Nu Skin Enterprises, Inc.

Good day and welcome to the first quarter 2022 New Skins Enterprises Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Scott Pond, Vice President of IR. Please go ahead.

Thanks, Betsy, and good afternoon, everyone. Today on the call with me are Ryan Napierski, President and CEO, Connie Tang, Chief Global Growth Officer, and Mark Lawrence, CFO. On today's call, comments will be made that include some forward-looking statements. These statements involve risk, and uncertainties and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks. Also during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe these non-GAAP financial numbers assist in comparing period-to-period results in a more consistent manner. please refer to our investor website for any required reconciliation of non-GAAP numbers. And with that, I'll turn the call over to Ryan.

Hey, thanks, Scott. Good afternoon, everybody. Thanks for joining the call today. We remain acutely focused on New Vision 2025 and our strategic transformation that we laid out with each of you at our investor day in February. This evolution of our business is vital to our long-term success as we lean into the rapidly evolving commercial landscape and we take advantage of emerging market trends such as product personalization, social commerce, and the gig economy in order to rejuvenate sustained growth in the coming years, all in spite of these near-term disruptions we're seeing in the market. For the first quarter, we were pleased to report strong results, including revenue of $604.9 million, which exceeded the high end of our prior guidance by approximately $15 million. First quarter earnings per share also came in slightly above our prior guidance at $0.76, due in large part to the revenue beat. Our outperformance was driven by solid gains in the U.S., Taiwan, and Southeast Asia, and continued effective product rollouts, including AgeLock Meta, and Beauty Focus Collagen Plus, which both performed well in the quarter. These two product introductions helped to further strengthen the wellness side of our business, improving from 35% of revenue to 44% year over year. We're particularly encouraged with our results considering the continued global pandemic disruptions, including increasing lockdowns in China, the conflict in Europe, and global economic challenges. Now, let me give you some brief thoughts on a couple of our key regions. Unforeseen global factors of heightened uncertainty in both EMEA and China. We're deeply saddened by the unfortunate situation in Ukraine and recognize the profound impact that these events are having on many people around the world. On March 4th, we announced suspension of our limited operations in Russia and Ukraine and and are experiencing some softness in EMEA due to the broader distractions associated with the war in this part of the world. In mainland China, we remain optimistic in our long-term view of this market's substantial potential for our unique beauty and wellness products. However, operations in the latter part of first quarter were impacted by COVID-related lockdowns and other factors, and we anticipate these disruptions and the loss of momentum to impact our Q2 and annual results. In other regions, the rollout of Meta and Collagen Plus and other new products coupled with the continuing advancement of our social commerce initiatives remain encouraging, contributing to return to growth in Southeast Asia and continued growth in the US and Taiwan. Connie will provide a bit more context in just a few minutes. Nevertheless, given the global uncertainties in China, EMEA and the broader economy, we're lowering our outlook for 2022 by approximately $150 million. Now, in spite of this and the short-term challenges, we remain focused on the transformation of our business with New Vision 2025. Let me provide just a bit more context on that. While still in the early stages, we're fully engaged in this major strategic transformation to capitalize upon the commercial shifts of product personalization and beauty and wellness, social commerce, and the gig economy. Our transformation from traditional direct selling to becoming the world's leading integrated beauty and wellness company powered by our dynamic affiliate opportunity platform is all about defining a new framework for our company to win in this evolving landscape. For the first time in three years, we are preparing to meet with our team elites in London to align with our top global sales leaders around New Vision 2025 projects. and our three strategic imperatives, Empower Me, affiliate-powered social commerce, and our digital ecosystem. Let me just briefly talk about progress on each of the three. Our Empower Me personalization beauty and wellness strategy is intended to provide consumers with deeper insights into their individual skin care and body care needs. IoT-connected devices will be a key aspect of Empower Me, beginning with the launch of LumaSpa IO in early Q3 2020. followed by some limited previews of body I.O. beginning in Q4. Now these unique input-output devices will enhance the consumer experience and forge even stronger connections with the company through enhanced personalization of product and content curation, improving customer loyalty and lifetime value. Next, affiliate-powered social commerce builds on our roots of person-to-person marketing to amplify messaging around authentic personal recommendations from our roughly 250,000 paid affiliates by leveraging social media scale and reach. In 2022, we are leveraging key learnings from our Western markets as we refine our product promotions cadencing, introduce a new global pricing model, beginning with LumaSpa IO, and further train our sales force around the globe to embrace this new social commerce model. Thirdly, we continue to build out our digital-first ecosystem with the introduction of Vera and Stella apps towards the end of the first quarter. The Vera app leverages AI and machine learning to guide consumers through their personalized beauty and wellness journeys, while the Stella app enables brand affiliates to easily access key information and tools to better manage and build their businesses, all from their mobile devices. Both apps were introduced in English at the end of the quarter, and other languages and capabilities will be added throughout 2022. Now, to help you better understand our transformation and measure progress along the way, we committed in February to providing greater transparency into additional key drivers. Our first notable change is to begin reporting the number of paid affiliates, which is a broader segment of our sales force who actively share products with customers on a much more flexible basis and who act as a pipeline for future sales leaders. Connie will describe that a bit in just a couple of minutes. I'm also pleased to report our ongoing ESG efforts as we seek to improve people's lives and the world in which we all live. We recently released our fourth annual sustainability report where we highlighted our progress in several key areas, including the reduction of 131 tons of plastic and more than 34 tons of paper in 2021 due to packaging changes to more than 60 products and other related initiatives. In addition, the two Communitas Awards we recently received further reflect our tremendous commitment to our entire organization towards corporate social responsibility. Nu Skin also continues to lean into diversity, equity, and inclusion as we're pleased to be named to Forbes list of the world's top female-friendly companies, for 2021, as well as their list of America's best employers for 2022, where we rank number two within packaged goods, and number 57 out of 500 mid-sized companies overall. So in summary, while there are near-term uncertainties with China, Europe, and the broader economy, there are also new opportunities arising as our world continues to evolve. I'm optimistic about the future as we work towards New Vision 2025. Our agile model is built on a strong foundation and is globally diversified, which helps to mitigate risks and enables us to continually find new pathways for growth. In the early phases of New Vision 2025, I really am as confident as ever in our future as we leverage our capabilities and resources to transform to becoming the world's leading integrated beauty and wellness company, powered by our dynamic affiliate opportunity platform. So with that, I'll turn it over to Connie to provide some additional insight on market performance. Connie?

Thank you so much, Ryan. You know, before I share more information about our market performance by segment, I'd like to provide detail on the addition of paid affiliates to our earnings report that Ryan mentioned earlier. As we continue to focus on customer acquisition, our brand affiliates who primarily share products are a bridge to attracting new customers and nurturing relationships and community. Brand affiliates power our social commerce model. This is an important indicator of consumer purchasing activity in our business. The number of paid affiliates that we report include any brand affiliates as well as sales employees or independent directors in mainland China who earned sales compensation during the quarter. It's also important to notice flagship and how we are reporting our sales leader number going forward. Instead of just reporting the number of sales leaders who achieved certain qualification requirements in the last month of the quarter, we will be providing an average of all three months to more accurately reflect activity for the entire quarter. Our registered customer number has not changed. and includes those who purchase directly from New Skin during this quarter. Just as before, this does not include customers who buy directly from a member of our sales force. Collectively, we believe reporting this information each quarter provides a more complete picture of those participating in our business opportunity at all levels, whether it be through sharing products, building a team, or leading a sales organization. Now, as we look at our results, by segment for the quarter, our multi-year growth in the Americas, specifically the U.S., continued in quarter one. Coupled with solid Southeast Asia Pacific results, we continue to progress in our efforts to balance our global revenue distribution. In the Americas, growth in the U.S. market continues to be offset by macroeconomic factors in Latin America. The U.S. market grew 15% as we carry forward momentum from last year's Collagen Plus launch and building our subscription base. We also continue to drive further adoption of our social commerce model in the U.S. While Latin America continues to face macro pressures, we have worked with our leaders and continue to provide them with training to support the adoption of social commerce. In addition, we are adapting the Collagen Plus playbook which generated strong results in the US and we believe can do the same in Latin America. As EMEA is in the midst of conflict, this segment is down 25% in constant currency. The war in the Ukraine has created major disruptions in Eastern Europe and the impact is felt greatly across the entire region. Our teams throughout EMEA have spent much of their time and resources to support those directly impacted. And our hearts really do truly go out to all those whose lives have been thrown into turmoil during this difficult time. From a business perspective, as Ryan mentioned, we have suspended operations in Russia and Ukraine. Our leaders are identifying opportunities to rebuild business momentum in the EMPA region despite the ongoing conflict. As Ryan mentioned, our mainland Chinese business has been disrupted due to severe COVID-related lockdowns and other factors. Yet the team was able to deliver better than anticipated results in the market during the quarter, due in part to effective online product promotion. Shanghai and other areas continue to be under strict lockdown, furthering the disruptions of sales events and promotional activities and requiring frequent pivots. As we stated last quarter, we anticipate challenging headwinds to continue in mainland China. but we are looking forward to the launch of AgeLock LumiSpa IO in the last half of the year to help shift the momentum. The 6% constant currency revenue growth in Hong Kong and Taiwan has been led by strong performance in our Taiwan market. Taiwan has seen success with new customer acquisition through our Enjoy Customer Loyalty program with 4% growth in customers for the Taiwan-Hong Kong segments. Hong Kong was one of the markets hit hardest by strict COVID shutdowns during the quarter, but we were able to mitigate some of the impact of the lockdown with a live shopping broadcast event. We are taking the learnings from this virtual shopping event to inform how we organize future events and help drive social commerce growth in this market. While Japan was down slightly, the market was able to regain some momentum in the second half of the quarter, after a slow start due to strict COVID lockdowns. The launch of Ageloc Meta was a catalyst for this and with sales that significantly exceeded expectations. South Korea also experienced a slow start to the quarter and ended down 4% in local currency. We created positive momentum later in the quarter with a successful Ageloc Meta launch, and we are highly encouraged by a 200% increase in new subscriptions. In the second quarter, we will continue to focus on signing up subscribers, and we will run a TR90 challenge, which is typically driven sales and customer acquisition to market. Finally, in Southeast Asia and Pacific, we grew revenue 11% in constant currency. One of the key drivers of this was our ability to energize our sales leaders during our age-lock meta-previews ahead of launch. Combined with some loosening of long-lasting COVID restrictions throughout the region, this preview has built some energy ahead of the full launches of Ageloc Meta and LumiSpa IO later in the year. Now, looking ahead, we are building energy among our affiliates with continued launches of Ageloc Meta and Collagen Plus across our global markets and the upcoming Empower Me launch with our first connected beauty device, the LumiSpa IO, in the third quarter. We also continue to train and focus our leaders on social commerce adoption and the digital tools we are making available to them to attract and nurture customers to build their businesses. We anticipate some ups and downs in the midst of lingering concerns. However, we remain confident in our execution and the ongoing transformation of our business to support our new mission. those in more detail on our financial performance. Mark?

Hey, Connie, let me just summarize. We had a difficult connection on our side, and so I want to make sure that the analysts heard. So let me just quickly highlight a couple of things on that, and then we're happy during Q&A to answer any additional questions. So first, Connie just described our monthly paid affiliate number. We can talk more in Q&A about that. But again, this is a new indicator that sits really between customer and sales leaders. It's a key pipeline metric as we transition more to social commerce. And so you'll be seeing that data. Happy to talk more about that. On the geographic front, real quickly, as she just summarized there, America's growth really continues to be somewhat of a bifurcated path where we have strong growth in the U.S., which was up 15%, but Latin America continues to be pulled down by the macroeconomic environment, as we all understand. EMEA was down 25% in the quarter, predominantly related to the conflict and really the distractions across the rest of the markets there. She talked about mainland China. Obviously, that continues to be a major focus for us, but these extreme lockdowns in Shanghai and now extending through Beijing, Guangzhou, which are the major parts of their business, we're taking the guide down as a result of that as we continue to struggle. Hong Kong and Taiwan were up 6%, which we were pleased with, related to new product introductions and some good promotional activity there. Japan was down slightly on a year-over-year basis, but we continue to be optimistic about momentum there. Korea was down 4%, still struggling with some lockdowns, but we are seeing some encouraging signs with subscriptions, with TR90 business and the like. I think a key bright spot for us was in the South Asia Pacific, which grew 11%. predominantly related to meta previews and also the market opening up a little bit more, although there are some continued lockdowns there. So that's just a brief summary on the markets. And again, during Q&A, happy to go a little bit deeper if you had any questions on that. But Mark, with that, why don't you summarize?

Sure. Thanks, Ryan. Thanks, Connie. And thanks to all of you for joining our call today. I'll provide a brief Q1 financial review, and then give initial Q2 projections and update full year 2022 guidance. For additional detail, please visit our investor relations website. For the first quarter, our results beat expectations with revenue of $604.9 million with a negative foreign currency impact of 3%. We were down 8% in constant currency compared to Q1 2021, which was our largest first quarter in company history. In Q1 2022, revenue benefited in part by sales late in the quarter prior to an April 1st price increase. Earnings per share for the quarter was 76 cents. Our gross margin was 73.3%. This Q1 result was below our expectations, largely impacted by increased sales and promotions of Lumis by Devices as we prepare for the launch of the new connected LumiSpot IO device planned for Q3. Gross margin for the core Nu Skin business was 76.5% compared to 77.8% in the prior year quarter. We anticipate gross margin improvement throughout the year with global price increases largely implemented in Q2 as well as planned new product introductions. Selling expenses as a percent of revenue was 40.1%, 70 basis points below the prior year period. For the Nu Skin core business, selling expense was 43% compared to 43.7%. General and administrative expenses as a percent of revenue were 24.6% compared to 24.8% in the prior year. For the quarter, G&A declined $19 million year over year as we remain focused on carefully managing expenses. Operating margin for the quarter was 8.6% compared to 9.3% in the prior year period. We anticipate operating margin gains over the course of the year as we work towards our mid-term stated goal of 13%. The other income expense line reflects a $1.5 million expense compared to a $1.6 million gain in the prior year. Cash from operations was $7.5 million compared to a negative $18.9 million in the prior year. And as a reminder, Q1 is seasonally our lowest cash quarter. We are pleased with the inventory decline of $17 million during the quarter and remain committed to strategically invest in inventory to support our supply chain and plan to further reduce inventory levels as global supply chain constraints ease. We paid $19.3 million in dividends and repurchased $10 million of our stock with $235.4 million remaining in authorization. Our tax rate for the quarter was 23.6% compared to 26.5% in the prior year period and was within our guidance range of 21 to 25%. Our rise segment, which includes our manufacturing partners, declined 12% in the quarter. Remember that revenue reflected in our rise segment only represents sales to third-party customers. Rise revenue can fluctuate significantly depending on the available production capacity allocated to Nu Skin versus those external customers. The short-term demand for external customer products was soft in the quarter as many of our large customers were long on inventory and were impacted by continued supply chain constraints. Our manufacturing entities continue to benefit our core Nu Skin business by helping shore up our supply chain and generate U.S. profit that lowers the overall tax rate. We continue to carefully seek investment opportunities in this segment to further enhance our capabilities. Given the continued economic uncertainty, increasing COVID related factors, foreign exchange pressure, and geopolitical conflict, we are adjusting our annual guidance. We are reducing revenue by $150 million, consisting of a $100 million reduction in China, a $25 million reduction in EMEA, and a $25 million reduction due to increased FX headwinds as the dollar continues to strengthen. We are now expecting 2022 revenue of $2.51 to $2.62 billion. We anticipate earnings per share of $3.60 to $3.90. This guidance assumes a negative foreign currency impact of 3% to 4% and a tax rate of 25% to 28%. We are projecting second quarter revenue of $590 million to $620 million, assuming a foreign currency headwind of 3% to 4% and a tax rate of 25% to 28%. Q2 earnings per share guidance is 75 cents to 85 cents. So while we face near-term headwinds, we remain focused on making the right operational decisions and investments to resource the transformation of our business to NuVision 2025 and becoming the world's leading integrated beauty and wellness company powered by our dynamic affiliate opportunity platform. And with that operator, we will now open up the call for your questions.

We will now begin the question and answer session. To ask the question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Steph Wissink with Jefferies. Please go ahead.

Thank you. Good afternoon, everyone. Ryan, thanks for recapping Susan's comments. That was helpful. I want to just focus in on that affiliate class as part of your overall business model. Can you just help us think through what tools are available to them today, maybe how broad spread those tools have been deployed? And then as you think about that group specifically, what are their biggest advantages to your model, whether that's connectivity to the end consumer, data intelligence, feedback loops. If you could just talk a little bit about that cohort, that would be great. Thank you.

You bet, Steph. Thanks for the question. The paid affiliate class is a really important one for us and will be for you as the transformation continues to evolve. They are a more flexible group, whereas sales leaders have qualifications that they're required to maintain, sales volume requirements. Affiliates are really more of what I would define as kind of the gig economy type shares where they participate much more flexibly. It is a fairly, it's a newer classification or I guess focus for the company, although we've had affiliates for a long time, but with social commerce and the social sharing aspect, it's important that we really place more focus on them. And so The tools so far, as I mentioned, the Stella app and the Vera app, or specifically the Stella app that we just introduced literally, I think, on the last day of Q1, so we're just starting to roll that out, is a predominant tool for them that will help them to effectively share products, manage their connections through various tools. We have some CRM activity and the like, and so that's a really critical tool that we offer to them. And it's in the very nascent stage of that. We're really still developing that. We call it an MLP, a minimum lovable product now. We really expect by the end of this year that that tool will be much more robustly developed. I think advantage-wise, what we like about this group, again, plays into the gig economy, where there are far more people interested in kind of flexibly working, Uber driving, et cetera. And so this affiliate position coupled with our velocity compensation structure gives that much more flexible approach to the business as we see it today.

All right, that's great. And then my second one is on your innovation. I'm really curious about what a connected device can afford you in terms of more iterative innovation in the future versus I think what we've known of you in the past is these big launches and then you kind of manage the post-launch cycle. Seems like you could actually have a bit more of an iterative approach. So maybe talk a little bit about whether it's through IoT or through some of your other digital technologies, how you feel like you're shifting a bit in your innovation approach.

Yeah, and I'm glad you asked the question. I'll comment. I'd actually like Mark to maybe share a few thoughts from his Amazon days on this because it really is an important part. I mean, we really see this shift, Steph, from a customer integration standpoint between the company and our customer to be very important from a strategic shift. And I kind of liken it to almost a Netflix shipping DVDs versus having persona-driven content content curation. In our case, it's persona-driven product curation. For us, what will be very important with these IoT connected devices and coupled with the Vera app is the personalized product experience that we will be able to offer through both the app and the connected device will be based more upon their personal needs and desires as a customer. You can imagine from a preferential perspective will have preference data through the app where they fill out a personal product recommendation that helps them profile their personal beauty and wellness needs. That then moves into their purchase history, so what products they're buying, and then using AI and ML, we can feed recommendations through that process. So I would see, again, at the very early stages, it will be somewhat different basic, so to speak, in terms of how that experience goes. But just as we've seen with Netflix over the last decade, the degree of personalization through persona-driven management is going to increase significantly. And a lot of this, for me, is why we're so focused on New Vision 2025. And taking us a couple of years to build these personas out and continue to advance them, we'll start this with the Lumi.io device, and it will continue. But Mark, maybe talk about the journey on the digital product side.

For sure. Thank you, Ryan. And thank you for the question, Steph. This is probably what I'm most excited about for our company going forward is really this deeper understanding of our customers with the data that we should be able to gather with the connected devices. We'll know our customers better than ever. And that information will help us facilitate what our products become going forward. I think back to my times at Amazon. So think seven years back when the Alexa device and the Echo devices came out. they didn't do very much. They were a voice-activated alarm clock. They could maybe play your favorite music. They could tell you a joke. And then now fast forward to today, what the Alexa enablement offers, and it's so broad. Think about that from a device perspective. If we find our customers are spending 65% of the time on the right side of their face versus the left side of their face, maybe there's something we can do in the design of the next generation product that makes that experience better for that customer. If we find that they're using it three times a week versus five, there are so many things that we can learn about the customer that will help us make our next generation of products that much better and a better experience, along with all of the personalization that Ryan mentioned.

And this is Connie. Hopefully technology will be friendly to me right now, and you'll be able to hear this. But I think what's really exciting for me about the iterative process is that it translates from the data – into how we operationalize and how we as a company put forth programs and iterate on our own programs based on the data that's collected, meaning we can improve the programs that are designed for customer acquisition, for retention, as well as for loyalty development. The more we learn about behaviors and the more we learn about preferences as well as consumption of the content that is both company-created and user-generated, the more we can personalize as well as adeptly execute and implement programs that are relevant and key to customer retention.

All right, thanks, Connie. Thanks, everybody. Thanks, Steph.

The next question comes from Doug Lane with Lane Research. Please go ahead.

Good afternoon, everybody. Mark, can you elaborate on what the magnitude is of the pricing that's going into effect this quarter and where it is geographically and then what plans may be as the year progresses?

Yeah, so we instituted a global price increase this year, about 5%. Most all the markets around the world have implemented that in the start of Q2. There are a couple of markets that will implement that in the early summer, even later in the year.

Okay. Thank you. And then most of your peers have reported already, and there seems to be a thread of a very difficult April in the channel. I just wanted to see if you could just qualitatively give us your characterization of how April was.

Yeah, so I mean, so far, as we're watching the quarter unfold, it's probably unfair to look at a single month simply because our product launches and introductions and our promotion schedule varies market to market. Again, I think what we're probably most focused on right now, Doug, is China and the broad media that we're hearing as well from our teams where these lockdowns are going from Shanghai. We're now hearing them there in Beijing and in Guangdong. which is the Guangzhou area, so the three major metropolitan areas of China. So, you know, we're watching with, you know, significant focus to understand what the government there is going to do and how severe it's going to be. But, you know, it's hard to comment as of now other than to say that, you know, there's a lot of uncertainty and that's why our guide is where it is, a large reason why.

No, that makes sense to me. Can we talk about live meetings? You mentioned a Team Elite meeting coming up in London. How big is that? And is this the first meeting really globally since the pandemic started of any size?

No. So, yeah, great question, Doug. And I want to reiterate, our view of the future, Doug, is very digital first. We do not see ourselves moving back towards that more traditional network marketing type of style. We're investing heavily on the digital front. We believe that's the wave of the future from a scale standpoint. And so, you know, I want to just be clear. I mean, while we certainly, you know, believe that in-person activities are important, such as this Team Elite trip where we get to align. It's been three years since we've met with our top leadership. So that's very important for us. Success trips as well. In half the world, those have been able to resume, predominantly in the West. Again, in Asia, there's still pretty severe lockdowns on travel in many parts of the geography. So those have been going on predominantly in the West, and those are helpful from kind of a motivation and alignment because those are qualified trips that motivate sales leaders to do it. As far as the broader, larger meetings, the convention-type meetings, We really haven't turned those back on, and I would imagine in the future as we think about it, there's a place for that at a limited basis, but it's not going to be the extent that we were in the past. We believe that that model has had its day and has played it out, and we need to be investing in our digital-first approach. Okay, that's good.

And if I may, I think... If I may, I think there will be a new version of a hybridized world of how the balance and the shift, I think, is a lot more agile between virtual, digital, and in-person. And I think it's going to be a really exciting opportunity for us to scale and reach even more people going forward beyond what the walls or halls of a certain one location may hold for us. So we are leaning into that, and we've seen some interesting, not only interesting, but encouraging success across our markets who have been limited due to external factors.

Okay. Thanks, Connie. That's helpful.

The next question comes from Mark Askichan with People. Please go ahead.

Yeah, thanks. Afternoon, everyone. Can you hear me all right? Yeah, Mark. Perfect. I guess, Mark, first for you, what was the impact from the sell-in ahead of the pricing that you had called out in the press release. And I'm also curious, was pricing contemplated in the original guidance? I guess I'm just trying to get a sense of how to think about it. I know you don't talk about volumes, but how would we think about kind of the underlying volumes relative to the revenue guidance that was updated, inclusive of the benefit of 5% pricing, but offset, obviously, by some impact of not just the pricing and volume impact, but just everything else that's going on in the world?

Yeah, thanks, Mark. We were trending towards the high end of our range all the way up until the last couple of weeks of the quarter. And then we saw a surge of revenue the last couple of weeks of the quarter that kind of pushed us to that $15 million over the high end of the range. That's why you can't quantify exactly how much of that revenue beat was due to the price increase. You can argue that maybe it was in somewhere in the range of $10 to $15 million based on where we were trending up until the last couple of weeks of the quarter. And then the price increase, yeah, in our original guide, we decided on the price increase post our original guide, but it is contemplated in the updated guidance that we gave today.

Got it. Yeah, it did make sense. And then just the broader strokes, too, on the guidance reduction from a revenue standpoint by geography. The numbers seem like pretty rounded numbers. I guess I'm just curious how you got there, how you're sort of thinking about the impact from what's going on, given what you're expecting now.

Yeah, for sure. So starting with the easiest one, FX is about one point worse than what we had originally guided. So that worked out to be about $25 million. And again, the breakout of the 150 is intended to be somewhat rounded, right? We do have ranges on each side of those numbers. We are seeing a significant impact to our EMEA business, and we contemplated that. And when we looked at that, it was about $25 million. And then as we looked at what we were seeing in China, it was about $100 million. So all those numbers are plus or minus, you know, $2 to $5 million, depending on the size of them. But the overall impact is about $150 million.

Got it. Okay, great. I appreciate it. Thanks, all. Thanks, Mark.

As a reminder, if you would like to ask a question, please press star then one to be joined into the question queue. The next question comes from Linda Bolton-Weiser with DA Davidson. Please go ahead.

Hi. How are you? Hi. So, you know, sorry I missed it, but when you were talking about margin performance, I think you said something about something, something that impacted growth margin in the quarter. Can you just kind of repeat what that was? And then you had given like a gross margin guidance range for the year of 75% to 76%. Is that still what you're thinking? Thanks.

Yeah, Linda, thank you for that question. Yes, so we did have increased sales and promotions of the LumiSpots that are currently shipping. And the performance of those promotions performed above our expectations. and that did drag down gross margin in the quarter. There's a plus to that in that we're reducing inventory of those original LumiSpas in anticipation of the launch of the new LumiSpas connected IO device. And then as far as our guidance for the year, with the 73.3% in the quarter, we believe that our model still gets us to, I originally guided 75 to 76. We can still get into that range, but it would be towards the bottom end of that range.

Okay, thanks. And then can you just comment on, you know, another company today that reported definitely said what you did about the dampening of things in EMEA because of the Ukraine war. Is there anything at all you can do? I know it's like a hard thing, but is there anything you can do to improve the morale or the sales activity? I mean, is there any type of promotion maybe that you used in the past? It just strikes me that this could be a dampening thing because the Ukraine war could continue for some time. So can you just talk about your past experiences with this type of thing?

Yeah, no, it's a great question. I think, you know, as we evaluate, we certainly are mindful and sensitive towards the neighboring countries in particular. If you think of the likes of Poland or Romania, Hungary, you know, we need to be mindful of their mindset today. But what we look at, Linda, are just as you said, number one, What promotions are we able to do that excite and ignite activity at the customer level? And, you know, can we do more of that? Yes. Are there additional product introductions we can bring in the market? And the answer is yes. And so we do have a series for the remainder of the year as this conflict is now entering, I think, day 72 or 74. We're getting further and further away. And unfortunately it's normalizing in, you know, the current state of affairs. And so we do, we would anticipate that we'll, that we'll be able to utilize those levers to, to ignite more, you know, more energy into the market, but we want to do it in a very responsible manner, given the mindset and the framing of many people in the, in the country. So, but we will leverage those, those throughout the, the remainder of the year to, help improve the morale generally.

And Linda, I might add is, you know, while the Q1 results are negative 25% year over year, on a two-year look back, that market is still up 50%. And so we're still pleased with the leaders who have joined the business. We're pleased with the way the business is operating and the fact that even with all this going on in the world, we're still maintaining much of what we saw in 2021.

Okay. And just, can I just ask something about your apps that you've been talking about? Can you just clarify whether the consumer-facing one is, like, does that actually enable the consumer to order the product through the app, or do they still kind of have to go through a rep or some other website, or can they order right on the apps?

Yeah, I love that you asked that. It's really cool. If you haven't downloaded it, I'd encourage you to download it. It does allow you to buy directly from the app. It also allows you to go in and fill out a personal skin consultation. It allows you to take a selfie and to measure progress in fine pores, wrinkles, etc. And then it provides you some recommendations. It also allows you to buy right there from the app. So it's a pretty... good experience. And again, it's what we call a minimum lovable product right now. We're building upon it, but it has that good feature and functionality in it.

And that's the whole point of this app. Oh, sorry for that. The whole point of this app is also to allow for, I call it democratizing the consumer experience. It allows for every customer to have access to information and to discover things and journey through what the app offers in terms of product information coupled with your personal preferences and needs that are both taken into account through questionnaire format as well as visually through a camera that will take a picture of your skin. So I think it's really, number one, super fun. And at the same time, we hope it's part of every consumer's journey as they engage with us.

Okay, sounds good. Thank you.

Thanks, Linda. Thank you. It looks like, and I apologize, the call went a little bit longer. We know you're very busy covering too many companies out there, but I do want to just say thank you to you from the analyst's point of view. We laid out a multi-year transformation in New Vision 2025 in February, and I just want you to know we are acutely focused on that vision. We understand the near-term headwinds within direct selling and within just the broader economic landscape. And I want you to know, as a management team, we're committed to this vision and to the transformation. It's not always easy, and there's a lot of puts and takes along the way. That's why we tried to be really conservative. We don't foresee everything as we go, but we do commit to you to be as transparent as possible. So, again, thanks for your time. Thanks for participating in the call. If you have any additional calls or would like to reach out, feel free to reach to Scott. Pond or to Mark, myself, we're happy to answer any questions as we go. But again, just wanted to thank you for your time. And with that, I think we'll end.

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