Nu Skin Enterprises, Inc.

Thank you for standing by and welcome to New Skin Enterprises Q4 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please press star 11 on your telephone. Please be advised that today's call is being recorded. I would now like to turn the conference to your host, Mr. Scott Pond, Vice President of Investor Relations. Please go ahead.

Thanks, Valerie, and good afternoon, everyone. Today on the call with me are Ryan Napierski, President and CEO, and James Thomas, CFO. On today's call, comments will be made that include some forward-looking statements. These statements involve risks and uncertainties, and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings reviews 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 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.

Thanks, Scott. Hello, everyone. Thanks for joining our call today. We have a lot to cover in today's call, so let's jump into business performance and then on to expanded enterprise vision and strategy. We are pleased to deliver fourth quarter revenue above our latest guidance range, driven by the continued rollout of Ageloc WellSpa IO in many markets, seasonal promotions in China, and the continued strong performance of our RISE businesses. This quarter further demonstrated that while we continue to make progress towards our long-term vision, much of our headway was concealed by the persistent macroeconomic pressures impacting consumer spending and customer acquisition around the globe. as well as disruptions associated with the ongoing transformation of our core business. This was particularly evident in the fourth quarter results, which were down in our Americas, South Korea, and Europe and Africa segments. This was offset by seasonal promotions in mainland China, stabilization in Japan, and modest growth in our Hong Kong-Taiwan segment. In addition, we achieved over 100% growth in our RISE businesses, which accounted for 13% of our revenue in the fourth quarter and continues to become a more meaningful part of our and users are achieving their desired results with this more personalized approach. WellSpa.io has been a strong addition to our number one beauty device systems brand and is generating consumer interest with demonstrable results. WellSpa.io is scheduled to launch in mainland China in Q2, and we'll be launching a similar device, RenuSpa.io, in the U.S. later this quarter. Moving into 2024, we are preparing to enter the rapidly growing $10 billion brain health market. Stress, sleep, and mental acuity are all growing concerns for consumers around the world, and our unique approach to holistic wellness positions us to provide integrated solutions to help our consumers find better balance in their lives. We will be introducing this new division and brand at our live events in Q3. We also continue to focus on deepening connectivity with customers and affiliates through enhanced capabilities and feature sets in the Vera and Stella apps, which we believe will enable deeper connections with our customers to meet their personalized needs. Geographically, we continue to see near-term pressures on consumer spending related to extended hyperinflationary conditions around the globe. The Americas, South Korea, Europe, and Southeast Asia all experienced a more difficult year as consumers shifted purchasing habits towards lower-priced goods and services. In the meantime, we will be introducing new affordable luxury products targeting the Mastige customer segments, including a series of new product regimens being rolled out in the U.S. and South Korea this quarter. Together with WellSpa, RenewSpa, and our TRE-TME line, We anticipate leveling trends in the business moving into the second half of 2024. Mainland China experienced stabilization in our business in the fourth quarter, which was associated with seasonal promotions. While we continue to believe in the potential of this great market, we anticipate ongoing challenges as the economy works to recover over the coming year. We are introducing a new go-to-market model, partnering with Douyin, a sister app of TikTok, which will begin being tested and refined in the first half of 2024. Japan, Hong Kong, and Taiwan each showed favorable outcomes in 2023, and we anticipate these trends to continue moving into 2024. Next, let me discuss our expanded enterprise ecosystem vision and strategy, including RISE, which is becoming a more substantial part of our business. As consumer discovery and purchasing behavior shift further from traditional media into social media, Influencer and affiliate marketing continues to grow at an accelerating pace. A recent statistics study estimates influencer marketing in the U.S. to grow from $6 billion to around $69 billion by 2029. We believe that we are well positioned to capitalize upon this shift as we expand our enterprise vision towards becoming the world's leading integrated beauty, wellness, and lifestyle ecosystem. This implies an even broader opportunity in the mid to long term as we further build out our rise business segments and seek synergistic opportunities across our business units. By applying our nearly 40 years of learnings in affiliate marketing from our core business with new capabilities and learnings from our rise businesses, we see greater potential for driving enterprise value over time via this expansive beauty, wellness, and lifestyle ecosystem. In order to further enable this expanded vision, we have been reviewing all aspects of our business and reassessing our approach to capital allocation to invest in long-term growth and business evolution. This includes rebalancing our dividend payout ratio to be more in line with or better than our industry peers. This move will provide increased financial flexibility, enabling us to effectively seize forthcoming opportunities. This was a difficult decision for our management team and the board, and one that we don't take lightly. However, after extensive analysis and careful deliberation, we believe this move is in the best interest of all stakeholders as we pursue our long-term enterprise ecosystem vision for growth. This capital reallocation will free up approximately $65 million annually that will be directed towards high potential growth investments, which in the near term will be relatively evenly spread across the following three areas – Number one, accelerating the growth opportunities in our RISE ecosystem, which grew 41% last year and is becoming a more substantial portion of the overall enterprise. Number two, facilitating a progressive new market expansion model for our core Nu Skin business, beginning with India, anticipated in 2025. And number three, furthering the build-out of our digital-first affiliate opportunity platform, with an extended technology partnership with Infosys. Given the importance of our updates to strategy and capital allocation, I want to spend a few minutes diving deeper into the areas we are now targeting for stepping up investment. I'll start with Rise, which was established back in 2018 as part of our enterprise diversification strategy. Rise is a synergistic ecosystem of consumer, technology, and manufacturing companies focused on innovation within the beauty, wellness, and lifestyle space. These companies synergistically support our core business and or have capabilities that provide greater growth potential to our expanding ecosystem vision. Rise has experienced healthy, organic, and acquisition-led growth, and most of the businesses are still very early in their life cycles. In the fourth quarter, Rise revenues were up over 100% or 87%, excluding last year's beauty bio acquisition. Rise segments accounted for 13% of total enterprise revenue in the fourth quarter, and we anticipate this growing to 20% to 25% by 2025. With an increased investment in Rise, we plan to increase manufacturing capabilities and capacity to service new skins, as well as additional consumer goods and indie brands. expand technology capabilities for Maverly, which is rapidly becoming a leading affiliate brand marketplace and technology provider for our other businesses, and develop a creator-led indie beauty brand incubator, including new and acquired brands. For the incubator, we will be able to leverage the beauty biointegration and acceleration framework that we developed last year. For the past several years, we've been building the infrastructure necessary to incubate, launch, and support creator brands with an array of services including product R&D, manufacturing and packaging, technology, logistics, and internationalization. These additional rise investments will enable us to delve further into the influencer or creator economy and its far-reaching opportunities in the beauty, wellness, and lifestyle space. We are well positioned to service the creator economy and indie brand markets by leveraging our vast array of resources on our way to becoming the world's leading integrated beauty, wellness, and lifestyle ecosystem. Next, new market expansion beginning with India. This vibrant country is rapidly becoming the world's fastest growing economy. With 1.4 billion people, a growing middle class, and the highest per capita digital and mobile adoption, we see India as a market holding great potential for us. Nu Skin has a rich history of international expansion that has fueled our growth into nearly 50 markets around the globe. We plan to reinvent the way we go to market with a progressive digital-first model which will enable us to expand our global footprint more quickly and cost-effectively, accelerating our ability to bring Nu Skin to people around the world who are seeking to look, feel, and live better. We will be aligning with our global sales leaders around an anticipated 2025 entry into this strategically important market at our annual Team Elite trip this April. And third, our third area of focus is further investment in our digital first affiliate opportunity platform. We aim to provide our brand affiliates with a simpler, faster, and easier way to engage in our businesses around the globe. Through our expanded partnership with Infosys, we plan to enhance our digital ecosystem, accelerate our global Equinox rollout, and streamline the affiliate journey to minimize friction and accelerate growth. So in summary, 2024 will be another year filled with transformation of our core Nu Skin business to win in the future and further our build-out of the RISE ecosystem. Our initial outlook for 2024 reflects further macro challenges in the core lessening throughout the year, partially offset by continued double-digit growth from the rise segments. Throughout these challenging times, we remain optimistic in our future growth potential as we continue to reposition the enterprise towards becoming the world's leading integrated beauty, wellness, and lifestyle ecosystem. And with that, I'll turn the call over to James to dive deeper into our guidance and the financials. James?