Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record second-quarter results, with revenue of $424.4 million, a 9 percent improvement over the prior-year period. Quarterly revenue was positively impacted 8 percent by foreign currency fluctuations. Earnings per share for the quarter were $0.65, a30 percent improvement over the prior year.
"We are pleased with our second-quarter results and are confident that our performance keeps us on track for another strong year," said Truman Hunt, president and chief executive officer. "We continue to fuel our momentum by attracting new distributors, leveraging our exclusive ageLOC product portfolio, focusing on growth in our emerging markets, and consistently improving profitability and shareholder value. We are also looking forward to the fall introduction of additional anti-aging products, which we anticipate will continue to drive consumer demand and steady business growth."
Regional Results
North Asia. Second-quarter revenue in North Asia grew 12 percent to $183.1 million, compared to $164.1 million for the same period in 2010. Revenue was positively impacted 11 percent by foreign currency fluctuations. Local-currency revenue in South Korea increased 25 percent. As expected, Japan reported a 10 percent year-over-year decline, largely due to the impact of the natural disasters in March. The number of executive distributors in the region was up 6 percent and the number of active distributors was up 1 percent compared to the prior year.
Greater China. Revenue in Greater China declined 2 percent to $79.4 million for the quarter and was positively impacted 6 percent by foreign currency fluctuations. The decline was due to a very significant ageLOC product launch in the second quarter of 2010 that boosted revenue by approximately $25 million, contributing to a 53 percent increase reported in the prior year. Local-currency revenue in Mainland China improved 77 percent, Taiwan was down 8 percent and Hong Kong experienced a 61 percent decline. Individual market comparisons for the quarter were impacted by regional convention sales in Hong Kong in the prior year. Both the executive and active distributor numbers increased 14 percent compared to the prior-year period.
Americas. Second-quarter revenue in the Americas was $59.8 million, compared to $62.4 million for the prior-year period. Revenue in the United States and Canada declined 6 and 14 percent, respectively, while Latin America improved 21 percent. The number of executive distributors in the region declined 6 percent compared to the prior year, while the number of active distributors declined 2 percent.
South Asia/Pacific. Revenue in South Asia/Pacific was $59.2 million for the second quarter, a 29 percent improvement over the prior year. Regional results were positively impacted 11 percent by foreign currency fluctuations. The region's second-quarter executive count improved 24 percent and the active distributor count increased 23 percent.
Europe. Quarterly revenue in Europe was $42.9 million, a 22 percent improvement over the prior-year period. Results in the region were positively impacted approximately 14 percent by foreign currency fluctuations. Executive and active distributor counts in the region increased 7 and 8 percent, respectively, compared to the prior year.
Operational Performance
The company's operating margin improved to a record level of 15.6 percent, compared to 15.2 percent in the prior year. The company's gross margin in the second quarter was 83.2 percent, a 70 basis-point improvement as a result of foreign currency benefits and supply chain efficiencies. Selling expenses, as a percent of revenue, were 43.2 percent in the second quarter, an increase of 180 basis points. Selling expenses in the prior year were unusually low because of non-commissionable convention fees and sales aid revenue. In addition, selling expenses increased in the current period as a result of a higher number of distributors qualifying for promotional sales incentives, as well as initiatives to support distributors impacted by the natural disasters in Japan. General and administrative expenses, as a percent of revenue, were 24.4 percent, improving 140 basis-points over the prior year as the company continues to benefit from increased efficiencies. Other expense was $0.1 million compared to $7.3 million in the prior year.
The company's income tax rate for the quarter was 36.7 percent. Dividend payments during the quarter were $8.4 million and the company repurchased $11.8 million of its outstanding shares.
Outlook
"Our strong first-half performance has laid the foundation for what we believe will be a solid second half of 2011," said Hunt. "We anticipate the largest product launch in our history when we introduce new ageLOC products at our global distributor convention in October.
"We also continue to have high expectations for continued growth in emerging markets, particularly Mainland China and South Asia. These markets are becoming more meaningful to our global business, providing geographic diversity and long-term opportunity. Our established markets are performing as expected, with a positive trend improvement in the United States, and with Japan in-line with our guidance following the natural disasters.
"Our operating margin improvements and strong cash generation reflect continued management focus on profitability. These improvements led to our mid-year 19 percent dividend increase. We believe we are ahead of schedule on our plan to reach $4.00 earnings per share by 2015," concluded Hunt.
"With favorable foreign currency movements and our anticipation for a strong back half of the year, we are increasing our 2011 projected revenue to $1.655 to $1.675 billion and earnings per share to $2.06 to $2.14, or $2.38 to $2.46 when excluding the Japan customs charge of $0.32 taken in the first quarter," said Ritch Wood, chief financial officer. "For the third quarter, we project revenue of $405 to $415 million assuming a currency benefit of approximately 5 percent, and earnings per share in the $0.58 to $0.61 range."
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