Q1 2025 USANA Health Sciences Inc Earnings Call
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and Michael M. Hopkins. Thank you. © The Bulletproof Executive 2013 All Rights Reserved. The Bulletproof Executive 2013
Speaker Change: Greetings. Welcome to the USANA Health Sciences first quarter conference call. At this time I'm up participants are in a listen only mode.
Speaker Change: A question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: Please note that this conference is being recorded. I will now turn the conference over to your host, Andrew Masuda, director and investor relations. Thank you. You may begin.
Speaker Change: Shortly following the call, a replay will be available on our website. As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events 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 2025, uncertainty related to the economic and operating environment around the world, and our operations and financial results.
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 violins with the SEC.
Speaker Change: I'm joined by our President and CEO Jim Brown, our Chief Financial Officer Doug Hecking, our Chief Operating Officer Walter Noot, our Chief Commercial Officer, Brent Neidig, as well as other
Speaker Change: Yesterday, after the market closed, we announced our first quarter results and posted our management commentary document on the company's website. We'll now hear a brief remarks from Jim before opening the call for questions.
Jim Brown: Thank you, Andrew, and good morning, everyone. USANA is also a solid start to the year. Our first quarter results were in line with our internal expectations as consolidated net sales through 12% year-over-year and constant currency, which includes our first full quarter of contribution from higher.
Jim Brown: Net sales and active customers in our direct selling business grew modestly on a sequential basis for the second consecutive quarter.
Jim Brown: While consumer sentiment in some of our key markets continues to reflect an overall cautious tone, we're seeing some pockets of strength. For example, sequential first quarter net sales and active customers in our largest market, mainland China, grew 6% and 4% respectively.
Jim Brown: We continue to educate our associate first strategy that prioritizes associate engagement on multiple levels. Accordingly, we have several leadership events across various markets during the quarter.
Jim Brown: and have many events planned throughout the remainder of the year. Early in the second quarter, we hosted our China National Sales Meeting in Nanjing, China. Attendance was strong while we focused on business-building, strategy and training, leadership recognition, and USANA's Associate First Amendment.
Jim Brown: We also use this event to broaden our product offering in China with the introduction of additional products. Both attendees and our executive team came away from this event, energized and motivated.
Jim Brown: We also successfully expanded our product offering in several other markets with a rollout of new products during the first quarter. Simultaneously the team continued to increase their efforts on several new product launches that are planned to be announced in the second half of the year.
Jim Brown: For instance, Dr. Catherine Armstrong, our chief scientific officer, traveled to several of our Asia-Pacific markets where she met with leaders and her local management teams to gather valuable insights and customer feedback as well as collaborate on future product ideas.
Jim Brown: Overall, our direct selling business remains on track to meet the sales guidance range we provided at the beginning of the year.
Moving to our newly acquired Haya Business
Jim Brown: The team continues to deliver robust results with strong growth in net sales and active monthly subscribers.
Jim Brown: Haya continues to see increasing subscriber adoption of both its core product offering as well as new products.
Jim Brown: For example, Kent Daily Greens, which was launched in the third quarter of 2024, has continued to sell at a higher than expected pace.
Jim Brown: We've spent this year over year growth and highest momentum to continue as the management team executes its plans to launch several new products this year. Unveil another strategic partnership and expand to additional channels.
Jim Brown: We're confident in the continued growth of the business and are proud to be reaching a new customer demographic in children's health and wellness
Jim Brown: Before opening the call for questions, I'd like to provide some thoughts on your son's position as it relates to tariffs and other trade-related actions by the US and its trading partners around the world.
Jim Brown: The impact of potential trade policies and tariffs remain highly uncertain at this time As such, we have not reflected any potential impact in our financial guidance
Jim Brown: As a reminder, we manufacture in China for our China market and manufacture for the rest of the world here in the US.
Jim Brown: While this structure does afford some insulation from recently enacted tariffs, we do source certain raw materials from various markets around the globe and therefore have exposure to tariffs.
Jim Brown: Our primary focus for now is on the potential tariff impact associated with importing certain raw material from China into the US and China.
Jim Brown: Our team response for supply chain management has proactively built inventory of the last several quarters to mitigate tariff exposure and has continued to explore alternate sourcing relationships.
Jim Brown: Our team will continue to evaluate and pursue these strategies to address the potential impact of tariffs and emerging trade policies as they evolve.
Jim Brown: and we plan to provide additional information as to gain greater visibility.
Jim Brown: With that, I'll now have the operator to please open the lines for questions.
Speaker Change: Thank you, and at this time we will conduct our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please is while we pull for questions.
Speaker Change: Our first question comes from Andrew Lebiedzinski with Cedodian Company, please do your question.
Speaker Change: Good morning everyone and thanks for taking the questions. So first, China, South Korea, the post net sales and active customer count increases on the sequential basis. You guys talked about
Speaker Change: Incentive offerings helping those out at the start of the year. So just curious as to what your plans are for additional incentives in these countries and elsewhere. How do you guys think about that as far as that's concerned. We love to hear your thoughts on that.
Speaker Change: Sure thing, Anthony, it's Brent here. Good morning. Good morning.
Speaker Change: China did have a good quarter. It was helped at the beginning of the year we had a couple of product promotions that took place before Chinese New Year and those were all very, very successful in which helped drive the quarter.
Speaker Change: The Quarterly Results. You know, we're always opportunistic and we're always looking at promotions when they're going to make the most sense, how we can drive the best value for our distributors and customers around the world.
Speaker Change: So, we are always going to continue to evaluate promotions and throughout every one of the quarters the rest of this year we do have promotional incentives planned.
So.
That's currently on the docket.
Speaker Change: Korea, it also was a good first quarter relative to Q4 last year.
Speaker Change: I think in both of those markets we're starting to see some really positive momentum, especially with our event that we had in China during the first part of the second quarter, really great event that we had there in Nanjing with 13,000 attendees.
Speaker Change: It's just really strong momentum and great things that we're seeing there.
Speaker Change: That's encouraging to hear. Yes, thanks for that. And then, you know, with respect to higher.
Speaker Change: So you talk about the seasonality of the business, which is understandable, you know, as far as, you know,
Speaker Change: The new product launches that are planned for this year. Can you share some more specifics about the timing and kind of what's embedded in your guidance?
Speaker Change: Right now there's a plan for a pretty meaningful launch of kind of a new relationship at the beginning of May, but the team is always bringing different ideas and really is a point to go back and engage a broader frontal.
Speaker Change: and engage more customers in acquiring those customers. And so this is probably the primary part of their growth strategy right now is on product innovation and broadening that product offering out.
You also see them exploring channel opportunities.
Speaker Change: and really kind of evaluating kind of that experience with the customer, which is I think been a real strength of theirs. So I think we see continuation of that but it really is continues to be focused on the
Speaker Change: The Children's Health and Wellness category and that will be squarely in focus as they move forward here and so I think there's quite a few opportunities they're encouraged by and some that may play a little bit different potentially in different channels and what they currently operate.
Speaker Change: Thanks, Doug. So now that you've had higher for four months, do you guys have any updated thoughts on the synergy opportunities?
Thank you. Thank you.
Speaker Change: Yeah, I think this is Walter. Yeah, we've been working with Haya especially operationally because it's one of our strengths we do manufacturing.
Speaker Change: We understand supply chain real well and we can really help them with that. So there are definitely synergies.
Speaker Change: There are a lot of things we're helping with them with IT.
Speaker Change: So, yeah, lots of projects going on right now where both teams are collaborating.
Speaker Change: Yeah, we're taking this very systematic approach. The one thing that we have to be careful with is with a lot of opportunities for synergies. We don't want to overwhelm the higher team and somehow distract them from their strategy for 2025 and 2026. So we're taking a very measured approach when we're looking at ways.
Speaker Change: to improve them from an operational standpoint. And I would say many of these things. Anthony, I think the yield and the benefits you're not going to see on an immediacy basis, you'll see that kind of systematically layered in there as we do that. And so we're really focused on things that will be additive and beneficial for both parties.
Anthony: Can you give us any update on India, how that's progressing?
India is still a promising market for us.
Anthony: We still have high expectations and high hopes for it to become a very solid, stable market for us in the future.
Anthony: I still as a slow roll as we've mentioned in previous quarters.
Anthony: Our chief sales officer is over there currently right now meeting with our leaders and our leadership team over there. We have a lot of energy and emphasis is being placed on that market to see us start to pick up its growth momentum. So we have a few plans in place and we're optimistic about where it's going to go.
Speaker Change: Gotcha. Thanks, Brent. And then lastly for me, as far as the potential tariff impact, so I know you guys brought in some additional inventories to try to get ahead of that.
Speaker Change: So do you think what you have done so far like this for one quarter out as far as the you know.
Speaker Change: The higher inventory was it, the more than that, I mean, you're just trying to obviously still a very fluid and dynamic environment as it relates to terrorists, but just just maybe if you could expand on that as far as the...
Speaker Change: The level of inventory that you have for raw materials is a good, how long of a period of time should that be good for?
Speaker Change: This is Walter. As far as raw material, we've built that up, especially for our nutritional products, because that's a lion share of our...
or revenue. A lot of it comes from there.
Speaker Change: We, in February , we start recognizing that there might be tariffs coming, so we bought a head.
Speaker Change: But again, the real issues, I mean, just a little bit of what Jim said earlier, we don't have a ton of inventory coming, for instance, from China to the US. It's 6% of our overall raw materials that come from China, so we've worked on that for the last four years.
Speaker Change: The impact isn't as bad, but it's still there's still money there to be made and so we want to make sure we had inventory ready
Speaker Change: Yeah, and over the last few years to Walter in the supply chain team and we've mentioned this is really worked on multiple sources and they can come from, you know, different geographic locations as well, so that has also less of the impact some
Speaker Change: That makes a lot of sense. Well, thank you very much, guys, and the best of luck.
Thank you.
Speaker Change: Thank you and a reminder to the audience. That's a question. Press star one on your telephone keypad to remove your question. Press star two.
Speaker Change: Our next question comes from Ivan Feinseth with Tigress Financial Partners, please state your question.
Ivan Feinseth: Congratulations on the great start to the year and the success with the higher acquisition.
Ivan Feinseth: And I forget that question. So just starting with China, what have been some of the new products that were launched there and the reception that you're getting and what do you see as some of the new categories that you're going to be launching?
Sure thing, Ivan. So it are evented in the second.
Ivan Feinseth: Quarter, so it's the first part of the second quarter there in Nanjing.
Ivan Feinseth: We only had a couple of new products that were launched. One was a new chewable calcium product for our children.
and that was really well received at BIDAR Forecast.
Ivan Feinseth: and then a couple of other products that were launched through our cross-border e-commerce channel.
Ivan Feinseth: They were some of our existing USANA nutritional products that were we were then introducing into China for the first time and those were also very well received in the U.S. Department of Health and Health and Health Sciences.
Ivan Feinseth: So, at the beginning of the year, it is more of a slower role as we've talked about in the past.
Ivan Feinseth: The product introductions and enhancements that are going to take place will accelerate in the back half of the year.
Ivan Feinseth: So that is going to be the same for here in the United States.
Ivan Feinseth: and in China and in our other markets around the world. So we expect in the second half of the year you should seem a greater acceleration of new product introductions.
Speaker Change: Yeah, then as you know from from the past that we have our international convention in August and we usually use big meetings like that like for example what Brent was talking about in China has launching points so
Speaker Change: Okay, and then for my big question is, you know, that there are a lot of competing products on the market that contain a lot of bad ingredients, and now what do you think your opportunity is as RFK starts to implement the elimination of a lot of these colors, dies artificial ingredients and you tend to lean toward a more natural product.
How do you feel, that? [inaudible]
Speaker Change: How do you feel that that will create an opportunity for you?
Speaker Change: Yeah, Ivan, this is Doug. I think we've always been well positioned just from the ethos of the company.
Speaker Change: to capitalize on that. And I think one of the things Brent and his team have really done.
Speaker Change: is focused a lot more on gauging the story and telling the differentiation .
Speaker Change: And I think as we continue to perfect that message, you get it out there that resonates at a greater and greater level. And so yeah, I think it's an opportunity for us. It's something that we've always done. We've always had that as part of our identity.
Speaker Change: and have some of those things come to light. I think provides us the ability to tell more differentiated story moving forward. Yeah, it actually goes into Haya as well. They're in the same boat, very clean product, so this again is an opportunity for both Haya and USANA.
Thank you. Congratulations again and wishing you a great year.
Thanks, Adam. Thanks, Adam.
Thank you.
Speaker Change: Once again, to ask a question, press star one on your telephone keypad. To remove yourself from the queue, press star two, we'll pause for another moment while we pull for questions. Thank you.
Speaker Change: And there appears to be no additional questions at this time. I'll hand the floor back to Andrew Masuda for closing remarks.
Andrew Masuda: Thanks for your questions, then. Participation on today's conference call. If you have any remaining questions, please feel free to contact investor relations at 801-95472-10.
Speaker Change: Thank you. This concludes today's call. All parts of me disconnect. Have a good day.