NU SKIN ENTERPRISES, INC. Q1 FY2026 earnings call

And our next anticipated major market, India, holds tremendous potential with planned formal launch by the end of this year. Operating efficiency remains a critical focus, working on gross margin improvement via localized manufacturing, portfolio optimization, and strategic pricing. Chelsea Lance introduced as interim CFO, discussed first quarter results, second quarter outlook, and full year expectations. Continued investment in key strategic priorities like the expansion of the intelligent beauty and wellness platform through Prism.io and ongoing investment in emerging markets. Also, completed refinancing of credit facilities and returned approximately $8 million to shareholders.

For the first quarter, revenue was $320.6 million. Adjusted growth margin was 67.9% compared to 67.8% in the prior year. Within the core Nu Skin business, growth margin improved to 76.9%, up 20 basis points from the prior year. 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. General and administrative expenses declined by $9 million year-over-year on an adjusted basis, but as a percentage of revenue, G&A was 29.9% up from 28.9% in the prior year. Adjusted operating margin for the quarter was 3.6% down from 6.4% in the prior year.

For the second quarter, expected revenue in the range of $330 million to $360 million, assuming relatively neutral foreign currency impact. Expected earnings per share in the range of $0.15 to $0.25. Maintaining annual guidance and expect more clarity following the second quarter.

Potential inflationary pressures impacting consumer sentiment related to macro factors such as tariffs, recent fuel price increases, and broader geopolitical dynamics.

Q: 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?

A: 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.

Q: 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?

A: 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.

Q: 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?

A: 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.

Q: 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.

A: 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.