Nu Skin(NUS) - 2024 Q2 - Quarterly Report

Revenue Performance - Revenue for Q2 2024 decreased by 12% to $439.1 million compared to$ 500.3 million in the prior-year period, with a 13% decline to $0.9 billion for the first six months of 2024[97] - Revenue for Q2 2024 decreased by 12% to$ 439.1 million compared to $500.3 million in the prior-year period[120] - Revenue for the first half of 2024 decreased by 13% to$ 0.9 billion compared to $1.0 billion in the prior-year period[120] - Foreign-currency fluctuations negatively impacted Q2 and first six months of 2024 revenue by 4.2% and 4.0%, respectively[97] - The Americas segment revenue was negatively impacted by 6% due to unfavorable foreign currency fluctuations in Q2 2024[109] - Constant-currency revenue change removes foreign-currency exchange rate impacts, enabling period-to-period performance comparisons[153] - Majority of revenue and expenses are recognized outside the U.S., with reported revenue and earnings impacted by U.S. dollar fluctuations[157] Segment Performance - Rhyz segments showed significant growth, with revenue increasing by 32.3% in Q2 and 43.3% in the first half of 2024, driven by acquisitions and organic growth[98] - Nu Skin Americas segment revenue declined by 21.1% in Q2 2024, while Mainland China saw a 26.8% decline[102] - Rhyz Investments Manufacturing segment revenue grew by 13.0% in Q2 2024, with Rhyz other segment revenue increasing by 186.1%[102] - Total Nu Skin segment contribution decreased by 23% in Q2 2024, while Rhyz Investments segment contribution declined by 550%[104] - Manufacturing segment revenue increased by 13.0% in Q2 2024 and 25.2% in the first half of 2024[118] Customer and Affiliate Metrics - Customers, Paid Affiliates, and Sales Leaders declined by 14%, 17%, and 16% year-over-year, respectively[97] - Total Customers decreased by 14% to 893,514 in June 2024 compared to 1,041,118 in June 2023[107] - Total Paid Affiliates decreased by 17% to 155,486 in June 2024 compared to 187,652 in June 2023[107] - Japan's Paid Affiliates decreased by 41% to 21,575 in June 2024 due to changes in eligibility requirements[107] Earnings and Profitability - Earnings per share for Q2 2024 decreased by 541% to$ (2.38), primarily due to $149.4 million in restructuring and impairment charges[99] - Gross profit as a percentage of revenue decreased to 70.0% in Q2 2024 from 72.9% in the prior-year period[121] - Selling expenses as a percentage of revenue increased to 37.7% in Q2 2024 from 37.0% in the prior-year period[123] - General and administrative expenses decreased to$ 117.9 million in Q2 2024 from $137.0 million in the prior-year period[124] - Net loss of$ (118.3) million in Q2 2024 compared to net income of $26.9 million in the prior-year period[132] Restructuring and Impairment Charges - Total charges under the workforce reduction program estimated at$ 20.0 million in cash severance, $2.2 million in other cash charges, and$ 8.2 million in non-cash charges, including $6.4 million in fixed asset impairments[126] - Non-cash goodwill impairment charge of$ 130.9 million recorded in Q2 2024 due to decline in stock price and market capitalization[127] - Impairment charge of $10.1 million for the BeautyBio retail asset group in Q2 2024[128] Cash Flow and Financial Position - Cash flow from operations increased to$ 54.5 million in the first six months of 2024, up from $13.4 million in the prior-year period[133] - Capital expenditures for 2024 estimated at$ 40–60 million, including Rhyz plant expansion and facility upgrades[134] - Outstanding borrowings under the revolving credit facility decreased to $90.0 million as of June 30, 2024, from$ 120.0 million as of December 31, 2023[136] - Quarterly cash dividends of $0.06 per share declared in February, May, and August 2024[138] - Non-U.S. cash and cash equivalents held as of June 30, 2024, totaled$ 170.1 million, down from $213.7 million as of December 31, 2023[139] Strategic Initiatives and Outlook - The company plans to launch MYND360, a new brand focused on cognitive health, in Q3 2024[98] - The company remains optimistic for the remainder of 2024, with key events like the Global Nu Skin L!VE in July and September 2024[98] - Revenue and profitability forecasts considered recent and historical performance, strategic initiatives, industry trends, and macroeconomic factors, with assumptions similar to those used by market participants[149] - Sensitivity analysis showed that a 5% reduction in annual EBIT or a 40 basis point increase in discount rates did not cause reporting units' fair values to fall below carrying values[151] Seasonal and Market Factors - Seasonal factors, such as local New Year celebrations in Asian markets, negatively impact Q1 revenue, while vacation patterns in Q3 affect direct selling[152] - Argentina subsidiary adopted highly inflationary accounting in 2018, with net sales contributing less than 2% of consolidated net sales as of June 30, 2024[158] - Foreign currency exposure is managed through exchange contracts and intercompany loans, with no material derivative contracts held as of June 30, 2024[159] Interest and Other Expenses - Interest expense increased to$ 6.7 million in Q2 2024, up from $5.8 million in the prior-year period[129]