Good day and thank you for standing by. Welcome to the Nu Skin Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to hand the conference over to Scott Pond.

Thanks, Cory, and good afternoon, everyone. Today on the call with me are Ryan Napierski, President and CEO; and Mark Lawrence, CFO. 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 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 in comparing period-to-period results in a more consistent manner. Please refer to our investor website for any required reconciliation of non-GAAP numbers. And with that, I'll turn the call over to Ryan.

Hey, thanks Scott. Good afternoon, everybody, and thanks for joining us on today's call. As we've discussed with you over the past few quarters, we are actively engaged in Nu Vision 2025 and our multi-year transformation to becoming the world's leading integrated beauty and wellness company that's powered by our dynamic affiliate opportunity platform. We're making progress on our vision despite ongoing macro challenges that are causing near-term disruptions in several regions, including the extended lockdowns in Mainland China, ongoing distractions in EMEA and the economic uncertainties, particularly in emerging markets like Latin America. While second quarter revenue was lower than planned due to these headwinds, we delivered non-GAAP EPS within our previous guidance range, reflecting the agility of our model and the entire team to adapt quickly to environmental challenges. In addition, we delivered our ninth consecutive quarter of growth in the US, driven by our recent product launches and broader adoption of social commerce, which bodes well for our future growth aspirations in this market and our other regions. We've also established some momentum in both Southeast Asia and Taiwan through our new ageLOC Meta and Beauty Focus Collagen+ product launches, and we're gaining some traction with our social commerce model in these markets as well. Over the past several months, we've continued to advance our three strategic imperatives that underpin Nu Vision 2025, including Empower Me personalized beauty and wellness, affiliate powered social commerce and our digital-first ecosystem. These strategies support Nu Skin's transition from being identified largely by our traditional direct selling channel to being a leader in integrated beauty and wellness. We remain confident in our direction, along with our ability to accelerate future growth and drive significant value for shareholders. Let me quickly update you on each of the three strategic imperatives. First, we're…

Thank you, Ryan, and thanks to all of you for joining today. I'll provide a brief Q2 financial review, and then give initial Q3 projections, and update full year 2022 guidance. For additional details, please visit our Investor Relations website. For the second quarter, we posted revenue of $560.6 million, with a negative foreign currency impact of 5% or $34.6 million. The US dollar continues to strengthen at a pace well above expectations, which negatively impacted Q2 and will impact the balance of the year. Reported earnings per share for the quarter was $0.67 or $0.77 when excluding an additional charge in other income expense associated with our Q4 2021 exit from Grow Tech. Our gross margin was 73.6%, a sequential improvement over the prior quarter. Gross margin was negatively impacted by foreign currency exchange rates and increased promotions, particularly of LumiSpa devices in preparation for the launch of LumiSpa IO beginning in the third quarter. Gross margin for the core Nu Skin business was 77% compared to 78.3% in the prior year quarter. We anticipate second half 2022 gross margin stabilization, with new product introductions that have healthy margins, along with ongoing global price increases to offset continued supply constraints and inflationary pressure. Selling expense as a percent of revenue was 39.1%, 80 basis points below the prior year period. For the core Nu Skin business, selling expense was 42% compared to 42.8%. General and administrative expenses declined $25 million year-over-year as we remain focused on cost control. As a percent of revenue, G&A was 25.3% compared to 23.6% in the prior year. Operating margin for the quarter was 9.2% compared to 12.1% in the prior year period, driven by the lower revenue level this year. We anticipate sequential operating margin gains in the second half of 2022 as…

Thank you. At this time we will conduct a question-and-answer session. [Operator Instructions] All right. First up, we have Stephanie Wissink with Jefferies.

Thank you. Good afternoon, everyone. Ryan, I'm wondering if you can start by just taking us around your key markets and helping us think through when Lumi iO will be launched and when some of the digital tools will be launched. I think it would just help us understand the back half acceleration you're anticipating just to think through when some of those key initiatives will be implemented.

Yes. Hi Steph. Yes, so just at a high level, we have the LumiSpa IO introductions and launches, so limited introductions to the sales force, followed by launches to the consumer base that are spread relatively evenly between Q3 and Q4. Each market is on a slightly different cadence, but the goal is to have it in all markets over the course of the two quarters. I think probably the best way to just to look at it would be a more even distribution between Q3 and Q4 for those products. The digital tools, specifically Vera and Stella, they hit the app stores really in the first part of Q2 and the last day of Q1. Those have really been in a beta form and those will continue to roll out in English, but they'll continue to roll out really into Q3 and Q4 as we add those features. They're going to be really, the adoption of those tools, are going to be highly associated with LumiSpa IO, because the device connects to the Vera app. So, they kind of work in tandem with one another. But they're not -- those apps are not specifically intended to be revenue-driving mechanisms as much as facilitating the standard business. So we're not really associating revenue specifically with the apps.

Okay. That's helpful. And then related to the product innovation pipeline, the idea of integrated beauty and wellness is something that you're uniquely positioned to address. So I want to just give you a chance to also to talk about what you're learning about Collagen+, what you've been seeing so far in your customer feedback, your affiliate feedback on this idea of integration? And how do you amplify that as you go into the back half and into 2023?

No. Yes, great question. And I'm glad you really focus in on the integrated -- the word integration. For us, integration really intimates a couple of different considerations. The first is the inside-out approach of the product portfolio that we have. As you know, we're pretty well split between personal care and wellness products. And so to your point, around Collagen+, integrated with LumiSpa IO or LumiSpa, that we have clinical studies on that is a great example of how we look at input/output. The other dimension is the input/output devices themselves and device systems specifically. So the devices plus the product lines that work in conjunction with those devices. And so yes, Collagen+ for us is definitely one of these great integrated products as it plays really well with LumiSpa. It is an ingestible beauty, so to speak, which is a very strong growing category in Beauty as we know. And so we see that being very beneficial. The other good thing with Collagen+ related to social commerce, their social selling is that it's a great subscription product. So in many of our markets, the US, EMEA, Latin America, these markets in particular, have really leveraged that as a subscription product, which creates a greater retained lifetime value of the customers on it.

The only thing I would add to that, Steph, is the Collagen+ is the top five product for us in this quarter, which really shows the ability of new products to gain traction as we roll it out around the world. I think this integrated beauty and wellness theme is starting to resonate well around the world.

That's fantastic. My last one, Mark, is for you. I know cost restructuring programs are never easy to undertake and they can be emotional and culturally impacting. So, I wanted to just give you a chance to talk about the scope of this program, how you plan to implement it, it sounds like it's going to be a bit more Q3 weighted maybe give us some sense of timing. And as you look out into '23, $100 million of savings, is that net savings should we assume that drops through to the bottom line, or is there some level of reinvestment? Thank you.

Yes. Steph, maybe I'll comment first, and Mark can really fill in all the details on that. You're absolutely right. Every time a business has to look at a restructure, we take it extremely seriously and we have a global team that's really critical to the transition. As we talked about in the call, this is really all around looking at how we're allocating resources across legacy programs, legacy capabilities, legacy technologies, legacy assets and what is truly needed for us to move more quickly as we shed some of those legacy elements that can hold us back. And so we felt like this is the right time to do it. And so, we've structured it that way, and we'll be executing according to that plan. But it really is all around, how do we align these resources to move more quickly into the future by letting go of some things that have held us back. But Mark, maybe you can give a little more detail.

Ryan, hit on the key points. We went through it nearly every line item in our P&L. We looked at our assets around the world, look at our different geographic balance of our business as it shifted pretty dramatically over the last few years and then really work to realign the allocation of resources to where our business is really thriving and where is thriving and ensure that we're putting resources towards the future towards New Vision 2025. We are not backing off our stated investment of $500 million in technology. We believe that's key to our future. So, there will be some reallocation of resources, but I still believe that, that $100 million is real, and we can deliver that to the bottom-line next year, even with those future investments in technology that we've already slated a spot for. And then the timing stuff, we're going to try to get most of that done in Q3. We stated about $30 million of the $35 million to $45 million range, that will largely be dependent on, how we work with governments around the world and make sure we're proper and taking care of employees in the proper way and doing things according to the law. That will largely be what depends on whether it's a Q3 or a Q4 action.

Always very helpful.

Thanks, Steph.

Thanks Steph. Next up, we're going to have Chad Wendor [ph] with Citi. Hold on one second and Chad you are up. Q –Unidentified Analyst: Great. Thank you, operator. Good afternoon, everyone and thanks for the question. I guess where I just want to start, can you talk a little bit more about the one price incentive structure, specifically which market it's going into and how it's going to impact the sales leaders relative to the marketing plan that's already there?

Yes, hey Chad. Yeah, thanks for the question. We anticipated there would be one. So, thanks for asking, gives us a chance to explain it a little bit more. You may be or may not be familiar with our model, our traditional business model where whereby we sell products traditionally at a wholesale product to our affiliates who then mark them up and sell them at retail. And this has been how the company's price products, mostly speaking, since the beginning of the company. Over the course of time as social commerce continues to evolve, we found that the retail margin is such a critical part of that -- and a part of the social commerce model for new brand affiliates who are really early in their business, being able to get earnings going. And so the idea with one price is to institutionalize that retail margin into the product. We felt that LumiSpa iO was a perfect opportunity because -- largely because this product is the iO technology add such greater consumer value than the 1.0, the non-connected device. So we really are bringing this out to the market. We are planning to roll it out globally with LumiSpa iO and we will be introducing it across a few others, I think, three to four other products around the globe as we continue to learn our way or lean further into social commerce. This will be really important that we talked about the adoption of social commerce into Asia in the past and how it's somewhat more difficult. And one of the areas has been the reselling of a retail price product to friends and associates even online that there's an apprehension to do that in some Asian communities. And so this one price model will make it easier for our affiliates to sell it at that one price, we believe around the globe. Q – Unidentified Analyst: Great. That's helpful. And then if I could just ask about the team meetings you have, as you said it was in London. Can you talk about whether post those meetings happening, it has translated to either improving activity or productivity amongst the sales force? And then just juxtaposed against the full challenging macro travel restrictions, and a very digital-oriented strategy in Nu Vision 2025. How did that change the way you're thinking about in-person meetings and incentivizing and catalyzing activity from sales leaders? Thanks.

Yes. No question that – the world -- macro factors over the last 2.5 years has evolved our thinking around this. And we continue to learn but most certainly, as we look to the future and we look to social commerce proliferation, that model specifically online meetings are definitely an important part of it. But the offline, the face-to-face or the hybrid approach is really important for training, motivating and aligning with our leadership. And so we do expect moving into the future, that more and more face-to-face meetings will be a hybrid part of just like the workplace, very much a hybrid part of our of our approach to growth. We continue to believe that in-person face-to-face is important. But even in London, we were not able to meet, for example, with our Chinese team at least because they were unable to receive visas to leave China. And so even in some of our Asia markets as recently as May we were not able to meet with them face-to-face. And those lockdowns continue to be challenging. I think as governments around the globe learn how to adapt to this hybrid economy, we will continue to lean into online and limited offline meetings. We have an upcoming live event for our US market in September that, by the way, any of you who are interested in attending that, we would love to have you. It's only for the US, it's not a global meeting but we anticipate having that around September 7. So please reach out to Scott on. If you're interested, we can get you information. And we do those sorts of limited meetings in markets where local governments are more favorable. Last comment I'll make on meetings within China. I will say there is still severe restrictions, lockdowns on face-to-face or person types of meetings due to the COVID implications there. And so we're very limited there, and we really have to rely upon limited online meetings there. Q –Unidentified Analyst: Got it. Thanks for the color. I'll pause there now and then pass it on. Thanks.

Thanks, Chad.

Thank you. Kevin. Next up is going to be Christine Chen [ph] with Stifel. One second, and I will let you know when you’re live. Christine, you are up. Q – Unidentified Analyst: Perfect. This is Christine on for Mark. I have two questions. One being, I guess, you had just talked about restrictions in China, and there are some indications coming out of there that suggest that no COVID policy will continue definitely. Do you just have a reasonable time line going back to positive revenue growth in China? That's the first one.

Yes, Christine, thanks and give Mark our regards as well. Yes. Regarding China, you're absolutely right. It's uncertain. The future is uncertain there for the COVID restrictions in the one -- the no case structure there. We really are leaning directly into digital first. Our investments in we shop last year, my shop this year, we continue to just really invest in a digital first because we – in the mid-term, don't want to be reliant upon face-to-face, the way that the traditional China business has been. It's really hard for us to forecast out positive growth in that market, and Mark can maybe talk a little bit more on his thoughts around that. The way we're looking at the model from the enterprise standpoint is we're really focusing on growth outside of China with the uncertainty there in the market, although we believe in the long-term, potential of this market. We all know it's an enormous beauty and wellness market. We know there's a lot of uncertainty in the short-term. We believe that the economy needs to needs to start to shape in the right direction. And so we're really trying to position ourselves as we move forward into this China evolves locally to being a digital-first company that reaches our customers and our salesforce via that digital-first model, and that's more of a mid-term horizon. But you'd add to that point.

I think it's too early for us to project when China can return back to normal until we start seeing some stabilization, until we start seeing a period of time when there aren't daily and weekly updates of lockdowns in various provinces around China. I think it'd be too early for us to project China returning to any level of growth.

Yes. And I might just -- sorry, Christine, I might just also just remind everyone because it's -- China has been such a critical part of the revenue equation for the company and the future state remains to be seen, but it is certainly under 20% of the business today. It's much more geographically diverse, which I think for us and frankly, any company this day is a very good thing to be. It's a definite focus for us is making that balance continue as we go. Q – Unidentified Analyst: Okay. Thank you. That's helpful. The second question being that 5% price increase taken at the start of this past quarter, are you seeing any pricing elasticity? And do you have any key takeaways from that price increase? What are your thoughts on maybe price offsetting costs, some of that gross margin pressure? Thanks.

Yes. I'll talk to maybe the consumer side and Mark can talk to the margin side on price increases. Just to reaffirm, we are very committed to addressing the impact of inflation on the business and on our margin structure. We are also very customer-obsessed. And we are very concerned about the broader pressure that's coming through consumers around the globe. And so we're very careful in how we do price increases. We did execute a price increase in the spring. We'll continue to look at opportunities there in the fall and beyond as inflation continues to be managed and monitored around the globe. It's hard to say in our price point, which tends to be masstige and above, how much pricing pressure there really is. And I would say if the inflation -- we're really in an unprecedented inflationary levels. And so it's hard for us to really know, but I think it's fair to understand that the consumer wallets being really squeezed. And so certainly, there would be pricing pressure even on more masstige and premium-priced products. Fortunately, I do feel that our devices, for instance, are -- even with price increases, continue to be very reasonably priced in markets of premium devices. We see product devices that are much more expensive than that -- than ours. And so I think the value proposition remains strong, but we'll continue to balance consumer purchasing capability versus the margin trade-offs. And so far, I don't think we've hit a ceiling there. But Mark, maybe

I would say that we were happy to see sequential improvement in gross margin in Q2, we're projecting for the second half margin stabilization, which basically means we're expecting margins about where they are today and there's going to be a number of puts and takes in our business, foreign exchange movement, and we're seeing a heavy headwind in foreign exchange. That does impact gross margin, and it hurts our gross margin. Obviously, inflation and cost increases in raw materials also hurt our gross margin. And then we offset that with just the work we're doing to try to take cost out of our product and then the price increases, which we've flowed through to kind of keep gross margins about where they are. The new product introductions really help us. Those on average, have better than average gross margins, and we should see lift from those over time. Q – Unidentified Analyst: Great. Thanks.

Thanks, Christine. And it doesn't look like we have any other hands raised. So I think we'll go ahead and wrap up the call. If you do have any questions, we would like to set up time with Scott or Mark, myself, we're more than happy to find the time with you for certain. So let me just thank you all for joining. And so to summarize, our views, while the macro environment is uncertain, we remain acutely focused on our vision on this new vision 2025 and on executing our multi-year transformation to becoming the world's leading integrated beauty and wellness company. As we laid out in Investor Day earlier this year, we have confidence in our capabilities as an innovative beauty and wellness company and a beauty device systems leader, combined with our global affiliate channel to enable our transformation into this new space. We believe in the vision and we believe it will return greater value to shareholders over the next few years as we scale our integrated beauty and wellness platform. And with that, we'll go ahead and end the call. Thanks again for joining us.