:XX:XX) are product of Insta bit now the U.S. new of think Glow sort Hello. markets. little correctly, were [Technical Hi, last also XX talking I and (XX:XX:XX) I think (XX:XX:XX) social [indiscernible] heard portfolio, to selling with and

traction? the just that around see the more year, So, social Dana in the there's more second broad the in can out Gloss, conversation Just might we that get new Dr. think us did think U.S. Lip AP about half or the any mask bit help or the quarter, a second selling of portfolio. of a came I you little

Ryan S. Napierski

Great. great Yeah, question. Beth,

maybe give [Technical out little Difficulty] mentioned, event. previewed years [Technical (XX:XX:XX) staged [Technical (XX:XX:XX) over a coming and those Difficulty] the to and to clarity live concepts that of you and course as next prior October our the on of So, last product products more series two a (XX:XX:XX) products we Difficulty]

some products So, in those of were still concept.

PowerLips had America, and good the is the the North as Insta by little product according out For We've has process and interest and markets, series both speaking which the – while. the Latin that's the feel we've high in of currently products rolled in well, the as effectively products very of rolled of seasonally concept needs be so the (XX:XX:XX), next region, one utilized example market will [ph] out interest for (XX:XX:XX), promotional you side Glow to this mentioned, market calendaring in America. example, [indiscernible] final in EMEA development of been

moving it those previewed of Asia, Similarly continue roll key time. few a we Dana, know it. roll and by in the sold in they'll course market out previewed of you some forward. with Dr. that markets, to we they'll over market Now We

to have products (XX:XX:XX). And so, do additional continue you the mentioned we

products, just stimulate These I through I (XX:XX:XX) acquisition products social – products does to will We market products to thing. the the online like the what enable sharing in see very LumiSpa give to years the demonstrable to really But of help course have by they're that conversations. next sharing intention these products a say, that opening products color mean, two good more that little really as market. (XX:XX:XX) complements are well the effectively of really customer built and of (XX:XX:XX) same we the open that's other conversation

Beth N. Kite

Yes, me, China, growth as quarter-over-quarter actually level you we've launched leaders in in much And of that nice sales one part Do you the about Mainland, a pardon had because LumiSpa December the perfect, me April. seen to so. particular momentum you assume – of obviously sort LumiSpa from mentioned June rise I when fall of in the in of for China. years? in such maintaining the leader good very sales previous quarters in reminded in feel March

Ritch N. Wood

of the markets led China. customers see really is We and from different And that. be little think the encouraging one about Yeah. that seems thing in to leaders I it follow sales some other a a generally growth, after do trends bit China on then

of strength So, that the the in compare We we we quarter we'll anticipate still in number year back tougher rates get a go strong particularly. our But the the see leader. QX fourth in half we'll as anticipate growth sales China well. as in really customer with in QX

continue. to that there strong really trends anticipate overall, So and see we

Beth N. Kite

Excellent. Thank you. you. Thank

some to the And just in (XX:XX:XX) around questions. Mark Olivia's briefly, can go so, you G&A if I could spending and dialog of

sort a in Latin the right, think in investment and past previously the spending lot doing, a specific. maybe Argentina of specifically whole I you're I markets you of probably you of think cited America around lot talked about world,

how big But just (XX:XX:XX) trying Do next about won't over are think year, time? year. progression you year you'll this year have the to and do sort to and separate reinvestment just we continue that impact think the the and versus around quarter last? So, operating the M&A obviously, third margin of of – to here sort last from just this like we flow of had understand much events, you moving into trying as doing exit large I year we think next picture,

Mark H. Lawrence

asking Yeah. Beth. thank that. you Great for And question,

We to are continuing we areas drive invest growth. in will that the think

Specifically, us. focusing for investment on America Latin are China areas of and

new As technologies as business. us far yield in we initiative returns such and we we're and core lastly, out invest to we in to And growth for our Groviv, great then, indoor grow digital are will it initiative our continue building infrastructure believe and the IT as investing growing infrastructure, our because that support seeing.

So, as there but committed increasing amount operating we are is a we margin our large investment, of invest. to

Beth N. Kite

in manufacturing earlier is that is seen? product. of the of the kind the guess here a would able Mark, sort that the initiatives, If the know your profile of, to changes that in little could fact happening some (XX:XX:XX) I'm kind that was you're with such even profit I one, in a get that's have of quickly LumiSpa, that efficiencies last that year, – second When happen I half have thought you to improve of than you timeframe then of going to have liked so you might the And already or I sorry. was product new one said to Perfect. there or

Mark H. Lawrence

happening right with it's line in Yeah, expected. what about we

effort that the we once stronger little as at benefit we're And started in ways and to to QX saw and (XX:XX:XX) that expanding capabilities. in product, optimize success looking the we As product seeing manufacturing costs as you including even we the soon know, a bit of start that right going launched started our QX.

Beth N. Kite

all Thank very Perfect. much. you

Ritch N. Wood

Beth. Thanks,

Operator

Mark next from Stifel. you. our from Thank And Astrachan question comes

now is Your line open.

Mark S. Astrachan

afternoon, Thanks, Yeah. and good everyone.

Ritch N. Wood

Hey, Mark.

Mark S. Astrachan

I Wanted to ask, the was acquisitions in quarter, I the think heard want from of recall the million. assumptions And increased that are to like $XX.X the acquisitions then, if since correctly. I I balance so over verify year for last number the second $XX what quarter the million

little So, that be a if clarity of could give there would you bit great.

Ritch N. Wood

be that was bit correct I anticipate as with lower it's QX Yeah, QX for and generally it consistent softer. to second in year-end, little million. maybe quarter, million We sure. a The that $XX in was than $XX.X little coming the manufacturing a into think fairly

quarters, XXXX. next then about the slight anticipate coming into same that couple for in next that of growth year we right some level and So, of yeah, do

Mark S. Astrachan

Got it.

back expenses XXX Okay. base per XX% try sequentially. basis that's that out points get like so the sales, to of to basis I if selling points I something revenues, revenue of the don't down, XXX on And and get know still year-on-year, non-commissionable the you commentary your

seems there. So, of levers like lot is still a there it I guess,

going specifically then core is how what we So, on within expense think selling go-forward about that selling on and basis? line, a that expense should

Ritch N. Wood

a too. That's great Yeah. question

Let that are us the that for lower than to normal. biggest (XX:XX:XX). fluctuates on qualifying of selling for also quarter expense has sales of bit for couple and second number The incentive me in qualifiers the The our China speak partially little influence that. reasons. the a

our a – impacts modeling. I we're how the in not think, enhancements. to we'll the that Velocity pretty impact same, about. the up we the that the program, increase of flow. XX% little Skin on QX expense rollout in bit one core roll-out next one, with our talking that's again, see the business much raise be should expense, (XX:XX:XX) our Nu selling the sometimes And and It what overall QX, may also Velocity very have It that's it's to close should (XX:XX:XX) but quarter impact

than is generally think in I yeah, So, XX% the would little anticipate we a bit next two lower quarters.

Ryan S. Napierski

Skin sure. For core for Nu business

Mark S. Astrachan

Got it.

Okay. a low-double And of is one on about operating very it? so you historically the company acquisitions, good to talking had would line the then that in just you're digits, I averages, said with kind last think think be so also something clarification, margins way about roughly

Ritch N. Wood

Yeah, that's Mark. correct,

accounting as just or mentioned, it's right dropped accounting slightly expense expense. a million about So, $X as quarter, purchase now that acquisition Mark was

Difficulty] margin lot next that So margin, (XX:XX:XX) operating not those per (XX:XX:XX) [Technical for [Technical [Technical showing right we're change Difficulty] of now, Difficulty] low-double-digit but entities. share earnings (XX:XX:XX) beginning a will

Mark S. Astrachan

Got it.

you. Thank Okay.

Ritch N. Wood

Thank you.

Ryan S. Napierski

Thanks, Mark.

Operator

question Thank Lane with you. Lane Research. And once again, we have from Doug a

now is Your open. line

Douglas Calder Lane

Hi.

everybody. about Sorry afternoon that. Good

Ritch N. Wood

Hi.

clear now, is right sound that's Your so good.

Douglas Calder Lane

improvement already so right, all Good, an then. Oh!

big program a successes a the on social Just us we've then quarter? the Ritch, give had Powerlips was lifecycle things, initiatives, play for and very in feel to one particularly another couple moved does with fold these Action, for these those another and and How initiatives and selling initiatives lifecycle AP-XX one Clear and Insta about the year out? you into a in here it for how does mean, Glow out? we're can of and I the any one quarter,

Ritch N. Wood

Yeah, move forward selling, the the our give I for pickup, we really, in (XX:XX:XX) but low are a steady AP-XX necessarily the revenue paste that $XX go of price (XX:XX:XX) million first this margins What gloss and whitening to it's XX his a sell at lip that social around a just They products single in the on it's quarter product. good, that social product continue by really the we've and towards way is Because lower other when they price with lines [indiscernible] vision we in they're store really toothpaste, done the needle now credit a forward. [Technical Ryan life point. as it quarter. Difficulty] move move some Difficulty] overall going is points on not don't product (XX:XX:XX) producing lot that a last only generally, selling, really, the done the months. and we've that What [Technical around a keep follow to

customer However, and what we into really acquisition and going some see strong of those is turning driving forward. customers with the business a sales leaders

really the our interest may that and way then to business, the want lead that's into do customer turns and great a out. to somebody we really it's products it into sell who and rolling So, see

Douglas Calder Lane

Oh, that's interesting.

Okay.

with of as kind the excitement particular feeding cycle the new because keep to of do keep you it there products? the at or group look we to a portfolio have for sales additional will these is So, short products how

Ritch N. Wood

products is Smile all in we we product portfolio (XX:XX:XX) [Technical for with products the can right. AP-XX example it, the The Yeah. that that continue work We play, the out Difficulty] it lip-gloss other very a follow that that well, came with to with spotlight. call it keep keeps in on Pop a

one, social PPP sharing quickly. really I continue part market (XX:XX:XX), our products strategy. who is about give that's our we Number So, past bring adjusted I and enhance the marketing think we to that it's much market teams, product come have strategy this is into really important a and opportunity things. new continue more strategy. to of of credit their to to talked couple to have in products strategy the than Ryan quickly that more

and Our to getting in we're the capability with And sales then, additional partners, social our market we manufacturing build to who try bought people so have more moving are both more quickly. obviously capable and of product the sharing. internally really

Ryan S. Napierski

cycle that Doug. Dr. didn't product was and point, and is – What some social refined associated that sharing rhythm of actually is of we've into that fit that add LPO here, lot on. that do enable that And representing with are product Chang exciting LPOs our to one things social development. (XX:XX:XX) a that to about have innovations going really the that innovation one help historically market. these we the to with sharing just is and able [Technical the of Difficulty] cycle research in-house to in-house on been

lot and see they of out on to so, cycle product and there, get a these based do seasonality. fraction it's exciting And really trends engage concepts really

pick right find of we Insta (XX:XX:XX) (XX:XX:XX) Difficulty] middle [Technical Southern very Hemisphere summer now, in going now, the so up the Glow will for of well there And Difficulty] time course example proper there. [Technical

accessible So, leverage innovations R&D the in the have [Technical capabilities we Difficulty] and organization. more team, to (XX:XX:XX) make our Joe's to built

Douglas Calder Lane

to like give months. a and us you outlook Japan of should your Okay. really couple change on is sound that's Can business. up, it's but just going next and see are the numbers your gears, much by for helpful. which line top and on done going the color of the years, still there. just a what's Can what really is talk in little the of Korea, markets, quarter And forward three quarters XX haven't about doesn't going we much impressive it your in past six, shifting they over and keep driven and business you

Ritch N. Wood

encouraged our our Yeah. [Technical is growth and important ongoing most customer What markets to very strategy Difficulty] Korea implementing success. are there, just I'm both These Japan. about we're (XX:XX:XX)

of to border. Korean and change market, of in into as the Xst the Japan Velocity products new So, going [indiscernible] starting July hit (XX:XX:XX) the

an few months (XX:XX:XX). those in seen Difficulty] [Technical markets Difficulty] have last [Technical both of the (XX:XX:XX) We in acquisitions in uptick

– implementing direction. believe seem to seem be It's we believe have now encouraged be those trend we (XX:XX:XX). businesses right the the we right direction. steady, to turn really, [Technical (XX:XX:XX) that Difficulty] So, they the the able in and in [indiscernible] moving right We're

So, QX We'll some be starting to going us. strategy for see of important our thesis to is implemented. really really be important

have a an and We have manage that start would place going customer to good start sign growth will people to the those we customer know we'll And first believe markets, movement, markets and is in those anticipation is be us we impact. focused. and important which see now, turnaround strategy Our to are the to the in very it business. to are

Ryan S. Napierski

anti-aging that just both I point those of that markets. skin in markets markets to demographics and because in And the importance markets. of add of the sharing would These are two care regarding social advanced both very

So, we've anti-aging category. done historically in very well that

more more future we focused sharing, Ritch's we've social markets to growth. than with what broader demographic point go upon, in we historically into a will are up open products those be millennial-oriented and LumiSpa that better as As we like we more that really reach to drive feel that positioned

So, this social to sharing element is key our expanding demographic reach.

Douglas Calder Lane

Okay. That's Thank you. helpful.

Ritch N. Wood

our it the end Thank like that's you looks much, of Doug. very And questions.

in all us as that future you CEO, been XX never our my years know and pause strategy of confident us and as let the and I've I'd as now months a you today. XX a business. thank positive in for let joining just the to a CFO moment So, for

great Have and a the today. continued for and progress afternoon. being of we you all So, growth forward part for thank in our call look business

Operator

all gentlemen, does Ladies and conclude for your this may program you day. have Everyone today and great disconnect. a

Nu Skin Enterprises (NUS) 3 Aug 182018 Q2 Earnings call transcript