Nu Skin Enterprises Inc (NUS)
Q2 2012 Earnings Call
July 26, 2012 12:00 p.m. ET
Scott Pond – Director, Investor Relations
Truman Hunt – President, Chief Executive Officer, Director
Ritch Wood – Chief Financial Officer
Joe Chang – Chief Scientific Officer
Bill Schmitz – Deutsche Bank
Olivia Tong – Merrill Lynch
Mark Astrachan – Stifel Nicolaus
Timothy Ramey – DA Davidson
Scott Van Winkle – Canaccord Genuity
John Faucher – JP Morgan
Previous Statements by NUS
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Good day, ladies and gentlemen and welcome to the Second Quarter 2012 Nu Skin Enterprises Conference Call. My name is Shaun and I’ll be your operator for today. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would like to now hand the call over to Mr. Scott Pond, Director Investor Relations. Please proceed.
Thank you. Good afternoon everybody. We appreciate you’re listening in today. With us in the room are Truman Hunt, President and Chief Executive Officer; Ritch Wood, Chief Financial Officer; and Joe Chang, Chief Scientific Officer. Just a reminder, during the call today, the comments may be made that include forward-looking statements. These statements involve risks and uncertainties and actual results may differ from those discussed or anticipated. We encourage you to refer to today’s earnings release and our SEC filings for a complete discussion of these risks.
Also during the call certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe these non-GAAP financial numbers assist management and investors in evaluating and comparing period-to-period results in a more meaningful and consistent manner.
And with that, I’ll turn the time over to Truman.
Thanks, Scott. Good morning everyone. We appreciate you joining us today. And we’re delighted to share with you the results of another record quarter. We generated revenue of $593 million in the quarter which represents growth of 40% exceeding guidance by more than $50 million. I think you all agree with us that these results are reflected a very strong business momentum. It wasn’t too long ago when we first generated revenue of $1 billion for full year and this year we’ve accomplished that in just a first six months.
Our earnings also came in well ahead of guidance with a record high quarterly EPS of $0.94, a very healthy 45% increase over the last year. These results were generated by a record level of active sales representatives and executive distributors. The number of executive distributors, who are those who are actively working to build successful Nu Skin business. And sales representatives in China are key indicator for our business direction and the number of these south leaders climbed to a record level of 54,000 at the end of the second quarter. So, we’re very pleased with the progress of our business. And we remain confident that we will continue to generate healthy growth levels.
I want to highlight five factors today that work to support our level of confidence. First, as today’s release demonstrates, we continue to improve the execution of what we call opportunity renewal process, effective product launches are a key component of our ability to continually renew the vibrancy of the business opportunity we offer. In the second quarter, we generated nearly $165 million of revenue from the launch of our ageLOC products in the South Asia, Pacific and Greater China regions.
We reported $140 million of these product sales during the quarter with the remaining $25 million to be shipped in the third quarter. You’ll recall the last fall we generated about $100 million in sales of these same products when we introduced them on our global distributor convention. And as we rollout new products around the world, we’re refining our approach to deliver increasingly impressive results. This approach is based on the notion of the utilizing global and local limited time offers prior to a product going online on a full-time basis and it’s just working extremely well.
We use this same approach in the second half of the year with LTO launches in Europe of R2 and the Body Spa in Japan and South Korea.
So the momentum we’re generating with the new region regional new product launches as a result of record level distributors and preferred customers nearly 900,000 at the end of the quarter. With each product launch, we’re improving our overall trial and our penetration rates and our sales leaders are also becoming more familiar with the process and frankly they become believers when they see the successful launch process reflected in their commission checks.
The second headline I want to site for the quarter is that while we’ve been very successful with our ageLOC product platform, the best of ageLOC is still yet to come. AgeLOC products in the market today consist of the Facial and Body Spas, the ageLOC skin care transformation system, vitality and R2, which are both energy products. But the larger categories are yet to come. Weight management in 2013, next year is going to be big. And then we will ageLOC, our core nutrition product, which will also be significant in the subsequent product launch. Both of these launches have more revenue impact than anything we’ve done so far.
And as we further refine our launch process to reach deeper into a growing consumer and sales leader base, we have great ammunition to sustain growth for the foreseeable future. Now, of course, we’re going to run into occasional quarters where comps are difficult because the timing of our launches may not always a line on exact annual anniversaries. So overall, we’re very confident that we have a very sound pipeline for growth for the next several years.