Q4 2019 Earnings Call

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Good day and welcome to the U.S. <unk> Health Sciences fourth quarter Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr., Patrick Richards Executive director of Investor Relations and business development. Please go ahead Sir.

Thank you. Good morning, we appreciate you joining us this morning, three New York order for your results.

Conference calls being broadcast live webcast.

Access directly from our website at <unk> Dot you saw that dot com.

Shortly following the call a replay will be available on our website.

As a reminder, during the course of this conference call management will make forward looking statements regarding future events for the future financial performance our company.

Statements involve risks and uncertainties that could cause actual results to differ perhaps materially results project in such forward looking statements.

Examples of these statements, including those regarding our strategies outlook for fiscal year 2020.

Caution you that these statements should be considered in conjunction with disclosures.

I think risk factors and financial data contained in our most recent filings yes.

I'm joined this morning by our CEO Kevin guest.

President Jim Brown.

Our Chief Financial Officer, Doug Hekking as most other executives yesterday after market close we announced our fourth quarter results posted our management commentary results now with document on the company's website.

Well now if you're a brief remarks from Kevin before opening the call for questions.

Good morning, and thanks for joining us the fourth quarter was an excellent and in fiscal year 2018.

Red several successful promotions very order, which helped contribute to the momentum in many of our markets around the world.

As a result, well that sales and earnings per share exceeded our guidance.

Remember, we held our annual China's national meeting in Macau.

Event generates a lot of excitement in the region and attendance was strong again this year.

You bet, we introduced new products that were very well received in the market.

To help build on this we also offered a product promotion follow the event focused on products that we introduced at the event. This promotion was also very successful.

In other markets around the world, we ran successful promotions that highlighted Selby, our skin and personal care line.

Although we faced a fair amount of challenges throughout 2019.

Please to report that we finished the year with positive momentum.

As we look forward, we're optimistic about the future of you saw.

We're confident that you saw in his position to build upon the solid foundation over the last 27 years.

Also adapting to meet growing need to demand today's customers.

2020, our global strategy will remain focused on advancing our customer experience strategy.

The strategy involves many different initiatives that touched nearly all areas of our business.

The center of this effort is the need to offer technology enhancements and product innovation.

We're committed to making the appropriate investments stay relevant this fast paced environment.

Our business has been there will always be about help people and relationships, but now more than ever these relationships shifts and interactions are taking place through technology.

Over the last several years you saw the has made meaningful investments to ensure that we are providing our customers within technology to support each of these factors.

Equally important is there needs to remain relevant product innovation standpoint.

We will roll out several new products throughout the year across several of our product categories.

These are not only products that well better help but they're also products that our customers are requesting a we've picked up for a tribute to our growth in 2020.

Although it's.

A bit early to speak about I'd also like to mention that we're fighting to roll a whole new product category in early 2021.

This new product line to offer our customers more holistic approach of their health and won't be while also leveraging investments we haven't made in both technology and our new manufacturing facility next door.

Finally, we will focus on customer acquisition through a combination of incentive offerings, new customer centric product offerings and programs designed to broad increase our customer reach.

Additionally, we will continue to offer market specific promotions that target addressed that need the different customer demographics within each individual market.

During the call over for questions I'd like to comment briefly on the current environment in China.

We believe that consumer sentiment and improved in China during the second half of 2019, and particularly the fourth quarter.

That said, we are obviously monitoring the corona virus situation in China on a day to day basis.

World as we tried to gain more visibility into the potential impact. This dynamic could have of our employees customers and overall business as we come out of the extended Chinese new year holidays.

As noted in our outlook and earnings press release issued yesterday, we're committed to providing transparency of is evolving situation and any impact to our business, we gain more visibility as we gain more visibility into the situation I do however, once you have decided our confidence in our China business and our long term.

Both opportunity here.

Lastly, we issued a release this morning announcing that the board has authorized an additional $100 billion and share repurchase authorization.

In addition to $30 million currently authorized bringing the total authorization $130 million.

With that I'll now ask the operator, please open the lines for questions. Thank you if he would like to ask a question. Please signal by pressing star one on your telephone keypad.

Using a speakerphone. Please make sure your mute function is turned off.

Signal to reach our Clinton <unk> again press star one to ask a question.

After just a moment hello, everyone and opportunity to signal for questions.

Well take our first question from Doug Lane with Lane research.

Hi, good morning, everybody I'm going to start with sort of what you would you mentioned about China and.

The Corona virus.

The outlook for 2020 was a very wide outlook much wider than you've given in the past and I'm sure. It's the uncertainty about China and accruals Irish but also the sales performance was good in the third quarter in the fourth quarter, but it sounds like there were sort of one off promotions really to try to jumpstart things after the week start to the year so how much.

About wide range next years because of the underlying business may not be back to where you want it and how much it happens because of the uncertainty on the Corona buyers.

Yes.

This is the other dogs.

[laughter] the wider range is almost entirely attributed to kind of the uncertainty surrounding kind of the emergence the chronic virus.

And really is very tough to get visibility why we're in a kind of prolong Chinese new year area and so it just hasn't really been I'll go back and get any early indicators as far as what that means to us and so I think its hopefully out of an abundance of caution, but that's what it relates to as it relates to the promotions, we're going to you know were.

Our sales organization.

And the way we grow has happened families individuals the more of those take our products and so we'll still be doing ongoing promotions I was just part of our business, we have been a little bit more intentional during kind of the recovery the consumer sentiment in China.

And you'll see some more of that going forward, but that's really just part of our business.

Okay. That's helpful and then.

Kevin getting back when you're on your customer centric strategy, you know you've got a huge infrastructure of associates, which built the business and like many of your peers I understand the shift to targeting me in consumer and he and user with the promotions, but how do you strike that balance and does this does this change.

Range in strategy will not change, but this does nuance and strategy to go to customer centric is that going to require a tweak to the compensation plan.

So.

As we think about you know interacting with a company. If you think about how you did your Christmas shopping this year I'm sure as much different than you did a few years ago.

It's not unlike our customer base, they want to an expected interact differently.

As they receive their interaction and products through USANA.

The customer strategy has more to do from a technology ease of interaction and doing business than it does a compensation plan strategy change.

We are fully 100% committed to.

Our direct sellers, who are out there with their businesses.

And we're going to find ways to help complement their business that is additive to what we're doing and adding to their overall possibility for success because it what it comes down to as more customers consuming more products in their business equal success for them and for us and so I mentioned they.

And then an expanded.

Product offering and the new product line, that's part of that customer centric strategy by not being sold laser focused in a certain category, but expanding in they help.

Arena other product offerings that are business owners can sell as part of that strategy as well.

So we're not moving away from.

By by the states that have a customer centric, we're not going direct to consumer as our business model we.

We're going to find creative ways through technology through product strategies in sales I think pricing strategy is part of the equation and interaction with the end user but.

For right now, we're going to make it easier for people to do business with you saw that as a whole.

But again, we're not going to take those profits internally.

So we're going to still continue to find ways to incentivize customer acquisition sales through our direct sales channel.

And we're going to require a change in compensation plan.

Well we have constantly.

Over the years done things. An example is to sell the you could call the compensation plan change by having this 25% bonus to incentivize them to enroll preferred customers, if you're calling data compensation plan change the answer would be yes, we're going to do different sales strategies to us.

Supervise acquisition, but.

Again, we're going to make sure that we're going to include those who were involved in activities a brief customers to you saw on.

Okay. That's helpful. Im just just one last thing I'm just I.

I noticed that Dr. went left the board and as the founder of the company and spiritual leader I Wonder what the impact is on the relationship between corporate and the sales leaders and then also is still a big stockholder.

You know of any plans for in stock.

So oh.

I've been literally home I think two or three days this year out traveling meeting with our distributors I started the year off in China.

Been all over I'm, leaving this afternoon for other markets around the world meeting face to face with our our sales associate leaders, we had over 6000 people in Korea. When I was just there are few weeks ago.

And part of that was to talk about the transition of Dr. went.

His message to the World, which is Rx, which are our expectations is that he will continue to give input and guidance from a scientific perspective in the company and that he will continue to play a role and you saw him and going forward.

As a transition for him where he's not coming in for board meetings.

And conducting board business, but but my expectation is that from what he has told us as well as a company that he will continue at some level is involved you saw the.

It's been very well received he is 80 years old this year.

And.

What we're finding as I've traveled to talk to our customers. They are thankful that we're being very thoughtful and planning and thinking ahead from a a transitional strategy.

Dr West and not waiting and letting it go on until he passed as why isn't that all the so we have.

It is this summer and what we do this is part of a strategic plan. It's been in process underway for quite some time and more continued to execute on that strategy that plan.

And any comment with regards to a stock holdings as he made any comments.

I would I don't want to speak for Dr was that's a personal issue.

He has everything that he is said to me.

And I don't think do it might be saying just publicly.

Even as sure as soon as yesterday.

He was he intends on be enacted participant and a significant.

Shareholder as of yesterday and you saw.

Okay. Thank you.

We have no more questions in the queue at this time I would like to turn the conference back over to Patrick Richard.

Well. Thank you for your questions and for your participation on today's conference call. If you have any remaining questions. Please feel free to contact investor relations and internal blended kind by 47961.

This concludes today's call. Thank you for your participation you may now disconnect.

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