Nu Skin(NUS) - 2024 Q1 - Quarterly Report

Revenue Performance - Revenue for Q1 2024 decreased 13.3% to $417.3 million, down from$ 481.5 million in Q1 2023, with a 3.8% negative impact from foreign-currency fluctuations[95]. - Revenue for the three-month period ended March 31, 2024 decreased 13.3% to $417.3 million, compared to$ 481.5 million in the prior-year period[117]. - Revenue from the Americas segment decreased by 25.8% year-over-year, with subscription sales disruptions negatively impacting revenue[101][108]. - Mainland China revenue declined by 10.2% year-over-year, affected by macroeconomic challenges and decreased consumer spending[101][109]. - Japan's revenue decline was impacted by a 10.3% negative effect from unfavorable foreign-currency fluctuations[101][110]. - Total Customers decreased to 875,261, down 19% from 1,083,536 in the prior year[107]. Earnings and Profitability - Earnings per share for Q1 2024 decreased 104% to $(0.01), compared to$ 0.23 in Q1 2023, primarily due to the decline in revenue[97]. - Net income for the first quarter of 2024 was $(0.5) million, compared to$ 11.4 million in the prior-year period[125]. - Gross profit as a percentage of revenue was 70.5% for the first quarter of 2024, down from 72.3% in the prior-year period, with a 3.1 percentage decrease in gross margin attributed to increased write-offs[118]. - Selling expenses as a percentage of revenue decreased to 36.8% for the first quarter of 2024, compared to 39.1% in the prior-year period[119]. - General and administrative expenses decreased to $124.6 million in the first quarter of 2024, down from$ 133.9 million in the prior-year period[120]. Cash Flow and Capital Management - Cash from operations generated in the first three months of 2024 was $3.3 million, compared to a net outflow of$ 22.1 million during the prior-year period[126]. - Working capital as of March 31, 2024 was $338.0 million, down from$ 373.0 million as of December 31, 2023[127]. - Capital expenditures for the three months ended March 31, 2024 were $12.3 million, with an estimated total of$ 40–60 million planned for 2024[127]. - The company believes that existing cash balances, future cash flows from operations, and existing lines of credit will be adequate to fund cash needs on both short- and long-term bases[133]. - The company has the option to realign strategic plans, including a reduction in capital spending, stock repurchases, or dividend payments if cash flow needs are not met[133]. Strategic Initiatives and Growth - The launch of the ageLOC WellSpa iO smart connected device generated approximately $23.7 million in revenue during Q1 2024[96]. - Rhyz segments experienced a 57.5% growth, driven by acquisitions and organic growth, helping to partially offset declines in core Nu Skin segments[96]. - The company anticipates continued growth in the Rhyz segments, which are expected to diversify revenue and create synergies for owned and partner brands[96]. Foreign Currency and Risk Management - The company may seek to reduce exposure to fluctuations in foreign currency exchange rates through foreign currency exchange contracts and intercompany loans[149]. - The company regularly monitors foreign currency risks and takes measures to reduce the impact of foreign exchange fluctuations on operating results[149]. - The company uses constant-currency revenue change as a non-GAAP financial measure to facilitate period-to-period comparisons of performance[143]. - The company performed a sensitivity analysis indicating that a 5% reduction in annual earnings before interest and tax did not cause estimated fair values of reporting units to decline below carrying values[141]. - The company adopted highly inflationary accounting for its subsidiary in Argentina, with the functional currency becoming the U.S. dollar[148]. Tax and Interest Expenses - Interest expense increased to$ 7.3 million in the first quarter of 2024, compared to $4.9 million in the prior-year period[123]. - The effective tax rate for the first quarter of 2024 was 148.4% of pre-tax book income, compared to 22.0% in the prior-year period[124]. Impairment and Valuation - The fair value of all reporting units exceeded their carrying amounts by approximately 1% - 7%, indicating no impairment charge was required[139]. - Revenue and profitability forecasts considered recent and historical performance, strategic initiatives, industry trends, and macroeconomic factors[139].