Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record first-quarter results, with revenue of $364.1 million, a 23 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 $0.48, a 153 percent improvement, or 71 percent when excluding restructuring charges of approximately $0.09 per share included in the prior-year results.
"We started the year off strong, generating record results while focusing on innovation in our products and processes," said Truman Hunt, president and chief executive officer. "Our ageLOC skin care system continues to be a significant catalyst by generating tremendous distributor excitement and consumer demand. During the quarter, we continued the global ageLOC rollout, with launches in the United States, Europe and South Korea. To date, the ageLOC product launch has been the most successful in our history, generating more than $80 million in just the first two quarters of product sales. We also supplemented the ageLOC launch by introducing a new and improved ageLOC version of our top-selling Galvanic Spa System.
"We continue to reap the rewards of our multi-year transformation process, demonstrated by our improved operating margin of 12.7 percent in the first quarter. Our consistent efforts to operate more efficiently and innovate in our business processes provide a stable foundation for increasing profitability," said Hunt.
Regional Results
North Asia. First-quarter revenue in North Asia grew 22 percent to $170.9 million, compared to $139.8 million for the same period in 2009. Revenue was positively impacted 11 percent by foreign currency fluctuations due to the strengthening of both the Japanese yen and the South Korean won. Local-currency revenue increased 67 percent in South Korea due to a very successful launch of the ageLOC™ Transformation system, offsetting a 4 percent revenue decline in Japan. The number of executive distributors in the region was up 6 percent while the number of active distributors was even with the prior year.
Americas. First-quarter revenue in the Americas was $62.5 million, compared to $58.4 million for the prior-year period. Revenue in both the United States and Canada improved 8 percent, while the company's small Latin American business had a constant currency decline of 23 percent due to a drop in sales in Venezuela. The number of executive distributors in the region increased 10 percent compared to the prior year, while the number of active distributors declined 2 percent.
Greater China. Revenue in Greater China improved 22 percent to $57.7 million for the quarter, and was positively impacted 3 percent by foreign currency fluctuations. Local-currency revenue in Mainland China improved 24 percent. Taiwan and Hong Kong revenue improved 17 percent and 12 percent, respectively, compared to the prior year. The executive distributor count in the region increased 20 percent and the number of active distributors improved 9 percent.
Europe. First-quarter revenue in Europe was $37.8 million, a 42 percent improvement over the prior-year period. Results in the region were positively impacted approximately 11 percent by foreign currency fluctuations. Executive and active distributor counts in the region increased 25 percent and 17 percent, respectively, compared to the prior year.
South Asia/Pacific. Revenue in South Asia/Pacific was $35.3 million for the first quarter, a 48 percent improvement over the prior year. Regional results were driven by solid performances in all markets and were positively impacted 16 percent by foreign currency fluctuations. The region's first-quarter executive count improved 28 percent, while the active distributor count increased 14 percent.
Operational Performance
The company's operating margin improved to 12.7 percent, compared to 6.8 percent in the prior year, or 10.0 percent excluding restructuring charges. The company's gross margin in the first quarter was 82.2 percent, representing a 40 basis-point improvement as a result of foreign currency benefit and sales of higher margin ageLOC products. Selling expenses, as a percent of revenue, were 42.4 percent in the first quarter, an increase of 40 basis points, but in line with historical averages. General and administrative expenses, as a percent of revenue, were 27.2 percent, a 270 basis-point improvement over the prior year as the company continues to benefit from its transformation efforts.
The company's income tax rate for the quarter was 33.6 percent. Dividend payments during the quarter were $7.8 million and the company repurchased $10.1 million of its outstanding shares.
Outlook
"We have established a solid foundation for growth and believe we can generate strong results throughout the remainder of 2010 and into the future," said Hunt. "We will continue to fuel the ageLOC momentum by rolling out our ageLOC product suite in Taiwan and Hong Kong in the second quarter and Southeast Asia in the third quarter.
"We are maximizing our synergistic strength in both personal care and nutrition to develop an entirely new class of anti-aging products. The ageLOC skin care system demonstrates our scientific leadership in anti-aging products, and later this year we will introduce our proprietary ageLOC science into our nutrition line. Given our ability to address the ultimate sources of aging both internally and externally, we believe we have a clear competitive advantage that allows us to capitalize on the growing anti-aging category," concluded Hunt.
"With strong revenue results in the first quarter and great momentum behind the ageLOC product launch, we are increasing our 2010 projected revenue and earnings per share guidance to $1.44 to $1.46 billion and $1.80 to $1.88, respectively," said Ritch Wood, chief financial officer. "We expect currency to benefit revenue 1 to 2 percent for the year, while we project local-currency revenue growth of 8 to 9 percent. For the second quarter, we project revenue in the $362 to $370 million range with earnings per share in the $0.44 to $0.46 range," concluded Wood.
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