Q2 2024 USANA Health Sciences Inc Earnings Call

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Unknown Executive: Hello and welcome to the USANA Health Sciences Second Quarter earnings call.

Jess: Hello and welcome to the USANA Health Sciences second quarter earnings call. My name is Jess and I'll be your coordinator for today's event.

Jess: My name is Jess, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on this and only. However, there will be the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero, and you'll be connected to an operator.

Speaker Change: Please note this call is being recorded and for the duration of the call your lines will be on listen only, however there will be the opportunity to ask questions.

Operator: This can be done by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero, and you'll be connected to an operator. I will now hand over to your host, Andrew Masuda, to begin today's call. Thank you.

Speaker Change: This can be done by pressing star 1 on your telephone keypad to register your question at any time.

Speaker Change: If at any point you require assistance, please press star zero and you'll be connected to an operator.

Unknown Executive: I will now hand over to your host, Andrew Masuda, to begin today's call. Thank you.

Speaker Change: I will now hand over to your host, Andrew Masuda, to begin today's call. Thank you.

Andrew Masuda: Thank you, Jess, and good morning, everyone. We appreciate you joining us to review our second quarter 2024 results. Today's conference calls being broadcast live via webcast into the access directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website.

Andrew Masuda: Thank you, Jess. And good morning, everyone.

Andrew Masuda: Thank you, Jess, and good morning, everyone. We appreciate you joining us to review our second quarter 2024 results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com.

Andrew Masuda: We appreciate you joining us to review our second quarter 2024 results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website.

Andrew Masuda: As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially, from the results projected in such forward-looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2024, as well as uncertainty related to the economic and operating environment around the world, our operations, and financial results.

Unknown Executive: As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially, from the results projected in such forward-looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2024, as well as uncertainty related to the economic and operating environment around the world or operations and financial results. We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC.

Speaker Change: Shortly following the call, a replay will be available on our website.

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

Speaker Change: Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially, from the results projected in such forward-looking statements.

Speaker Change: Examples of these statements include those regarding our strategies and outlook for fiscal year 2024, as well as uncertainty related to the economic and operating environment around the world, our operations, and financial results.

Andrew Masuda: We caution you that these statements should be considered in conjunction with disclosures including specific risk factors and financial data contained in our most recent filings with the SEC. I'm joined by our President and CEO, Jim Brown, our Chief Financial Officer, Doug Hecking, our Chief Commercial Officer, Brent Neidig, as well as other executives. Yesterday, after the market closed, we announced our second quarter results and posted our management commentary document on the company's website. We'll now hear brief remarks from Jim before opening the call for questions. Thank you, Andrew.

Speaker Change: We caution you that these statements should be considered in conjunction with disclosures including specific risk factors and financial data contained in our most recent filings with the SEC.

Andrew Masuda: I'm joined by our president and CEO, Jim Brown, our chief financial officer, Doug Hacking, our chief commercial officer, Brent Nightig, as well as other executives. Yesterday, after the market closed, we announced our second quarter results and posted our management commentary document on the company's website.

Speaker Change: I'm joined by our President and CEO , Jim Brown, our Chief Financial Officer, Doug Hecking, our Chief Commercial Officer, Brent Neidig, as well as other executives.

Speaker Change: Yesterday, after the market closed, we announced our second quarter results and posted our management commentary document on the company's website. We'll now hear brief remarks from Jim before opening the call for questions.

Jim Brown: We'll now hear a brief remarks from Jim before opening the call for questions.

Jim Brown: Thank you, Andrew, and good morning, everyone. During the second quarter, we saw continued macroeconomic pressure in several of our key markets, which continue to impact our associates' productivity and consumer spending. We continue to take action to strategically address these challenges, including making USANA's overall value proposition more attractive. Our strategy includes restructuring our commercial team to better drive our initiatives, focusing on product innovation, increasing our efforts to engage our sales leaders with an associate-first approach, expanding into India, and continuing to pursue M&A activities. These strategic initiatives are a meaningful undertaking and are focused on driving long-term performance. This effort will be a multi-year endeavor, and it will take time to fully realize the rewards of these efforts.

Jim Brown: Thank you, Andrew, and good morning, everyone. During the second quarter, we saw continued macroeconomic pressure in several of our key markets, which continued to impact our associate's productivity and consumer spending. We continue to take action to strategically address these challenges, including making you sound as overall value proposition more attractive. Our strategy includes restructuring our commercial team to better drive our initiatives, tightening our focus on product innovation, increasing our efforts to engage our sales leaders with an associate-first approach, expanding into India and continuing to pursue M&A activities. These strategic initiatives are a meaningful undertaking and are focused on driving long-term performance.

Jim Brown: Thank you Andrew and good morning everyone. During the second quarter we saw continued macroeconomic pressure in several of our key markets which continue to impact our associates productivity and consumer spending.

Jim Brown: We continue to take action to strategically address these challenges, including making USANA's overall value proposition more attractive.

Jim Brown: Our strategy includes restructuring our commercial team to better drive our initiatives, heightening our focus on product innovation, increasing our efforts to engage our sales leaders with an associate-first approach, expanding into India, and continuing to pursue M&A activities.

Jim Brown: These strategic initiatives are a meaningful undertaking and are focused on driving long-term performance. This effort will be a multi-year endeavor and will take time to fully realize the rewards of these efforts.

Jim Brown: This effort will be a multi-year endeavor and will take time to fully realize the rewards of these efforts.

Jim Brown: Before providing a few highlights from the quarter, I'd like to provide an overview on the restructuring of our commercial team. Over the past several months, we have reorganized our sales, marketing, and communications departments into one commercial team to better position us to execute our customer growth strategy. A significant part of this strategy is centered on our ability to deliver three fundamental things to ourselves. course, Best in Class products, a simple message that highlights the benefits of these products and an income opportunity that is simple, rewarding, and worthy of our associate's time and effort. Accordingly, our new commercial team is comprised of three core global teams: product, opportunity, and brand, as well as our regional and local business units.

Jim Brown: Before providing a few highlights from the quarter, I'd like to provide an overview of the restructuring of our commercial business. Over the past several months, we have reorganized our sales, marketing, and communications departments into one commercial team to better position us to execute our customer growth strategy. A significant part of this strategy is centered on our ability to deliver three fundamental things to our sales force... best-in-class products, a simple message that highlights the benefits of these products, and an income opportunity that is simple, rewarding, and worthy of our associates' time and effort. Accordingly, our new commercial team is comprised of three core global teams, Product, Opportunity, and Brand, as well as our regional and local business teams. Our global teams are designed to do the following.

Jim Brown: Before providing a few highlights from the quarter, I'd like to provide an overview on the restructuring of our commercial team.

Jim Brown: Over the past several months, we have reorganized our sales, marketing, and communications departments into one commercial team to better position us to execute our customer growth strategy.

Jim Brown: A significant part of this strategy is centered on our ability to deliver the three fundamental things to our sales force.

Jim Brown: best-in-class products, a simple message that highlights the benefits of these products, and an income opportunity that is simple, rewarding, and worthy of our associates time and effort.

Jim Brown: Accordingly, our new commercial team is comprised of three core global teams, product, opportunity, and brand, as well as our regional and local business units.

Jim Brown: Our global teams are designed to do the following. The product team is responsible for ensuring that we bring innovative, best-in-class, nutritional products to the market. Accordingly, this team is focused on increasing our market share and driving customer growth, with science remaining at the core of our business. The opportunity team is focused on delivering a rewarding compensation plan with an associate-first approach offering for both part-time and full-time entrepreneurs. The brand team will deliver USANA's story and brand framework, which will align all company messaging, both internally and externally, improving messaging's effectiveness and bolstering our global reputation.

Jim Brown: The product team is responsible for ensuring that we bring innovative, best-in-class nutritional products to the market. Accordingly, this team is focused on increasing our market share and driving customer growth, with science remaining at the core of our business. The Opportunity Team is focused on delivering a rewarding compensation plan with an associate-first approach offering for both part-time and full-time entrepreneurs.

Jim Brown: Our global teams are designed to do the following. The product team is responsible for ensuring that we bring innovative best-in-class nutritional products to the market. Accordingly, this team is focused on increasing our market share and driving customer growth with science remaining at the core of our business.

Jim Brown: The Opportunity Team is focused on delivering a rewarding compensation plan with an associate-first approach offering for both part-time and full-time entrepreneurs.

Jim Brown: The brand team will deliver USANA's Story & Brand Framework, which will align all company messaging, both internally and externally, improving messaging's effectiveness and bolstering our global reputation. I believe the collective output of the new commercial team will better position USANA to make these fundamental deliveries to our sales force and position USANA to achieve long-term customer growth. Now on to some strategic highlights for the quarter.

Jim Brown: The brand team will deliver USANA's Story & Brand Framework, which will align all company messaging, both internally and externally, improving messaging's effectiveness and bolstering our global reputation.

Jim Brown: I believe the collective output of the new commercial team will better position USANA to make these fundamental deliveries to our sales force and position USANA to achieve long-term customer growth.

Jim Brown: I believe the collective output of the new commercial team will better position USANA to make these fundamental deliveries to our sales force and position USANA to achieve long-term customer growth.

Jim Brown: Now onto some strategic highlights for the quarter. I recently returned from India after spending a week in our offices in Gergon with our local leadership team and sales force. While I was there, I saw the energy and excitement for USANA's brand and products with our sales force and customers. Our local leadership team led by regional vice president and manager, Benit Madan, continues to attract high-quality leaders, and we remain very excited about the long-term potential that this important market presents. As we have consistently communicated, sales contributions from this important opportunities currently small. However, we plan to consistently and systematically build this market over the next several years.

Jim Brown: I recently returned from India after spending a week in our offices in Gurgaon with our local leadership team and sales team. While I was there, I saw the energy and excitement for USANA's brand and products among our sales force and customers. Our local leadership team, led by Regional Vice President and Managing Director, Sunit Madan, continues to attract high-quality leaders, and we remain very excited about the long-term potential that this important market presents. However, as we have consistently communicated, sales contributions from this important opportunity are currently small.

Jim Brown: Now on to some strategic highlights for the quarter.

Jim Brown: I recently returned from India after spending a week in our offices in Gurgaon with our local leadership team and sales force. While I was there, I saw the energy and excitement for USANA's brand and products with our sales force and customers.

Jim Brown: Our local leadership team, led by Regional Vice President and Managing Director, Bhuneet Madan, continues to attract high-quality leaders, and we remain very excited about the long-term potential that this important market presents.

Jim Brown: As we have consistently communicated, sales contributions from this important opportunity is currently small. However, we plan to consistently and systematically build this market over the next several years.

Jim Brown: However, we plan to consistently and systematically build this market over the next several years. We also strengthened our leadership team across the company during the second quarter. Dr. Katherine Armstrong joined USANA as our new Executive Vice President of R&D. Dr. Armstrong received her Ph.

Jim Brown: We also strengthen our leadership team across the company during the second quarter. Dr. Katherine Armstrong joined USANA as our new Executive Vice President of R&D. Dr. Armstrong received her PhD in biochemistry from Notre Dame and is a seasoned scientific leader with 17 years of experience in consumer products, direct selling, and consulting. She brings a wealth of knowledge, technical prowess, and extensive expertise in product development and innovation. Dr. Armstrong will be instrumental in helping lead USANA's product development and innovative initiatives.

Jim Brown: D. in Biochemistry from Notre Dame and is a seasoned scientific leader with 17 years of experience in consumer products, direct selling, and consulting. She brings a wealth of knowledge, technical prowess, and extensive expertise in product development and innovation. Dr. Armstrong will be instrumental in helping lead USANA's product development and innovative initiatives. Peter Wong has been promoted to Global Vice President and General Manager of China. Peter joined USANA Baby Care in January of 2022.

Jim Brown: We also strengthened our leadership team across the company during the second quarter.

Speaker Change: Dr. Katherine Armstrong joined USANA as our new Executive Vice President of R&D. Dr. Armstrong received her PhD in Biochemistry from Notre Dame and is a seasoned scientific leader with 17 years of experience in consumer products, direct selling, and consulting.

Speaker Change: She brings a wealth of knowledge, technical prowess, and extensive expertise in product development and innovation. Dr. Armstrong will be instrumental in helping lead USANA's product development and innovative initiatives.

Jim Brown: Since then, he has been instrumental in driving a transformation in our China sales. He worked closely with the team to successfully launch China's Healthy Families Strategy, which is focused on ensuring China's continued growth over the next several years. He has played a pivotal role in driving sales, building close relationships with sales leaders, optimizing our business model, creating innovative growth strategies, and developing our organization. I'm truly excited about Peter's future contributions, as well as his dedication, enthusiasm, and leadership in this important market.

Jim Brown: Peter Wong has been promoted to Global Vice President and General Manager of China. Peter joined USANA Baby Care in January of 2022. Since then, he has been instrumental in driving a transformation with our China sales business. He worked closely with the team to successfully launch China's Healthy Family Strategy, which is focused on ensuring China's continued growth over the next several years. He has played a pivotal role in driving sales, building close relationships with sales leaders, optimizing our business model, creating innovative growth strategies, and developing our organization.

Speaker Change: Peter Wong has been promoted to Global Vice President and General Manager of China.

Speaker Change: Peter joined USANA Baby Care in January of 2022. Since then, he has been instrumental in driving a transformation with our China sales business.

Speaker Change: He worked closely with the team to successfully launch China's Healthy Family Strategy, which is focused on ensuring China's continued growth over the next several years.

Speaker Change: He has played a pivotal role in driving sales, building close relationships with sales leaders, optimizing our business model, creating innovative growth strategies, and developing our organization.

Jim Brown: I'm truly excited about Peter's future contributions, as well as his dedication, enthusiasm, and leadership in this important market.

Speaker Change: I'm truly excited about Peter's future contributions as well as his dedication, enthusiasm, and leadership in this important market.

Jim Brown: I'll close by saying that we operate our business with a focus on building sustainable long-term success in the form of customer growth. I'm confident that successful execution of this strategy will position USANA to return to growth.

Jim Brown: I'll close by saying that we operate our business with a focus on building sustainable long-term success in the form of customer growth. I'm confident that successful execution of this strategy will position USANA for growth. With that, I'll now ask the operator to please open the lines for questions.

Speaker Change: I'll close by saying that we operate our business with a focus on building sustainable long-term success in the form of customer growth. I'm confident that successful execution of this strategy will position USANA to return to growth. With that, I'll now ask the operator to please open the lines for questions.

Unknown Executive: With that, I'll now ask the operator to please open the line for questions. If you would like to ask a question, please press star 1 on your telephone keypad. Please enjoy your line as unmuted locally, as you will be advised when to ask your question. So once again, that's star 1 if you would like to ask a question.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, that's star one if you would like to ask a question. And our first question comes from the line of Anthony Lebiedzinski from Sidoti & Co. Please go ahead.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: Please ensure your line is unmuted locally, as you will be advised when to ask your question.

Anthony Lebiedzinski: On our first question, it comes from the line of Anthony Lebiedzinski from Sudoti and Co. Please go ahead.

Speaker Change: So once again, that's star one if you would like to ask a question.

Speaker Change: And our first question, it comes from the line of Anthony Lebiedzinski from Sudotian Co. Please go ahead.

Anthony Lebiedzinski: Good morning, and thank you for taking the questions. So overall, I think you guys did a pretty good job of explaining your two key results in the press release and the management commentary. So I'll focus most of my questions on forward-looking topics.

Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions. Overall, I think you guys did a pretty good job of explaining your two key results in the press release and the management commentary. So I'll focus most of my questions on forward-looking topics. But first, I just wanted to follow up, Jim, on one of the things that you said at the beginning of Thank you for the call.

Anthony Chester Lebiedzinski: Good morning and thank you for taking the questions.

Anthony Chester Lebiedzinski: So, overall, I think you guys did a pretty good job of explaining your 2Q results in the press release and the management commentary. So, I'll focus most of my questions on forward-looking topics, but first I just wanted to follow up, Jim, on one of the things that you said at the beginning of

Jim Brown: But first, I just wanted to follow up, Jim, on one of the things that you said at the beginning of the call. One of the things that you look at to do is to make the value proposition more attractive. Can you expand on that? What that means in terms of pricing or just how should we think about that? And then I have to a couple of other questions.

Anthony Chester Lebiedzinski: One of the things that you're looking to do is to make the value proposition more attractive. Can you expand on that? What does that mean in terms of pricing, or just how should we think about that? And then I have a couple of other questions.

Speaker Change: Nicole, one of the things that you're looking to do is to make the value proposition more attractive. Can you expand on that, what that means in terms of pricing, or just how should we think about that? And then I have a couple of other questions.

Jim Brown: Yeah, when I talk about the value proposition, you can get into specific products and how those are priced, and how the opportunity rewards the consumption of those products. But we always look at it as our team, our associates in the field, need to be value-adding in general. We want to supply more than just products and a great opportunity. We want to have other ads there that their customers and associates can then depend on to want to stay as a community, as a family with USANA.

Jim Brown: Yeah, when I talk about the value proposition, you can get into specific products and how those are priced and how the opportunity rewards for the consumption of those products. But we always look at it as our team, our associates in the field need to be value-adding in general. We want to supply more than just products than a great opportunity.

Jim Brown: Yeah, when I talk about the value proposition, you can get into specific products and how those are priced and how the opportunity rewards for the consumption of those products.

Speaker Change: We always look at it as our team, our associates in the field, need to be value-adding in general. We want to supply more than just products and a great opportunity. We want to have other ads there that their customers and associates can then depend on to want to stay as a community, as a family with USANA.

Jim Brown: We want to have other ads there that their customers and associates can then depend on to want to stay as a community, as a family with Usana. But of course, it comes down to nuts and bolts as well, and how we price our products.

Doug Hecking: But of course, it comes down to nuts and bolts as well and how we price our products. But we will continue, as I stated in the opening comments, to be a science-based company and have premium products. And that's what we have had for the last 30 years, and we'll continue down that path. Yeah, Anthony, this is Doug. Maybe you can chime in here.

Jim Brown: But we will continue, as I stated in the opening comments, to be a science-based company and have premium products. And that's where we've had for the last 30 years, and we'll continue down that path.

Speaker Change: But, of course, it comes down to nuts and bolts as well and how we price our products. But we will continue, as I stated in the opening comments, to be a science-based company and have premium products. And that's where we've had for the last 30 years and we'll continue down that path.

Doug Hacking: Anthony, this is Doug. Maybe you chime in here. A lot of the value proposition we look at is conveying the differentiation of the products. Also, the innovation that we have in the horizon that Jim mentioned. So there's a host of things that go in there.

Doug Hecking: A lot of the value proposition, when we look at it, is conveying the differentiation of the products and also the innovation that we have on the horizon that Jim mentioned. So there are a host of things that go into it. And so you probably should not perceive this as just pushing down a path of price adjustments. It's a value add and making sure the consumer understands the true differentiation of our products in addition to a great deal of product innovation on the horizon.

Doug Hecking: Yeah, Anthony, this is Doug. Maybe you can chime in here. A lot of the value proposition, when we look at it, is conveying the differentiation of the products.

Doug Hacking: And so you probably should not perceive this as just pushing down a path of price adjustments. It's a value add and making sure the consumer understands the true differentiation of our products in addition to a great dual product innovation on the horizon.

Anthony Chester Lebiedzinski: Also, the innovation that we have on the horizon that Jim mentioned. So there's a host of things that go in there. And so you probably should not perceive this as just pushing down a path of...

Anthony Chester Lebiedzinski: of Price Adjustments, it's value add and making sure the consumer understands the true differentiation of our products in addition to, you know, a great deal of product innovation on the horizon.

Anthony Lebiedzinski: Gotcha. Okay. Thanks for that.

Anthony Chester Lebiedzinski: Gotcha. Okay. Thanks for that.

Jim Brown: And so, just to follow up on the product innovations, I just wanted to get a better understanding of that. So, as you're looking to focus more on new products, so I guess when you look at your product innovation now process, what's on average the typical time frame when you guys think of an idea to bring out to the market. So what is that now, and what's the expectation going forward with the changes that you're making? I know it's a simple question, maybe not a simple answer for you, but I just wanted to get a better understanding of that.

Speaker Change: Gotcha, okay, yeah, thanks for that. And so just to follow up on the product innovation side, I just wanted to get a better understanding of that. So as you're looking to focus more on a new product. So I guess, you know, when you look at your product innovation now process,

Anthony Chester Lebiedzinski: And so just to follow up on the product innovation side, I just wanted to get a better understanding of that. So as you're looking to focus more on new products, so I guess, you know, when you look at your product innovation process now, you know, what's the average time frame that, you know, when you guys think of an idea to bring out to the market, you know, so what is that now?

Speaker Change: What's, on average, the typical time frame when you guys think of an idea to implement?

Anthony Chester Lebiedzinski: And what's the expectation going forward with the changes that you're making? I, you know, it might be, I know it's a simple question, maybe not a simple answer for you, but just wanted to get a better understanding of that.

Speaker Change: to, you know, bring out to the market, you know, so what is that now and what's the expectation going forward with the changes that you're making? You know, it might be, I know it's a simple question, maybe not a simple answer for you, but just wanted to get a better understanding of that.

Jim Brown: Yeah, it's not really a simple answer, but, you know, I talked about it with the restructuring, and we've gone as far as restructuring internally and have three product teams across our product lines of nutritionals, skin care, and foods. And it takes about a year and a half to two years from the initial decision to go down a path on a product, the science, the testing, and everything else, and we're just not happy with that.

Jim Brown: Yeah, it's not really a simple answer, but I talked about it with the restructuring. And we've gone as far as restructuring internally and have three product teams over our product lines and nutritional skincare and foods. And it takes about a year and a half to two years from the initial decision to go down a path on a product, the science, the testing, and everything else.

Speaker Change: Yeah, it's not really a simple answer, but, you know, I talked about it with the restructuring, and we've gone as far as restructuring internally and have three product teams over our product lines of nutritionals, skin care, and foods.

Speaker Change: and it takes about a year and a half to two years from...

Jim Brown: And we're just not happy with that. We think we should be able to do it within a year's time. And those teams will be the catalyst to get that done. They have ownership; they're looking at the entire product life cycle, and of course, innovation and new ingredients or systems will help with that as well. But it's longer, and that's one of the reasons that we've made the decision to do some restructuring and get more of a team focus with cross-functional teams together to be able to get stuff done quicker.

Speaker Change: The initial decision to go down a path on a product, the science, the testing, and everything else, and we're just not happy with that. We think we should be able to do it within a year's time, and those teams will be the catalyst to get that done. They have ownership, they're looking at the entire product lifecycle, and of course, innovation and new ingredients.

Jim Brown: We think we should be able to do it within a year's time, and those teams will be the catalyst to get that done. They have ownership, they're looking at the entire product life cycle, and, of course, innovation and new ingredients or systems will help with that as well. But it's longer, and that's one of the reasons that we've made the decision to do some restructuring and get more of a team focus with cross-functional teams together to be able to get stuff done quicker.

Speaker Change: Our systems will help with that as well but it's longer and that's one of the reasons that we've made the decision to do some restructuring and get get more of a team focus with cross-functional teams together to be able to get stuff done quicker.

Anthony Chester Lebiedzinski: Gotcha, so this restructuring was completed, I believe, soon after Jim became CEO, so you know, so as far as, What's a reasonable time frame for you guys to see tangible benefits from this? I know it's going to take some time, but could we see something by next year, or do you think it will take longer for that to play out?

Anthony Lebiedzinski: Joshua, so this restructuring was completed, I believe, soon after Jim, you became CEO. So, you know, as far as like, what's the reasonable time for him to, for you guys to see tangible benefits from this, I know it's going to take some time, but could we see something by next year or do you think it will take longer for that to play out?

Jim Brown: So, this restructuring was completed, I believe, soon after Jim, you became CEO .

Jim Brown: you know so as far as like

Speaker Change: What's a reasonable time frame for you guys to see tangible benefits from this? I know it's going to take some time, but could we see something by next year or do you think it will take longer for that to play out?

Brent L. Neidig: Hey Anthony, it's Brent here. I'll take that question. As Jim mentioned, historically, it takes upwards of three years in some instances to develop a product, and that's just not satisfactory for us. So with this restructuring, we've been able to accelerate the time it takes from ideation to commercialization. As Jim's repeatedly mentioned, we're scientific-based, and science takes time. So, we expect, especially on our most premium, differentiated products, that the scientific research aspect is still going to be time-intensive.

Brent Neidig: Hey, Anthony, it's Brent here. I'll take that question. As Jim mentioned, historically, it takes upwards of three years in some instances to develop a product, and that's just not satisfactory for us. So, with this restructure, we've been able to accelerate the time it takes from ideation to commercialization. As Jim's repeatedly mentioned, we're scientific based, and science takes time. So we expect, especially on our most premium differentiated products, that scientific research aspect is still going to be time intensive. But once that science has come to a point where we want to take the product through the commercialization process, we believe that through our transformation that's taken place internally, we could see 50%, 75% improvements or reductions in the time it takes to bring a product to market.

Brent L. Neidig: Hey Anthony, it's Brent here. I'll take that question. As Jim mentioned, historically it takes upwards of three years in some instances to develop a product and that's just not satisfactory for us.

Speaker Change: So with this restructure, we've been able to accelerate the time it takes from ideation to commercialization.

Speaker Change: As Jim's repeatedly mentioned, we're scientific-based, and science takes time.

Jim Brown: So, we expect, especially on our most premium differentiated products, that scientific research aspect is still going to be time intensive.

Brent L. Neidig: But once that science has come to a point where we want to take the product through the commercialization process, we believe that through the transformation that's taken place internally, we could see 50%, 75% improvements or reductions in the time it takes to bring a product to market. More recently, we've seen, you know, from ideation to commercialization as quick as six months, which is a dramatic improvement for us internally. We're going to continue to push hard on that process to make it as quick as possible because the markets are always changing.

Jim Brown: But once that science has come to a point where we want to take the product through the commercialization process

Speaker Change: We believe that through our transformation that's taken place internally, we could see 50%, 75% improvements or reductions in the time it takes to bring a product to market. More recently, we've seen, you know, from ideation to commercialization as quick as six months.

Brent Neidig: More recently, we've seen, you know, from ideation to commercialization as quick as six months, which is a dramatic improvement for us internally. We're going to continue to push hard on that process to make it as quick as possible because the market's always changing. We need to ensure that we're meeting the market where it's at, not trying to play catch up all the time. So we'll see improvements. We have some additional products that are going to come to market here soon this year, which we're happy about. We're planning many more upgrades and new products that are going to be launched in 2025.

Speaker Change: which is a dramatic improvement for us internally. We're going to continue to push hard on that process to make it as quick as possible because the market's always changing. We need to ensure that we're meeting the market where it's at, not trying to play catch-up all the time. So we'll see improvements.

Brent L. Neidig: We need to ensure that we're meeting the market where it is, not trying to play catch up all the time. So we'll see improvements. We have some additional products that are going to come to market here soon this year, which we're happy about. We're planning many more upgrades and new products that are going to be launched in 2025. So we're already starting to see the fruits of the restructure, and it's only going to get faster over time.

Speaker Change: and some additional products that are going to come to market here soon this year.

Speaker Change: which we're happy about. We're planning many more upgrades and new products that are going to be launched in 2025. So we're already starting to see the fruits of the restructure and it's only going to get quicker over time.

Brent Neidig: So we're already starting to see the fruits of the restructure, and it's only going to get quicker over time.

Doug Hacking: Yeah, and Anthony, I would chime in both Brent Nightig and Walter Note had, you know, Jim assumed the mantle of CEO took on additional responsibility. And so a good part of the back half of last year is Brent was meeting with everybody, trying to go back and assess where it's at. And the bulk of the changes in the actual structure, the right people in the right places, have been something that's really been more recent than that. And so I think you've got the structure in place.

Doug Hecking: Yeah, and Anthony, I would chime in. Both Brent Neidig and Walter Noot had, you know, as Jim assumed the mantle of CEO, taken on additional responsibilities. And so a good part of the back half of last year, Brent was meeting with everybody, trying to go back and assess where we were. And the bulk of the changes in the actual structure, the right people in the right places, have been something that's really been more recent than that. And so I think you've got the structure in place. I think it's the right alignment. But

Speaker Change: Yeah, and Anthony, I would chime in. Both Brent Neidig and Walter Noot had, you know, as Jim assumed the mantle of CEO , took on additional responsibility.

Anthony Chester Lebiedzinski: And so a good part of the back half of last year is Brent was meeting with everybody trying to go back and assess where it's at, and the bulk of the changes in the actual structure, the right people in the right places, have been something that's really been more recent than that.

Doug Hacking: I think it's the right alignment, but just I just want you to have a kind of a correct understanding of kind of timing of that. Yeah, it was really this past quarter when we really made significant changes to the team size to the structure. So within just a quarter, we've made dramatic improvements, and it's only going to accelerate over time.

Speaker Change: And so I think you've got the structure in place, I think it's the right alignment, but I just want you to have a kind of a correct understanding of kind of, you know, timing of that. Yeah, it was really just this past quarter when we really made significant changes to the team size, to the structure.

Doug Hecking: Yeah, it was really this past quarter when we really made significant changes to the team size and the structure. So within just a quarter, we've made dramatic improvements, and it's only going to accelerate over time.

Speaker Change: So within just a quarter we've made dramatic improvements and it's only going to accelerate over time.

Anthony Lebiedzinski: That's great to hear.

Anthony Chester Lebiedzinski: That's great to hear, and then just switching gears, I know in the release and the commentary, you guys talked a little bit more about your acquisitions strategy there. As far as the pipeline that you have, can you talk, speak to that, you know, as far as what could be As far as potential acquisitions and then buybacks, how are you guys thinking about that in light of the current stock price?

Walter Noot: And then just switching gears. I know in the release, in the commentary, you guys talked a little bit more about your acquisitions strategy there. As far as the pipeline that's that you have of, can you talk to speak to that and you know as far as which which could be. For potential acquisitions and then sure buybacks. How are you guys thinking about that in light of the current stock price.

Speaker Change: That's great to hear. And then just switching gears, I know in the release and the commentary you guys talked a little bit more about your acquisitions strategy there. As far as the pipeline that you have, can you speak to that as far as what could be

Speaker Change: As far as potential acquisitions and then share buybacks, how are you guys thinking about that in light of the current stock price?

Walter Noot: This is Walter. For acquisitions, we've got a full pipeline. We've been talking to companies. I mean, we've been very, very busy. And our biggest, you know, our biggest issue is that we want to make sure that we acquire companies that have a really good cash return. And so that's what we spend a lot of time with our banks. I think things are opening up a little bit right now. If you look just generally at the market, there seems to be more opportunities and more companies that are becoming available. And like I said, there's a huge list right now, so we're very excited.

Walter Noot: So for this is Walter. Now, so for acquisitions, we've got a full pipeline. We've been we've been talking to companies. I mean we've been very, very busy. and our biggest issue is that we want to make sure that we acquire companies that have a really good cash return. And so that's what we spend a lot of time with our banks and vetting companies. I think things are opening up a little bit right now. If you look at just generally in the market, this seems to be more opportunities and more companies that are becoming available. And like I said, there's a huge list right now, so we're very excited.

Speaker Change: So for, this is Walter, now so for acquisitions we've got a full pipeline. We've been, we've been talking to companies, I mean we've been very very busy.

Speaker Change: And our biggest issue is that we want to make sure that we acquire companies that have a really good cash return.

Speaker Change: And so, that's what we spend a lot of time with, our banks and...

Speaker Change: [inaudible]

Jim Brown: Yeah, one other thing too; when we're looking at business opportunities, we want a very strong management team that will stay on and run those businesses. We're looking at it as a long-term opportunity and not just something where you're just going in and trying to manage something and then going down a path of selling it. Ours is a long-term strategy to bring great businesses on to be part of the USANA structure.

Walter Noot: Yeah, one other thing too: when we're looking at business opportunities, we want a very strong management team that will stay on and run those businesses. We're looking at it from a long-term opportunity and not just something where you're just going in and trying to manage something and then go down a path of selling it. Our ours are long-term strategies. You bring great businesses on to be part of the USANA structure.

Speaker Change: And, like I said, there's a huge list right now, so we're very excited. Yeah, and one other thing, too, when we're looking at...

Speaker Change: Business opportunities. We want a very strong management team that will stay on and run those businesses. We're looking at it from a long-term

Speaker Change: opportunity and not just something where you're just going in and trying to manage something and then go down a path of selling it. Ours is a long-term strategy to bring great businesses on to be part of the USANA structure.

Doug Hecking: Yeah, and Anthony, this is Doug. I'll follow on really with kind of the broader capital allocation narrative. It's a very similar discussion that we've had in the past. This is, you know, Jim leads a lot of these conversations with the board about capital allocation and where we are. And so at any given time, we're evaluating a number of different opportunities and evaluating this stuff. Share repurchase is definitely in our arsenal, but, you know, we're evaluating that in context of many of the other things that we're currently evaluating as well.

Doug Hacking: Yeah, and Anthony, this is Doug. I'll follow on really on kind of the broader capital allocation narrative. It's a very similar discussion that we've had in the past.

Speaker Change: Yeah, and Anthony, this is Doug. I'll follow on really on kind of the broader capital allocation narrative.

Jim Brown: This is Jim. Jim leads a lot of these conversations with the board about capital allocation and where we're at. And so, at any given time, we're evaluating a number of different opportunities and evaluating this stuff. Sherry Purchase is definitely in our arsenal, but we're evaluating that in context of many of the other things that we're currently evaluating as well. So it is a discussion every quarter with the board, and we spend some amount of time on it. And so we'll get you updated. We really don't have any comments at this point as far as future plans in the immediate near term.

Doug Hecking: It's a very similar discussion that we've had in the past. This is, you know, Jim leads a lot of these conversations with the board about capital allocation and where we're at.

Speaker Change: And so at any given time, we're evaluating a number of different opportunities and evaluating this stuff.

Speaker Change: Share repurchase is definitely in our arsenal, but you know we're evaluating that in context of many of the other things that we're currently evaluating as well So it it is a discussion

Doug Hecking: So it is a discussion every quarter with the board, and we spend some amount of time on it. And so we'll get you updated. But we really don't have any comments at this point as far as, you know, future plans in the immediate near term.

Speaker Change: every quarter with the board and we spend some amount of time on it and so we'll get you updated. We really don't have any comments at this point as far as you know future plans in the immediate near term.

Anthony Lebiedzinski: Understood.

Anthony Chester Lebiedzinski: Understandable. Well, thank you very much and best of luck.

Anthony Lebiedzinski: Well, thank you very much. The best of luck. Thanks, Anthony.

Operator: Thanks Anthony. Thank you.

Unknown Executive: Thank you.

Speaker Change: Understood. Well, thank you very much and best of luck.

Linda Bolton: The next question that comes from the line of Linda Bolton, why they're from DA Davidson. Please go ahead.

Operator: The next question comes from the line of Linda Bolton-Weiser from D.A. Davidson. Please go ahead.

Anthony Chester Lebiedzinski: Thanks Anthony. Thank you.

Speaker Change: The next question comes from the line of Linda Bolton-Weiser from DA Davidson. Please go ahead.

Linda Ann Bolton: Yes, hi, um, so I was curious about what happened sort of in the mainland China region in the quarter. I guess I was rather encouraged by the performance last quarter with some growth there, and then it seems like the growth kind of went away, even against, I think it was an easier prior year comparison. Or was it just the promotions, that you ran promotions in the first quarter but none in the second quarter? Maybe you could add a little more color on China. Thanks.

Linda Bolton: Yes, hi. So I was curious what happens sort of in mainland China region in the quarter. I guess I was rather encouraged by the performance last quarter with some growth there. And then it seems like the growth kind of went away, even against. I think it was an easier prior year comparison. Is it just the promotions that you ran promotions in the first quarter, but none in the second quarter? Maybe a little more color on China. Thanks.

Linda Ann Bolton: Yes, hi. So I was curious...

Linda Ann Bolton: Like, what happened sort of in mainland China region in the quarter, I guess I was rather encouraged by the performance last quarter.

Linda Ann Bolton: with some growth there, and then it seems like the growth kind of went away, even against, I think it was an easier prior year comparison. Is it just the promotions, that you ran promotions in the first quarter, but none in the second quarter? Maybe a little more color on China. Thanks.

Doug Hacking: Yeah, Linda, this is Doug. I'm going to give you kind of a brief response to kind of what we'd said historically here.

Doug Hecking: Yeah, Linda, this is Doug. I'm going to give you kind of a brief response of kind of what we've said historically here And I'm going to let Brent respond who has far more market insight to that key market for us We had said at the end of our first quarter stuff that we would expect a softer Q2 just because of the promotional cadence China had both prior year and the sequential quarter had a more prominent Promotion calendar during those periods and that's something that we had called out a little bit But I give you that context and I'll let I'll let Brent go back and kind of respond

Linda Ann Bolton: Yeah, Linda, this is Doug. I'm going to give you kind of a brief response of kind of what we've said historically here and then I'm going to let Brent respond who has far more...

Brent Neidig: And then we'll let Brent respond, who has far more market insight to that key market for us. What we had said at the end of our first quarter stuff that we would expect a softer Q2 just because of the promotional cadence. China had both prior year and the sequential quarter had a more prominent promotion calendar during those periods. And that's something that we had called out a little bit, but I did give you that context, and I'll let Brent go back and kind of respond.

Speaker Change: Market Insight to that key market for us. We had said at the end of our first quarter stuff that we would expect a softer Q2 just because of the promotional cadence.

Speaker Change: China had, both prior year and the sequential quarter, had a more prominent promotion calendar during those periods, and that's something that we had called out a little bit, but I usually give you that context and I'll let Brent go back and kind of respond.

Brent Neidig: Hi, Linda. There certainly was a softness in the results. And I think that was really primarily too pronged. First and foremost was the cadence of the promotional calendar that we have now. We try to space those things out according to market need. Not necessarily to hit a revenue target, but really what are the needs on the ground in the market? and if you pile them on too quickly, too fast, then it can have more damaging effects long term than the positive upside.

Brent L. Neidig: Thank you, Linda. There certainly was a softness in the results, and I think that was really primarily two-pronged. First and foremost was the cadence of the promotional calendar that we have. We try to space those things out according to market need, not necessarily to hit a revenue target but really to meet the needs on the ground in the market. If you pile them on too quickly, too fast, then it can have more damaging effects in the long-term than the positive upside.

Brent L. Neidig: Hi Linda. There certainly was a softness in the results and I think that was really primarily two-pronged.

Brent L. Neidig: First and foremost was the cadence of the promotional calendar that we have. We try to space those things out according to market need, not necessarily to hit a revenue target, but really what are the needs on the ground in the market.

Brent L. Neidig: If you pile them on too quickly, too fast, then it can have more damaging effects long-term than the positive upside.

Brent Neidig: So I think the promotional calendar and the second is you certainly heard in the news that there is certainly an economic softness, headwinds that we're seeing within the market right now, and I think that was part of the issue and that's one of the reasons why we continue to look at strengthening our value proposition, so that even though there is economic softness, people are still willing to pay for premium solutions that are going to solve a need that they have in their life. So the better we can cut through that noise within the marketplace, people will continue to choose USANA, and that's what we're striving towards.

Brent L. Neidig: So I think the promotional calendar and then the second thing is, you certainly heard in the news, that there is certainly an economic softness. Headwinds that we're seeing within the market right now, and I think that was part of the issue. And that's one of the reasons why we continue to look at strengthening our value proposition, so that even though there is economic softness, people are still willing to pay for premium solutions that are going to solve a need that they have in their lives. So the better we can cut through that noise within the marketplace, people will continue to choose USANA, and that's what we're striving for.

Brent L. Neidig: So I think the promotional calendar and then the second is, you certainly heard in the news, that there is certainly an economic softness.

Brent L. Neidig: headwinds that we're seeing within the market right now and I think that was part of the issue and that's one of the reasons why we continue to look at strengthening our value proposition.

Brent L. Neidig: So that even though there is economic softness, people are still willing to pay.

Brent L. Neidig: for premium solutions that are going to solve a need that they have in their life. So the better we can cut through that noise within the marketplace, people will continue to choose USANA.

Doug Hecking: Yeah, and Linda, I would also say, and Brent's kind of brought this to the forefront, we're really excited about the management team over there and the elevation of Peter Wang. I think it's a really solid team that allows Brent to operate in a broader sense, so we're quite excited about the team structure there as well.

Jim Brown: Yeah, and Linda, I would also say, and Brent's kind of brought this to the forefront. We're really excited about the management team over there and the elevation of Peter Wang. I think really solid team that allows Brent to operate in a broader sense, so we're quite excited about the team structure there as well.

Speaker Change: And that's what we're striving towards. Yeah, and Linda, I would also say, and Brent's kind of brought this to the forefront, we're really excited about the management team over there and the elevation of Peter Wang.

Speaker Change: I think a really solid team that allows Brent to operate in a broader sense, so we're quite excited about the team structure there as well.

Linda Bolton: Okay, and then I guess on the opposite side of it, the Americas and Europe kind of region did quite a bit better actually than our projection.

Linda Ann Bolton: Okay. And then, on the opposite side of it, the Americas and Europe kind of region did quite a bit better actually than our projection. Can you call out something there that made the performance there sort of different and better?

Speaker Change: Okay, and then I guess on the opposite side of it, the Americas and Europe kind of region did quite a bit better actually than our projection. Can you call out something there that that made the performance there sort of different and better?

Brent Neidig: Can you call out something there that made the performance there sort of different and better? Yeah, I think it's just really the continued effort at addressing the current environment. The team's done a nice job. I would call it; I think Canada's done a really good job. We've been pleased with some of the progress in Canada. I think particularly in a sequential sense, and so I think we're getting some traction. Lean into it, Brent, more from kind of the, yeah, we're really pleased with our leadership that we have here in market, and they've been aggressively going after our associate first strategy and re-engaging local leaders, both in Canada and the Americas.

Doug Hecking: Yeah, I think it's just really the continued effort to address the current environment. The team's done a nice job. I would call it I think Canada's done, you know, a really good job, and we've been pleased with some of the progress in Canada, I think, particularly in a sequential sense, and so I think we're getting some traction leaning into it. Brent, more from a kind of a...

Speaker Change: Yeah, I think it's just really the continued effort at addressing the current environment. The team's done a nice job. I would call it, I think Canada's done.

Speaker Change: You know a really good job and we've been pleased with some of the progress in Canada I think particularly in a sequential sense and so I think we're getting some traction leaning into it Brent more from a kind of a

Brent L. Neidig: Yeah, we're really pleased with our leadership that we have here in market, and they've been aggressively going after our Associate First strategy and re-engaging local leaders, both in Canada and the Americas. That strategy is really, I think, starting to take hold, and we're starting to develop some positive momentum that we're excited about, and that's going to really parlay into our America's Europe convention that's taking place here next We're really excited about that and many key initiatives that we're gonna be launching in the second half of the year. So we're optimistic about the long-term trajectory of the market.

Speaker Change: Yeah, we're really pleased with our leadership that we have here in market.

Speaker Change: and they've been aggressively going after our Associate First strategy and re-engaging local leaders both in Canada and the Americas.

Brent Neidig: And that strategy is really, I think, starting to take hold, and we're starting to develop some positive momentum that we're excited about.

Speaker Change: And that strategy is really, I think, starting to take hold, and we're starting to develop some positive momentum that we're excited about, and that's going to really parlay into our America's Europe convention that's taking place.

Brent Neidig: And that's going to really parlay into our America's Europe Convention, this taking place here this next month in Las Vegas. We're really excited about that and in many key initiatives that we're going to be launching in the second half of the year. So we're optimistic in the long-term trajectory of the market. Okay.

Speaker Change: here this next month in Las Vegas. We're really excited about that and many key initiatives that we're going to be launching in the second half of the year. So we're optimistic in the long-term trajectory of the market.

Linda Ann Bolton: Okay, and then, um... With regard to your growth margin, it actually came in pretty much what I had projected. I'm just curious, and it's really stable, seemingly. What is it that is making the growth margin stable, despite the sales declines on the top line? Like, how are you managing to maintain that growth margin? Yeah, I mean,

Linda Bolton: And then, with regard to your growth margin, actually came in pretty much what I have projected. I'm just curious, and it's really stable seemingly.

Speaker Change: Okay, and then...

Speaker Change: With regard to your your growth margin actually came in pretty much what I had projected. I'm just curious and it's it's really stable seemingly.

Doug Hacking: What is it that is making the growth margin stable despite the sales declines on the top line? How are you managing to maintain that growth margin? Yeah, I mean, we've had a host of things, and there's a lot of things that go into the equation. One currency rates are operating against us. The non-variable cost we're seeing some pressure relative to a little bit softer top line. So all those things go into what you said. If you look dynamically at China, China has the robust growth margins. They make up a little bit bigger share of the overall.

Speaker Change: What is it that is making the growth margin stable despite...

Speaker Change: the sales declines on the top line. Like, how are you managing to maintain that growth margin?

Doug Hecking: Yeah, I mean, we've had a host of things, and there are a lot of things that go into the equation. You know, one, currency rates are operating against us. The non-variable costs, we're seeing some pressure relative to a little bit softer top line. So all those things go into what you said.

Speaker Change: Yeah, I mean, we've had a host of things, and there's a lot of things that go into the equation. You know, one, currency rates are operating against us.

Speaker Change: The non-variable cost, we're seeing some pressure relative to a little bit softer top line. So all those things go

Doug Hecking: If you look dynamically at China, you know, China has robust gross margins. They make up a little bit bigger share of the overall. We see some improvements there, but we've also seen the operations team, and procurement team, do a good job in kind of managing the environment. So it really is a combination of a variety of things. There are a few risk factors there with currency, and a little bit of softness on the top line.

Speaker Change: If you look dynamically at China, you know, China has a robust gross margins. They make up a little bit bigger share of the overall. We see some improvements there, but we've also seen the operations and procurement team do a good job.

Doug Hacking: We see some improvements there, but we've also seen the operations team procurement team do a good job and kind of managing the environment. So it really is a combination of variety of things. There's a few risk factors there with currency, a little bit of softness on the top line. We do have a little bit of a mixed dynamic relative to what we've seen; China has picked up a little bit.

Speaker Change: and kind of managing the environment. So it really is a combination of a variety of things. There's a few risk factors there with currency, a little bit of softness on the top line. We do have a little bit of a mixed dynamic.

Doug Hecking: We do have a little bit of a mixed dynamic. Relative to what we've seen, China's picked up a little bit. We see some improved gross margins just from there. And then I think just internal efforts to keep working on securing good prices and favorable outcomes factor in there as well.

Linda Bolton: We see some improved growth margins just from there, and then I think just internal efforts to keep working on securing good prices and fair wild comes factors in there as okay. And then, you know, I guess just in a bigger one thing with the direct selling companies that I've been, you know, seeing over the years is a lot of times what the distributors want is like more training, more training and programs that can help them as well as their downlines, no better how to sell the product and how to actually go about their business on a day-to-day basis.

Speaker Change: Relative to what we've seen is China's picked up a little bit. We see some improved gross margins just from there, and then I think just internal efforts to keep working on securing good prices and favorable outcomes factors in there as well.

Linda Ann Bolton: Okay, and then, um... You know, I guess just in a bigger way with the direct selling companies that I've been seeing over the years is that a lot of times, what the distributors want is like more training, more training and programs that can help them, as well as their downlines, know better how to sell the product and how to actually go about their business on a day-to-day basis. I don't really hear you talking much about training initiatives. Is there anything there that you think you need to focus on more, or is it just not something that's relevant to your business?

Speaker Change: Okay, and then, um...

Speaker Change: You know, I guess just in a bigger, one thing with the direct selling companies that I've been, you know, seeing over the years is a lot of times what the distributors want is like more training.

Speaker Change: More training and programs that can help them as well as their downlines.

Speaker Change: know better how to sell the product and how to actually go about their business on a day-to-day basis. I don't really hear you talking much about training initiatives. Is there anything there that you think you need to focus on more or is it just not something that's relevant to your business?

Brent Neidig: I don't really hear you talking much about training initiatives.

Brent Neidig: Is there anything there that you think you need to focus on more, or is it just not something that's relevant to your business? Linda, it's Brent here, and you're speaking music to our ears. I think you really hit it on the head there that part of that value proposition that we provide for our associate for strategy is not only providing a rewarding compensation opportunity, and one of the things we're really working on is reducing the time to success, which is how long it takes for an associate or one of our sellers to find, quote, unquote, success.

Brent L. Neidig: Linda, it's Brent here, and you're speaking to our ears like music. I think you really hit the nail on the head there that part of that value proposition that we provide with our Associate First Strategy is not only providing a rewarding compensation opportunity, but one of the things we're really working on is reducing the time to success, which is how long it takes for an associate or one of our sellers to find quote-unquote success. A big part of that is training. It's a massive part, and it really plays into their effectiveness and ability to go out and portray the message to the prospects that they have.

Speaker Change: Linda it's Brent here and you're speaking music to our ears. I think you really hit it on the head there that part of that value proposition that we provide

Speaker Change: for our Associate First Strategy is not only providing a rewarding compensation opportunity, and one of the things we're really working on is reducing the time to success.

Speaker Change: which is how long it takes for an associate or one of our sellers to find quote-unquote success.

Brent Neidig: A big part of that is training. It's a massive part, and it really plays into their effectiveness and ability to go out and portray the message to the prospects that they have. So, I would say the training takes up much of our commercial team's resources to figure out how we can deliver, in a very compelling, short, concise package, all the information that a new person would need in order to be successful right out of the gate. That's one of the primary objectives of our brand team that Jim mentioned is their sole focus: trying to figure out how to create a short, concise, compelling message in training material for our new sellers.

Speaker Change: A big part of that is training. It's a massive part and it really plays into their effectiveness and ability to go out and portray the message to the prospects that they have.

Brent L. Neidig: So I would say that training takes up much of our commercial team's resources to figure out how we can deliver in a very compelling, short, concise package all the information that a new person would need in order to be successful right out of the gate. That's one of the primary objectives of our brand team, as Jim mentioned. Their sole focus is trying to figure out how to create a short, concise, compelling message in training material for our new sellers.

Speaker Change: So I would say that training takes up much of our commercial team's resources to figure out how

Speaker Change: We can deliver, in a very compelling, short, concise package, all the information that a new person would need in order to be successful right out of the gate.

Speaker Change: That's one of the primary objectives of our brand team that Jim mentioned.

Speaker Change: is, their sole focus is trying to figure out how to create a short, concise, compelling message in training material.

Brent Neidig: And then, as you go along the whole associate journey, once a person's been in for a certain period of time, their training needs change over time. And we continue to provide education, certification resources on our products, on the opportunity, really so that they can become their best self and their best customer so that they can present themselves in a very compelling way to all their prospects.

Brent L. Neidig: And then as you go along the whole associate journey, once a person's been in for a certain amount of time, we continue to provide education, certification resources on our products, and opportunities, really so that they can become their best self and their best customer so that they can present themselves in a very compelling way to all their customers.

Speaker Change: for our new sellers. And then as you go along the whole associate journey, once a person's been in for a certain period of time, their training needs.

Speaker Change: change over time. And we continue to provide education, certification resources on our products, on the opportunity, really so that they can be become their best self and their best customer so that they can can present themselves in a very compelling way to all their prospects.

Linda Bolton: Okay. Thank you.

Linda Ann Bolton: Okay. Thank you. That's all for me.

Unknown Executive: That's all from me.

Unknown Executive: Thanks, Linda.

Speaker Change: Okay. Thank you. That's all for me.

Doug Lane: The next question that comes from the line of Doug Lane from Water Power Research. Please go ahead.

Operator: The next question comes from the line of Doug Lane from Watertower Research. Please go ahead.

Linda Ann Bolton: Thanks, Linda.

Speaker Change: The next question comes from the line of Doug Lane from Watertower Research. Please go ahead.

Douglas Matthai Lane: Yeah, hi, good morning everybody. I'm looking at your revised guidance and trying to sort of back into some second-half trends we can expect. I think the two things I'd just like to drill down on are, in my math, the sales are looking to be in the second half somewhere close to flat to down, maybe mid-single digits, which is obviously an improvement from the first half trend. So what drives you to believe that the trends will improve in the second half versus the first half?

Doug Lane: Yeah, hi.

Doug Lane: Good morning, everybody. Look at looking at your revised guidance and trying to sort of back into some second half trends we can expect. I think all the two things I just like to drill down on is in my math, the sales looking to be in the second half somewhere close to flat to down, maybe mid-singles digits, which is obviously an improvement from the first half trends.

Douglas Matthai Lane: Looking at your revised guidance and trying to sort of back into some second half trends we can expect.

Douglas Matthai Lane: I think the two things I'd just like to drill down on is, in my math, the sales looking to be in the second half, somewhere close to flat to down, maybe.

Doug Lane: So what drives you to believe that the trends will improve in the second half versus the first half? Yeah.

Speaker Change: mid-single digits, which is obviously an improvement from the first half trend. So what drives you to believe that the trends will improve in the second half versus the first half?

Doug Hecking: Yeah, Doug, this is the alternative Doug, your alter ego here. A great deal of what Jim talked about with the commercial team and kind of what Brent's executing there, and some of the things we see in the product pipeline, the innovation, really is kind of what we outline in those key strategic initiatives. One of the things that Brent has done, to give him directive to the team, is this associate first, and the effort and engagement to go back and get out and talk with them and just take any opportunity we have to go back and engage with them is really a critical part of our business. I think we really heard this in kind of loud tones coming out of COVID.

Doug Hacking: Doug, this is the alternative Doug. You're alter ego here. I think a great deal, kind of what Jim talked about with the commercial team and kind of what Brent's executing there and some of the things we see in the product pipeline and innovation, it really is kind of what we outlined in those key strategic initiatives. One of the things that Brent has done to give him directed team is this associate first and the effort and engagement to go back and get out and talk with them and just take any option we have to go back and engage with them.

Speaker Change: Doug, this is the alternative Doug, your alter ego here.

Speaker Change: A great deal of kind of what Jim talked about with the commercial team, kind of what Brent's executing there, and some of the things we see in the product pipeline, the innovation, really is kind of what we outline in those key strategic initiatives.

Speaker Change: One of the things that Brent has done, to give him direction to the team, is this associate first, and the effort and engagement to go back and get out and talk with them.

Jim Brown: It is really a critical part about our business, and I think we really heard this in kind of loud tones coming out of COVID. And so to me, I think that's the number one thing. I think the timing and cadence of different promotional activity, as Brent said, we want to be smart; we want to do things that are value added to them and not overwhelm them. But we see some of the things that we have kind of planned and baked in are additive, but it is just one part of a broader approach and strategy.

Speaker Change: just take any option we have to go back and engage with them is really a critical part about our business and I think we really heard this in kind of loud tones coming out of COVID.

Doug Hecking: And so, to me, I think that's the number one thing. I think the timing and cadence of different promotional activities, as Brent said, we want to be smart. We want to do things that are value-added to them and not overwhelm them, but we see some of the things that we have kind of planned and baked in are additive, but it's just one part of a kind of broader approach and strategy. Jim, anything else that's big picture?

Speaker Change: And so to me, I think that's the number one thing. I think the timing.

Speaker Change: and Cadence of different promotional activity. As Brent said, we want to be smart, we want to do things that are of value, add to them and not overwhelm them. But we see some of the things that we have kind of planned and baked in.

Jim Brown: Jim, anything else there, a big picture? Yeah, I mean, it is a cadence on promotions, and we are going to address that some in the third and fourth quarter, but it is really the strategy and getting the alignment there. And Doug talked about our associate distributor first strategy and getting them the tools to be successful.

Speaker Change: are additive, but it is, it's just one part of a kind of a broader approach and strategy. Jim, anything else that's a big picture?

Jim Brown: Yeah, I mean, it's a cadence on promotions, and we're going to address that some in the third and fourth quarters. But it's really the strategy and getting the alignment there, and like Doug talked about, our associate distributor first strategy, and getting them the tools to be successful. Linda just talked about training. We didn't spend a lot of time on that, but that's probably one of the biggest jobs that our GMs across the world do, is train and continue to support that distributor to find more consumers of our products.

Jim Brown: Yeah, I mean, it's just...

Jim Brown: It's a cadence on promotions, and we're going to address that some in the third and fourth quarter.

Jim Brown: But it's really the strategy and getting the alignment there and our, like Doug talked about, our associate distributor first strategy.

Jim Brown: Linda just talked about training. We didn't spend a lot of time on that, but that is probably one of the biggest jobs that our GMs across the world do. So what we do is train and continue to support that distributor to find more consumers of our products.

Jim Brown: and getting them the tools to be successful. Linda just talked about training. We didn't spend a lot of time on that, but that's probably one of the biggest jobs that our GMs across the world do, is train and continue to support that distributor to find more consumers of our products.

Doug Lane: Okay, thank you. Thank you. That's helpful, Jim.

Douglas Matthai Lane: Okay, thankful. Thank you. That's helpful, Jim.

Doug Lane: And I guess in the second thing I want to focus on is the operating margin, where you have, you know, you're advised to range, but not very much despite the sales shortfall. And again, according to my numbers, the first half operating margin was what, nine and a half, nine point six percent. And so you back into a second half that's going to be below nothing. And I just wondered why, despite the improving trends, although still possibly down sales, or the operating market is going to be lower than a second half versus in the first half.

Jim Brown: Okay.

Douglas Matthai Lane: And I guess the second thing I want to focus on is the operating margin, where you have, you know, you're advised to range, but not very much despite the sales shortfall. And again, according to my numbers, the first half operating margin was what? nine and a half, 9.6%. And so you back into the second half, it's going to be below nine. And I just wondered why, despite the improving trends, although still possibly down sales, or the operating margin is going to be lower in the second half versus in the first.

Speaker Change: Thank you. That's helpful, Jim. And I guess the second thing I want to focus on is the operating margin where you have, you know, you're advised to range, but not very much despite the sales shortfall. And again, according to my numbers, the first half operating margin was

Speaker Change: What, nine and a half, 9.6%? And so you back into a second half that's going to be below nine. And I just wondered why, despite the improving trends, although still possibly down sales, or the operating margin's going to be lower in the second half versus in the first half.

Doug Hacking: Yeah, I think it really is just the dynamic of seeing a softer top line, the loss of leverage, and some of the infrastructure costs. We've definitely been selective in pairing back some infrastructure costs that we don't deem as adding value, you know, going forward and doing this other stuff. At the same time, we've been investing in the strategic conditions that Jim outlined in his open remarks, and we'll continue to go back and invest in the future. And I would just say the strength in our balance sheet allows us to have that mentality and lean into things and lean into things efforts that we think will help grow the company.

Doug Hecking: Yeah, I think it really is just the dynamic of seeing a softer top line, the loss of leverage, and some of the infrastructure costs. We've definitely been selective in paring back some infrastructure costs that we don't deem as adding value, you know, going forward and doing this other stuff. At the same time, we've been investing in the strategic initiatives that Jim outlined in his open remarks, and we'll continue to go back and invest in the future. And I would just say the strength in our balance sheet allows us to have that mentality and lean into things and lean into things, efforts that we think will help grow the company.

Speaker Change: Yeah, I think it really is just the dynamic of seeing a softer top line, the loss of leverage and some of the infrastructure costs. We've definitely been selective in paring back some infrastructure costs that we don't deem as adding value, you know, going forward and doing this other stuff. At the same time, we've been investing.

Speaker Change: in the strategic initiatives that Jim outlined in his open remarks and we'll continue to go back and invest in the future and I I would just say the you know the strength in our balance sheet allows us to have that mentality and lean into things and lean into things efforts that we think will help grow the company

Douglas Matthai Lane: Okay, I mean that makes sense. If you increase your investment, then hopefully, your sales trends will improve. And just last thing on the tax rate, I know you talked about in your commentary, and I get it, but I just think the tax rate has just shot up here these last couple of years and now into the 40% range after forever being in the upper 20s, low 30s. So just what is different about USANA today that's driving that higher tax rate?

Doug Lane: Okay, I mean, that makes sense. If you're up your investment, then hopefully your sales trends will improve.

Doug Hacking: And just last thing on the tax rate, I already talked about your commentary and I get it, but I just, the tax rate is just shut up here these last couple of years. And now I'm to the 40% range after forever being in the upper 20s or 30s. So just what is different about your son at the day that's driving that higher tax rate? I think just the dynamics from a tax book standpoint of where that income sits. That's the primary thing. I think we've had several years of currency adjustments and some of those other stuff, and with our concentration in the US and our concentration of overhead here in the US.

Speaker Change: Okay, I mean that makes sense if you up your investment and hopefully your sales trends will improve.

Speaker Change: And just last thing on the tax rate, I know you talked about in your commentary and I get it, but I just, the tax rate has just shot up here these last couple of years and now into the 40% range after forever being in the upper 20s, low 30s. So just what is different about USANA today that's driving that higher tax rate?

Doug Hecking: I think just the dynamics from a tax book standpoint of where that income sits is the primary thing. I think we've had several years of currency adjustment, some of this other stuff, and with our concentration in the US and our concentration of overhead here in the US, just the currency alone creates some operating leverage dynamics. And I think the softness in sales and where we are at and where many of the investments are happening on these strategic initiatives are still domestic here.

Speaker Change: I think just the dynamics from a tax book standpoint of where that income sits, that's the primary thing. I think we've had several years of...

Speaker Change: of Currency Adjustments and some of this other stuff, and with our concentration in the U.S. and our concentration of overhead here in the U.S., you know, just the currency alone creates some operating leverage.

Doug Hacking: You know, just the currency along create some operating leverage dynamics, and I think the softness in sales and where we're at and where many of the investments are happening on these strategic initiatives is still domestic here. I think there's some opportunity here, but there's nothing going to be kind of a real quick fix to that. And I think we're looking at things longer term and making sure we're making good, good decisions for the health of the company long term.

Speaker Change: dynamics and I think the softness and sales and where we're at and where many of the investments are happening on these strategic initiatives is still domestic here. I think there's some opportunity here but there's nothing going to be kind of a real quick

Doug Hecking: I think there's some opportunity here, but there's nothing going to be kind of real quick thanks to that, and I think we're looking at things longer term to make sure we're making good, good decisions for the health of the company long term.

Speaker Change: fix to that and I think we're looking at things longer term to make sure we're making good good decisions for the health of the company long term.

Douglas Matthai Lane: Well, I mean, I know you're not giving guidance for next year and the far future, but just directionally, are we here to stay in the 40s, or is there something you can do to get back into the 30s, you know, near term, in the next year or two? Well, you know, as we go back and roll these...

Doug Hacking: Well, I mean, I know you're not giving guidance for next year in the out years, but just directionally, are we here to stay in the 40s, or is there something you can do to get back into the 30s near term in the next year or two? Well, as we go back and roll these strategic initiatives and execute much of what Brent and Walter and Jim's leadership is directing us to, I think that top line momentum will really help out. And, you know, what we'll just see is we look to allocate some of the capital of different opportunities that may have an impact on how some of that stuff looks as well.

Speaker Change: Well, I mean, I know you're not giving guidance for next year and the out years, but just directionally, are we here to stay in the 40s, or is there something you can do to get back into the 30s, you know, near term, in the next year or two?

Doug Hecking: Well, as we go back and implement these strategic initiatives and execute much of what Brent, Walter, and Jim's leadership is directing us to, I think that top-line momentum will really help out. And, you know, we'll just see as we look to allocate some of the capital to different opportunities how that may have an impact on how some of that stuff looks as well. Okay. Thanks, Doug.

Operator: We currently have no questions in the queue, so as another reminder, please press star 1 if you would like to ask a question. We have no further questions in the queue, so I will turn the call back over to your hosts for any closing remarks. Thank you, Jeff.

Speaker Change: Well, you know, as we go back and roll these strategic initiatives and execute much of what Brent and Walter and Jim's leadership is directing us to, I think that top line momentum will really help out.

Speaker Change: And, you know, we'll just see as we look to allocate some of this capital to different opportunities that that may have an impact on how some of that stuff looks as well.

Doug Lane: Okay.

Unknown Executive: Thank you, sir. We currently have no questions in EQ, so, as another reminder, please press star 1 if you would like to ask a question.

Speaker Change: Okay, thanks Doug.

Jess: We have no further questions in the queue, so I will turn the call back over to your host for any closing remarks. Thank you, Jess, and thank you everyone for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7210. Thank you for joining today's call.

Speaker Change: We have no further questions in the queue so I will turn the call back over to your hosts for any closing remarks.

Andrew Masuda: Thank you, Jess, and thank you everyone for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7210.

Speaker Change: Thank you, Jess, and thank you everyone for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7210.

Operator: Thank you for joining today's call. You may now disconnect your line.

Unknown Executive: You may now disconnect your life.

Speaker Change: Thank you for joining today's call. You may now disconnect your line.