Nu Skin Enterprises, Inc.

Thank you for standing by. My name is Prilla and I will be your conference operator today. At this time, I would like to welcome everyone to the Nu Skin Enterprises Q3 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, you may do so by pressing star 1 again. Thank you. I would now like to hand the conference over to Scott Pond, Vice President of Investor Relations. You may begin.

Thanks, Prila, 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 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 these non-GAAP numbers. And with that, I'd like to turn the call now over to Ryan.

Thanks, Scott. Hello, everyone. Thanks for joining our call. I'll start by providing a performance summary on Q3, sharing thoughts on our near-term priorities to improve operating performance. followed by an update on our longer-term strategies to re-energize growth as we continue to evolve our core Nu Skin traditional direct selling business towards a more expansive integrated beauty, wellness, and lifestyle ecosystem, including our Rise businesses. The third quarter results were in line with our guidance range reflecting continued headwinds in our core Nu Skin business, partially offset by ongoing strong performance from our Rise segments. We delivered growth in a handful of markets in Latin America and Southeast Asia, as well as impressive growth from Maverly, our affiliate marketing platform. We continue to face pressures in several of our larger markets, including South Korea and China, where ongoing macroeconomic factors are impacting consumer spending. I was recently in China with our team evaluating future opportunities in the market and continue to believe in the long-term potential of this market despite the near-term headwinds. In the U.S., where the direct selling industry faces ongoing pressures, and many companies are evolving their business model to address the changing commercial landscape more towards social media-driven product discovery and growing influencer and affiliate marketing. We are introducing a new sales performance plan this month and are exploring innovative ways to make it even easier for affiliates to share new skin products via social media links, both of which I will discuss more in just a moment. Our rise segments exceeded forecasts and closed another record quarter up, more than 20% year over year, led by Maverly. Maverly is our affiliate marketing platform that enables approximately 1,200 brands and retailers to connect with consumers via more than 100,000 everyday influencers across most social media platforms. We've invested in the development of Maverly over the past three years as their creator economy continues to expand and see tremendous potential looking forward. Manufacturing also continues to perform well, servicing a broad array of leading beauty and wellness brands across traditional CPG, direct-to-consumer, and retail. As we navigate the broader market uncertainties in the near term, we will be accelerating our efforts to drive cost efficiencies and improve margins and cash flow, even under a scenario where top-line headwinds persist into 2025. To that end, our near-term priorities are focused on the following three areas. First, on the product side, we will be accelerating our product portfolio optimization efforts that began earlier this year and are pleased with progress made to date of reducing approximately 20% of our sub-optimized SKUs globally. In 2025, we anticipate reducing another 30% of low-performing SKUs, which will lead to more than 50% portfolio consolidation by year's end. Coupled with the work we've been doing on lowering raw material and manufacturing costs, we anticipate 150 to 200 basis point gross margin improvement to our core Nu Skin business by the end of 2025. Second, selling expense in the core has risen over the past several quarters, due in large part to shifts in both geographic market and sales force mix. The new sales performance plan I mentioned earlier combines the best of affiliate marketing with the scaling power of our leadership-driven business model by promoting healthy and sustainable growth in both direct consumer sales and team building. It places an enhanced focus on product selling and referrals for others who do the same. We'll start by introducing this in North America and South Korea this quarter with other markets to follow next year. These initiatives will help to improve channel activation while optimizing selling expense in the core as we work towards our historic 40% target by year's end in 2025. And third, we'll extend our operational optimization efforts to all underperforming markets as we strive to ensure balanced profitability across all market segments in 2025. We initiated this process in Argentina earlier this year and have experienced significant improvements in both top and bottom line as we simplified and focused our business in the market. We anticipate improving annual profitability beyond $20 million across developing markets as we work towards $50 million in annualized G&A savings over the coming year. Together, we believe these three near-term operational optimization initiatives will enhance our ability to simplify and focus our business on the things that matter most in terms of returning our business to growth while ensuring operational profitability. Longer term, we remain focused on building out our enterprise vision of becoming the world's leading beauty, wellness, and lifestyle ecosystem. We've introduced several new initiatives that we believe will lead us towards this long-term vision, including, one, the introduction of Mind360 at our East and West live events this past quarter, with global market launches continuing over the next few quarters. Cognitive health is a rapidly growing consumer category reported to be $9 billion globally and growing at 13% per year. While this burgeoning category is new to overall consumer behavior, we believe it will attract a new segment of customers to NuSkin in the future. Second, in addition, our product pipeline remains robust and we are also exploring new innovations in our nutrition supplement business along with technologies that help demonstrate their efficacy. Our nutrition product lines, including Pharmanex, Lifepack, G3, and others, also hold some of the highest customer acquisition and retention rates in our portfolio. We anticipate some of these new innovations to hit the market in late 2025, and we'll discuss with you more in upcoming quarters. At Live, we also introduced our exploration into integrated brand building. with our sales force as we strive to broaden Nu Skin's accessibility wherever customers seek to find us. We're very early in the exploration of efforts but are beginning to see promising indicators as customers access our products via third-party marketplaces and search engine advertisements. For instance, approximately 80% of those purchasing via online ads are customers who found their way back to Nu Skin to place an order through an advertisement. We believe there is untapped potential in invigorating customer activation and retention through integrated brand building. Fourth, we will be releasing a beta version of Maverly initially to our U.S. brand affiliates later this month. Our affiliates are authentic micro-influencers, and we believe that the combination of Maverly and Nu Skin will further enhance their ability to engage with customers socially. The app will improve their ease of sharing new skin products as well as more than 1,200 additional beauty, wellness, and lifestyle brands on the Maple Leaf platform. And lastly, we continue to explore future market expansion into India, the world's second largest population and one of the fastest growing economies in the world. India is a complex market but holds significant potential as we strive to introduce new skin to this highly entrepreneurial, beauty and wellness conscious 1.3 billion person population anticipated in late 2025. So in summary, despite the challenging operating environment, we are making progress in several areas of our vision. Over the immediate term, we are pushing harder to drive operational efficiencies, which will help to improve profitability and cash flow and as well as free up additional resources to support our key growth initiatives. We also continue to evolve our business model as well as overall branding efforts to regenerate healthy and sustainable growth. We remain focused on executing our long-term vision of becoming the world's leading integrated beauty, wellness, and lifestyle ecosystem. So with that, I'll turn the time over to James to cover Q3 in more detail, along with guidance, and then we'll open it up for questions. James?