USANA Health Sciences, Inc. (NYSE:USNA) Q1 2024 Earnings Conference Call May 1, 2024 11:00 AM ET Andrew Masuda - Investor Relations Jim Brown - President & Chief Executive Officer Brent Neidig - Chief Commercial Officer Anthony Lebiedzinski - Sidoti & Company Hello and welcome to USANA Health Sciences First Quarter Earnings Call. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] Andrew Masuda Today's conference call is bein ...

USANA Health Sciences Reports First Quarter 2024 Results SALT LAKE CITY, April 30, 2024 (BUSINESS WIRE)—USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal first quarter ended March 30, 2024. Key Financial & Operating Results | | | Consolidated Results | | | --- | --- | --- | --- | | Net Sales | $228 million | • | -8% vs. Q1 2023 | | | | • | -5% constant currency vs. Q1 2023 | | | | • | +3% sequentially | | | | • | +2% constant currency sequentially | | | | • | -$7 mill ...

Financial Performance - The company reported a revenue increase of 15% year-over-year, reaching $1.2 billion for the quarter[7] - Operating margin improved to 18%, up from 15% in the previous year[7] - The company projects a revenue growth of 10-12% for the next quarter, driven by new product launches[7] - The company reported a backlog of orders valued at $300 million, indicating strong future demand[7] User Growth and Market Expansion - User base expanded by 20%, with a total of 3 million active users reported[7] - The company plans to enter two new international markets by Q3 2024, aiming for a 5% market share within the first year[7] Product Development - Investment in research and development increased by 25%, totaling $50 million for the year[7] - A new product line is expected to launch in Q2 2024, projected to contribute an additional $100 million in revenue[7] Strategic Moves - The company has completed a strategic acquisition of a competitor for $200 million, enhancing its market position[7] Customer Satisfaction - Customer satisfaction ratings improved to 90%, reflecting enhanced service and product quality[7] Risks and Challenges - The company faces risks from political events, natural disasters, and health crises that may negatively impact economic conditions and consumer behavior[21] - Changes in the legal and regulatory environment, including data security and privacy regulations, could affect operational compliance and costs[21] - Geopolitical tensions, particularly involving Russia, Ukraine, and the Middle East, may disrupt market stability and foreign relations[21] - Fluctuations in foreign currency values against the U.S. dollar could impact financial performance and profitability[21] - Supply chain disruptions, including raw material shortages and price increases, pose risks to production and operational efficiency[21] - The company must ensure compliance with debt covenants in its Credit Facility to maintain financial stability[21] - Legal compliance risks, including litigation and tax-related costs, may differ materially from expected amounts, affecting financial forecasts[21] - Information technology system failures and cybersecurity threats could compromise data security and operational integrity[21] - Risks associated with acquisitions, divestitures, and investments may impact strategic growth and financial outcomes[21]

Financial Data and Key Metrics Changes - The company reported fourth quarter net sales and diluted EPS above expectations, ending the year with $330 million in cash and essentially debt-free, while generating strong free cash flow [4][78]. - The company anticipates flat or declining profit margins for the current year, indicating a cautious outlook on profitability [10]. Business Line Data and Key Metrics Changes - The Greater China region experienced double-digit sequential growth in active customers, reflecting positive responses to incentive offerings [78]. - Malaysia saw a 7% increase in local currency sales, while the Philippines struggled, indicating differing market responses to promotional initiatives [14][86]. Market Data and Key Metrics Changes - Active customer growth was noted in Greater China, with a 5% year-over-year increase, although local currency sales were slightly down, attributed to promotional spending [43][87]. - The Philippines market has been significantly impacted by socioeconomic factors, leading to weaker performance compared to Malaysia [86]. Company Strategy and Development Direction - The company plans to focus on increasing engagement with associate leaders, enhancing incentive opportunities, and expanding operations in India, alongside product innovation and potential acquisitions [19][60]. - The strategy for 2024 includes a renewed focus on executing a global growth strategy aimed at consistent active customer growth [60]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging operating environment in 2023 due to inflation and other economic factors but expressed optimism about long-term growth in the global health and wellness market [78][20]. - The company is committed to investing in its direct selling business and exploring M&A opportunities within the wellness industry [83][110]. Other Important Information - The company has returned to a regular cadence of meetings and events in China, which had been restricted during the COVID era, indicating a positive shift in operational dynamics [117]. - The company is monitoring transportation costs closely, particularly in light of potential impacts from global events like the Suez Canal situation [104][106]. Q&A Session Summary Question: What is the outlook for pricing in 2024? - Management indicated that pricing adjustments in 2024 will be significantly less than in 2023, with a focus on targeted product pricing rather than broad adjustments [109]. Question: How is the company addressing market opportunities related to reduced food consumption? - The company is well-positioned to address nutritional needs and is exploring M&A opportunities while ensuring that its product offerings align with market demands [113]. Question: What is the company's strategy for promotions in 2024? - The company plans to tailor promotions market by market, moving away from global promotions to more localized strategies that resonate with individual markets [103]. Question: How is the regulatory environment in China affecting business? - The company has resumed regular interactions with government agencies post-COVID and is optimistic about future growth in the Chinese market [116][117]. Question: What are the capital allocation priorities given the strong balance sheet? - The company is considering various opportunities for capital allocation, including investments in organic growth and potential acquisitions in the wellness sector [67][110].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission file number: 001-35024 ______________________ USANA HEALTH SCIENCES, INC. (Exact name of registra ...

USANA Health Sciences, Inc. (NYSE:USNA) Q3 2023 Earnings Conference Call October 25, 2023 11:00 AM ET Company Participants Andrew Masuda – Investor Relations Jim Brown – President and Chief Executive Officer Doug Hekking – Chief Financial Officer Brent Neidig – Chief Commercial Officer Conference Call Participants Anthony Lebiedzinski – Sidoti Doug Lane – Water Tower Research Ivan Feinseth – Tigress Financial Partners Operator Hello and welcome to USANA Health Sciences' Third Quarter Earnings Call. My name ...

Financial Data and Key Metrics Changes - The company reported better-than-expected operating results for Q2 2023, with stabilization in active customer counts and stronger-than-anticipated net sales in Mainland China [54] - Operating cash flow was down year-over-year, primarily due to accrued liabilities from 2022 being settled in 2023, including employee bonuses and tax payments [5][6] - The operating margin has softened compared to historical levels due to top-line pressure, but the company remains committed to investing for growth [7] Business Line Data and Key Metrics Changes - Local currency sales in China grew 10% sequentially, driven by a small market-specific promotion [58] - The company is moving away from large global incentives to smaller market-specific incentives to generate sustainable sales and active customer growth [56] Market Data and Key Metrics Changes - Consumer spending is feeling pressure from inflation across various markets, affecting purchasing decisions [36] - The company anticipates modest sales contributions from the new market in India, with expectations for more significant growth in 2024 [62] Company Strategy and Development Direction - The company plans to expand into India, focusing on long-term sustainable growth rather than immediate revenue [60][62] - There is a strategic shift towards enhancing digital commerce capabilities, particularly in China, to improve customer engagement [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improvements in the Chinese market as it continues to reopen, despite ongoing inflationary pressures affecting consumer spending [59] - The company raised the low end of its fiscal 2023 guidance range, indicating confidence in executing its strategies for sustainable long-term growth [63] Other Important Information - The company is exploring acquisition opportunities, focusing on brands that align with its health and wellness product offerings [32][34] - The management team is prioritizing investments that stimulate organic business growth, followed by inorganic opportunities [30][31] Q&A Session Summary Question: How is the performance in Korea? - Management noted that Korea has flattened out a bit due to prior price increases, but the market remains strong with ongoing customer engagement efforts [65][66] Question: What is the outlook for gross margin? - The gross margin improved due to higher revenue from China, but the company does not expect the same promotional cadence in the second half of the year [67][70] Question: What are the capital allocation priorities? - The company prioritizes investments in organic growth, followed by potential acquisitions, and will consider share repurchase when there are no immediate uses for cash [30][31]

Financial Data and Key Metrics Changes - The company reported solid first quarter results, modestly ahead of expectations, with stabilization in active customer counts and sequential quarter net sales growth [6][7] - The company raised the lower end of its net sales and earnings per share guidance for the full year [6] - Inventory levels ended the first quarter at $68 million, down $2 million from the fourth quarter and down $29 million year-over-year [15] Business Line Data and Key Metrics Changes - The demand for health and wellness products increased significantly in China, contributing approximately $12 million to net sales in the first quarter [7] - Annual price increases were announced in many markets, leading to an estimated $13 million increase in customer purchasing ahead of these increases [8] Market Data and Key Metrics Changes - The global operating environment remains dynamic, with ongoing inflationary pressures impacting customer purchasing decisions [7] - The company experienced a meaningful increase in demand for health products in China following a government shift in COVID policy [7] Company Strategy and Development Direction - The company is focusing on returning to live meetings and events globally, which are seen as critical for generating excitement and momentum [9] - Plans to open a new market later in the year were mentioned, with optimism about long-term growth opportunities [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation but expressed confidence in the company's ability to execute its growth strategy [7] - The management team is optimistic about the future, especially following successful in-person events in China [29] Other Important Information - A transition in the CEO role was announced, with Jim Brown set to become the new CEO effective July 1 [11][12] - The company is implementing a slightly higher price adjustment this year to manage elevated materials and supply chain costs [14] Q&A Session Summary Question: Inquiry about gross margin and transportation costs - Management explained that the primary decline in transportation costs was due to reduced air shipping, with stabilization in ocean cargo [19] Question: Future cost expectations - Management indicated that raw material costs have stabilized, with a 7% to 9% increase noted [19] Question: Price increases and pre-buying effects - Management noted that the majority of pre-buying occurred in markets like China and Korea, with smaller markets expected to have less impact [26] Question: Plans for acquisitions - The strategy is to keep acquired companies separate while leveraging synergies, such as manufacturing efficiencies [33][34] Question: New market launch expenses - Management confirmed that expenses related to the new market launch will ramp up as the opening approaches [36] Question: U.S. market performance and price increases - Management is monitoring customer response to price increases and is working closely with the sales team to gauge appetite [39]

Financial Performance - In 2022, USANA Health Sciences generated $998.6 million in net sales and had approximately 490,000 active Customers worldwide[21] - Mainland China accounted for approximately 45.4% of net sales and 45.9% of active Customers[21] - In 2022, net sales outside of the United States represented approximately 89.4% of consolidated net sales, highlighting the company's international presence[41] - The Auto Order subscription program generated 65% of product sales volume for the year ended December 31, 2022, offering a 10% price discount[81] - Product returns were approximately 0.7% of net sales in 2022, indicating strong customer satisfaction[84] - No single Associate or Preferred Customer accounted for 10% or more of net sales in the last three fiscal years, indicating a diversified customer base[85] - 89.4% of the company's total net sales for the year ended December 31, 2022, were generated outside the United States, making it vulnerable to currency fluctuations[186] Growth Strategy - The company plans to execute a global growth strategy in 2023, focusing on increasing active Customers through digital commerce initiatives and market-specific promotional strategies[24] - In 2022, USANA completed the acquisition of two companies, Rise Bar and Oola Global, LLC, to leverage their expertise for growth[33] - The company plans to invest in research and development to roll out new science-based products in 2023 and beyond[29] - USANA aims to enhance its digital capabilities and customer experience through initiatives like an Affiliate program launched in January 2023[26] - The company is optimistic about long-term growth in China despite recent challenges, with plans for market-specific strategies and in-person events in 2023[30] Research and Development - USANA's product sales breakdown for 2022 shows that Nutritionals accounted for 70%, Essentials/CellSentials for 17%, Foods for 7%, and Personal Care and Skincare for 5%[35] - USANA's R&D efforts focus on high-quality, science-based products, with ongoing research supporting proprietary technologies like InCelligence[42] - In fiscal years 2022, 2021, and 2020, the company spent $11.6 million, $11.1 million, and $10.6 million on product R&D activities, respectively, indicating a consistent investment in research and development[47] - BabyCare's R&D efforts include collaborations with universities and clinical studies to evaluate product efficacy, enhancing product quality[72] - The company has established partnerships with various universities and research institutes globally to advance knowledge in applied human nutrition, with plans to accelerate clinical studies in the coming years[45] Manufacturing and Quality Control - The company conducts manufacturing and quality control operations for approximately 65% of its products in-house, with a significant manufacturing facility expansion completed in 2019[49] - The company plans to increase the proportion of personal care and skincare products manufactured in-house, reducing reliance on third-party suppliers, which currently account for approximately 35% of product sales[54] - The company maintains in-house microbiology and analytical chemistry labs for quality control, testing for biological and chemical contamination, and ensuring compliance with internal specifications[55] - The company’s Salt Lake City manufacturing facilities are registered with multiple regulatory agencies, ensuring compliance with Good Manufacturing Practices (GMPs) and other quality standards[51] - BabyCare's in-house manufacturing accounts for approximately 65% of product sales, providing a competitive advantage in quality control and production reliability[73] Regulatory Compliance and Challenges - The company engages in ongoing dialogue with government officials to navigate regulatory challenges in China[69] - The Chinese government has increased scrutiny of the direct selling industry, impacting the company's operations and regulatory compliance[106] - The company has obtained direct selling licenses in Beijing, Jiangsu, Shaanxi, and Tianjin, but requires additional licenses for further expansion in China[108] - The Chinese government has suspended the application review process for direct selling licenses since 2019, impacting BabyCare's ability to grow[178] - Regulatory compliance is critical, as failure to meet FDA requirements could lead to product withdrawals or fines, adversely affecting marketability[189] Employee and Corporate Culture - The company had approximately 1,900 employees across 23 countries, with 46% in the United States and 28% in China, and 58% of the workforce being female[124] - The company has a commitment to diversity, equity, and inclusion, with initiatives such as the Women in Leadership Program and mentorship programs[126] - The company has established a wellness program that includes free nutritional products and access to on-site health services for employees[132] - The company is focused on sustainability, with a strategy centered on products, people, and planet, and aims to fortify these pillars for meaningful progress[121] - The company has not experienced work stoppages due to labor disputes and maintains a good relationship with its employees[125] Legal and Regulatory Risks - The company faces potential legal obligations regarding the classification of Associates, which could lead to increased costs and liabilities if they are deemed employees[162] - The company is subject to various anti-corruption laws, and any violations could result in severe penalties and adversely affect its reputation and operations[208] - Changes in tax laws and regulations could materially affect the company's effective tax rate and financial condition[210] - The company faces risks related to maintaining effective internal controls, which are necessary for reliable financial reporting[212] - Legal actions against the company by former Associates could harm its business, although such litigation is typically routine and not materially impactful[203] Cybersecurity and Data Management - The company relies on information technology for operations and reporting, with significant amounts of data, including personally identifiable information (PII), stored in data centers and cloud systems[217] - Data breaches could lead to significant losses, including damage to reputation, increased cyber insurance premiums, and loss of customer confidence[219] - Cybersecurity measures are continuously improved, but the company remains vulnerable to persistent attacks, including viruses and ransomware[218] - The company faces potential legal liabilities from affected individuals or business partners due to data breaches[219] - Regulatory compliance is critical for the secure collection and storage of data, impacting business strategy[219]

USANA Health Sciences, Inc. (NYSE:USNA) Q4 2022 Earnings Conference Call February 8, 2023 11:00 AM ET Company Participants Andrew Masuda - Investor Relations Kevin Guest - Chairman and Chief Executive Officer Jim Brown - President Doug Hekking - Chief Financial Officer Brent Neidig - Chief Officer and Managing Director, China Conference Call Participants Linda Bolton-Weiser - D.A. Davidson Susan Anderson - Canaccord Genuity Ivan Feinseth - Tigress Financial Partners Operator Good day and welcome to today’s ...