Nu Skin Enterprises, Inc.

Good day and thank you for standing by. Welcome to the Q2 2026 New Skin Enterprises Earnings Conference Call.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, BG Hunt, and Best Relations. Please go ahead.

Thanks, Daniel, and good afternoon, everyone. I'm joined by Ryan Napierski, President and CEO, and by our interim CFO, Chelsea Lantz. Today we'll be sharing Nu Skin's Q2 2026 results and providing guidance for the remainder of the year. Before I turn time over to Ryan, let me point out that on today's call, comments will be made that include forward-looking statements. These statements involve important risks 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 numbers assist in comparing period-to-period results in a more consistent manner. Please refer to our investor website, ir.newskin.com, for any required reconciliation of these non-GAAP numbers. And with that, I'd like to turn the call over to Ryan.

Thanks, BG. Good afternoon, everyone. Thanks for joining the call. Over the past quarter, our team around the world has been focused upon aligning our top leaders around the next era of opportunity for Nu Skin as we extend our anti-aging leadership position with the introduction of our new innovation, Prism IO. The field is now learning, adapting, and incorporating this new technology into their business models, which contributed to second quarter revenue of approximately $320 million. Our focus on profitability and operational efficiency helped us achieve adjusted earnings per share near the midpoint of our previously communicated range. We've made meaningful progress on our strategic priorities, including expanding our Prism.io platform and global rollout, working to align and activate our sales leaders via an enhanced leader elite achievement and incentive roadmap, and preparing India for formal openings. We're building capabilities that we believe will strengthen our competitive position and create sustainable growth over time as we advance our vision to becoming the world's number one leadership company, powering our intelligent anti-aging platform. As we have greater clarity and line of sight on the remainder of the year, we are updating our full year revenue and EPS guidance, which Chelsea will cover in just a few minutes. Let me briefly update you on the three strategic priorities and continue to guide our business forward. Our first priority is extending Nu Skin's leadership position in intelligent anti-aging. For nearly two decades, Agiloc has differentiated Nu Skin through world-class anti-aging science, generating approximately $16 billion in cumulative revenue. Today, advances in epigenetics and biological aging research are creating an entirely new frontier. Our next major anti-aging innovation, Prism IO, remains in the early stages of its global rollout with more than 39,000 devices placed to date, up nearly 30% quarter over quarter, and 2.5 million scans, which is up 25% over the same quarterly comparison. We're learning a lot from the nascent technology, including consumer lifestyle behavior and habits, as well as overall nutrition health status and trends around the world. Our next objective is to turn these learnings into increasing engagement opportunities to improve customer health and wellness by improving their nutritional health scores. On the business frontier, one of our biggest learnings to date has been how our sales leaders are using this device to grow their businesses. Many of our sales leaders are primarily using Prism.io as a wellness consultation tool. to invite consumers into their own personal wellness journey, which is different from our earlier hypothesis of the PRISM-IO being an in-home placement device. These early insights are helping us refine our commercial strategy as we enter our next phase of global deployment to better assist our brand affiliates in performing wellness consultations at scale as we work towards the longer-term vision of placing a PRISM-IO in every healthy household. We expect to place 50,000 to 60,000 devices by year's end. At our global live event in Japan this September, we plan to introduce the next generation of AI-enabled Prism I.O. apps, powered by our proprietary new intelligent platform to deliver even more personalized wellness assessments, product recommendations, and 90-day wellness plans to improve customer engagement, conversion, and lifetime value. In the future, the new intelligence proprietary trained agent will also assist our affiliates in their personalized wellness and business journeys with Nu Skin. Based upon early findings with PrismaIO, as well as new scientific research from institutions including Shanghai Jiao Tong University, Yonsei University in South Korea, and our collaborators such as Dr. Ann Chang at Stanford Medicine, we are expanding our understanding of how nutritional and lifestyle impact Biological Aging, reinforcing our belief that the future of wellness will increasingly focus on extending health span or the quality of years lived, not only the quantity or longevity of those years. This work is now informing the next stage of anti-aging research and our aging response modulator science, an approach to anti-aging research incorporating epigenetics that we believe will fuel our next generation of innovation. In addition to supporting the continued rollout of PRISM-IO, we will introduce a new range of products at our live event, including two new products to support women's unique health needs, helping support hormonal balance and empowering women through every stage of life. These innovations further demonstrate our commitment to advancing our intelligent anti-aging leadership position. Our second strategic priority is engaging, aligning, and empowering our sales force to grow the channel. While our field continues to demonstrate resilience in a difficult operating environment, recruiting and leadership development remain below the levels needed to return the business to sustainable growth. Over the past several months, we've been redesigning how we reward, recognize, and empower leadership globally to empower them to do what they do best, build the network of independent entrepreneurs. We continue to refine our global compensation framework to place greater emphasis on balancing product selling, team building, and leadership development while maintaining appropriate flexibility for local market needs, including modifications to mainland China's distinct business model. This revised framework has been rolled out across the Americas and Pacific in the first half of 26 and will continue into other markets throughout 2027. Our greatest strength is our global leadership, and this fall we will begin introducing a new leadership achievement roadmap which will provide clearer developmental pathways, stronger recognition, and incentives that reinforce long-term leadership building. This progressive system will be accompanied by increasing investments in leadership achievements, by working more closely with our field leaders to better assist in training and development of new affiliates on the skills and capabilities required, for today's evolving environment. Sustainable growth begins with successful leaders who find, develop, and mentor the next generation of aspiring entrepreneurs, and strengthening our commitment to our talented leadership remains one of our top priorities. Our third strategic priority is expanding our growth opportunities in emerging markets. Across Latin America, we continue to navigate a mixed macroeconomic environment while remaining encouraged by the long-term opportunities in the region. Our leaders throughout the region continue to demonstrate strong commitment and resilience to building the business in spite of persistent disruptions. In India, our focus during the first half of the year has been on building the operational foundation necessary for long-term success, including high-quality local product sourcing, integrated supply chain, technology, and regulatory readiness. As we've progressed, we've identified additional opportunities to refine elements of our business model before formally launching into the market. And as a result, we've decided to move our full market launch into the first half of 2027 to ensure business model operational and field readiness for this significant long-term opportunity. While this extends our formal opening timeline for India, we believe taking the time to optimize the model today will position us for stronger and more sustainable growth once we scale the market. In parallel with our growth initiatives, we'll equally focus on improving profitability along the way. We continue to optimize our gross margin through thoughtful price actions, supply chain efficiencies, and infrastructure improvements as we work towards our long-term objective of approximately 80% gross margin in our core businesses. This includes strategic price increases to offset rising costs of goods around the globe, as well as realigning manufacturing to further leverage our facilities in China for our Asia-based businesses and our US facilities for our Western businesses. From an operations perspective, our East and West markets each deploy unique approaches to the business, and so to better enable our leaders and business to grow in these adjacent models, Our Chief Operating Officer, Chayce Clark, is leading an effort to build out a more distinct east-west structure, which marks a shift from our current approach focusing on seven distinct regions and will result in our global teams being better positioned to support our customers and sales leaders. This transition will occur over the next two quarters and is intended to create a more agile, efficient, and growth-oriented organization. and with that I'll turn the time over to Chelsea to go through some of the financial details.

Thanks Ryan and good afternoon everyone. Today I'll review our second quarter results, discuss our outlook for the third quarter and provide an update to our full year guidance. Second quarter revenue was $320.1 million including an approximate 1% or $4 million foreign currency headwind. Reported earnings per share were negative $5.14 or a positive 20 cents excluding non-cash accounting charges related to a goodwill impairment and a valuation allowance on our U.S. deferred tax assets. Adjusted earnings per share were in line with our guidance range. Growth margin for the quarter was 68.2% compared to 68.8% in the prior year, reflecting the revenue mix between the Nu Skin Core and Rise businesses. Within the core Nu Skin business, growth margin improved to 77.7%, up 20 basis points from the prior year, reflecting continued progress on our margin improvement initiative. Selling expense as a percentage of revenue was 33.7%, compared to 33.2% in the prior year. Within the core Nu Skin business, selling expense was 39.8%, down slightly from 40% in the prior year. General and administrative expenses declined by $15.9 million year over year, reflecting continued cost discipline while maintaining investments in our strategic priorities. G&A represented 28.4% of revenue compared to 27.6% in the prior year. Adjusted operating margin for the quarter was 6.1% compared to 8% in the prior year. Following the year-to-date changes in our market capitalization, we performed an interim goodwill impairment assessment, resulting in a $78.9 million non-cash goodwill impairment charge related to our RISE Manufacturing Reporting Unit. The goodwill impairment also led us to reassess the realizability of our deferred tax assets, resulting in a $167.5 million non-cash valuation allowance within income tax expense. We have excluded these non-cash accounting adjustments from our adjusted results as we do not believe they are indicative of our ongoing operating performance. Our effective tax rate for the quarter was negative 295.4% or positive 36.6% on an adjusted basis compared to 23% in the prior year. As Ryan discussed, we will be implementing an east-west operating model designed to better align our resources with the needs of our markets while creating a more agile organization. We expect these changes to improve operating efficiency and generate meaningful cost savings beginning in the second half of this year with a larger benefit in 2027. We currently anticipate approximately $5 to $10 million in cash-based organizational transition costs through the remainder of the year, which are excluded from our adjusted earnings guidance. On the balance sheet, we continue to maintain a strong liquidity position and remain focused on disciplined capital allocation. During the quarter, we generated 10.6 million of operating cash flow and ended the quarter with 189.6 million of cash and cash equivalents. Total debt at quarter end was 213.7 million. We also returned $2.9 million to shareholders through dividends during the quarter. We did not repurchase shares and ended the period with $137.3 million remaining under our current authorization. Looking ahead, our adjusted guidance reflects current business trends and our expectations for the remainder of the year. For the third quarter, we expect revenue in the range of $310 to $340 million, including an anticipated 2% to 3% foreign currency headwind. We expect reported earnings per share in the range of zero to nine cents or adjusted earnings per share of 10 to 20 cents. For the full year, we now expect revenue of 1.28 to 1.35 billion, including an anticipated foreign currency headwind of approximately 1%. We expect annual reported earnings per share of negative $4.90 to negative $4.73 or adjusted earnings per share of 70 to 90 cents. Our adjusted EPS guidance excludes certain first quarter charges, the second quarter goodwill impairment, anticipated second half organizational transition costs and the deferred tax valuation allowance. After these adjustments, our guidance reflects an effective tax rate of approximately 35%. Our outlook incorporates the continued adoption of our strategic initiatives as well as the expected benefits from our ongoing cost optimization and margin improvement initiatives. As we move forward, our focus remains on disciplined execution, improving profitability, and continuing to invest in the initiatives that strengthen our business and position us for sustainable growth. And with that, operator, we'll now open the line for questions.

As a reminder, to ask a question, please 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 Dave Storms with StoneGate. Your line is open. Afternoon.

I appreciate you taking my questions. I wanted to maybe start With respect to India, as we look to that market, clearly India is one of the most robust or more robust growing direct selling markets in the world, continues to report strong year-over-year growth.

across the industry, but it's also a very nuanced market. So as we've begun our exploration in Q4 of this past year, several of the key learnings that we've taken out of that include, one, how do we ensure NuSkin's standard of quality for our products is maintained through local manufacturing partners? So how do we improve that and ensure that that's on par with our 6S quality process? Two, logistics in the market are unique and complex. So moving forward, how do we get the right partnerships that know the local market needs beyond maybe more of the global considerations as we go? Three, technologically, we have good partners there in our Infosys managed service provider, but how do we ensure that we integrate our systems effectively into kind of the government structure, payment systems, etc.? ? So all three of those areas for us have been, you know, we've been refining in the first half of this year and they're on track. What we want to do as we evaluate the model moving forward is to ensure that the actual business model, in other words, how our affiliates will grow the business in India based upon our first six or seven months of learning that we optimize in order to enable better network building capabilities in the market. Every business is a little different in India. is as well. And so we just want, we're taking this time now to refine the business model, make sure that it syncs well with local practices, commercial practices there to enable ourselves to build longer term more effectively. So we anticipate it being a first half opening. The market today, we are able to facilitate business in terms of products and and building out our network. But in terms of actual opening, we want to make sure to have all of these elements dialed in most effectively. And the business model is where we're going to be focusing here over the next few months to ensure that we have that right.

That's great. I appreciate it. I also wanted to ask maybe a question around the sales force. And I wanted to ask it maybe through the lens of Prism. With Prism being maybe more of a wellness than a beauty product, is that open up the aperture of the profile of someone who could be maybe a sales leader? Or does that shift the focus of someone who could be a sales leader? It might be a little nuanced, but yeah.

Yeah, Dave, no, that's actually a very helpful question and insightful for two different reasons. One is the question you're asking, which is, you know, in the western part of the world for us, particularly the Americas and Europe, our business is predominantly beauty. And so when we put a new innovation into the market or it's become more beauty, I should say, we've historically been balanced between beauty and wellness almost 50-50, but different geographies perform differently. So as we take a new product or device like Prism.io, which is an intelligent wellness journey, there is a learning curve for those beauty consultants or affiliates. to really learn not only how to explain a wellness product for themselves, but also how to then sell it. and build a network or a sales team around that. So that learning process for sure is one of the factors that kind of drove kind of results on the first half being a bit below where we see them being. Moving into the future, however, it does lend well towards... We found that beauty and wellness play well together because typically... Consumers who are interested in one category are interested in the other. So we see long term there to be synergies between the two. It's kind of overcoming the near term implications of just beauty folks trying to learn how to sell wellness and that will typically happen in different cycles as we go. So that's kind of our focus right now is getting those salespeople oriented to be able to sell wellness and Prisma IO effectively.

Understood, I really appreciate that. And then maybe just one more one to touch on guidance real quick here. It's implying that Q4 will be pretty strong from an adjusted EPS standpoint. I gotta imagine most of that is as you get closer to that 50, 60 devices by year end. Is there anything else that we should be looking into maybe the second half of the year that could put you on either the higher or lower end of guidance?

Yeah, no, I think the few things that we're looking at for the second half of this year, number one, and I think you mentioned that already, as we continue to see interest and excitement building on Prism.io, that's helpful. to coming out of the live event. This is really our opportunity. It happens only once every couple of years where we're able to really sit down and align with our leadership around the globe deeper than just our top-tier leaders. This year in Japan, we expect over 10,000 attendees that are largely made up of the mid- to higher-level leadership in the company. To be able to really align with them Explain to them what we've learned so far about PRISM, what the new opportunities are with this AI-enabled app that will help them more effectively create conversion and opportunities for depth of customer lifetime value creation, as well as this new aging response modulator science. that we're pretty excited about from an epigenetic standpoint. We're going to be able to talk with them and get them comfortable with where we see our anti-aging platform going. And then the third part of it in Q4, traditionally, it is a strong promotion quarter. Obviously, Black Friday and various events Holiday-based promotions, but also promotions in the East that tend to drive the fourth quarter better as well. So those are our opportunities as we look forward into the fourth quarter.

That's perfect. I appreciate the time and wish you luck in the next quarter. Thanks, Dave.

Thank you.

Thank you. I'm showing no further questions at this time. Oh, and I'd like to turn it back to Ryan Napierski for closing remarks.

Well, thank you very much. So just closing up, we've talked about the important elements that are coming forward in the second half of our year. We're building out our intelligent wellness platform that combines the world-class anti-aging accomplishments of Ageloc with this new burgeoning aging response modulator science and combining that with the power of our AI platform and Prism.io. We're strengthening the foundation of our sales force with an improved compensation and incentive structure. And we're positioning the company to grow more effectively through our emerging markets, particularly India in this mid to long-term opportunity that we see is very vibrant moving forward. As we do all of those things, we're creating a more effective organization capable of delivering stronger growth and profitability, both in the eastern and western hemispheres over time. And we look forward to this upcoming global live event where we can meet with our top leaders to align with them around our aging response modulators science, showcasing this next phase of PRISM-IO and AI innovation. Aligning with our field leadership on the go-forward plan and our leader elite roadmap and continuing to prepare for India and the formal launch of that in the first half of 27. So while there's still significant work ahead, we remain confident that these initiatives position Nu Skin to create greater long-term value for our customers, affiliates, shareholders, and all of our stakeholders moving forward. And with that, thank you for joining us. We'll keep you updated as we go.

This concludes today's conference call. Thank you for participating. You may now disconnect