Nu Skin Enterprises, Inc.

And our next anticipated major market, India, holds tremendous potential in the future as we apply key learnings in this pre-market entry phase of operations to better understand the need of entrepreneurs and customers in the world's most populous market. We're working to solidify our operations, infrastructure, and such ahead of our planned formal launch by the end of this year. Evolving a premium global brand to a broader market is challenging and requires thoughtful execution. However, finding the right balance that remains true to our core brand promise while helping more people around the world look, feel, and live better can unlock meaningful long-term growth. What remains constant throughout all of this is the central role of our independent sales leaders. We are a leadership-driven company, and our long-term success depends on our ability to inspire, equip, and align our leaders around these compelling opportunities. Next week, we'll be in South Africa with our top global sales leaders for our Team Elite trip. This will provide an important opportunity to closely engage with them as we share learnings, strengthen alignment, and continue building confidence in the future we are all creating together. Now, throughout all of this, operating efficiency remains a critical focus for us. We're working tirelessly to sustain growth in gross margin in spite of the headwinds associated with uncertain trade practices, which have placed significant pressures over the past many years. We're pleased with progress to date and are committed to continuing improvements in gross margin through localized manufacturing, portfolio optimization, and strategic pricing actions. We will also work to optimize selling expense to reward leadership for growth and maintain discipline controls on our G&A. This discipline allows us to invest in our strategic growth priorities while ensuring our cost structure remains aligned with revenue. So with that, let me turn some time over to Chelsea Lance, who's been a key leader for us over the past several years and valuable contributor to our finance organization. Chelsea has been instrumental in driving cost reductions throughout our organization, and she is now leading us as interim CFO. It's also Chelsea's birthday tomorrow, so we've intentionally synced these two things up. So, Chelsea, take it away.

Hey, thank you, Ryan, and good afternoon, everyone. Before I begin, I'll briefly introduce myself. I'm currently serving as interim chief financial officer and have been with Nu Skin for 15 years, most recently as corporate controller. In that role, I partnered closely with the executive team on operational efficiency and gross margin initiatives while overseeing the company's global financial operations and financial reporting. I'm excited to continue supporting the business as we focus on disciplined execution and long-term value creation. Today, I'll walk through our first quarter results, provide our outlook for the second quarter, and share an update on our expectations for the full year. Additional details can be found on our investor relations website. As a reminder, I will be discussing adjusted non-GAAP measures. Reconciliations to the most directly comparable GAAP measures are available on our website. For the first quarter, we delivered revenue of $320.6 million within the guidance range, including a 1% favorable foreign currency impact. GAAP earnings per share were 4 cents, while adjusted earnings per share were 14 cents excluding costs related to our decision to wind down our separate beauty bio business and other charges. Adjusted EPS was in line with our guidance range. These results reflect continued investment in our key strategic priorities, including the expansion of our intelligent beauty and wellness platform through Prism.io, as well as ongoing investment in emerging markets. We believe these investments are important for our future growth and we're encouraged by our ability to advance these initiatives while maintaining a disciplined focus on operational execution and margin improvement. From a margin perspective, adjusted growth margin was 67.9% compared to 67.8% in the prior year, reflecting a relatively stable revenue mix between the Nu Skin core and RISE entities. Within our core Nu Skin business, growth margin improved to 76.9%, up 20 basis points from the prior year, reflecting continued progress in our operational efficiency initiatives and product mix optimization, consistent with our focus on margin improvement. Consolidated selling expense was 34.3% of revenue compared to 32.5% in the prior year. Within the core Nu Skin business, selling expense was 40.5% up from 38.7% in the prior year, consistent with our expectations as we continue to focus on rewarding sales leaders' productivity through compensation plan enhancements. Looking ahead, we expect selling expense in the core business to remain around 40% as we continue to prioritize investment and initiatives that support top-line revenue growth and sales leader engagement. General and administrative expenses declined by $9 million year-over-year on an adjusted basis, reflecting continued cost discipline while focusing on future investments. As a percentage of revenue, G&A was 29.9%, up from 28.9% in the prior year, reflecting our ongoing investments in technology and emerging market expansion, including India. As a result, adjusted operating margin for the quarter was 3.6% down from 6.4% in the prior year. We remain focused on improving operating efficiency and aligning our cost structure with the current operating environment while continuing to invest in future growth initiatives. Now I'll turn to the balance sheet. Over the past several years, we have focused on paying down debt to strengthen our balance sheet and improve our liquidity position. During the quarter, we completed a refinancing of our credit facilities, extending maturities through 2031, and improving our overall cost of borrowing. This transaction provides appropriate financial flexibility to support our operating and strategic priorities. Proceeds from the refinance were used to repay existing indebtedness. Consistent with our discipline capital allocation strategy, we returned approximately $8 million to shareholders during the quarter, comprised of 3 million in dividends and 5 million in share repurchases. At quarter end, we had 137.3 million remaining under our current share repurchase authorization. Looking ahead, we remain in the early stages of our key growth initiatives and are encouraged by early signs of stabilization including improved brand affiliate and new sales leader trends across several markets. At the same time, we are mindful of potential inflationary pressures impacting consumer sentiment related to macro factors such as tariffs, recent fuel price increases, and broader geopolitical dynamics. As a result, we are taking a measured approach as we evaluate the remainder of the year. We are maintaining our annual guidance and expect to provide more clarity following the second quarter. For the second quarter, we expect revenue in the range of $330 million to $360 million, assuming relatively neutral foreign currency impact, reflecting sequential improvement from the first quarter. We expect earnings per share in the range of $0.15 to $0.25, also reflecting sequential improvement. In closing, we were pleased to deliver results in line with expectations while continuing to invest in our strategic priorities. While the near-term environment remains challenging and the financial impact of these initiatives will take time to scale, we are focused on disciplined execution through managing costs, improving efficiency, and positioning the business for long-term growth. We appreciate your continued support and look forward to updating you on our progress next quarter. And with that, operator will now open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Dave Storms of StoneGate. Your line is now open.

Evening, everyone. I appreciate you taking my questions. Hi, Dave. How's it going? Just kind of wanted to start with Prism. I know, obviously, this is still very early innings. We're still in the training process for a lot of it. Just, you know, maybe any thoughts on what the qualities of a successful leader is having in Prism? You know, I know you mentioned the more wellness orientation, but is there anything that you're doing or tailoring in your training that is going to help them hit the ground running?

Yeah, I think that's a great question, Dave. To the point, we're seeing different leaders around the world utilizing it differently so far, kind of three to four months in. As I mentioned, the groups that tend to do that tend to convert best are those who are utilizing it as wellness, as a wellness consultative or wellness assessment tool. So part of a bigger assessment, that seems to be a prevailing approach that seems to work really well. For us, it's mostly about providing them with the knowledge of what PRISM is truly measuring from a carotenoid perspective measurement perspective and how carotenoids or antioxidants benefit the body, what sort of against oxidative stress. So there's kind of the product knowledge or the device knowledge. There's the consumer journey knowledge that's necessary to scan themselves to then learn about that scan and then, you know, ultimately, you know, lead to a subscription of products. that work well. And so it's a lot of that is the product training, the behavior training, and then there's kind of the CRM side or the follow-up and kind of the persistent, persistency of being with those customers and the like. And so I'd say those are probably the three elements on the consumer side. On the business side, because each of these sales leaders, of course, leads a team, and it's important for that team to understand how to do the business with Prisma as well. So there's also a train-the-trainer approach. So we have certifications in multiple markets today, primarily in Asia, for example, in Japan, Korea, China. We don't have those certifications in place, but we are working in other markets around the world, but we're working to bring those together based upon best practices out of these other markets.

That's super helpful. I appreciate all that, caller. Wanted to, you know, the other big growth driver here is obviously India. You mentioned that you are having to change up some things on, you know, incentives and the like, maybe get some traction there. Just curious as to how maybe aggressive you're being with really trying to grow India. Is it pretty paramount to, you know, get off on the right foot here? Or maybe how are you thinking of the growth potential there?

Yeah, no, I think, in fact, we talk a lot about this because we, as we've said kind of from the beginning, India is for us a very important mid to long-term market. You know, the direct selling industry in India is still relatively small. It's just over $3.5 billion U.S. dollars. So it places it in pale comparison to some of the other markets, but it's also the fastest growing. And so we understand that there's a lot of potential there. We also understand there's a lot of room for growth and development, I would say, in that market. Before, it really will see kind of an explosive level of growth, at least for our business model and our product categories that we plan from an intelligent beauty and wellness perspective. So I would say it's very important for us to get it right. The reason we really looked at the market in this unique way of a pre-market entry and for about a year before we actually opened doors for formal launch is precisely for us to learn about how to approach the Indian consumer and the Indian entrepreneur. Highly educated, highly ambitious, fairly conservative on discretionary spend and disposable income still, especially in the premium spaces. We have a lot to learn on our side as well about how to target them at the right level of spend and benefit. By the way, there's a whole host of learnings that we're gathering out of that. So we want to get it right. I think these 12 months or so have been really important for us to dial in manufacturing, quality, logistics, and distribution, and even product formulas to ensure that they meet the consumer's properly, the business model itself aligning that. So I would say as we look forward, we still anticipate a low. We're not forecasting a lot of revenue into our guide. It's really more learning in 2026. And of course, being so late in the year, we don't have much in the model. And then we'll begin to really ramp up year by year as we learn and grow.

I think that makes a lot of sense. Maybe just zooming out a little bit, you mentioned in your prior remarks, you know, just some of the macro headlines. I know, Chelsea, you mentioned them as well. I guess trying to think about where the most leverage is here, the consumers that you're catering to, are they most impacted by gas prices, diesel prices? Is there more leverage to the consumer sentiment number? I guess how are you thinking about where we could get the most leverage if we get some clarity over the next three to six months?

Yeah, in fact, I just came from this event called Crossroads of the World and listened to some of the leading economic experts around all of this tariff pressure since 2018 and even more recently, obviously, with the conflicts in the Middle East. And it's interesting how, you know, it's a bit of the boil of the frog where we've all been in this hot water for, geez, nearly a decade now, going all the way back to 2018 in the first tariff round. When I step back and realize the impact that has happened over time on our gross margins, on raw materials, and how that transfers through to the consumer, we were looking at just general consumer goods post-COVID, and you're talking about average of 16% to 30%. inflationary pressures on consumers. I mean, that's an enormous, when we think about that, up to 30%. That's a third of paying a third as much, again, on products. And so we've seen this enormous pressure on consumers. Then you add to that fuel costs, growing fuel costs that impact every good and every part of the wallet of consumers. I think consumers are highly, highly strained around the globe. I think we're still waiting to see the effects of this, and Chelsea mentioned that we're trying to forecast out. Our view is very much we need to continue to innovate our way through, providing greater value to our consumers, largely in the digital space, but also continue to deliver highly efficacious formulas in our beauty and wellness industry. And we're leaning heavily into that side of it to ensure that consumers do feel that they're getting enormous value or at least as great a value as we can provide. But there is that macro pressure that I think just really does hurt margins over time, as we know.

Yeah, and I'd just add... And Ryan talked about this, and I mentioned it earlier as well. As far as our guidance model, we're not currently anticipating a significant impact, but as the increase in oil prices and other macroeconomic pressures are prolonged, then we're monitoring that as well. And we're continuing to look for ways that we can optimize our growth margin to offset and navigate these uncertain times. So not... currently anticipating a significant impact, but we're very aware and we're working on plans to mitigate the risk.

That's a great call. I appreciate that. Maybe just one more, and Chelsea, I think you mentioned this in some of your prepared remarks as well, just some of the share buybacks, the dividends, the repayments, you know, balance sheet looks like it's in a good spot and, you know, we obviously, especially you guys, to continue to perform in here. How do you think about prioritizing your capital allocation? Is it more of the same where it'll be maybe a smattering of everything or is debt pay down going to be the primary or are you going to look to M&A markets? Just any thoughts there would be very helpful.

Yeah, yeah. Thanks for the question, Dave. I would say it remains unchanged at this point. Our priorities are to continue to fund the business, prioritize investment and strategic opportunities to provide value for our customers and our sales leaders. We do maintain a strong liquidity profile, and we did recently refinance our debt, which extended our liquidity through 2031, which we're happy about. So we do continue to look for opportunities to return value to shareholders through dividends, and repurchasing shares is appropriate. But as you mentioned, prioritizing our liquidity profile has been important to us, so we will look to pay down the debt, especially with this new facility that we have.

Understood. I appreciate all the commentary and good luck in the next quarter. Thanks, Dave.

Thank you. Thank you. This concludes the question and answer session. I would now like to turn it back to Brian Napierski, President and CEO, for closing remarks.

Yeah, thank you. So, in summary, we're making meaningful progress on our vision around our intelligent beauty and wellness platform, building that out with Prism.io and expanding further into our emerging markets, both existing and new. Newskins Heritage has always been one that's based upon innovation and transformation, and we'll continue to do so as we navigate these uncertain times. We're very encouraged by these green shoots that we're beginning to see with our sales leaders, and again, exiting the quarter with new sales leader growth on a year-on-year basis gives us some more encouragement towards our plans of returning to growth in the second half of this year as we align and engage our leaders. And with that, we'll plan to keep you all updated in the months to come. So thank you for tuning in, and we'll speak with you in the next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.