Q3 2023 Nu Skin Enterprises Inc Earnings Call

November 1, 2023

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Speaker 1: G'day, ladies and gentlemen. Thank you for standing by. Welcome to new skin and surprises third quarter 2023 earnings conference call. At this time, over to Spins on a-

Good day, ladies and gentlemen, thank you for standing by welcome to Nu skin Enterprises third quarter 2023 earnings conference call.

At this time all participants are in a listen only mode.

Speaker 1: After to speak as presentation, there will be a question and answer session.

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 one one on your telephone.

Speaker 1: To ask a question during the session, you will need to press star 1, 1 on your telephone. You will then hear an automatic message advised in your hand its raise. Please note that today.

Oh, well donnean automatic message advising yohan its ways.

Please note that today's conference maybe recorded.

Speaker 1: I will now hand the conference over to you, Speaker Hose, the Scott Pond by the President of Investulations. Please go ahead.

I will now hand, the conference of a Geo Steakhouse, So Scott Pond, Vice President of Investor Relations. Please go ahead.

Thank you Olivia and good afternoon, everyone today on the call with me are Ryan appear ski President and CEO and James Thomas CFO on today's call comments will be made that include some forward looking statements. These.

Speaker 2: Thanks, Olivia, and good afternoon, everyone. Today on the call with me are Ryan Dupersky, President and CEO and James Thomas CFO . On today's call comments will be made that includes some forward-looking statements.

Speaker 2: These statements involve risks and uncertainties and actual results made different materially from those discussed or inquisitive.

These statements involve 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.

Speaker 2: Please refer to today's earnings release and our SEC firings for a complete discussion of these risks.

Speaker 2: Also during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial state.

We believe these non-GAAP numbers assist in comparing period to period results in a more consistent manner.

Speaker 2: We believe these non-gap numbers assist in comparing period to period results in a more consistent

Speaker 2: Please refer to our investor website for any required reconciliation of non-gap numbers. And with that, I'll...

Refer to our Investor website for any required reconciliation of non-GAAP numbers and with that I'll turn the call over to Brian. Thanks, Scot Hello, everyone. Thanks for joining us today.

Speaker 2: Thanks Scott, hello everyone. Thanks for joining us today. These are very important times for our company, as we continue to navigate our enterprise transformation amid the macro-environmental headwinds, impacting consumers around the globe, and pivot our business accordingly.

These are very important times for our company as we continue to navigate our enterprise transformation amidst the macro environmental headwinds impacting consumers around the globe and pivot our business accordingly.

Speaker 2: Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our Newskin Corps business.

Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our new skin core business, particularly evident during the last half of this past quarter. This led to sales below our expectations and non-GAAP earnings per share to the low end of our guide.

Speaker 3: Particularly evident during the last half of this past quarter.

Speaker 3: This led to sales below our expectation and non-gap earnings per share to the low end of our guide.

Speaker 3: In the third quarter, our revenue was $499 million with Q3 non-gap earnings per share of 56 cents when excluding a strategic inventory write down. The primary factor leading to our underperformance was mainland China.

In the third quarter, our revenue was $499 million with Q3 non-GAAP earnings per share of <unk> 56 cents, when excluding our strategic inventory write down.

The primary factor leading to our underperformance was mainland China.

Speaker 3: We had projected to grow for China in the second half of the year based on improving trends in the first half and even into early Q3. But a significant slowdown in consumer spending across the broader economy reversed those early trends.

We had projected the growth grow for China in the second half of the year based on improving trends in the first half and even into early Q3, but a significant slowdown in consumer spending across the broader economy reverse those early trends in the Americas prolonged inflation has constrained incomes and led to more cautious.

Speaker 3: In the Americas, prolonged inflation has constrained incomes and led to more cautious and price sensitive consumers.

And price sensitive consumer.

Speaker 3: However, growth in our regions and other regions partially offset these challenges. Japan, Hong Kong, Taiwan, and Europe all experienced notable gains with the introduction of what age lock well spa IO. We also generated sequential growth in our Southeast Asia Pacific and South Korea segment.

However growth in our regions and other regions, partially offset these challenges, Japan, Hong Kong, Taiwan, and Europe, all experienced notable gains with the introduction of <unk>. We also generated sequential growth in our southeast Asia Pacific and South Korea segments. It is important to call.

Speaker 3: It's important to call out our ride segments that perform well above expectations, which I'll discuss more in just a moment.

All out our rides segment that performed well above expectations, which I'll discuss more in just a moment.

Speaker 3: While our strategic initiatives associated with our new skin core business transformation have generated some positive lift in key areas over the past quarters, the pace of improvement has been slower than expected primarily due to macro factors that I just discussed. Consequently, we'll continue refining our tactics to sync with market dynamics and maximize our investments across three strategic comparatives and power me personalization, social commerce, and our digital ecosystem.

While our strategic initiatives associated with our new skin core business transformation have generated generated some positive lift in key areas over the past quarters. The pace of improvement has been slower than expected primarily due to macro factors that I just discussed consequently will continue refining our tactics to sync with <unk>.

Dynamics and maximize our investments across three strategic imperatives, empower me personalization, social commerce and our digital ecosystem.

Speaker 3: During the quarter, we continued to advance our Empower Me strategy through the mainland China and Korea rollouts of age-lock T-R-Me personalized weight management system, and the introduction of our second connected device system age-lock well-spot I-O in the many of our markets.

During the quarter, we continued to advance our empowerment strategy through the mainland China and Korea Rollouts of <unk> personalized weight management system.

And the introduction of our second connected device system <unk> Io into many of our markets.

Speaker 3: We remain focused on enhancing our personalization journey with our connected device roadmap, with IO device systems currently contributing 14% of revenue in the third quarter. This aligns with our near-term goal of 15% and our long-term target of 30% by 2025.

We remain focused on enhancing our personalization journey with our connected device roadmap with Io device systems currently contributing 14% of revenue in the third quarter. This aligns with our near term goal of 15% and our long term target of 30% by 2025 to.

Speaker 3: To date, we have logged more than 9 million connected device treatments and collected over 100 million unique data insights, which will play an increasingly meaningful role as we lean further into our personalization, beauty and wellness journey.

To date, we have logged more than 9 million connected device treatments and collected over 100 million unique data insights, which will play an increasingly meaningful role as we lean further into our personalization beauty and wellness journey.

Speaker 3: Next, we continue to make modifications to our affiliate-powered business model to better support new business builders, which are yielding some promising outcomes in recent trials across multiple markets, most notably in Japan and parts of Latin America. We will continue to lean further into this new affiliate journey as an increasing portion of today's workforce workforce seeks more flexible ways of working in the gig and more economy.

Next we continue to make modifications to our affiliate powered business model to better support new business builders, which are yielding some promising outcomes and recent trials across multiple markets, most notably in Japan and parts of Latin America, We will continue to lean further into this new affiliate journey as an increasing portion of today's <unk>.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to NU Skin Enterprises' third quarter, 2023 Earnings Conference call. At this time, all participants on a listen only mode. After the speech presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automatic message advised in your hand its ways. Please note that today's conference may be recorded.

Operator: I will now hand a conference over to your speakers.

Workforce workforce seeks more flexible ways of working in the gig and more economy.

Speaker 3: As a reminder, our affiliate numbers were impacted by adjustments made to the eligibility requirements for affiliate rewards in some markets beginning in Q2 and continuing through 2024.

As a reminder, our affiliate numbers were impacted by adjustments made to the eligibility requirements for affiliate rewards and some markets beginning in Q2 and continuing through 2024.

Speaker 3: For our digital ecosystem, we are continuously enhancing the features and capabilities of our VARA and Stella apps to strengthen connections with our customers and affiliates.

For our digital ecosystem, we are continuously enhancing the features and capabilities of our Vera and stellar apps to strengthen connections with our customers and affiliates.

Scott Pond: Scott Pond, Vice President of Investulations, please go ahead. Thanks, Olivia and good afternoon, everyone. Today on the call with me are Ryan Napierski, President and CEO and James Thomas, CFO.

Speaker 3: Following recent tests of new promotional features of Vera in Europe , we were very encouraged by the revenue that was generated and the potential for coordinated at-based global promotions in 2024. Our monthly active user ratio increased to 18% of monthly active customers for Vera, which is tracking behind our target of 30% mostly due to slower adoption in Asia.

Following recent tests of new promotional features of Vera in Europe, we were very encouraged by the revenue that was generated and the potential for coordinated App based global promotions in 2024, our monthly active user ratio increased 18% to 18% of monthly active customers for Vera which is tracking behind <unk>.

Scott Pond: On today's call, comments will be made that includes some forward-looking statements. These statements involve risks and uncertainties and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filing 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-gap numbers assist in comparing period to period results in a more consistent manner.

Our target of 30%, most mostly due to slower adoption in Asia for.

Speaker 3: For Stella, we have more than doubled our annual target of monthly active users this year with 68% of average monthly paid affiliates on the app.

For stellar we have more than doubled our annual target of monthly active users. This year with 68% of average monthly paid affiliates on the App, we will be focusing on 2024 upon driving deeper connections with our customers and affiliates through these apps to expand engagement and conversion, resulting in improved lifetime value.

Speaker 3: We will be focusing on 2024 upon driving deeper connections with our customers and affiliates through these apps to expand engagement and conversion, resulting in improved lifetime value.

Scott Pond: Please refer to our investor website for any required reconciliation of non-gap numbers.

Given the robustness of rise it's important for us to dive deeper into these business segments as we lean further into our broader enterprise strategy rise consists of several dynamic businesses, including mainly a leading affiliate marketing and technology platform, which connects nearly 800 retail.

Speaker 3: Given the robustness of rise, it's important for us to dive deeper into these business segments as we lean further into our broader enterprise strategy. Rise consists of several dynamic businesses, including Mavily, a leading affiliate marketing and technology platform, which connects nearly 800 retail and brands to more than, retailers and brands to more than 45,000 Mavily affiliates and helps power our bearer out.

Ryan Napierski: And with that, I'll turn the call over to Ryan. Thanks, Scott. Hello, everyone. Thanks for joining us today. These are very important times for our company as we continue to navigate our enterprise transformation amid the macro environmental headwinds impacting consumers around the globe. And pivot our business accordingly. Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our new skin core business, particularly evident during the last half of this past quarter.

<unk> brand and brands to more than retailers and brands to more than 45000, nasally affiliates and helps power or their app.

Speaker 3: Watt's such an elevate manufacturing, which currently service more than 120 customers, including new skin.

Wasatch and elevate manufacturing, which currently serves more than 120 customers, including new skin.

Speaker 3: Beauty Bio, our most recent clean beauty on the channel acquisition, which continues to expand its retail and digital channels. And like DNA, a DNA recommendation, which holds significant future potential for our broader personalization strategy.

Beauty bio our most recent clean beauty Omnichannel acquisition, which continues to expand its retail and digital channels and.

Ryan Napierski: This led to sales below our expectation and non-gap earnings per share to the low end of our guide. In the third quarter, our revenue was $499 million with Q3 non-gap earnings per share of 56 cents when excluding a strategic inventory right down. The primary factor leading to our underperformance was mainland China. We had projected to grow for China in the second half of the year based on improving trends in the first half and even into early Q3.

In light DNA, a DNA recommendation, which holds significant future potential for our broader personalization strategy.

Right now accounts for 12% of our business and we anticipate it growing to 20% to 25% of revenue over the next two years this segment delivered more than 40%.

Speaker 3: Rise now accounts for 12% of our business, and we anticipate it growing to 20 to 25% of revenue over the next two years. This segment delivered more than 40% growth year over year in the quarter, underscoring the robustness of these business.

Both year over year in the quarter underscore underscoring the robustness of these businesses. Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem that consumer technology and manufacturing companies that not only enhance our core business, but I'll facilitate our broader beauty and wellness eco.

Ryan Napierski: But a significant slowdown in consumer spending across the broader economy reversed those early trends. In the Americas, prolonged inflation has constrained incomes and led to more cautious and price sensitive consumer. However, growth in our regions and other regions partially offset these challenges. Japan, Hong Kong, Taiwan, and Europe all experienced notable gains with the introduction of age lock, well-spot IO. We also generated sequential growth in our Southeast Asia Pacific and South Korea segments.

Speaker 3: Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem of a consumer, technology, and manufacturing companies that not only enhance our core business, but also facilitate our broader beauty and wellness ecosystem enterprise transformation.

System Enterprise transformation.

Speaker 3: While we have not yet talked indefinitely about our right strategy, I'm personally very excited about sharing our broader enterprise vision with you early next year.

While we have not yet talked in depth about our rise strategy I'm personally very excited about sharing our broader enterprise vision with you early next year.

Speaker 3: Before wrapping up, I'd like to share some insights on our approach to managing the business in the near term as we navigate the macroenvironmental uncertainties. Striking a balance between executing our long-term strategy while upholding our commitment to delivering value to our shareholders. The continued headwinds around the globe remain exceedingly dynamic and visibility is constrained as conditions can evolve swiftly.

Before wrapping up I'd like to share some insights on our approach to managing the business in the near term as we navigate the macro environmental uncertainties striking a balance between executing our long term strategy, while upholding our commitment to delivering value to our shareholders. The continued headwinds around the globe remain exceedingly dynamic and visibility is.

Ryan Napierski: It's important to call out our right segments that perform well above expectations, which I'll discuss more in just a moment. While our strategic initiatives associated with our new skin core business transformation have generated some positive lift in key areas over the past quarters, the pace of improvement has been slower than expected primarily due to macro factors that I just discussed. Consequently, we'll continue refining our tactics to sync with market dynamics and maximize our investments across three strategic comparatives and power me personalization, social commerce, and our digital ecosystem.

Constrained as conditions can evolve swiftly.

Speaker 3: At the same time, we have ambitious plans in place for 2024 to accelerate growth in our new skin core business as well as the enterprise, including the introduction of an entirely new mental wellness category, which will incorporate several strategic investments made over the past few years. Therefore, it is paramount that we simplify our business to the core value drivers, focus strictly on priority work, and execute with excellence in areas where we have the greatest control.

At the same time, we have ambitious plans in place for 2024 to accelerate growth in our new skin core business as well as the enterprise, including the introduction of an entirely new mental wellness category, which will incorporate several strategic investments made over the past few years. Therefore, it is permanent it is paramount that we simplify our business.

Ryan Napierski: During the quarter, we continued to advance our Empower Me strategy through the mainland China and Korea rollouts of agelock PRME personalized weight management system, and the introduction of our second connected device system, agelock well spa IO in the many of our markets. We remain focused on enhancing our personalization journey with our connected device roadmap, with IO device systems currently contributing 14% of revenue in the third quarter. This aligns with our near-term goal of 15% and our long-term target of 30% by 2025.

To the core value drivers focused strictly on priority work and execute with excellence and areas, where we have the greatest control.

Speaker 3: To this end, we are strategically reevaluating our New Skin Core business under the premise of one global business. A holistic competitive advantage that enables us to operate more effectively and efficiently around the globe.

To this end we are strategically reevaluating, our new skin core business under the premise of one global business, a holistic competitive advantage that enables us to operate more effectively and efficiently around the globe. This re tooling will include number one a strategic global realignment of our product portfolio.

Speaker 3: This retooling will include, number one, a strategic global realignment of our product portfolio, focusing on our hero brand, number two, global process and organization remapping the way we work as one global team, and number three, an operational footprint review, including where and how we operate in our markets.

Focusing on our hero brands number two global process and organization re mapping the way we work as one global team and number three and operational footprint review, including where and how we operate and our markets.

Ryan Napierski: To date, we have logged more than 9 million connected device treatments and collected over 100 million unique data insights, which will play an increasingly meaningful role as we lean further into our personalization, beauty and wellness journey. Next, we continue to make modifications to our affiliate-powered business model to better support new business builders, which are yielding some promising outcomes in recent trials across multiple markets, most notably in Japan and parts of Latin America.

Speaker 3: This retooling will improve overall effectiveness of execution and efficiency of work that will result in increasing cash flows, improving margins, and enhanced earnings per share in the coming year.

This retooling will improve overall effectiveness of execution and efficiency of work that will result in increasing cash flows improving margins and enhanced earnings per share in the coming year. For example, we are thoroughly reevaluating our product portfolio relative to our integrated beauty and wellness strategy and anticipate a <unk>.

Speaker 3: For example, we are thoroughly reevaluating our product portfolio relative to our integrated beauty and wellness strategy, an anticipated eliminating 20 to 30 percent of non-strategic excuse over the next 12 to 18 months.

Ryan Napierski: We will continue to lean further into this new affiliate journey as an increasing portion of today's workforce seeks more flexible ways of working in the gig and more economy. As a reminder, our affiliate numbers were impacted by adjustments made to the eligibility requirements for affiliate rewards in some markets, beginning in Q2 and continuing through 2024. For our digital ecosystem, we are continuously enhancing the features and capabilities of our Vera and Stella apps to strengthen connections with our customers and affiliates.

Emanating, 20% to 30% of nonstrategic Skus over the next 12 months to 18 months. We are also exploring additional opportunities to optimize our global operations adhering to our one global business approach to market.

Speaker 3: We are also exploring additional opportunities to optimize our global operations, adhering to our one global business approach to market.

Speaker 3: I'd also like to note that Connie Tang has decided to step down from her role as Global Growth Officer due to family health matters. Connie has been a great strategic partner over the past two years. But with this change, we will be realigning our organization to create greater strategic alignment between regions and global functions in order to further enhance our go-to-market industry authority.

I'd also like to note that <unk> has decided to step down from her role as global growth officer due to family health matters <unk> been a great strategic partner over the past two years, but with this change we will be realigning our organization to create greater strategic alignment between regions and global functions in order to further.

Ryan Napierski: Following recent tests of new promotional features of Vera in Europe, we were very encouraged by the revenue that was generated and the potential for coordinated app-based global promotions in 2024. Our monthly active user ratio increased to 18 percent of monthly active customers for Vera, which is tracking behind our target of 30 percent most mostly due to slower adoption in Asia. For Stella, we have more than doubled our annual target of monthly active users this year with 68 percent of average monthly paid affiliates on the app.

Enhanced our go to market execution.

Speaker 3: Throughout our nearly 40-year history, we have confronted numerous challenges and have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model in Salesforce. We maintain a strong balance sheet and financial prudence to ensure that we're able to invest in the businesses needed while returning value, including a healthy dividend, to our investors.

Throughout our nearly 40 year history, we have confronted numerous challenges.

And have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model and Salesforce, we maintain a strong balance sheet and financial prudence to ensure that we're able to invest in the business as needed while returning value, including a healthy dividend to our investors I am confident that we will continue to discover new and compelling opportunity.

Speaker 3: I'm confident that we'll continue to discover new and compelling opportunities amidst these disruptive times, generating long-term growth and value for shareholders.

Ryan Napierski: We will be focusing on 2024 upon driving deeper connections with our customers and affiliates through these apps to expand engagement and conversion resulting in improved lifetime value. Given the robustness of rise, it's important for us to dive deeper into these business segments as we lean further into our broader enterprise strategy. Rise consists of several dynamic businesses, including Mavily, a leading affiliate marketing and technology platform, which connects nearly 800 retail and brands to more than retailers and brands to more than 45,000 Mavily affiliates and helps power our Vera app.

Amidst these disruptive times generating long term growth and value for shareholders. So with that let me turn the time over to James to take you through our financials in more detail, including our guidance for Q4 and end of year and then on to Q&A Jason.

Speaker 3: So with that, let me turn the time over to James to take you through our financials in more detail, including our guidance for Q4 and end of year, and then on to Q&A. James.

Speaker 2: Thank you, Ryan, and thanks to all of you for joining today. I'll provide a brief financial review and then give Q4 projections and update full year 2023 guidance. For additional details, please visit our investor relations website.

Thank you Ryan and thanks to all of you for joining today I'll provide a brief Q3 financial review and then give Q4 projections and update full year 2023 guidance for additional details. Please visit our Investor Relations website for the third quarter, we posted revenue of $498 8 million.

Speaker 2: For the third quarter, we posted a revenue of $498.8 million, with a negative foreign currency impact of 1.5% or $8.1 million. Reported earnings per share for the quarter was negative $0.74 or $0.56 when excluding inventory write-up charges.

With a negative foreign currency impact of one 5% or $8 $1 million reported earnings per share for the quarter was negative 74.

Ryan Napierski: What's such an elevate manufacturing, which currently serves us more than 120 customers, including new skin. Beauty Bio, our most recent clean beauty on the channel acquisition which continues to expand its retail and digital channels and like DNA, a DNA recommendation which holds significant future potential for our broader personalization strategy. Rise now accounts for 12 percent of our business and we anticipate it growing to 20 to 25 percent of revenue over the next two years.

Or 56, when excluding inventory write off charge given the state of the business and in line with the strategic review Ryan mentioned, we've made the decision to rebalance and narrow our product portfolio, resulting in a $65 7 million inventory write offs.

Speaker 2: Given the state of the business, and in line with the strategic review Ryan mentioned, we've made the decision to rebalance and narrow our product portfolio, resulting in a 65.7 million dollar inventory write off this decision helps accelerate our product portfolio optimization by further aligning our product offerings with our empower me integrated beauty and wellness strategy.

This decision helps accelerate our product portfolio optimization by further aligning our product offerings with our empowerment integrated beauty and wellness strategy.

Ryan Napierski: This segment delivered more than 40 percent growth year over year in the quarter, underscoring the robustness of these businesses. Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem, a consumer technology and manufacturing companies that not only enhance our core business but also facilitate our broader beauty and wellness ecosystem enterprise transformation.

Speaker 2: We expect the benefits from the product portfolio optimization to be realized over the next two to three years with the ability to support our business with lower inventory levels to free up our cash to invest in areas of growth across the enterprise, as well as enabling faster responses to market demand, customer preferences, and shifts in the competitive landscape.

We expect the benefits from the product portfolio optimization to be realized over the next two to three years with the ability to support our business with lower inventory levels to free up our cash to invest in areas of growth across the enterprise as well as enabling faster responses to market demand customer preferences.

And shifts in the competitive landscape.

Ryan Napierski: While we have not yet talked in depth about our rise strategy, I'm personally very excited about sharing our broader enterprise vision with you early next year. Before wrapping up, I'd like to share some insights on our approach to managing the business in the near term as we navigate the macro-environmental uncertainties. Striking a balance between executing our long-term strategy while upholding our commitment to delivering value to our shareholders. The continued headwinds around the globe remain exceedingly dynamic and visibility is constrained as conditions can evolve swiftly.

Speaker 2: Our gross margin was 58.6% or 71.8% when excluding the inventory charge. Gross margin for the core Nu Skin business was 61.8% or 76.8% excluding the inventory write-off compared to 73% or 76.7% excluding restructuring charges in Q3 of 2022.

Our gross margin was 58, 6% or 71, 8% when excluding the inventory charge gross margin for the core Nu skin business was 61, 8% or 76, 8%, excluding the inventory write off compared to 73% or 76.

7%, excluding restructuring charges in Q3 of 2022.

Speaker 2: With the 45% growth of our rice segments, this has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group.

With a 45% growth of our rise segments. This has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group.

Ryan Napierski: At the same time, we have ambitious plans in place for 2024 to accelerate growth in our new skin core business, as well as the enterprise, including the introduction of an entirely new mental wellness category, which will incorporate several strategic investments made over the past few years. Therefore, it is paramount that we simplify our business to the core value drivers focused strictly on priority work and execute with excellence in areas where we have the greatest control.

Selling expense as a percentage of revenue was 37, 6% 270 basis points below the prior year period.

Speaker 2: Sally Expense of a percentage of revenue was 37.6%, 270 basis points below the prior year period. The lower selling expenses do in large part to growth in our rise manufacturing segment, which represented 10% of our total sales.

Lower selling expenses due in large part to growth in our rise manufacturing segment, which represented 10% of our total sales for the core Nu skin business selling expense was 41, 7% compared to 43, 5%.

Speaker 2: For the core new skin business, selling expense was 41.7%, compared to 43.5%.

Ryan Napierski: To this end, we are strategically re-evaluating our new skin core business under the premise of one global business. A holistic competitive advantage that enables us to operate more effectively and efficiently around the globe. This re-tooling will include, number one, a strategic global re-alignment of our product portfolio, focusing on our Hebrew brands. Number two, global process and organization remapping the way we work as one global team. And number three, an operational footprint review, including where and how we operate in our markets.

Speaker 4: General administrative expenses declined $7 million a year over year, as prudent expense management remained the top priority. As a percentage of revenue, GNA was 26.2%, compared to 25.7% in the prior year.

General and administrative expenses declined $7 million year over year as prudent expense management remains a top priority.

As a percentage of revenue G&A was 26, 2% compared to 25, 7% in the prior year.

Speaker 4: Operating margin for the quarter was negative 5.3%, or 7.9%, excluding inventory write-off charges, compared to negative 3.8%, or 6.8%, excluding restructuring charges in the prior year. The other income expense line was at an $8.1 million expense.

Operating margin for the quarter was negative five 3% or seven 9%, excluding inventory write off charges compared to negative three 8% or six 8% excluding restructuring charges in the prior year. The other income expense line reflected an $8 1 million.

Ryan Napierski: This re-tooling will improve overall effectiveness of execution and efficiency of work that will result in increasing cash flows, improving margins, and enhanced earnings per share in the coming year. For example, we are thoroughly re-evaluating our product portfolio relative to our integrated beauty and wellness strategy and anticipate eliminating 20 to 30 percent of non-strategic skews over the next 12 to 18 months. We are also exploring additional opportunities to optimize our global operations adhering to our one global business approach to market.

Speaker 4: We generated strong cash from operations for the third quarter at $51 million, compared to $28.4 million in the prior year period. This was mainly driven by greater inventory conversion led by the market previews of TRME and Well Spa I-O.

<unk>.

We generated strong cash from operations for the third quarter at $51 million compared.

Compared to $28 4 million in the prior year period. This was mainly driven by greater inventory conversion led by the market previews of TRP and well Spa Io.

Speaker 4: We paid $19.5 million in dividends and repurchased $13 million of our stock with $162.4 million remaining on the current authorization.

We paid $19 5 million in dividends and repurchased $13 million of our stock with $162 $4 million remaining on the current authorization.

Speaker 4: Our tax rate for the quarter was negative 7.3% or 10.1% excluding inventory write-offs compared to 12.3% or 24% excluding restructuring charges in the prior year period. Our tax rate was negatively impacted by the reduced earnings in the US as a result of the inventory write-off.

Our tax rate for the quarter was negative seven 3% or 10, 1%, excluding inventory write offs compared to 12, 3% or 24% excluding restructuring charges in the prior year period, our tax rate was negatively impacted by the reduced earnings in the U S.

Ryan Napierski: I'd also like to note that Connie Tang has decided to step down from her role as global growth officer due to family health matters. Connie's been a great strategic partner over the past two years. But with this change, we will be re-aligning our organization to create greater strategic alignment between regions and global functions in order to further enhance our go-to-market execution.

As a result of the inventory write offs we.

Speaker 4: We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%.

We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%.

Ryan Napierski: Throughout our nearly 40-year history, we have confronted numerous challenges and have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model and sales force. We maintain a strong balance sheet and financial prudence to ensure that we're able to invest in the businesses needed while returning value, including a healthy dividend, to our investors. I'm confident that we'll continue to discover new and compelling opportunities amidst these disruptive times, generating long-term growth, and value for shareholders.

Shifting focus now to guidance give.

Speaker 4: Given the aforementioned economic conditions and the recent business trend, we are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of $15 million to $25 million. We now expect 2023 revenue of $1.92 to $1.96 billion.

Given the aforementioned economic conditions and the recent business trends, we are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of 15 million to $25 million. We now expect 2023 revenue of $1 92 to $1 96.

James Thomas: So with that, let me turn the time over to James to take you through our financials in more detail, including our guidance for Q4 and End of Year and then on to Q&A. James? Thank you, Ryan. Thanks to all of you for joining today. I'll provide a brief two, three financial review and then give Q4 projections an update full year 2023 guidance.

<unk>.

Speaker 4: We anticipate earnings per share of negative $0.10 to $0.05, or $1.62 to $1.77, which excludes the inventory write-off and restructuring charges for 2023. This guidance assumes a negative foreign currency impact of approximately 2% to 3%.

We anticipate earnings per share of negative <unk> five.

<unk> or $1 62 to $1 77, which excludes the inventory write off and restructuring charges for 2023.

James Thomas: For additional details, please visit our investor relations website. For the third quarter, we posted a revenue of $498.8 million with a negative form currency impact of 1.5% or $8.1 million. Reported earnings per share for the quarter was negative $0.74 or 56 cents when excluding inventory right up charge. Given the state of the business and in line with the strategic review Ryan mentioned, we've made the decision to rebalance and narrow our product portfolio resulting in a $65.7 million inventory right up.

This guidance assumes a negative foreign currency impact of approximately 2% to 3%.

Speaker 4: We are projecting fourth quarter revenue of $440 million to $480 million, assuming a foreign currency headwind of approximately 3% with reported earnings per share of negative 14 cents to 1 cent, or 15 cents to 30 cents when excluding the fourth quarter charge.

We are projecting fourth quarter revenue of $440 million to $480 million, assuming a foreign currency headwind of approximately 3% with reported earnings per share of negative <unk> 14 to <unk>.

Or 15 to 30.

When excluding the fourth quarter charge in.

Speaker 4: Inclusing while our new skin business continues to decline from macro challenges, we remain steadfast in our dedication and driving forward our key initiatives while also prioritizing our financial strength. This involves streamlining expenses, maximizing our cash flow, and actively pursuing avenues for increased operational efficiencies by further leveraging our ride ecosystem in order to invest in future growth. And with that operator, we'll now open the call up for questions.

In closing, while our Nu skin business continues to decline from macro challenges, we remain steadfast in our dedication and driving forward our key initiatives. While also prioritizing our financial strength. This involves streamlining expenses maximizing our cash flow and actively pursuing avenues for increased operational.

James Thomas: This decision helps accelerate our product portfolio optimization by further aligning our product offerings with our empowered me integrated beauty and wellness strategy. We expect the benefits from the product portfolio optimization to be realized over the next two to three years with the ability to support our business with lower inventory levels to free up our cash to invest in areas of growth across the enterprise as well as enabling faster responses to market demand, customer preferences and shifts in the competitive landscape.

Efficiencies by further leveraging our rides ecosystem in order to invest in future growth and with that operator, we will now open the call up for questions.

Speaker 1: Finally, ladies and gentlemen, to ask a question, you will need to press star 1-1 on your touch-thong-tall phone and wait for your name to be announced.

Ladies and gentlemen to ask a question you will need to press star one on your Touchtone telephone and wait for your name to be announced.

To withdraw your question you May press Star one again, please standby, while we compile the Q&A roster.

Speaker 1: you may press star 1 1 again. Please stand by while we compile the K&A

James Thomas: Our gross margin was 58.6% or 71.8% when excluding the inventory charge. Gross margin for the core new skin business with 61.8% or 76.8% excluding the inventory right up compared to 73% or 76.7% excluding restructuring charges in Q3 of 2022. With the 45% growth of our rise segments, this has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group. Selling expense of a percentage of revenue was 37.6%, 270 basis points below the prior year period.

And I'm showing we have a question from Tristan <unk> with Stifel. Your line is now open.

Speaker 1: We have a question from Tristan Chowdhurstieffel. Your line is open. Hi everyone. Thanks for taking my question.

Hey, everyone. Thanks for taking my question just.

Just a follow up on your China commentary I was wondering how.

The weakening of the Chinese consumer impacts, how you're thinking about new product launches and go to market changes.

Speaker 1: new product launches and go to market changes if the weekend.

The weakness continues for a little bit longer.

And then I have two other questions after that.

Speaker 3: Yeah, Tristan, great question. Yeah, I know we're all reading the same research coming out, but James and I have been over in China now a couple of times over the course of the last couple of months and we've seen notable.

Yes, Tristan and great question.

And I know, we're all reading the same research coming out, but James and I have been over in China now a couple of times over the course of the last couple of months and we've seen notable.

James Thomas: The lower selling expenses do in large part to growth in our rise manufacturing segment, which represented 10% of our total sales. For the core new skin business, selling expense was 41.7%, compared to 43.5%. General administrative expenses declined $7 million a year over year as prudent expense management remained the top priority as a percentage of revenue. GNA was 26.2%, compared to 25.7% in the prior year. Operating margin for the quarter was negative 5.3%, or 7.9%, excluding inventory right up charges compared to negative 3.8%, or 6.8%, excluding restructuring charges in the prior year.

Speaker 3: notable implications around consumption in general there certainly research is pointing more towards a very cost-conscious consumer we Fortunately our product portfolio while we do play in a premium You know and more mass to each place we do have lower price products or more value-driven products For the affordable you know affordable consumer mass consumer there so as we see these

Notable.

Implications around consumption in general, they're certainly research is pointing more towards a very cost conscious consumer we fortunately our product portfolio, while we do play in the premium.

And more Masstige place, we do have lower priced products or more value driven products for the affordable affordable consumer mass consumer there so as we see these.

Speaker 3: these, you know, trends moving along, I would see opportunities for us to lean further into product lines like our Nutri-Essentials line. Even TRME versus our TR90 system is a more price-sensitive line.

These trends moving along I would see opportunities for us to lean further into product lines like our neutral Central's line, even TRP versus our TR 90 system is a more price sensitive line.

James Thomas: The other income expense line predicted an $8.1 million expense. We generated strong cash from operations for the third quarter at $51 million, compared to $28.4 million in the prior year period. This was mainly driven by greater inventory conversion led by the market previews of TRME and Wellspa IO. We paid $19.5 million in dividends and repurchased $13 million of our stock with $162.4 million remaining on the current authorization. Our tax rate for the quarter was negative 7.3%, or 10.1%, excluding inventory right up, compared to 12.3%, or 24%, excluding restructuring charges in the prior year period.

Speaker 3: And so we'll see you'll likely see more of that from us.

And so we will see you'll likely see more of that from us from a go to market side, we will continue to expand our 10 sand partnership our go to market.

Speaker 3: From a go to market side, we will continue to expand our 10 cent partnership, our go to market, leveraging our e-commerce capabilities over there as well in the near to midterm. So those are probably the two biggest things. Thanks.

Leveraging our e-commerce capabilities over there as well in the near near to mid term. So those are probably the two biggest things.

Got it and then.

Sorry on China, It seems that consumers are responding more to promotions.

Speaker 1: compared to historical levels, and so does that change how you're thinking about how

Compared to historical levels, and so does that change how you're thinking about how you have to compete in that region.

Speaker 3: Yeah, absolutely. I think, you know, again, it goes all the way back to the price value and price competitiveness right now for the consumer. In our business promotions are very, we have to be very...

Yeah, absolutely I think.

Again, it goes all the way back to the price value and price competitiveness right now for the consumer.

In our business promotions are very we have to be very.

Speaker 3: sensitive and how we apply them because they do tend to disrupt

Sensitive in how we apply them because they do tend to disrupt.

James Thomas: Our tax rate was negatively impacted by the reduced earnings in the US as a result of the inventory We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%.

Speaker 3: traditional product cycles and such, but when we think about things like November 11th and major events like that, promotion is certainly a critical part of our strategy and we'll continue to be so as we manage brand equity through that process. I think for us.

Traditional product cycles, and such but when we think about things like November 11th and major events like that promotion is certainly a critical part of our strategy and we will continue to be so.

As we as we manage brand equity through that process.

I think for us, making certain we lean on the value the value proposition per brand is going to be very important. So the more price conscious brands. We can be more aggressive on then maybe those that are more premium position that have a higher level of science research and development that sort of thing.

Speaker 3: making certain we lean on the value, the value proposition per brand is going to be very important. So the more price conscious brands, we can be more aggressive on than maybe those that are more premium position that have a higher level of science research and development, that sort of thing.

James Thomas: Shifting focus now to guidance, given the aforementioned economic conditions and the recent business trends, we are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of $15 million to $25 million. We now expect 2023 revenue of 1.92 to 1.96 billion dollars. We anticipate earnings per share of negative 10 cents to 5 cents or $1.62 to $1.77, which excludes the inventory right off in restructuring charges for 2023. This guidance assumes a negative foreign currency impact of approximately 2 to 3%.

Got it and then last one have you seen any changes in the growth rates in the parts of the beauty market, where you compete.

Speaker 3: Yeah, so yeah, that's a great question. So in terms of like most recent research, when we look at the third quarter, I haven't seen any direct research yet on categories within beauty and wellness.

Yes, so yes, that's a great question. So in terms of like most recent research when we look at the third quarter I haven't seen any direct research yet on categories within beauty and wellness.

That would point is what we what we're reading anecdotally I'm speaking more from like the Euro monitor side I think that's going to take a little more time to research what we are seeing though our mass consumer goods like Procter and gamble's those starts playing well obviously people needing the net necessities while luxury.

James Thomas: We are projecting a fourth quarter revenue of $440 million to $480 million, assuming a foreign currency had wind of approximately 3% with reported earnings per share of negative 14 cents to 1 cents or 15 cents to 30 cents when excluding the fourth quarter charge.

Speaker 3: You know, you like the proctor and gamble those sorts playing well. Obviously people needing the net and the facilities while luxury is under a bit more pressure from those types of companies. But I still, we still believe in the long tail of the device, beauty device market and the wellness device market that we now plan with Wells by I.O. We believe in the mid to long term that that deep customer connection that that insight-driven approach to personalization is going to be a winning strategy long term. So we continue to invest in the, you know, on the devices and the device systems we think are important. We'll continue to invest in in premium, but we are making more and more room for the value consumer.

<unk> is under a bit more pressure from.

James Thomas: In closing, while our NU Skin business continues to decline from macro challenges, we remain steadfast in our dedication and driving forward our key initiatives while also prioritizing our financial strength. This involves streamlining expenses, maximizing our cash flow and actively pursuing avenues for increased operational efficiencies by further leveraging our rise ecosystem in order to invest in future growth.

From those types of companies, but I still we still believe.

In the long tail of the device beauty device market and the wellness device market that we now plan with wells Bio you. We believe in the mid to long term that that deep customer connection and that insights driven approach to personalization is going to be a winning strategy long term. So we're continuing to invest in.

Speaker 3: in the, you know, on the devices and the device systems, we think are important. We'll continue to invest in in premium, but we are making more and more room for the value consumer in our portfolio as well.

On the devices and the device systems. We think are important we will continue to invest in in premium, but we are making more and more room for the value consumer.

Operator: And with that operator, we'll now open the call-up for questions.

Operator: Finally, Lisa and gentlemen, to ask a question, you will need to press star 1-1 on your touch phone telephone and wait for your name to be announced. To withdraw your question, you may press star 1-1 again. Please stand by while we compile the county roster.

In our portfolio as well.

Thank you one moment our next.

Question.

Operator: I'm Sean.

Tristan Chow: We have a question from Tristan Chow. Would Steve Foley or Yelena Sulfon? Everyone, thanks for taking my question.

And our next question coming from the line of Doug Lane with <unk> Research. Your line is now open.

Speaker 1: And our next question coming from the line up, the Glean with Watata Research, you'll understand.

Speaker 2: Yes, hi, good afternoon everybody. Ryan, stay on try to hear it. You know, you continue to sound cautious tone on the business near term, but can you step back?

Yes, hi, good afternoon everybody.

Ryan Napierski: Just to follow up on your China commentary, I was wondering how the weakening of the Chinese consumer impacts how you're thinking about new product launches and go to market changes. If the weakness continues for a little bit longer. And then I have two other questions after that. Thanks. Yes, Tristan. Great question. Yeah, I know we're all reading the same research coming out, but James and I have been over in China now a couple of times over the course of the last couple of months.

Brian staying on China here.

You continue to stay on the cautious tone on the business near term.

But can you step back and give us.

Speaker 5: Your outlook for maybe three to five years, there's been any change in your longer term impact to that market despite the difficulty there for the last four or five years.

Your outlook for maybe three to five years or has there been any change new longer term impact that market. Despite the difficulty stands for the last four or five years.

Speaker 3: yeah dog it's been by the way great to great to have you on the call and and connect again this is really appreciate you spending some time with us yeah you know china's interesting again we spent a lot of time in fact we're on with the team again last night you know china continues it's really interesting at the macro because obviously the economy's had had severe you know setbacks over the past few years they're having you know struggles more immediately with this consumption and and even you know the consumption portion that decrease the tapping at the GDP level

Yes, Doug it's been by the way great Great to have you on the call and connect again. This is really appreciate you spending some time with US yes. China's interesting again, we've spent a lot of time in fact, we are on with the team again last night, China continues its really interesting at the macro because obviously the economies had.

Ryan Napierski: And we've seen notable implications around consumption in general there. Certainly, research is pointing more towards a very cost-conscious consumer. We fortunately, our product portfolio, while we do play in a premium and more masterpiece place, we do have lower price products or more value-driven products for the affordable consumer or mass consumer there. So, as we see these trends moving along, I would see opportunities for us to lean further into product lines like our nutritional line.

Had severe.

Setbacks over the past few years, they are having struggles more immediately with this consumption and even at the consumption portion that decrease thats happening at the GDP level.

Speaker 3: But they still have an enormous middle class.

But they still have an enormous middle class there.

Speaker 3: They're still in our business specifically and some of the

They're still in our business, specifically and some of.

The <unk> party talking about economic opportunity.

Speaker 3: She seems party talking about economic opportunity.

Speaker 3: and second and third tier cities where new skin today we don't really operate it's a very small portion of our business outside of those first tier cities in China so we know that there's a big middle

Second and third tier cities, where new skin today, we don't really operate it's a very small portion of our business outside of those first tier cities in China. So we know that Theres, a big Middle class, we know near term theres pressure, but mid to long term that middle class will.

Ryan Napierski: Even TRME versus our TR90 system is a more price-sensitive line. And so you'll likely see more of that from us. From a go-to-market side, we will continue to expand our 10 cent partnership, our go-to-market leveraging our e-commerce capabilities over there as well in the near to midterm. So those are probably the two biggest things. And then to say I'm China seems that consumers are responding more to promotions compared to historical levels.

Speaker 3: we know near term there's pressure but but mid to long term that middle class will continue to to consume goods and and we believe there's expansion potential in second and third tier cities and so we're you know by no means do we write off china we just think it's going to be a

Continue to consume goods and and and we believe there is expansion potential in second and third tier cities and so by no means do we write off China. We just think it's going to be a at economic recovery period for time, and then we as a company need to be smarter in how we reach those consumers and this is why we're investing.

Speaker 3: an economic recovery period for time. And then we as a company need to be smarter in how we reach those consumers. And this is why we're investing more and more in our can-sent engagements, because clearly that's kind of a dominant.

<unk> more and more in our Tencent engagements, because clearly that that's kind of the dominant.

Ryan Napierski: And so does that change how you're thinking about how you have to compete in the region? Yeah, absolutely. I think, you know, again, it goes all the way back to the price value and price competitiveness right now for the consumer. In our business promotions are very, we have to be very sensitive and how we apply them because they do tend to disrupt traditional product cycles and such. But you know, when we think about things like November 11th and you know, major events like that, promotion is certainly a critical part of our strategy and will continue to be so as we manage brand equity through that process.

Channel.

With all the changes going on at Nu skin over the last couple of years.

Speaker 5: With all the changes going on at new skin over the last couple of years, there have been substantial retooling of how you go to market. Has there been any real change in China, or is it still pretty much the same model you've been operating for the last several years?

It has been a substantial retooling of how your go to market has there been any real change in China, which is still pretty much. The same model you've been operating for the last several years.

Speaker 3: Yeah, I would see that's a great question. We know we have continuously retooled that business, but this is where, and I appreciate you asking the question, where are business,

Yes, I would say, yes, it's a great question. We know we have we have continuously retooled that business, but this is where and I. Appreciate you asking the question where are where our business transformation has been interrupted.

Speaker 3: transformation has been interrupted. It really is around kind of the go to market. And during that COVID period with lockdowns, especially in China, that most certainly disrupted the way we were historically going to market. You'll recall some of our meetings historically were all about large group meetings. There were a lot of conversations with COVID that clearly stopped.

It really is around kind of the go to market and during that Covid period with Lockdowns, especially in China.

Ryan Napierski: I think for us making certainly lean on the value, the value proposition per brand is going to be very important. So the more price conscious brands, we can be more aggressive on than maybe those that are more premium position that have a higher level of science, you know, research and development, that sort of thing. Got it.

Most certainly disrupted the way we were historically going to market Youll recall some of our meetings. Historically, we're all about large group meetings. There were lot of conversations with Covid that clearly stopped but there are companies signaling that that's kind of the return to growth path. We continue to believe that's not.

Speaker 3: But there are companies signaling that that's kind of the return to growth path. We continue to believe that's not the return to growth path, although meetings for training purposes always play a value for ourselves for training and education. But in terms of reaching the mass customer, that's got to be through a digital first strategy that we started investing in and we believe in that future. And so where I would say it's China's probably been left

The return to growth path, although meetings for training purposes always play a value for our sales force training and education, but in terms of reaching the mass customer that's got to be through a digital first strategy.

Ryan Napierski: And then last one, have you seen any changes in the growth rates and in the parts of the beauty market? Were you compete? Yeah, so, yeah, that's a great question. So in terms of like most recent research, when we look at the third quarter, I haven't seen any direct research yet on categories within beauty and wellness that would point us. What we are reading anecdotally, and I'm speaking more from like the year-old monitor side, I think that's going to take a little more time to research.

That we started investing in and we believe in that future and so we're I would say, it's China's probably been less progressive in or we've been less progressive in China in evolving our go to market strategy then.

Speaker 3: progressive in or we've been less progressive in China in evolving our go-to-market strategy than in Other certain markets as just because of the dynamics of the macro and and trying to get that business restarted there with a new approach has has been more prolonged than we had hoped

Are there certain markets just because of the dynamics of the macro.

Ryan Napierski: What we are seeing though, our mass consumer goods, you know, you like the proctor and gambles, those sorts playing well, obviously people needing the necessities while luxury is under a bit more pressure from those types of companies. But I still, we still believe in the long tail of the device, beauty device market and the wellness device market that we now play in with Wells by I.O., we believe in the mid to long term, that deep customer connection and that insights driven approach to personalization is going to be a winning strategy long term.

And trying to get that business restarted there with a new approach as it has been more prolonged than we had hoped.

Speaker 5: Yeah, no, that's very helpful. Thanks, Ryan. Just shifting gears here, James, can you talk about, I know yet you're not talking about 2024 specifically yet, but just on the inflation front, we've gone through this huge wave of inflation that's impacted everybody all over the place. Can you just sort of give us your sense on how the inflationary environment's going to impact your outlook for 2024?

Yes, no thats very helpful. Thanks, and just shifting gears here James can you talk about I know you.

Youre not talking about 2024, specifically, yet, but just on the inflation front, we've gone through this.

Huge wave of inflation is impacting everybody all over the place can you just sort of give us your sense.

The inflationary environment is going to impact your outlook for 2024.

Speaker 4: Yeah, Doug, and it's good to speak to you again, like Ryan mentioned. We know we, this is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years. We've looked at it, how it impacts pricing, we've passed.

Yeah, Doug and it's good to speak to you again like Brian mentioned.

Ryan Napierski: So we're continuing to invest in the, you know, on the devices and the device systems we think are important, we'll continue to invest in in premium, but we are making more and more room for the value consumer in our portfolio as well.

This is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years, we've looked at it how it impacts pricing we've passed on some of those prices to the consumers, but also through our supply chain channels too and how whether its been doing two our cost. So we're trying to be cognizant of.

Speaker 4: on some of those prices to the consumers, but also through our supply chain channels too, and how it's been doing to our costs. So we're trying to be cognizant to make sure that we're protecting our operating margins and the go forward. And so as we look at and we project end of year Q4, we're looking at an operating margin very consistent with where we landed in Q3. As it pertains to 2024, we're still monitoring and looking at evaluating

Sure that we're protecting our operating margins in the go forward and so as we look out and we project end of year Q4.

Operator: Thank you, one moment for our next question.

Douglas Lane: And our next question coming from the line of Doug Lane with what is our research you want us to open? Yes, hi. Good afternoon, everybody. Ryan, staying on China here, you know, you continue to sound a cautious tone on the business near term. But can you step back and give us your outlook for maybe three to five years? There's been any change in your longer term impacts of that market despite the difficulty of the last four or five years.

We're looking at a operating margin very consistent with where we landed in Q3 as it pertains to 2024, we're still monitoring and looking at evaluating.

Speaker 4: What's going to happen to our channel, what's going to happen to our top line? Also, in addition to what type of growth we think we can see within our rise investment arm through those different businesses that we've acquired.

What's going to happen to our channel, what's going to happen to our top line also in addition to what type of growth.

We can see within our horizon investment arm.

Through those different businesses that we've acquired.

Okay. Thanks, great to speak with you again.

Thanks, Doug.

Douglas Lane: Yeah, Doug. By the way, great to have you on the call and connect again. This is really appreciate you spending some time with us. Yeah, China is interesting. Again, we spent a lot of time. In fact, we were on with the team again last night. China continues. It's really interesting at the macro because obviously the economies had severe setbacks over the past few years. They're having struggles more immediately with this consumption and even the consumption portion, that decrease the tapping at the GDP level.

Yes.

Okay, well this has been a fairly abbreviated call I know some of your stacked up with other her readout. So.

Speaker 3: Okay, well this has been a fairly abbreviated call. I know some of you are stacked up with other readouts so from other companies so we will keep it short but I just wanted to thank you all for joining the call.

From other companies. So we will keep it short, but I just wanted to thank you all for joining the call.

Speaker 3: You know, as we reflect on this, you know, many of the world's greatest companies right now are experiencing near-term challenges given the macros. I want you to know our team is very committed to continuously evolving our business to position it for greater opportunities ahead. We firmly believe in our mission of being a global force for good by empowering people to improve lives and doing that through our products and our opportunity to help people look, fill, and live better.

As we reflect on this many of the world's greatest companies right now are experiencing near term challenges given the macros.

I want you to know our team is very committed to continuously evolving our business to position. It for greater opportunities ahead, we firmly believe in our mission of being a global force for good by empowering people to improve lives and doing that through our products and our opportunity to help people look feel and live better.

Douglas Lane: But they still have an enormous middle class. They're still in our business specifically and some of the Xi Jinping's party talking about economic opportunity in second and third tier cities where NU Skin today, we don't really operate. It's a very small portion of our business outside of those first tier cities in China. So we know that there's a big middle class. We know near term, there's pressure. But mid to long term, that middle class will continue to consume goods and we believe there's expansion potential in second and third tier cities.

Speaker 3: We will continue to be focused very much on this, refining our strategic positioning and go-to-market plans to really give the world what it's looking for. We look forward to updating you continuously. We know touching bases quarterly is very important. We'll continue to do that and sharing more about our enterprise strategy in the months to come. Thank you all.

We will continue to be focused very much on this refining our strategic positioning and go to market plans to really give the world. What it's looking for US we look forward to updating you continuously we know touching basis quarterly is very important we will continue to do that and sharing more about our enterprise strategy in the months to come.

Thank you all.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Speaker 1: Ladies and gentlemen, the lesson got conference for today. Thank you for your participation. You may not disconnect.

Douglas Lane: And so by no means do we write off China, we just think it's going to be an economic recovery period for time. And then we as a company need to be smarter in how we reach those consumers. And this is why we're investing more and more in our Tencent engagements because clearly that's kind of a dominant channel. With all the changes going on at NU Skin over the last couple of years, could have been substantial retooling of how you go to market.

Okay.

Douglas Lane: Has there been any real change in China, or is it still pretty much the same model you've been operating for the last several years? Yeah, I would see at the great question. We know we have we have continuously retooled that business. But this is where and I appreciate you asking the question, where are where our business transformation has been interrupted. It really is around kind of the go to market and during that COVID period with lockdowns, especially in China, that most certainly disrupted the way we were historically going to market.

Okay.

Yes.

Okay.

Yeah.

Douglas Lane: You'll recall some of our meetings historically were all about large group meetings. There were a lot of conversations with COVID that clearly stopped. But there are companies signaling that that's kind of the return to growth path. We continue to believe that's not the return to growth path, although meetings for training purposes always play a value for ourselves for training and education. But in terms of reaching the mass customer, that's got to be through a digital first strategy that we started investing in and we believe in that future.

Okay.

Douglas Lane: And so where I would say it's China's probably been less progressive in or we've been less progressive in China in evolving our go to market strategy than in other certain markets as just because of the dynamics of the macro. And trying to get that business restarted there with a new approach has been more prolonged than we had hoped. Yeah, no, that's very helpful. Thanks Ryan. Just shifting gears here James. Can you talk about I know yet you're not talking about 2024 specifically yet, but just on the inflation front.

Douglas Lane: We've gone through a huge wave of inflation. There's impacted everybody all over the place. Can you just sort of give us your sense on how the inflationary environment is going to impact your outlook for 2024? Yeah, Doug, and it's good to speak to you again. Like Ryan mentioned, we know we this is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years. We've looked at it, how it impacts pricing.

Douglas Lane: We've passed on some of those prices to the consumers, but also through our supply chain channels to and how it's been doing to our cost. So we're trying to be cognizant to make sure that we're protecting our operating margins in the Gulf forward. And so as we look at and we project end of year Q4, you know, we're looking at an operating margin, very consistent with where we landed in Q3. As it pertains to 2024, we're still monitoring and looking at and evaluating, you know, what's going to happen to our channel, what's going to happen to our top line. Also in addition to what type of growth we think we can see within our rise investment arm through those different businesses that we required. Okay, thanks. Great to speak with you again. Thanks, Doug.

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Ryan Napierski: Okay, well, this has been a fairly abbreviated call. I know some of you are stacked up with other other readouts, so from other companies, so we will keep it short, but I just wanted to thank you all for joining the call. You know, as we reflect on this, you know, many of the world's greatest companies right now are experiencing near term challenges given the macros. I want you to know our team is very committed to continuously evolving our business to position it for greater opportunities ahead.

Yes.

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Ryan Napierski: We firmly believe in our mission of being a global force for good by empowering people to improve lives and doing that through our products and our opportunity to help people look fill and live better. We will continue to be focused very much on this, refining our strategic positioning and go to market plans to really give the world what it's looking for. So we look forward to updating you continuously. We know touching bases quarterly is very important.

Okay.

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Yes.

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Ryan Napierski: We'll continue to do that and sharing more about our enterprise strategy the months to come. So thank you all. Thank you for your participation. You may not disconnect. [inaudible] a lot of work to do. Thank you. . Pated.

Okay.

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Speaker 1: Good day, ladies and gentlemen. Thank you for standing by. Welcome to new skin and surprises third quarter 2023 earnings conference call. At this time, over to Spins on a-

Good day, ladies and gentlemen, thank you for standing by welcome to Nu skin Enterprises third quarter 2023 earnings conference call.

At this time all participants are in a listen only mode.

Speaker 1: After the speaker's presentation, there will be a question and answer session.

After the speaker's presentation, there will be a question and answer session.

Speaker 1: To ask a question during the session, you will need to press star 1, 1 on your cell phone. You will then hear an automatic message advised in your hand its raise. Please note that today.

To ask a question during the session you will need the westar one one on your telephone you will Danielle automatic message advising yohanan space.

Please note that today's conference maybe recorded.

Speaker 1: I will now hand the conference over to you, speakers. The Scott Pond, Vice President of Investulations, please go ahead.

I will now hand, the conference over to your Steakhouse, Mr. Scott <unk>, Vice President of Investor Relations. Please go ahead.

Thanks, Olivia and good afternoon, everyone today on the call with me are Ryan appear ski President and CEO and James Thomas CFO on today's call comments will be made that include some forward looking statements. These statements involve risks and uncertainties and actual results may differ materially from those discussed oriented.

Speaker 2: These statements involve risks and uncertainties and actual results made different materially from those discussed or in pieces.

<unk>. 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.

Speaker 2: Please refer to today's earnings release and our SEC firings for a complete discussion of these risks.

Speaker 2: Also, during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statement.

Speaker 2: We believe these non-gap numbers assist in comparing period to period results in a more consistent

We believe these non-GAAP numbers assist in comparing period to period results in a more consistent manner.

Speaker 2: Please refer to our investor website for any required reconciliation of non-gap numbers. And with that, I'll...

Please refer to our Investor website for any required reconciliation of non-GAAP numbers and with that I'll turn the call over to Brian. Thanks, Scot Hello, everyone. Thanks for joining US today. These are very important times for our company as we continue to navigate our enterprise transformation amidst the macro environmental headwinds impacting consume.

Speaker 3: Thanks Scott, hello everyone. Thanks for joining us today. These are very important times for our company, as we continue to navigate our enterprise transformation amid the macro environmental headwinds, impacting consumers around the globe, and pivot our business accordingly.

Around the globe and pivot our business accordingly, our.

Speaker 3: Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our new skin core business.

Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our Nu skin core business, particularly evident during the last half of this past quarter. This led to sales below our expectations and non-GAAP earnings per share to the low end of our guide.

Speaker 3: Particularly evident during the last half of this past quarter. This led to sales below our expectation and non-gap earnings per share to the low end of our guide.

In the third quarter, our revenue was $499 million with Q3 non-GAAP earnings per share of <unk> 56, when excluding our strategic inventory write down.

The primary factor leading to our underperformance was mainland China.

We had projected to growth growth for China in the second half of the year based on improving trends in the first half and even into early Q3, but a significant slowdown in consumer spending across the broader economy reverse those early trends.

Speaker 3: In the Americas, prolonged inflation has constrained incomes and led to more cautious and price sensitive consumers.

In the Americas prolonged inflation has constrained incomes and led to a more cautious and price sensitive consumer.

Speaker 3: However, growth in our regions and other regions partially offset these challenges. Japan, Hong Kong, Taiwan, and Europe all experienced notable gains with the introduction of the Age Lockwell Spa I-O. We also generated sequential growth in our Southeast Asia Pacific and South Korea segment.

Speaker 3: It's important to call out our ride segments that perform well above expectations, which I'll discuss more in just a moment.

All out our rise segments that performed well above expectations, which I'll discuss more in just a moment.

Speaker 3: While our strategic initiatives associated with our new skin core business transformation have generated some positive lift in key areas over the past four quarters, the pace of improvement has been slower than expected, primarily due to macro factors that I just discussed. Consequently, we'll continue refining our tactics to sync with market dynamics and maximize our investments across three strategic comparatives, Empowerment Personalization, Social Commerce, and our Digital EGAS system.

Dynamics and maximize our investments across three strategic imperatives, empower me personalization, social commerce and our digital ecosystem.

Speaker 3: During the quarter, we continued to advance our EmpowerMe strategy through the mainland China and Korea rollouts of age-lock TRME personalized weight management system, and the introduction of our second connected device system, age-lock well-spot IO, in the many of our markets.

During the quarter, we continued to advance our empowerment strategy through the mainland China and Korea Rollouts of <unk> personalized weight management system.

And the introduction of our second connected device system age locked wells by Io into many of our markets.

Speaker 3: We remain focused on enhancing our personalization journey with our connected device roadmap, with I-O device systems currently contributing 14% of revenue in the third quarter. This aligns with our near-term goal of 15% and our long-term target of 30% by 2025.

Speaker 3: To date, we have logged more than 9 million connected device treatments and collected over 100 million unique data insight, which will play an increasingly meaningful role as we lean further into our personalization, beauty and wellness journey.

Speaker 3: Next, we continue to make modifications to our affiliate-powered business model to better support new business builders, which are yielding some promising outcomes in recent trials across multiple markets, most notably in Japan and parts of Latin America. We will continue to lean further into this new affiliate journey as an increasing portion of today's workforce, workforce seeks more flexible ways of working in the gig and more economy.

Next we continue to make modifications to our affiliate powered business model to better support new business builders, which are yielding some promising outcomes in recent trials across multiple markets, most notably in Japan and parts of Latin America, We will continue to lean further into this new affiliate journey as an increasing portion of today's <unk>.

Workforce workforce seeks more flexible ways of working in the gig and more economy.

As a reminder, our affiliate numbers were impacted by adjustments made to the eligibility requirements for affiliate rewards and some markets beginning in Q2 and continuing through 2024.

Speaker 3: For our digital ecosystem, we are continuously enhancing the features and capabilities of our VARA and Stella apps to strengthen connections with our customers and affiliates.

For our digital ecosystem, we are continuously enhancing the features and capabilities of our Vera and stellar apps to strengthen connections with our customers and affiliates.

Target of 30%, most mostly due to slower adoption in Asia for.

Scott Pond: Please refer to today's earnings release and our SEC filing 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-gap numbers assist in comparing period to period results in a more consistent manner. Please refer to our investor website for any required reconciliation of non-gap numbers. And with that, I'll turn the call over to Ryan.

Speaker 3: For Stella, we have more than doubled our annual target of monthly active users this year with 68% of average monthly paid affiliates on the app.

Speaker 3: Given the robustness of rise, it's important for us to dive deeper into these business segments as we lean further into our broader enterprise strategy. Rise consists of several dynamic businesses, including Mavily, a leading affiliate marketing and technology platform, which connects nearly 800 retail and brands to more than retailers and brands to more than 45,000 Mavily affiliates and helps power our bearer app.

Scott Pond: Thanks. Scott, hello, everyone. Thanks for joining us today. These are very important times for our company as we continue to navigate our enterprise transformation amid the macro environmental headwinds impacting consumers around the globe and pivot our business accordingly. Our third quarter performance was mixed with notable progress on strategic initiatives overshadowed by escalating pressures in key markets of our new skin core business, particularly evident during the last half of this past quarter.

<unk> brand and brands to more than retailers and brands to more than 45000, nasally affiliates and helps power or their app.

Speaker 3: Watt's such an elevate manufacturing, which currently service more than 120 customers, including new skin.

Wasatch and elevate manufacturing, which currently service more than 120 customers, including new skin.

Scott Pond: This led to sales below our expectation and non-gap earnings per share to the low end of our guide. In the third quarter, our revenue was $499 million with Q3 non-gap earnings per share of 56 cents when excluding a strategic inventory right down. The primary factor leading to our underperformance was mainland China. We had projected to grow for China in the second half of the year based on improving trends in the first half and even into early Q3.

Beauty bio our most recent clean beauty Omnichannel acquisition, which continues to expand its retail and digital channels and.

In light DNA, a DNA recommendation, which holds significant future potential for our broader personalization strategy.

Right now accounts for 12% of our business and we anticipate it growing to 20% to 25% of revenue over the next few years.

This segment delivered more than 40% growth year over year in the quarter underscoring our underscoring the robustness of these businesses. Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem of consumer technology and manufacturing companies that not only enhance our core business, but <unk>.

Scott Pond: But a significant slowdown in consumer spending across the broader economy reversed those early trends. In the Americas, prolonged inflation has constrained incomes and led to more cautious and price sensitive consumer. However, growth in our regions and other regions partially offset these challenges. Japan, Hong Kong, Taiwan, and Europe all experienced notable gains with the introduction of Age Lock Well Spa IO. We also generated sequential growth in our Southeast Asia Pacific and South Korea segments.

Speaker 3: Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem that consumer, technology, and manufacturing companies that not only enhance our core business, but also facilitate our broader beauty and wellness ecosystem enterprise transformation.

Facilitate our broader beauty and wellness ecosystem enterprise transformation.

Speaker 3: While we have not yet talked indefinitely about our right strategy, I'm personally very excited about sharing our broader enterprise vision with you early next year.

While we have not yet talked in depth about our rise strategy I'm personally very excited about sharing our broader enterprise vision with you early next year.

Speaker 3: Before wrapping up, I'd like to share some insights on our approach to managing the business in the near term as we navigate the macro-environmental uncertainties. Striking a balance between executing our long-term strategy while upholding our commitment to delivering value to our shareholders. The continued headwinds around the globe remain exceedingly dynamic and visibility is constrained as conditions can evolve swiftly.

Scott Pond: It's important to call out our right segments that performed well above expectations, which I'll discuss more in just a moment. While our strategic initiatives associated with our new skin core business transformation have generated some positive lift in key areas over the past quarters, the pace of improvement has been slower than expected, primarily due to macro factors that I just discussed. Consequently, we'll continue refining our tactics to sync with market dynamics and maximize our investments across three strategic comparatives and power me personalization, social commerce, and our digital ecosystem.

Constrained as conditions can evolve swiftly.

Scott Pond: During the quarter, we continue to advance our Empower Me strategy through the mainland China and Korea rollouts of Age Lock T-R-Me personalized weight management system. And the introduction of our second connected device system Age Lock Well Spa IO in the many of our markets. We remain focused on enhancing our personalization journey with our connected device roadmap, with IO device systems currently contributing 14% of revenue in the third quarter. This aligns with our near-term goal of 15% and our long-term target of 30% by 2025.

Mount that we simplify our business to the core value drivers focused strictly on priority work and execute with excellence and areas, where we have the greatest control.

Speaker 3: To this end, we are strategically re-evaluating our NuSkin core business under the premise of one global business. A holistic, competitive advantage that enables us to operate more effectively and efficiently around the globe.

To this end we are strategically reevaluating, our new skin core business under the premise up one global business, a holistic competitive advantage that enables us to operate more effectively and efficiently around the globe. This retooling will include number one a strategic global realignment of our product portfolio.

Scott Pond: To date, we have logged more than 9 million connected device treatments and collected over 100 million unique data insight, which will play an increasingly meaningful role as we lean further into our personalization, beauty and wellness journey. Next, we continue to make modifications to our affiliate-powered business model to better support new business builders, which are yielding some promising outcomes in recent trials across multiple markets, most notably in Japan and parts of Latin America.

Speaker 3: This retooling will improve overall effectiveness of execution and efficiency of work that will result in increasing cash flows, improving margins and enhanced earnings per share in the coming year.

Scott Pond: We will continue to lean further into this new affiliate journey as an increasing portion of today's workforce seeks more flexible ways of working in the gig and more economy. As a reminder, our affiliate numbers were impacted by adjustments made to the eligibility requirements for affiliate rewards in some markets beginning in Q2 and continuing through 2024. For our digital ecosystem, we are continuously enhancing the features and capabilities of our Vera and Stella apps to strengthen connections with our customers and affiliates.

Speaker 3: We're also exploring additional opportunities to optimize our global operations adhering to our one global business approach to market.

I'd also like to note that Connie paying has decided to step down from her role as global growth officer due to family health matters. Connie has been a great strategic partner over the past two years, but with this change we will be realigning our organization to create greater strategic alignment between regions and global functions in order to further.

Scott Pond: Following recent tests of new promotional features of Vera in Europe, we were very encouraged by the revenue that was generated and the potential for coordinated app-based global promotions in 2024. Our monthly active user ratio increased to 18% of monthly active customers for Vera, which is tracking behind our target of 30% mostly due to slower adoption in Asia. For Stella, we have more than doubled our annual target of monthly active users this year with 68% of average monthly paid affiliates on the app.

Enhance our go to market execution.

Speaker 3: Throughout our nearly 40-year history, we have confronted numerous challenges and have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model and Salesforce. We maintain a strong balance sheet and financial prudence to ensure that we're able to invest in the business as needed while returning value, including a healthy dividend to our invest.

Throughout our nearly 40 year history, we have confronted numerous challenges.

And have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model and sales force, we maintain a strong balance sheet and financial prudence to ensure that we're able to invest in the business as needed while returning value, including a healthy dividend to our investors I am confident that we will continue to discover new and compelling opportunity.

Speaker 3: I'm confident that we'll continue to discover new and compelling opportunities amidst these disruptive times, generating long-term growth and value for shareholders.

Scott Pond: We will be focusing on 2024 upon driving deeper connections with our customers and affiliates through these apps to expand engagement and conversion, resulting in improved lifetime value. Given the robustness of rise, it's important for us to dive deeper into these business segments as we lean further into our broader enterprise strategy. Rise consists of several dynamic businesses, including Mavily, a leading affiliate marketing and technology platform, which connects nearly 800 retail and brands to more than retailers and brands to more than 45,000 Mavily affiliates, and helps power our Vera app.

Speaker 3: So with that, let me turn the time over to James to take you through our financials in more detail, including our guidance for Q4 and end of year, and then on to Q&A. James.

Speaker 4: Thank you, Ryan. And thanks to all of you for joining today. I'll provide a brief through three financial reviews and then give Q4 projections an update, full year 2023 guidance. For additional details, please visit our investor relations website.

Speaker 4: For the third quarter, we posted a revenue of $498.8 million with a negative foreign currency impact of 1.5% or $8.1 million. Reported earnings for share for the quarter was negative 74 cents or 56 cents when excluding inventory right up charge.

With a negative foreign currency impact of one 5% or $8 $1 million reported earnings per share for the quarter was negative 74.

Scott Pond: What's at an elevate manufacturing, which currently service more than 120 customers, including new skin, beauty bio, our most recent clean beauty on the channel acquisition, which continues to expand its retail and digital channels, and like DNA, a DNA recommendation, which holds significant future potential for our broader personalization strategy. Rise now accounts for 12% of our business, and we anticipate it growing to 20 to 25% of revenue over the next two years.

Speaker 4: Given the state of the business, and in line with the strategic review Ryan mentioned, we've made the decision to rebalance and narrow our product portfolio, resulting in a 65.7 million dollar inventory write off this decision helps accelerate our product portfolio optimization by further aligning our product offerings with our empower me integrated beauty and wellness strategy.

Utilization by further aligning our product offerings with our empowerment integrated beauty and wellness strategy.

Scott Pond: This segment delivered more than 40% growth year over year in the quarter, underscoring the robustness of these businesses. Moreover, it advances our enterprise strategy of evolving rise into a synergistic ecosystem, a consumer technology and manufacturing companies that not only enhance our core business, but also facilitate our broader beauty and wellness ecosystem enterprise transformation. While we have not yet talked indefinitely about our right strategy, I'm personally very excited about sharing our broader enterprise vision with you early next year.

Speaker 4: We expect the benefits from the product portfolio optimization to be realized over the next two to three years with the ability to support our business with lower inventory levels to free up our cash to invest in areas of growth across the enterprise, as well as enabling faster responses to market demand, customer preferences, and shifts in the competitive landscape.

And shifts in the competitive landscape.

Speaker 4: Our gross margin was 58.6% or 71.8% when excluding the inventory charge. Gross margin for the core new skin business was 61.8% or 76.8% excluding the inventory write-off compared to 73% or 76.7% excluding restructuring charges in Q3 of 2022.

Our gross margin was 58, 6% or 71, 8% when excluding the inventory charge gross margin for the core Nu skin business was 61, 8% or 76, 8%, excluding the inventory write off compared to 73% or 76.

Scott Pond: Before wrapping up, I'd like to share some insights on our approach to managing the business in the near term as we navigate the macro-environmental uncertainties. Striking a balance between executing our long-term strategy while upholding our commitment to delivering value to our shareholders. The continued headwinds around the globe remain exceedingly dynamic, and visibility is constrained as conditions can evolve swiftly. At the same time, we have ambitious plans in place for 2024 to accelerate growth in our new skin core business, as well as the enterprise, including the introduction of an entirely new mental wellness category, which will incorporate several strategic investments made over the past few years.

7%, excluding restructuring charges in Q3 of 2022.

Speaker 4: With the 45% growth of our rice segments, this has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group.

With a 45% growth of our rise segments. This has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group.

Speaker 4: Sally expense of a percentage of revenue was 37.6%. 270 basis points below the prior year period. The lowest selling expense is due in large part to growth in our rise manufacturing segment, which represented 10% of our total sales.

Selling expenses as a percentage of revenue was 37, 6% 270 basis points below the prior year period.

Scott Pond: Therefore, it is paramount that we simplify our business to the core value drivers, focus strictly on priority work and execute with excellence in areas where we have the greatest control. To this end, we are strategically re-evaluating our new skin core business under the premise of one global business, a holistic, competitive advantage that enables us to operate more effectively and efficiently around the globe. This retooling will include, number one, a strategic global re-alignment of our product portfolio, focusing on our Hebrew brands.

Speaker 4: For the core Nu Skin business, selling expense was 41.7% compared to 43.5%.

Scott Pond: Number two, global process and organization remapping the way we work as one global team. And number three, an operational footprint review, including where and how we operate in our markets. This retooling will improve overall effectiveness of execution and efficiency of work that will result in increasing cash flows, improving margins, and enhanced earnings per share in the coming year. For example, we are thoroughly re-evaluating our product portfolio relative to our integrated beauty and wellness strategy and anticipating 20 to 30 percent of non-strategic skews over the next 12-day team months.

Speaker 4: General and administrative expenses declined $7 million year-over-year as prudent expense management remains the top priority. As a percentage of revenue, GNA was 26.2% compared to 25.7% in the prior year.

General and administrative expenses declined $7 million year over year as prudent expense management remains a top priority.

As a percentage of revenue G&A was 26, 2% compared to 25, 7% in the prior year.

Speaker 4: Operating margin for the quarter was negative 5.3% or 7.9% excluding inventory write-off charges compared to negative 3.8% or 6.8% excluding restructuring charges in the prior year. The other income expense line reflected an $8.1 million expense.

<unk>.

Speaker 4: We generated strong cash from operations for the third quarter at $51 million, compared to $28.4 million in the prior year period. This was mainly driven by greater inventory conversion, led by the market previews of TRME and WellSpaIO.

We generated strong cash from operations for the third quarter at $51 million compared.

Compared to $28 4 million in the prior year period. This was mainly driven by greater inventory conversion led by the market previews of TRP and well Spa Io.

Speaker 4: We paid $19.5 million in dividends and repurchased $13 million of our stock with $162.4 million remaining on the current authorization.

We paid $19 $5 million in dividends and repurchased $13 million of our stock with $162 $4 million remaining on the current authorization.

Scott Pond: We are also exploring additional opportunities to optimize our global operations adhering to our one global business approach to market. I'd also like to note that Connie Tang has decided to step down from her role as global growth officer due to family health matters. Connie has been a great strategic partner over the past two years. But with this change, we will be re-aligning our organization to create greater strategic alignment between regions and global functions in order to further enhance our go-to-market execution.

Speaker 4: Our tax rate for the quarter was negative 7.3%, or 10.1%, excluding inventory write offs, compared to 12.3%, or 24%, excluding restructuring charges in the prior year period. Our tax rate was negatively impacted by the reduced earnings in the US as a result of the inventory write-off.

As a result of the inventory write offs we.

Speaker 4: We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%.

We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%.

Scott Pond: Throughout our nearly 40-year history, we have confronted numerous challenges and have repeatedly demonstrated our ability to navigate uncertainties with our resilient business model and sales force. We maintain a strong balance sheet and financial prudence to ensure that we are able to invest in the business as needed while returning value, including a healthy dividend, to our investors. I'm confident that we will continue to discover new and compelling opportunities amid these disruptive times, generating long-term growth, and value for shareholders.

Shifting focus now to guidance give.

Speaker 4: Given the aforementioned economic conditions and the recent business trends, we are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of $15 million to $25 million. We now expect 2023 revenue of $1.92 to $1.96 billion.

Scott Pond: So with that, let me turn the time over to James to take you through our financials in more detail, including our guidance for Q4 and end of year, and then on to Q&A. James? Thank you, Ryan. And thanks to all of you for joining today. I'll provide a brief through three financial reviews and then give Q4 projections and update full-year 2023 guidance. For additional details, please visit our investor relations website. For the third quarter, we posted a revenue of $498.8 million with a negative foreign currency impact of 1.5% or $8.1 million.

<unk>.

We anticipate earnings per share of negative <unk> <unk>.

<unk> or $1 62 to $1 77, which excludes the inventory write off and restructuring charges for 2023.

This guidance assumes a negative foreign currency impact of approximately 2% to 3%.

Speaker 4: We are projecting fourth quarter revenue of $440 million to $480 million. Assuming a foreign currency had wind of approximately 3% with reported earnings per share of negative 14 cents to one cent or 15 cents to 30 cents when excluding the fourth quarter chart.

We are projecting fourth quarter revenue of $440 million to $480 million, assuming a foreign currency headwind of approximately 3% with reported earnings per share of negative <unk> 14 to <unk> or.

Scott Pond: Reported earnings for share for the quarter was negative 74 cents or 56 cents when excluding inventory write-up charts, given the state of the business and in line with the strategic review Ryan mentioned, we've made the decision to rebalance and narrow our product portfolio, resulting in a $65.7 million inventory right off. This decision helps accelerate our product portfolio optimization by further aligning our product offerings with our empowered me integrated beauty and wellness strategy.

Or 15 to 30.

When excluding the fourth quarter charge in.

In closing, while our new skin business continues to decline from macro challenges, we remain steadfast in our dedication and driving forward our key initiatives. While also prioritizing our financial strength. This involves streamlining expenses maximizing our cash flow and actively pursuing avenues for increased operational.

Scott Pond: We expect the benefits from the product portfolio optimization to be realized over the next two to three years with the ability to support our business with lower inventory levels to free up our cash to invest in areas of growth across the enterprise as well as enabling faster responses to market demand, customer preferences and shifts in the competitive landscape. Our gross margin was 58.6% or 71.8% when excluding the inventory charge. Gross margin for the core new skin business was 61.8% or 76.8% excluding the inventory right off compared to 73% or 76.7% excluding restructuring charges in Q3 of 2022.

Efficiencies by further leveraging our rides ecosystem in order to invest in future growth and with that operator, we will now open the call up for questions.

Speaker 1: Finally, ladies and gentlemen, to ask a question, you will need to press star 1-1 on your touch phone telephone and wait for your name to be announced.

Ladies and gentlemen to ask a question you will need to press star one on your Touchtone phone and wait for your name to be announced.

Speaker 1: you may press star one one again. Please stand by while we compile the canary.

To withdraw your question you May press Star one again, please standby, while we compile the Q&A roster.

Okay.

Speaker 1: I'm Sean. We have a question from Tristan Cha. What's the full? Yelena Sulfon. Everyone, thanks for taking my question. Just a

And I'm showing we have a question from Justin <unk> with Stifel. Your line is now open.

Everyone. Thanks for taking my question just.

Just a follow up on your China commentary I was wondering how.

The weakening of the Chinese consumer impacts, how you're thinking about new product launches and go to market changes.

Scott Pond: With the 45% growth of our rise segments, this has a negative impact on our overall reported gross margin while positively affecting selling expenses for the consolidated group. Sally expense of a percentage of revenue was 37.6% 270 basis points below the prior year period. The lower selling expenses do in large part to growth in our rise manufacturing segment, which represented 10% of our total sales. For the core new skin business, selling expense was 41.7% compared to 43.5%.

Speaker 1: new product launches and go to market changes if the weakness.

The weakness continues for a little bit longer.

And then I have two other questions after that.

Speaker 3: Yeah, it's Kristen, great question. Yeah, I know we're all reading the same research coming out, but James and I have been over in China now a couple of times over the course of the last couple of months, and we've seen notable.

Yes, Tristan and great question.

And I know, we're all reading the same research coming out, but that James and I have been over in China now a couple of times over the course of the last couple of months we've seen notable.

Speaker 3: notable implications around consumption in general there certainly research is pointing more towards a very cost-conscious consumer we Fortunately our product portfolio while we do play in a premium You know and and more masterpiece place we do have lower price products or more value-driven products For the affordable you know affordable consumer mass consumer there so as we see these

Notable <unk>.

Implications around consumption in general, they're certainly research is pointing more towards a very cost conscious consumer we fortunately our product portfolio, while we do play in the premium.

Scott Pond: General administrative expenses declined $7 million year over year as prudent expense management remained the top priority as a percentage of revenue, GNA was 26.2% compared to 25.7% in the prior year. Operating margin for the quarter was negative 5.3% or 7.9% excluding inventory right off charges compared to negative 3.8% or 6.8% excluding restructuring charges in the prior year. The other income expense line provided an $8.1 million expense. We generated strong cash from operations for the third quarter at $51 million compared to $28.4 million in the prior year period.

And more Masstige place, we do have lower priced products or more value driven products for the affordable affordable consumer mass consumer there so as we see these.

Speaker 3: these, you know, trends moving along, I would see opportunities for us to lean further into product lines like our Nutricentials line, even TRME versus our TR90 system is a more price-sensitive line.

These trends moving along I would see opportunities for us to lean further into product lines like our neutral Central's line, even <unk> versus our tiara <unk> system is a more price sensitive line.

Speaker 3: And so we'll see, you'll likely see more of that from us.

And so we will see you'll likely see more of that from us from a go to market side, we will continue to expand our 10 sand partnership our go to market.

Speaker 3: From a go to market side, we will continue to expand our 10 cent partnership, our go to market, leveraging our e-commerce capabilities over there as well in the near near to midterm. So those are probably the two biggest things.

Leveraging our e-commerce capabilities over there as well in the near near to mid term. So those are probably the two biggest things.

Scott Pond: This was mainly driven by greater inventory conversion led by the market previews of TRME and Well Spa IO. We paid $19.5 million in dividends and repurchased $13 million of our stock with $162.4 million remaining on the current authorization. Our tax rate for the quarter was negative 7.3% or 10.1% excluding inventory right off compared to 12.3% or 24% excluding restructuring charges in the prior year period. Our tax rate was negatively impacted by the reduced earnings in the US as a result of the inventory right off.

Got it and then.

Say on China. It seems that consumers are responding more to from Albertsons.

Speaker 1: compared to historical levels, and so does that change how you're thinking about how

Compared to historical levels, and so does that change how you're thinking about how you have to compete in that region.

Yeah, absolutely I think.

Again, it goes all the way back to the price value and price competitiveness right now for the consumer.

In our business promotions are very we have to be very sad.

Speaker 3: sensitive and how we apply them because they they do tend to disrupt

Sensitive in how we apply them because they they do tend to disrupt.

Traditional product cycles, and such but when we think about things like November 11th and major events like that promotion is certainly a critical part of our strategy and we will continue to be so.

Scott Pond: We expect additional pressure with our Q4 2023 restructuring and are anticipating a Q4 adjusted tax rate of 26% to 30% or an annual adjusted tax rate of 20% to 24%. Shifting focus now to guidance, given the aforementioned economic conditions and the recent business trends, we are adjusting our annual guidance, which includes an anticipated Q4 restructuring charge of $15 million to $25 million. We now expect 2023 revenue of 1.92 to 1.96 billion dollars.

As we as we manage brand equity through that process.

Got it and then last one have you seen any changes in the growth rates in the parts of the beauty market, where you compete.

Scott Pond: We anticipate earnings per share of negative 10 cents to 5 cents or $1.62 to $1.77, which excludes the inventory right off in restructuring charges for 2023. This guidance assumes a negative foreign currency impact of approximately 2 to 3%. We are projecting fourth quarter revenue of $440 million to $480 million, assuming a foreign currency had wind of approximately 3% with reported earnings per share of negative 14 cents to 1 cents or 15 cents to 30 cents when excluding the fourth quarter charge.

Yes, so yes, that's a great question. So in terms of like most recent research when we look at the third quarter I haven't seen any direct research yet on on categories within beauty and wellness.

That would point is what we what we're reading anecdotally I'm speaking more from like that the Euro monitor side I think that's going to take a little more time to research what we are seeing though our mass consumer goods, if you'd like to Procter <unk> gamble's those starts playing well obviously people needing the net necessities while luxury.

Speaker 3: you know, you like the proctor and gambles, those sorts playing well, obviously people needing to invest these while luxury is under a bit more pressure from those types of companies. But I still, we still believe in the long tail of the device, beauty device market and the wellness device market that we now plan with Wells-Bio. You, we believe in the mid to long term that deep customer connection and that that insight-driven approach to personalization is going to be a winning strategy long term. So we continue to invest in the, you know, on the devices and the device systems we think are important. We'll continue to invest in in premium, but we are making more and more room for the value consumer.

<unk> is under a bit more pressure from.

Scott Pond: In closing, while our NU Skin business continues to decline from macro challenges, we remain steadfast in our dedication in driving forward our key initiatives, while also prioritizing our financial strength. This involves streamlining expenses, maximizing our cash flow, and actively pursuing avenues for increased operational efficiencies by further leveraging our right ecosystem in order to invest in future growth. And with that operator, we'll now open the call up for questions. Finally, Lisa and gentlemen, to ask a question, you will need to press star 1-1 on your touch on telephone and wait for your name to be announced.

From those types of companies, but I still we still believe.

On the devices and the device systems. We think are important we will continue to invest in in premium, but we are making more and more room for the value consumer.

In our portfolio as well.

Scott Pond: To withdraw your question, you may press star 1-1 again. Please stand by while we compile the county roster. I'm Sean. We have a question from Tristan Chow. It's the full Yelena Sulfon. Everyone, thanks for taking my question. Just to follow up on your China commentary, I was wondering how the weakening of the Chinese consumer impacts how you're thinking about new product launches and go to market changes. If the weakness continues for a little bit longer, and then I have two other questions after that.

Thank you our next question.

Okay.

Speaker 1: And our next question coming from the lineup, Doug Lane with Watertower Research, your line is now open.

And our next question coming from the line of Doug Lane with water Tower Research. Your line is now open.

Speaker 5: Yes, hi, good afternoon everybody. Ryan, stay on China here. You know, you continue to sound cautious tone on the business near term, but can you step back?

Yes, hi, good afternoon everybody.

Brian staying on China here.

You continue to stay on the cautious tone on the business near term.

But can you step back and give us.

Speaker 5: Your outlook for maybe three to five years, there's been any change in your longer term impact to that market despite the difficulty for the last four or five years.

Your outlook for maybe three to five years or has there been any change in your longer term impacts of that market. Despite the.

The difficulty for the last four or five years.

Scott Pond: Thanks. Yes, Tristan. Great question. Yeah, I know we're all reading the same research coming out, but James and I have been over in China now a couple of times over the course of the last couple of months. And we've seen notable implications around consumption in general there. Certainly, research is pointing more towards a very cost-conscious consumer. We fortunately, our product portfolio, while we do play in a premium and more masterpiece place, we do have lower price products or more value-driven products for the affordable consumer or mass consumer.

Speaker 3: yeah dog it's been by the way great to great to have you on the call and and connect again this is really appreciate you spending some time with us yeah you know china's interesting again we spent a lot of time in fact we're on with the team again last night you know china continues it's really interesting at the macro because obviously the economies had had severe you know setbacks over the past few years they're having you know struggles more immediately with this consumption and consumption portion that decrease the tapping at the GDP level

Yes, Doug it's been by the way great Great to have you on the call and connect again. This is it really appreciate you spending some time with US yes. China's interesting again, we spent a lot of time in fact, we are on with the team again last night.

<unk> continues its really interesting at the macro because obviously the economies had had severe.

Setbacks over the past few years, they are having struggles more immediately with this consumption and even at the consumption portion of that decrease of tapping at the GDP level.

Speaker 3: But they still have an enormous middle class.

But they still have an enormous middle class.

Speaker 3: They're still in our business specifically and some of the

They're still in our business specifically in some of the.

Scott Pond: As we see these trends moving along, I would see opportunities for us to lean further into product lines like our Nutricentials line. Even TRME versus our TR90 system is a more price-sensitive line. So you'll likely see more of that from us. From a go-to-market side, we will continue to expand our 10 cent partnership, our go-to-market leveraging our e-commerce capabilities over there as well in the near to mid-term. So those are probably the two biggest things.

The <unk> party talking about economic opportunity in second and third tier cities, where new skin today, we don't really operate it's a very small portion of our business outside of those first tier cities in China. So we know that Theres, a big Middle class, we know near term theres pressure, but mid to long term that.

Speaker 3: Xi Jinping's party talking about economic opportunity.

Speaker 3: We know near term there's pressure, but mid to long term that middle class will continue to consume goods and we believe there's expansion potential in second and third tier cities. And so by no means do we write off China, we just think it's going to be a

Middle class will continue to consume goods in and we believe theres expansion potential in second and third tier cities and so by no means do we write off China. We just think it's going to be a at economic recovery period for time, and then we as a company need to be smarter in how we reach those.

Speaker 3: an economic recovery period for time. And then we as a company need to be smarter in how we reach those consumers. And this is why we're investing more and more in our 10 cent engagements, because clearly that's kind of a dominant.

Scott Pond: And then to say on China seems that consumers are responding more to promotions compared to historical levels and so does that change how you're thinking about how you have to compete in the region? Yeah, absolutely. I think, you know, again, it goes all the way back to the price value and price competitiveness right now for the consumer. In our business promotions are very, we have to be very sensitive and how we apply them because they do tend to disrupt traditional product cycles and such.

Consumers and this is why we are investing more and more in our tencent engagements because clearly that that's kind of the dominant.

Channel.

Speaker 5: With all the changes going on at NuScan over the last couple of years, there has been a substantial retooling of how you go to market. Has there been any real change in China, or is it still pretty much the same model you've been operating for the last several years?

With all the changes going on at Nu skin over the last couple of years.

It has been a substantial retooling of how you go to market has there been any real change in China, which is still pretty much. The same model you've been operating for the last several years.

Speaker 3: Yeah, I would see you at the great question. We know we have continuously retooled that business, but this is where, and I appreciate you asking the question, where are business,

Scott Pond: But when we think about things like November 11th and major events like that promotion is certainly a critical part of our strategy and will continue to be so as we manage brand equity through that process. I think for us making certainly lean on the value, the value proposition per brand is going to be very important. So the more price conscious brands, we can be more aggressive on than maybe those that are more premium position that have a higher level of science, you know, research and development, that sort of thing.

It really is around kind of the go to market and during that Covid period with Lockdowns, especially in China.

Most certainly disrupted the way we were historically going to market Youll recall some of our meetings. Historically, we're all about large group meetings. There were a lot of conversations with Covid that clearly stopped but there are companies signaling that that's kind of the return to growth path. We continue to believe that's not.

Scott Pond: Got it. And then last one, have you seen any changes in the growth rates and in the parts of the beauty market where you compete? Yeah, so yeah, that's a great question. So in terms of like most recent research, when we look at the third quarter, I haven't seen any direct research yet on categories within beauty and wellness that would point us. That's what we are reading anecdotally. I'm speaking more from like the the year old monitor side.

That we've started investing in and we believe in that future and so we're I would say, it's China's probably been less progressive in or we've been less progressive in China in evolving our go to market strategy then.

Are there certain markets just because of the dynamics of the macro.

Scott Pond: I think that's going to take a little more time to research. What we are seeing though, our mass consumer goods, you know, you like the proctor and gambles, those sorts playing well, obviously people needing to necessities while luxury is under a bit more pressure from those types of companies. But I still we still believe in the long tail of the device beauty device market and the wellness device market that we now plan with Wells by I.O.

And trying to get that business restarted there with a new approach as it has been more prolonged than we had hoped.

Speaker 5: Yeah, no, that's very helpful. Thanks for having me. Just shifting gears here, James. Can you talk about, I know yet you're not talking about 2024 specifically yet, but just on the inflation front, we've gone through this huge wave of inflation that's impacted everybody all over the place. Can you just sort of give us your sense on how the inflationary environment's gonna impact your outlook for 2024?

Yes, no thats very helpful. Thanks, and just shifting gears here James can you talk about I know you.

Youre not talking about 2024, specifically, yet, but just on the inflation front, we've gone through this.

Huge wave of deflation is impacting everybody all over the place can you just sort of give us your sense of how the.

Scott Pond: We believe in the mid to long term that that deep customer connection and that that insights driven approach to personalization is going to be a winning strategy long term. So we continue to invest in the, you know, on the devices and the device systems we think are important. We'll continue to invest in in premium, but we are making more and more room for the value consumer in our portfolio as well. Thank you.

The inflationary environment is going to impact your outlook for 2024.

Speaker 4: Yeah, Doug, and it's good to speak to you again, like Ryan mentioned. You know, we, this is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years. We've looked at it, how it impacts pricing. We've passed...

Yeah, Doug and it's good to speak to you again like Brian mentioned.

This is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years. We've we've looked at it how it impacts pricing we've passed on some of those prices to the consumers, but also through our supply chain channels too and how whether its been doing two our cost. So we're trying to be cognizant to make.

Speaker 4: on some of those prices to the consumers, but also through our supply chain channels, too, and how what it's been doing to our costs. So we're trying to be cognizant to make sure that we're protecting our operating margins in the go forward. And so as we look out and we project end of year Q4, you know, we're looking at operating margins very consistent with where we landed in Q3. As it pertains to 2024, we're still monitoring and looking at evaluating

Sure that we're protecting our offer operating margins in the go forward and so as we look out and we project end of year Q4.

Scott Pond: One moment for our next question. And our next question coming from the line of the lane with what it's our research. You're not open. Yes, hi, good afternoon, everybody. Ryan, staying on China here, you know, you continue to sound the cautious tone on the business near term. But can you step back and give us your outlook for maybe three to five years, there's been any change in your longer term impacts that market despite the difficulty fair for the last four or five years.

We're looking at a operating margin very consistent with where we landed in Q3 as it pertains to 2024, we're still monitoring and looking at evaluating.

What's going to happen to our channel, what's going to happen to our top line also in addition to what type of growth. We think we can see within our rise investment arm.

Through those different businesses that we've acquired.

Okay. Thanks, great to speak with you again.

Thanks, Doug.

Scott Pond: Yeah, Doug, it's been by the way great to have you on the call and connect again. This is really appreciate you spending some time with us. Yeah, China is interesting. Again, we spent a lot of time. In fact, we were on with the team again last night. China continues. It's really interesting at the macro because obviously the economies had severe setbacks over the past few years. They're having struggles more immediately with this consumption and even, you know, the consumption push and that decrease the tapping at the GDP level.

Yes.

Speaker 3: Okay, well this has been a fairly abbreviated call. I know some of you are stacked up with other readouts. So from other companies, so we will keep it short. But I just wanted to thank you all for joining the call.

Okay, well this has been a fairly abbreviated call I know some of your stacked up with other her readout. So.

From other companies. So we will keep it short, but I just wanted to thank you all for joining the call.

We reflect on this many of the world's greatest companies right now are experiencing near term challenges given the macros.

Want you to know our team is very committed to continuously evolving our business to position. It for greater opportunities ahead, we firmly believe in our mission of being a global force for good by empowering people to improve lives and doing that through our products and our opportunity to help people look feel and live better.

Scott Pond: But they still have an enormous middle class. They're still in our business specifically and some of the the the Xi Jinping's party talking about economic opportunity. In second and third tier cities where new skin today, we don't really operate. It's a very small portion of our business outside of those first tier cities in China. So we know that there's a big middle class. We know near term there's pressure. But mid to long term, that middle class will continue to consume goods and and we believe there's expansion potential in second and third tier cities.

Speaker 3: We will continue to be focused very much on this, refining our strategic positioning and go to market plans to really give the world what it's looking for. So we look forward to updating you continuously. We know touching basis quarterly is very important. We'll continue to do that and sharing more about our enterprise strategy months to come. So thank you all.

Thank you all.

Okay.

Speaker 1: Lee Sanjul and other from the conference for today. Thank you for your participation. You may not disconnect.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Scott Pond: And so we're, you know, by no means do we write off China. We just think it's going to be an economic recovery period for time. And then we as a company need to be smarter in how we reach those consumers. And this is why we're investing more and more in our 10 cent engagements because clearly that that's kind of the dominant channel. With all the changes going on at new skin over the last couple of years, could have been substantial retooling of how you go to market.

Scott Pond: Has there been any real change in China? Or is it still pretty much the same model you've been operating for the last several years? Yeah, I would see at the great question. We know we have we have continuously retooled that business. But this is where and I appreciate you asking the question, where our business transformation has been interrupted. It really is around kind of the go to market. And most certainly disrupted the way we were historically going to market.

Scott Pond: You'll recall some of our meetings historically were all about large group meetings. There were a lot of conversations with COVID that clearly stopped. But there are companies signaling that that's kind of the return to growth path. We continue to believe that's not the return to growth path, although meetings for training purposes always play a value for ourselves for training and education. But in terms of reaching the mass customer, that's got to be through a digital first strategy that we started investing in and we believe in that future.

Scott Pond: And so where I would say it's China's probably been less progressive in or we've been less progressive in China in evolving our go to market strategy than in other certain markets. It's just because of the dynamics of the macro and trying to get that business restarted there with a new approach has been more prolonged than we had hoped. Yeah, no, that's very helpful. Thanks Ryan. Just shifting gears here James. Can you talk about, I know yet you're not talking about 2024 specifically yet, but just on the inflation front.

Scott Pond: We've gone through a huge wave of inflation that's impacted everybody all over the place. Can you just sort of give us your sense on how the inflationary alarm is going to impact your outlook for 2024? Yeah, Doug, and it's good to speak to you again. Like Ryan mentioned, we know we this is something from inflationary pressures that we've been monitoring and evaluating throughout the last two years. We've looked at it, how it impacts pricing.

Scott Pond: We've passed on some of those prices to the consumers, but also through our supply chain channels to and how it's been doing to our cost. So we're trying to be cognizant to make sure that we're protecting our operating margins in the Gulf forward. And so as we look at and we project end of year Q4, you know, we're looking at an operating margin, very consistent with where we landed in Q3. As it pertains to 2024, we're still monitoring and looking at evaluating, you know, what's going to happen to our channel, what's going to happen to our top line.

Scott Pond: Also, in addition to what type of growth we think we can see within our rise investment arm through those different businesses that we required. Okay, thanks. Great to speak with you again. Thanks, Doug. Okay, well, this has been a fairly abbreviated call. I know some of you are stacked up with other other readouts. So from other companies. So we will keep it short. But I just wanted to thank you all for joining the call.

Scott Pond: You know, as we reflect on this, you know, many of the world's greatest companies right now are experiencing near-term challenges. And that is given the macros. I want you to know our team is very committed to continuously evolving our business to position it for greater opportunities ahead. We firmly believe in our mission of being a global force for good by empowering people to improve lives and doing that through our products and our opportunity to help people look fill and live better.

Scott Pond: We will continue to be focused very much on this, refining our strategic positioning and go to market plans to really give the world what it's looking for. So we look forward to updating you continuously. We know touching bases quarterly is very important. We'll continue to do that and sharing more about our enterprise strategy months to come. So thank you all. Thank you for your participation. You may not disconnect.

Q3 2023 Nu Skin Enterprises Inc Earnings Call

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