Executive Summary - Nu Skin Enterprises Inc. reported Q4 2023 revenue of $488.6 million, a decrease of 6% year-over-year, slightly above guidance [1][3] - Full-year 2023 revenue was $1.97 billion, down 12% from 2022, with a foreign exchange impact of approximately 3% [1][5] - Rhyz revenue grew significantly, with Q4 2023 revenue at $65.1 million, a 101% increase, and full-year revenue at $216.6 million, a 41% increase [1][5] Financial Performance - Q4 2023 EPS was $0.15, or $0.37 excluding restructuring and other charges, compared to $1.15 or $0.89 in Q4 2022 [1][4] - Full-year 2023 EPS was $0.17, or $1.85 excluding inventory write-off and other charges, compared to $2.07 or $2.90 in 2022 [1][5] - Gross margin for Q4 2023 was 72.1%, slightly up from 71.7% in Q4 2022 [3] Customer and Affiliate Metrics - Total customers decreased by 15% year-over-year to 977,039 [1][19] - Paid affiliates decreased by 30% to 166,886, with a notable adjustment in eligibility requirements impacting the numbers [1][19] - Sales leaders decreased by 10% to 44,059 [1][19] Strategic Initiatives - The company is focusing on transforming its core business and investing in the Rhyz ecosystem to enhance long-term growth [2] - Plans include a new market expansion model starting in India anticipated in 2025 and building a digital-first affiliate opportunity platform [2] - The board declared a quarterly cash dividend of $0.06 per share, payable on March 6, 2024 [6] 2024 Outlook - Q1 2024 revenue is projected to be between $400 million and $435 million, reflecting a decline of 17% to 10% [5] - Full-year 2024 revenue guidance is set at $1.73 billion to $1.87 billion, with an expected foreign currency headwind of approximately 1% [5] - EPS for 2024 is expected to be between $0.75 and $1.15, or $0.95 to $1.35 on a non-GAAP basis [5][32]

Revenue and Financial Performance - Revenue in 2023 was $2.0 billion, primarily generated by the Nu Skin, Pharmanex, and ageLOC brands[9] - Rhyz companies contributed $216.6 million, or 11%, of the total revenue in 2023[10] - 26% of revenue came from the United States, with the remaining 74% from international markets[11] - Foreign-currency fluctuations negatively impacted revenue by 3% in 2023 compared to 2022[11] - Beauty products accounted for $858.6 million (43.6%) of revenue, while wellness products contributed $886.1 million (45.0%)[18] - ageLOC beauty products represented 46% of the beauty category revenue and 20% of total revenue in 2023[20] - ageLOC wellness products accounted for 46% of the wellness category revenue and 21% of total revenue in 2023[21] - Total Nu Skin revenue for 2023 was $1,752.5 million, a 20% decrease from 2022's $2,072.4 million[56] - Mainland China revenue for 2023 was $298.1 million, a 15% decrease from 2022's $360.4 million[56] - 74% of the company's sales in 2023 occurred in markets outside the United States, denominated in local currencies[186] - The company had $31.8 million in cash denominated in Chinese RMB and a $17.7 million intercompany receivable with its Argentina subsidiary as of December 31, 2023[187] Product Launches and Innovation - The company launched ageLOC LumiSpa iO and ageLOC WellSpa iO connected devices in 2023[13] - ageLOC TRMe personalized weight wellness line was launched in several markets in 2023, with plans for additional market launches in 2024[14] - Product launch process generates significant activity and high purchasing levels, resulting in higher-than-normal revenue increases during the quarter[54] - Sales of the ageLOC LumiSpa iO device in 2022 were below expectations, reflecting challenges in product acceptance[166] Digital Transformation and Social Commerce - The company is undergoing a significant digital transformation to achieve widespread adoption of social commerce, involving the development of new digital tools, apps, and an improved website design[31] - The digital transformation will require significant expenditures over the next several years and presents risks, including restrictions on multi-level marketing content by some social media platforms[32] - The company is undergoing a digital transformation to adopt social commerce, requiring significant expenditures over the next several years[168] Sales Force and Compensation - The company tracks Customers, Paid Affiliates, and Sales Leaders to monitor growth trends, with 977,039 Customers, 166,886 Paid Affiliates, and 44,059 Sales Leaders globally as of 2023[40] - The company's global sales compensation plan is considered one of the most generous in the direct selling industry, offering multi-level compensation for Sales Leaders[46] - Sales incentives, meetings, and recognition programs are key to motivating and training the sales force globally[52] - The company's sales force is composed of Brand Affiliates, who can earn money through retail markups and sales compensation under the global sales compensation plan[45] - Global sales compensation plan and Mainland China business model play a significant role in attracting and incentivizing the sales force, providing a competitive advantage[51] - The company had approximately 44,059 Sales Leaders as of December 31, 2023, with 294 occupying the highest levels under the global sales compensation plan[197] - In Mainland China, approximately 98 key Sales Leaders played a significant role in managing, training, and servicing the sales force[197] Regulatory and Compliance Challenges - Mainland China's regulatory environment is challenging, and the company is evaluating potential changes to its sales compensation structure, which could negatively impact sales[47] - Direct selling regulations in Mainland China limit sales compensation to 30% of revenue generated by independent direct sellers[62] - The FDA will implement the Modernization of Cosmetics Regulation Act of 2022 (MoCRA) in 2024, increasing regulatory burden for cosmetic manufacturers[67] - Mainland China's regulatory environment is complex, with restrictions on multi-level compensation and evolving direct selling regulations[60] - The company faces risks from government scrutiny and investigations in Mainland China, which have previously limited business operations[61] - The FDA prohibits certain ingredients in cosmetic products, and future restrictions on currently used ingredients could impact the company's product formulations[68] - The FDA has issued warning letters to cosmetic companies for improper structure/function claims, posing a risk of regulatory action or lawsuits for the company[69] - OTC drug products must comply with FDA monographs or require an approved NDA, potentially requiring reformulation or cessation of marketing if non-compliant[70] - In Mainland China, the product registration process for cosmetics can take 3-6 months for general cosmetics and over 2 years for special cosmetics[71] - The FDA Food Safety Modernization Act (FSMA) enhances food safety regulations, including mandatory recalls and stricter import requirements for food and dietary supplements[73] - Dietary supplements in the U.S. are regulated under DSHEA, requiring notification of structure/function claims to the FDA before marketing[74] - New dietary ingredients not marketed before October 15, 1994, require FDA notification and evidence of safety, with a 75-day pre-marketing submission period[75] - In Mainland China, health food product registration can take over 4 years, and marketing general foods without health claims carries regulatory risks[77] - The FDA's good manufacturing practices (GMP) regulations increase compliance costs and require rigorous quality control for dietary supplements and food products[81] - Advertising and product claims for dietary supplements in the U.S. must be substantiated and cannot imply disease treatment or prevention without FDA approval[83] - The FTC sent notices of penalty offense to nearly 700 companies, including the company, in 2023 regarding substantiation for product claims[89] - South Korea imposes a sales compensation limit of 35% of the total price of goods or services supplied[143] - The FTC issued warnings to over 1,100 companies, including the company, regarding unfair or deceptive practices related to earnings claims and endorsements[133] - Social media platforms like TikTok, WhatsApp, Pinterest, and Facebook prohibit or restrict content related to multi-level marketing, impacting the company's sales force promotion efforts[136] - The U.S. Department of Labor adopted a regulation in January 2024 that could reclassify more workers as employees, potentially impacting the company's sales force structure[146] - The company has been required to modify its sales compensation plans in markets like South Korea and Vietnam to comply with local regulations, which has negatively impacted sales force morale[142] - Mainland China's regulatory environment remains challenging, with increased government scrutiny and inspections since 2019[150] - The company faces risks of fines, suspensions, or license terminations in Mainland China if its operations or sales force activities are deemed non-compliant with local regulations[152] - Mainland China's regulatory environment imposes significant restrictions on direct selling, including prohibitions on multi-level compensation and overseas personnel participation[155] - Regulatory scrutiny in Mainland China has halted new direct selling licenses since early 2019, impacting expansion plans[160][161] - Product registration in Mainland China for health foods takes a minimum of two years, delaying new product launches[163] - Direct selling in Mainland China is limited to specific product categories like cosmetics, health foods, and household appliances[164] Manufacturing and Supply Chain - Manufacturing subsidiaries and third-party suppliers accounted for 23% and 77% of product sourcing, respectively, in 2023[27] - Production difficulties and quality control issues have led to stock outages and inventory write-downs, impacting sales[198] - Reliance on sole suppliers for key products like ageLOC Galvanic Facial Spa and Nu Skin Facial Spa devices poses risks if contracts are not maintained[199] - Supply shortages or price increases for unique natural ingredients in products like ageLOC Meta and ageLOC Youth could harm revenue[199] - Disruptions in manufacturing, supply chain, and distribution operations could significantly affect the company's business[200] - Climate change impacts, including extreme weather and rising costs, may disrupt production and sourcing of components[201] - Transportation channel disruptions, such as port congestion and increased fuel expenses, have raised shipping costs and reduced profitability[204] - Manufacturing facilities face regulatory risks, including labor and environmental regulations, which could result in financial penalties[205] - Product launch challenges, including forecasting difficulties and supply chain pressures, may negatively impact sales and revenue[206] Market and Geographic Segments - Nu Skin operates in nearly 50 markets, divided into seven segments: Mainland China, South Korea, Southeast Asia/Pacific, Americas, Japan, Hong Kong/Taiwan, and Europe & Africa[55] - In Mainland China, the company utilizes a unique business model involving retail stores, sales employees, independent direct sellers, and independent marketers, differing from other markets[34][48] - The company operates a cross-border e-commerce platform in Mainland China, selling products like ageLOC Meta and ageLOC Youth, which are not registered for direct selling[157] - Mainland China's e-commerce platform allows sales force members to promote and refer customers, earning a promotion bonus separate from direct selling compensation[158] - The company faced a significant negative impact on revenue and the number of Sales Leaders and Customers in Mainland China due to adverse publicity and government actions in 2014[130] - Japan's strict regulatory requirements and consumer complaints have led to ongoing scrutiny of the company's Brand Affiliates[131] - The ongoing conflict in Russia and Ukraine has caused distraction to the company's sales force[183] - Sales Leaders in Mainland China declined by 32% from December 31, 2021 to December 31, 2022 due to COVID-related pressures[193] Human Capital and Diversity - The company had approximately 3,700 full- and part-time employees worldwide as of December 31, 2023, excluding approximately 11,500 sales employees in Mainland China[100] - The company's human capital strategy includes a "Best You" wellness program, leadership training, and global employee experience surveys every six months[102][105] - The company's Diversity, Equity, and Inclusion initiatives include employee resource groups and training to address unintentional biases in hiring[103][104] Leadership and Governance - Steven J. Lund has served as Executive Chairman of the board since 2012 and previously held roles including President and CEO from 1996 to 2003[111] - Ryan S. Napierski has been President since 2017 and CEO since 2021, with prior roles including President of Global Sales and Operations and President of Nu Skin Japan[112] - James D. Thomas was appointed CFO in July 2023, having served as Interim CFO since March 2023 and as Chief Accounting Officer since 2019[113] - Chayce D. Clark has been Executive Vice President and General Counsel since 2021, joining the company in 2015 as Assistant General Counsel[114] - Steven K. Hatchett became Executive Vice President and Chief Product Officer in 2022, having joined the company in 2018 as Senior Vice President of Global Manufacturing[115] Risks and Challenges - Risks associated with direct selling include challenges to the network marketing system, regulatory scrutiny, and potential harm from improper sales force actions[117] - Operations in Mainland China face risks from government scrutiny, regulatory changes, and challenges in obtaining necessary approvals[117] - The company is exposed to risks from epidemics, international market conditions, and competition, which could negatively impact business performance[117] - Manufacturing and operational risks include production difficulties, supply chain disruptions, and challenges in managing growth[118] - Legal and regulatory risks include potential product liability claims, non-compliance with anti-corruption laws, and changes in tax and customs laws[118] - The company faces risks from foreign-currency fluctuations, with a strengthening U.S. dollar potentially reducing reported revenue, gross profit, and net income[186] - High inflation and currency devaluations in international markets could negatively impact the company's balance sheet and results of operations[188] - The company is exposed to risks from currency controls, which could limit the timing and amount of cash repatriation[187] - The company's sales force productivity was negatively impacted by COVID-19, including travel restrictions and supply chain interruptions[180] - Inflation and economic challenges in Mainland China negatively impacted 2022 and 2023 sales, with potential continued effects in 2024[170] - The company faces intense competition from direct selling, affiliate marketing, and gig economy companies, with AI adoption becoming a critical factor[172][173] Product Registration and Medical Devices - The company's Nu Skin Facial Spa and RenuSpa iO devices were cleared for marketing through the FDA's 510(k) process as medical devices with cosmetic benefits[91] - The company registered ageLOC Boost as a medical device in Thailand and is seeking medical device registration for Nu Skin WellSpa iO in Thailand[93] - The company's Pharmanex BioPhotonic Scanner, ageLOC LumiSpa, and other devices are registered as "health care equipment" or "household appliances" in Mainland China[94] Rhyz Companies and Segments - Rhyz companies generated $216.6 million, or 11% of the company's 2023 reported revenue (excluding sales to the core Nu Skin business)[99] - The company's Rhyz Manufacturing Segment includes Elevate Nutraceuticals, 3i Solutions, CasePak, and Wasatch Product Development[98] - The company's Rhyz Other Segment includes Beauty Biosciences, LifeDNA, and Mavely, focusing on digital and retail channels, DNA assessment, and social commerce[99]

Core Viewpoint - Nu Skin Enterprises, Inc. (NUS) is expected to report a decline in both revenue and earnings for the fourth quarter of 2023, with significant year-over-year decreases anticipated [1][3]. Revenue Summary - The Zacks Consensus Estimate for fourth-quarter revenues is $479.4 million, reflecting an 8.2% decrease from the same quarter last year [1]. - For the full year 2023, revenues are projected to be nearly $2 billion, indicating an 11.9% decline compared to the previous year [1][3]. - Management anticipates fourth-quarter revenues between $440 million and $480 million, suggesting a decline of 8-16%, including a negative foreign currency impact of 3-2% [3]. Earnings Summary - The consensus estimate for quarterly earnings is 29 cents per share, representing a 67.4% decline from the prior-year quarter [1]. - For 2023, the earnings estimate is $1.76 per share, indicating a drop of 39.3% from the previous year's level [1]. - Management expects adjusted EPS for the fourth quarter to be between 15 and 30 cents, which also suggests a year-over-year decline [3]. Performance Metrics - Nu Skin has a trailing four-quarter earnings surprise of 17.4% on average, but it reported a negative earnings surprise of 12.5% in the last quarter [2]. - The company is currently ranked 3 (Hold) by Zacks and has an Earnings ESP of -17.24%, indicating low odds for an earnings beat this time [4]. Influencing Factors - Persistent macroeconomic challenges are affecting consumer spending and customer acquisition, negatively impacting Nu Skin's core business [3]. - The company is implementing cost-control measures to support its profitability amidst these challenges [4].

Core Viewpoint - The market anticipates a year-over-year decline in Nu Skin Enterprises' earnings due to lower revenues, with the earnings report expected on February 14, 2024, being crucial for stock price movement [1] Group 1: Earnings Expectations - Nu Skin is projected to report quarterly earnings of $0.29 per share, reflecting a year-over-year decrease of 67.4% [2] - Expected revenues for the quarter are $479.35 million, down 8.2% from the same quarter last year [2] Group 2: Estimate Revisions - The consensus EPS estimate has been revised 1.52% higher in the last 30 days, indicating a reassessment by analysts [3] - The Most Accurate Estimate for Nu Skin is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -17.24%, suggesting a bearish outlook from analysts [6] Group 3: Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank of 1, 2, or 3 [5] - Nu Skin currently holds a Zacks Rank of 3, making it challenging to predict a beat on the consensus EPS estimate [6][7] Group 4: Historical Performance - In the last reported quarter, Nu Skin was expected to post earnings of $0.64 per share but delivered only $0.56, resulting in a surprise of -12.50% [8] - Over the past four quarters, Nu Skin has beaten consensus EPS estimates three times [8] Group 5: Conclusion - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [9] - Nu Skin does not appear to be a compelling candidate for an earnings beat, and investors should consider additional factors before making decisions [9]

Core Viewpoint - Nu Skin Enterprises, Inc. (NUS) is advancing its Nu Vision 2025 strategy to become a leading integrated beauty and wellness company, leveraging technology and product programs to capture market share despite facing macroeconomic challenges [1][6]. Product Launches - NUS is launching innovative beauty devices, including the ageLOC TRMe personalized weight management system and ageLOC WellSpa iO, enhancing its growth strategy [2]. - The company has successfully introduced its Vera and Stela apps across all markets, further solidifying its position in the beauty device sector [2]. Strategic Initiatives - The Nu Vision 2025 strategy focuses on personalized beauty and wellness, social commerce, and digital platform expansion, aiming to improve customer engagement and recurring revenues [4][5]. - The EmpowerMe strategy is designed to empower affiliates, enhance product consumption, and increase customer lifetime value [4]. Operational Developments - NUS is implementing cost-control measures and has acquired BeautyBio, a clean skincare and beauty device brand, to strengthen its market position [3]. - The company has launched Equinox, a new global e-commerce platform in North America, expected to enhance customer experience and operational efficiency [5]. Market Challenges - NUS is facing persistent macroeconomic obstacles that have negatively impacted consumer spending and customer acquisition, particularly in Mainland China and the Americas [6]. - The company's stock has decreased by 3.4% over the past three months, contrasting with the industry's 3.2% growth [6].

Q3 2023 Important Information Regarding Forward-Looking Statements:This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent the company’s current expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and include, but are not limited to, stateme ...

Financial Data and Key Metrics Changes - In Q3 2023, the company reported revenue of $499 million and non-GAAP earnings per share of $0.56, excluding a strategic inventory write-down [5][18] - The revenue was impacted by a negative foreign currency effect of 1.5%, equating to $8.1 million [18] - The gross margin was reported at 58.6%, or 71.8% when excluding the inventory charge, compared to 61.8% for the core Nu Skin business [19][20] Business Line Data and Key Metrics Changes - The Rhyz segments experienced over 40% year-over-year growth and now account for 12% of total business, with expectations to grow to 20% to 25% in the next two years [12] - The introduction of ageLOC WellSpa iO contributed to notable gains in Japan, Hong Kong, Taiwan, and Europe [5] - Selling expenses as a percentage of revenue decreased to 37.6%, largely due to growth in the Rhyz manufacturing segment [20] Market Data and Key Metrics Changes - The company faced significant challenges in Mainland China, where consumer spending slowed, impacting overall sales [5][4] - In the Americas, prolonged inflation has led to a more cautious and price-sensitive consumer [5] - Growth was noted in Southeast Asia Pacific and South Korea segments, partially offsetting challenges in other regions [5] Company Strategy and Development Direction - The company is focusing on three strategic imperatives: EmpowerMe personalization, social commerce, and digital ecosystem [7] - A strategic global realignment of the product portfolio is planned, with an anticipated elimination of 20% to 30% of non-strategic SKUs over the next 12 to 18 months [16] - The company aims to enhance its connected device roadmap, targeting 30% of revenue from connected devices by 2025 [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the macro-environmental headwinds impacting consumers globally and indicated a cautious outlook for the near term [4][13] - The company plans to introduce a new mental wellness category in 2024, reflecting strategic investments made in recent years [13] - Management emphasized the importance of simplifying the business to focus on core value drivers and enhancing operational efficiency [14][16] Other Important Information - The company announced a $65.7 million inventory write-off to optimize its product portfolio [18][19] - General and administrative expenses declined by $7 million year-over-year, reflecting prudent expense management [21] - The company maintained a strong balance sheet and financial prudence, ensuring the ability to invest in the business while returning value to shareholders [17] Q&A Session Summary Question: Impact of weakening Chinese consumer on product launches - Management noted that the weakening consumer sentiment in China has led to a more cost-conscious approach, with plans to focus on lower-priced products [26][27] Question: Changes in promotional strategies in China - Management confirmed that promotions are critical to the strategy, especially in response to the price-sensitive consumer environment [29][30] Question: Growth rates in the beauty market - Management indicated that mass consumer goods are performing well, while luxury segments face pressure, but they remain optimistic about the long-term potential of beauty devices [32][33] Question: Long-term outlook for China - Management expressed confidence in the long-term potential of the Chinese market, particularly in second and third-tier cities, despite current challenges [36][38] Question: Changes in go-to-market strategy in China - Management acknowledged that the go-to-market strategy has been less progressive in China compared to other markets due to macroeconomic challenges [39][41] Question: Inflation impact on 2024 outlook - Management is monitoring inflationary pressures and their impact on pricing and operating margins, with a cautious outlook for 2024 [42][43]

Revenue Performance - Revenue for Q3 2023 decreased 7% to $498.8 million, compared to $537.8 million in Q3 2022, and for the first nine months of 2023, revenue decreased 13% to $1.5 billion from $1.7 billion in the prior-year period[99]. - The decline in revenue was primarily driven by macroeconomic pressures affecting consumer spending and customer acquisition, with Customers, Paid Affiliates, and Sales Leaders declining 21%, 23%, and 6% year-over-year, respectively[99][100]. - Revenue from the Americas segment decreased 30% in Q3 2023 to $91.7 million, while the Asia/Pacific segment saw an 18% decline to $68.7 million[104]. - Total Nu Skin revenue for Q3 2023 was $498.8 million, a 7% decrease, while total revenue for the first nine months was $1.48 billion, down 13%[104]. - Mainland China revenue was negatively impacted by 6% due to unfavorable foreign currency fluctuations, despite a year-over-year increase in sales leaders and paid affiliates[114]. - Southeast Asia/Pacific reported a significant decline in revenue, with ageLOC Meta generating $17.1 million in the first nine months of 2023, down from $40.3 million in the same period of 2022[116]. Earnings and Profitability - Earnings per share for Q3 2023 decreased 45% to $(0.74), compared to $(0.51) in Q3 2022, and for the first nine months, it decreased 97% to $0.03 from $0.94[101]. - The third quarter of 2023 included an inventory write-off charge of $65.7 million, contributing to the decline in earnings per share[101]. - Gross profit as a percentage of revenue fell to 58.6% for the third quarter of 2023, down from 67.7% in the prior-year period[127]. - In Q3 2023, the company reported a net loss of $37.0 million, compared to a net loss of $25.4 million in Q3 2022[135]. - For the first nine months of 2023, net income was $1.3 million, a significant decrease from $47.6 million in the same period of 2022[135]. - The effective tax rate for Q3 2023 was (7.3)%, compared to 12.3% in Q3 2022, reflecting a decline in profitability[134]. Customer Metrics - Total customers decreased by 21% year-over-year to 978,907 in September 2023, down from 1,239,384 in September 2022[110]. - The number of Customers, Paid Affiliates, and Sales Leaders declined significantly, impacting overall business performance[108][109]. - The Americas segment experienced a decline in revenue, customers, paid affiliates, and sales leaders due to macroeconomic challenges, with a 27% decrease in customers[112]. - South Korea's paid affiliates decreased by approximately 17,000 due to changes in eligibility requirements for rewards[117]. Product Performance - The new product ageLOC TRMe generated approximately $30.2 million in revenue for Q3 2023 and $66.3 million for the first nine months, while ageLOC WellSpa iO generated $35.6 million in Q3 2023[100]. - The Manufacturing segment under Rhyz Investments reported a 20% increase in revenue for Q3 2023 to $49.7 million, while Rhyz other segment revenue surged 1,910% to $10.8 million[104]. - The Manufacturing segment revenue increased by 20% for the third quarter of 2023, driven by new customer onboarding and automation efforts[123]. Cash Flow and Expenditures - The company generated $64.5 million in cash from operations in the first nine months of 2023, down from $82.5 million in the prior-year period[136]. - As of September 30, 2023, cash and cash equivalents were $250.0 million, a decrease from $278.5 million as of December 31, 2022[136]. - Capital expenditures for the nine months ended September 30, 2023, were $38.1 million, with an estimated total of $50–60 million for the year[138]. - The new manufacturing plant in Mainland China is expected to begin production in Q4 2023, with total expenditures for the project projected at approximately $60 million[138]. Strategic Initiatives - The company plans to continue launching new products in Q4 2023, with previews in Mainland China for ageLOC TRMe and ageLOC WellSpa iO[100]. - The company expects total charges of approximately $15–$25 million in severance costs for the fourth quarter of 2023 as part of its strategic plan[131]. Foreign Currency and Market Risks - A significant portion of the company's revenue and expenses are recognized outside of the United States, with local currencies considered the functional currency for most subsidiaries[154]. - The subsidiary in Argentina adopted highly inflationary accounting as of July 1, 2018, with net sales from Argentina being less than 2% of consolidated net sales for the three- and nine-month periods ended September 30, 2023 and 2022[155]. - The company does not use derivative financial instruments for trading or speculative purposes and regularly monitors foreign currency risks[156]. - The company continues to evaluate its foreign currency hedging policy to reduce exposure to fluctuations in foreign currency exchange rates[156]. - A weakening of the U.S. dollar positively impacts reported revenue and earnings, while a strengthening negatively impacts them[154]. - The uncertainty of exchange rate fluctuations makes it difficult to predict their effect on future business and financial condition[154].

Financial Data and Key Metrics Changes - In Q2 2023, the company reported revenue of $500.3 million and earnings per share (EPS) of $0.54, both in line with guidance and reflecting an 8% year-over-year growth in Mainland China [5][17] - The gross margin for Q2 was 72.9%, down 70 basis points year-over-year, while the operating margin was 8.5%, compared to 9.2% in the prior year [17] - The company anticipates Q3 2023 revenue between $500 million and $540 million, with EPS guidance of $0.54 to $0.69 [20] Business Line Data and Key Metrics Changes - The growth in China was offset by softness in other markets, particularly in Southeast Asia Pacific, Europe, Africa, and Latin America, due to macroeconomic pressures [6] - The Americas and South Korea launched new products, but performance was below expectations due to declines in channel dynamics [7] - The RISE ecosystem reported a 33% year-over-year growth, indicating strong performance in manufacturing [12] Market Data and Key Metrics Changes - The company experienced a negative foreign currency impact of 3% or $16.4 million in Q2 [17] - The Americas and South Korea markets faced challenges in customer acquisition due to aggressive price increases [6] Company Strategy and Development Direction - The company is focused on its multiyear transformation, "Nu Vision 2025," aiming to become a leading integrated beauty and wellness company [4] - Key initiatives include the launch of the ageLOC WellSpa iO device and the EmpowerStart program to enhance affiliate-powered social commerce [8][9] - The acquisition of BeautyBio and a majority stake in Life DNA reflects the company's commitment to personalization and innovation in the beauty and wellness space [13][14] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about growth in China, citing positive trends in affiliate counts and product uptake [5][26] - The company acknowledges ongoing macroeconomic challenges but believes future opportunities will expand as strategic investments are made [20][21] Other Important Information - The company is implementing a new e-commerce platform, Equinox, to enhance operational efficiencies and customer experience [11] - Adjustments to eligibility requirements for rewards among paid affiliates are being made to focus on those actively building a consumer base [10] Q&A Session Summary Question: Insights on the BeautyBio acquisition - Management highlighted the strategic importance of BeautyBio's IP and capabilities, with expected revenue uplift of $10 million to $15 million in the second half of the year [24][25] Question: Growth in China and affiliate count - Management expressed cautious optimism regarding growth in China, attributing it to improved channel dynamics and product uptake [26][27] Question: Full year guidance adjustments - The company adjusted its guidance due to stronger-than-expected foreign currency impacts and macroeconomic evaluations [29][30] Question: Factors for expected growth in Q4 - Key factors include positive trends in China and the anticipated impact of the WellSpa iO product launch [34][35] Question: U.S. consumer behavior changes - Management noted trade-off decisions among U.S. consumers, impacting higher-end product sales [41][42] Question: Distribution strategy for BeautyBio - BeautyBio operates independently and is not a direct seller; the company plans to explore synergies without full integration [49][50] Question: TRMe product launch status - The TRMe product is rolling out market by market, with a cautious approach to the U.S. market due to competitive dynamics [55][56]

Revenue Performance - Revenue for Q2 2023 decreased 11% to $500.3 million, compared to $560.6 million in Q2 2022, and for the first half of 2023, revenue decreased 16% to $1.0 billion from $1.2 billion in the prior year[96]. - Revenue from the Americas segment decreased 14% to $107.6 million in Q2 2023, while the Mainland China segment reported a 2% increase to $88.4 million[101]. - The Southeast Asia/Pacific segment saw a significant decline of 32% in Q2 2023, with revenue of $63.8 million[101]. - The total revenue for the first half of 2023 was $981.7 million, down 16% from $1.165 billion in the same period last year[101]. - Revenue for the second quarter of 2023 decreased by 11% to $500.3 million, compared to $560.6 million in the prior-year period[122]. Customer Metrics - The number of Customers, Paid Affiliates, and Sales Leaders declined by 25%, 23%, and 9% year-over-year, respectively[96]. - Total customers decreased by 25% year-over-year to 1,041,118 as of June 30, 2023, down from 1,380,615 in the prior year[106]. - Paid affiliates decreased by 23% year-over-year to 187,652, down from 242,133[106]. Earnings and Profitability - Earnings per share for Q2 2023 decreased 19% to $0.54, and for the first half of 2023, it decreased 47% to $0.76, primarily due to revenue decline and $9.8 million in restructuring charges[98]. - In Q2 2023, net income was $26.9 million, down from $34.2 million in Q2 2022, and for the first six months of 2023, net income was $38.3 million compared to $73.0 million in the same period of 2022[130]. - Gross profit as a percentage of revenue was 72.9% for the second quarter of 2023, down from 73.6% in the prior-year period[123]. Expenses and Charges - General and administrative expenses decreased to $137.0 million in the second quarter of 2023, compared to $141.6 million in the prior-year period[126]. - Selling expenses as a percentage of revenue decreased to 37.0% for the second quarter of 2023, down from 39.1% in the prior-year period[124]. - The company incurred total restructuring charges of approximately $53.3 million in 2022, with cash charges of $40.8 million and non-cash charges of $12.5 million[127]. Cash Flow and Capital Expenditures - Cash from operations in the first six months of 2023 was $13.4 million, a significant decrease from $54.1 million in the prior-year period, primarily due to an $18.5 million increase in inventory[131]. - As of June 30, 2023, cash and cash equivalents were $252.3 million, down from $278.5 million as of December 31, 2022, driven by dividend payments and capital expenditures[131]. - Working capital decreased to $347.5 million as of June 30, 2023, from $400.6 million as of December 31, 2022, mainly due to acquisitions of BeautyBio and LifeDNA[132]. - Capital expenditures for the first half of 2023 were $26.2 million, with an estimated total of $55–75 million planned for the year, including a new manufacturing plant in Mainland China[133]. Foreign Currency and Market Risks - The company regularly monitors foreign currency risks and takes measures to reduce the impact of foreign exchange fluctuations on operating results[150]. - A significant portion of the company's revenue and expenses are recognized outside of the United States, impacting reported revenue and earnings based on U.S. dollar fluctuations[148]. - The company’s reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar[148]. - The functional currency for the subsidiary in Argentina became the U.S. dollar due to highly inflationary accounting adopted as of July 1, 2018[149]. Strategic Initiatives - The launch of ageLOC TRMe generated approximately $12.7 million in revenue during Q2 2023[97]. - Anticipated sales from the upcoming ageLOC WellSpa iO are projected to be between $70 million and $90 million for the second half of 2023[97]. - The company acquired 60% of LifeDNA for $4.0 million and 100% of Beauty Biosciences for $75.0 million in cash during Q2 2023[121]. Shareholder Returns - The company has $175.4 million available for stock repurchases under its existing plan, with no shares repurchased in the first half of 2023[135]. - The company anticipates continuing quarterly cash dividends, having declared $0.39 per share in February and May 2023, totaling approximately $39 million[136].