Q1 2020 Earnings Call

[music].

<unk>.

Oh.

Hi.

Yeah.

I appreciate your patience.

On the line.

[music].

Good day.

Hi.

The conference call.

Oh.

And at this time I would like to trend.

Richard.

Correct.

Please go ahead.

Okay.

We appreciate you joining us for 43, Corp. first quarter, it's called.

Oh, it's being brought a lot.

Yes.

I wish I got to prioritize.

Oh.

Oh.

Oh replay.

Website.

As a reminder, drain of course, it's conference call management will make forward looking statements regarding future events from future.

Yes.

Okay.

Statements involve risk.

It could cause actual results to differ perhaps materially from the results project in such forward looking statements.

Samples with these statements, including those regarding our strategies.

Oh, you're 20 Twond.

Uncertainty related.

So.

Okay, great impact.

King Pandemic tour business operations and financial results. We caution you that these people should be considered in conjunction with disclosures, including specific risk factors and financial data can change in our luxury apartments.

Although our CEO Kevin Cassidy.

This morning, I'm joined by our President Kim Brown, our Chief Financial Officer, Doug Hekking, as well and other executives to begin we'd like to point out that the majority of you saw in voice on the call have dialed in remote areas.

Their respective homes in early February we successfully implemented work from home plan for calling me.

Factory on distribution employees, and our whole walkers and around the world and expect to follow this plan until further notice.

Yesterday after market close we announced our first quarter results pushed her management commentary results you know documents on the company's website you boundaries are struggling before opening.

Calls or questions.

Good morning, Thank you for joining us basketball.

What went wrong smartpoint disruptions and challenges.

Personal lines business operations.

I'm hearing you saw has also been so one moment that make us proud to be part of this company.

Got the waterborne boys and associates.

Around the world.

Responded quickly professionally to solve real time challenges as we've had to make adjustments in every aspect of lumpiness.

For example, you Tom employed.

Shifting to somebody into a new building overnight in order to keen focus on time.

Call Center shoes into working from home and just two days.

And our leadership team comes together each day to overcome challenges and continued planning to the future.

Thank you Nicole up for questions I'd like to addressing a few key areas that have been affected by coking 19.

First our global manufacturing and distribution have remains fully operational we continue demand.

In fact for products and ship orders for homes around the world.

Always manufacturing, taking place and express my claim facilities and good manufacturing practices.

Hi, good quality standards.

Also at its safety measures to protect our manufacturing and distribution employees and customers, including additional protective equipment.

Matt temperature checks.

Okay and to keep our employees.

Second we continue to actively managed our supply chain and address challenges as being a price.

Our first quarter results indicate we have continued to experience high demand for our high quality health products generally we have ample inventory.

All of our markets and our operations team, perhaps quickly address any temporary backlog of orders.

It's important that we continue to provide support to our associates that time any potential customers are searching for ways.

Nutrition.

We're holding frequent training is concerned at our associates are familiar with our online.

Wind sales tools and resources and importantly, our associates and customers continue to receive the same great customer service in every market, whether thats via phone email what gap or line.

Or.

Research and development team, it's still hard at work on advancing distressed small personal wellness through new.

Developed.

Folding spec product launches to continue over the next year.

Finally, we are being creative and shoes on most of our large USANA sponsored associated gas online. Our team is working to November confidence you associates and customer homes.

I think gauging motivating.

Parsing advance.

Although we can't know we've certainly what's the next few months, we'll bring.

We'll continue to adapt and do everything we can give you saw in on track.

I am confident the strength that you saw underlining goodness and believe that as we navigate through these not interested in advance but long term mindset. You saw this business will be stronger that important before.

Mark.

With that.

Operator, please open the line for questions.

Thank you know and if he would like to ask a question. Please signal by pressing star for one on your telephone keypad.

Please make sure that your mute function is turned off to lay your signal to reach our equipment again that is star one to ask a question.

I think our first question comes definitely think with Jefferies.

Go ahead.

Thank you good morning, everyone.

Two questions. If we could just to unpack the guidance a bit more can talk a little bit about what you're seeing.

In the June quarter, and we should think about modeling.

At the June quarter.

There are that would be very helpful. Just to think about scope quarter to quarter. Then then you tried acceleration in the back half maybe give us sense around your confidence in that that Catholic salaries.

Yes, Stephanie that Doug.

We're probably in our range right around 250.

Mark in Q2.

And you go back and reflect earnings appropriately from there and then would you see some built the biggest dynamic from quarter to quarter, it's timing and promotions with some product launches in the first quarter I think particularly in China. We had a notable product launch and just being kind of a little bit.

Certainly down of demand of certain products, but.

With the plans that we've seen from our sales teams across the globe definitely picks up in the back half the year. That's this drilling our expectation.

Okay, and then it won't isolate the China market because it's so important for you guys and I think generally many are looking at that as a proxy.

For the recovery puts calling a virus worldwide, maybe give us a sense of how did the business function during the down period.

What things were you able to implement to help bridge some of that the renewal period and then how should we think about the contribution of China.

Into the back half.

Half recognizing that last year was a very unusual year as well, maybe even looking back at 18.

The more base case proxy how should we think about that market developing over the course of this year.

Yeah. This is Jim you know we had our challenges last year with the under day campaign and it was interesting enough when they're looking at.

2020 into plans for that.

We're really excited about where China was going BRD until the minimum change and prepare for a great 2020 and that we had this pandemic companion and really like you said in the past China was the first one and and are kind of head of the current right now we see a lot of information where.

In his opening backup economies and the market itself for us.

Are saying that as well for a while we had an extended Chinese new year weeks and that a few weeks Perkins governments requests and our perpetual offices were closed down the majority of those and now those are open back up for us the challenges what's going to.

The playing field in China over the next few weeks on few months, because even though we have offices opened there's still restrictions on those were.

The amount of people can come into those offices, we have smaller machines.

So the smaller meetings really are the challenge for us to see that momentum pick up Luckily what we've done.

Over the past couple of years from an ITC standpoint, and having a lot of systems placed online really has prepared us for this square.

Forced us to go online, but you were ahead of that curve just because we were working on writing business again Hamilton mine.

Okay I'm not sure one morning, because you mentioned.

Some products new product development can you just give us a sense of how you're thinking about your product development pipeline. If we do see a post crisis attitude shift towards general wellness or wellbeing anything that you're focused on with respect to.

Physical and mental lobbying within that pipeline that might be a nice.

At the back half thank you.

Yeah, we have.

Product development I won't give specifics on gaming products, because we use that product development and and announcements of new products to help momentum at our field and create excitement, but we have talked about that pass that we still have our active nutrition kind of an upgrade to our foods line thats going to be launched early next year.

Here are working on specific price for that we have intention to have products launched center Asia Pacific and would have been our Asia Pacific Convention, but capital that are doing more online, but that's in the May timeframe and then in August we had our Americas Europe Convention again, Weve council that from a face to face meaningful.

Online a bit but we have.

Products that are slated to be released at that time as well so and then in China. We have uptake products that were planning on be Doug just talking about that we did sell central's earlier year, but we have an additional seven or so products that are going be launched run up here in China and death events, So thats kind of.

Product development is going and you know again thats going to help the momentum and excitement in the last half of the year.

Thank you very much.

Thanks.

And our next question will come from Doug Lane with Lane research.

Go ahead, yeah, good morning, everybody.

On the on the product issue or have you seen with the spread of the global pandemic any maybe unexpected shift and the product mix already.

This is the has progressed.

Yes, we had beginning but that's that's part of what helped let's have a great first quarter.

Huge part where we have seen.

Some specific products you probably see profiling all booster see in a few other ones where the demand for that literally has gone up tenfold at times and again Thats just be or section from the feel of what those products do and and distract us being to help companies.

The.

Timing for debt I mean, not related to timing, but at the opportunity from our field too.

Take those products and and yourself to make sure that didn't feel comfortable with their own how.

No somewhat.

Impactful in first quarter, we're seeing that kind of say back down to normal run rate.

And that's when we talk about inventory and the fact that are inventories little bit lower debt, which explains some of that but yes. We have seen that we're very careful right now on how we explained but our projects due in the claims that they make we don't want to go down a path, but making claims that MTN.

[music].

The regulatory.

Here is out there looking at us.

And Doug. This is this is Doug just a little bit context on those products.

To Jim's point, we definitely saw picked up.

In some of these products were designed to support immune function.

And so we saw that those.

Collectively relatively small percentage of our sale.

And so we did see from subs to proceed as well so even though we did see some that during the quarter. We also saw a shift to buying that.

At a higher level not lines, while others jobs like side, just want to put that in context. It was additive.

Relatively small small part of the quarter.

Okay Fair enough and then follow on the topic of.

You know slowing economy, certainly provide an income opportunity to your associates. So have you thought about how you might get a towards talking little bit more investment income opportunity.

In the back half a year.

Yes.

Part of it I mean, when you talk about the economy and whatnot historical with direct selling companies when the economies have.

Shifting our gone down multi level marketing direct selling companies have seeing.

As a group.

Their business increase.

You know as you saw on up where health focused and.

Focused on our products first so when we go down the path jointly with our products in our hope is that people will start in the business by taking our progress and then see an opportunity.

From a business and become an associate I don't see that changing with the way that we energy's people to our business, we want to go products for us because of our lead but our products and.

And they are the best products in the world.

So there that opportunity, but I don't just changing a focus that we're talking about the business first.

Okay, well that Paul.

One of the the upside sports is my number was the associate productivity here and I'm looking at the preferred customer.

Particularly in Asia, we outside of greater China Asia preferred customers outside of greater China.

I've been growing rapidly in the accelerated in the first quarter. So can you give us some color towards what's driving that trying to customer growth in those markets.

Yes.

Really over the last year to 18.

We really been emphasizing that that customer profile for the company and that continues and I think in this environment, it resonates pretty well, particularly given the types of products that we sell.

I think that definitely contributed there what you've seen a little bit of the overall productivity is is it some of the.

Pickup on the types of products that we sold during the quarter as well as the promotion in China were added to that productivity figure that you referenced the that customer folks will be continue to go back can be an emphasis that we have or the for the foreseeable future as well.

Okay. Thanks Thats helpful. Just one last thing.

Can you remind me what does the.

What is the opportunity to convert that.

Those preferred customers into being actual associates.

I think we see it yeah, you'll remember in our China business everybody comes in as the customer.

And then as they have success, referring different customers.

And referring parts. They also get some free product opportunity here or reprice discounts.

In China.

So that we've looked at that.

As it relates to the markets or other markets excuse me. So I would guess maybe different potential there we would get made some plans.

For a market outside of China did go back in rural something similar out has a similar kind of intend to go back and get the word of mouth spread in there right.

I think a lot of people sign up based upon their intent. So I don't think there are huge numbers, but I think you definitely see path there and I think some of the the folks can do get of converting to be entered the.

So should because theyre just.

Passionate about products I think really have maybe successful and some carriers mine. So the numbers are small, but I think the impact can be.

Pretty additive to the business if we're successful.

Okay. Thanks, Doug Thanks, Jim.

Okay.

And we'll take our final question from Ivan Sciences, Tigris financial partners.

Hi, Thank you for taking my questions. Congratulations on the great results on the nice reaction in the stock.

Following the seeing that no one of the upsides to this terrible this horrible situation. We're in is that there was an increase in.

Focus at least the belief that may be one the best ways to be healthy is to be healthy.

And pursue you know I'm, good diet and taking supplements and.

Hi can you do have a nice complement to both of them boosting products how have you said.

C are you seeing you did see a spike in that because other.

Sure.

Nutritional companies I'm speaking to say they pretty much sold out.

In many cases on some of these amazing product, so what kind of interested in Siemens products.

Yeah, I mean overall, especially additionally, when it came out you know probably four or five.

Leasing though.

You saw a tremendous amount of interest in the products and.

Stripping cost some short term issues when it came down inventory management and in our availability of products. We reacted quickly and you could see that some of our inventory numbers as well.

For the quarter, but we've reacted quickly to refilled the supply chain.

Very good shape would that be continue to tell that story of the healthy lifestyle and supplements to make sure that you continue to be health as a person just like you are saying, but.

Right now, we see that come back into on all kind of a normal range that we've seen in the past so we feel very comfortable for.

This quarter in future.

The only those products that were highlighted.

And then reflecting from what's happened in the past couple of months.

What.

I know Directionally do you see you going to try to.

Take what's happening and improve upon for your company.

As far as you know new product development, and marketing initiatives and things like that.

Yes, when you look at it from new product development in our overall strategy like I said earlier, we have already planned strategy to release progress around are you seeing convention, our Americas Europe timeframe in August we would also do products.

Around the China National meeting better be online as well November it really hasn't changed that.

We have a lot of our.

Countries that don't have specific products that come back in and requested from our R&D group to get specific products again those that are identified is.

It really healthy for the body.

And so we'll see some of those products being launched rolled out throughout the year, we haven't really made any large strategic changes through our product.

I also mentioned the direction that we're going to go and I don't think we're going to change.

Okay. Thank you and congratulations again.

Thank you.

And I would now like to turn the call back to Patrick Richards for any additional my closing remarks.

Well. Thank you for your question for your participation on today's conference call you have any remaining questions. Please feel free contact investor relations each are warranted.

Sure.

Seven nine pretty smart thank you.

And this concludes today's conference. Thank you for your participation and you may now disconnect.

[music].

Oh.

[music].

Oh.

[music].

No.

Oh.

Oh.

Oh.

Oh.

[noise].

Oh.