Q2 2025 USANA Health Sciences Inc Earnings Call

Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: Please note, this conference is being recorded.

Good morning and welcome to the usada Health Sciences. Second quarter earnings call at this time. All participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad,

Andrew Masuda: I will now turn the conference over to your host, Andrew Masuda, Director of Investor Relations. Thank you. You may begin.

Please note this conference is being recorded.

Andrew Masuda: Thanks, Diego, and good morning, everyone. We appreciate you joining us to review our second quarter 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.

Speaker Change: I will now turn the conference over to your host. Andrew massuda director of investor relations. Thank you. You may begin.

Speaker Change: We appreciate you joining us to review our second quarter results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at IR usana.com.

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 2025, uncertainty related to the economic and operating environment around the world, and our 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 FDIC.

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

Andrew Masuda: I'm joined by our President and CEO, Jim Brown, our Chief Financial Officer, Doug Hecking, our Chief Commercial Officer, Brent Neidig, our Chief Operating Officer, Walter Noot, as well as other executives.

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. 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, 2025 uncertainty related to the economic and operating environment around the world and our 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.

Jim Brown: Yesterday, after the market closed, we announced our second quarter results and posted our management commentary document on the company's website.

Jim Brown: We'll now hear brief remarks from Jim before opening the call for questions. Thank you, Andrew, and good morning, everyone. USANA delivered positive second quarter results consistent with our internal expectations. Consolidated net sales grew 11% year-over-year, and adjusted earnings per share increased 36% from the prior year. Notably, we repaid our line of credit, which had carried a balance since our acquisition of HIA this past December, and ended the quarter debt-free with $151 million in cash on the balance.

Speaker Change: I'm joined by our president and CEO. Jim Brown, our Chief Financial Officer, Doug hacking our chief commercial officer, Brett Knight our chief operating officer Walter not 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: Well, now here brief remarks from Jim before opening the call for questions.

Jim: Thank you, Andrew, and good morning, everyone.

Jim: You saw a delivered positive second quarter results, consistent with our internal expectations Consolidated, net sales, grew 11% year-over-year and adjusted earnings per share increased 36% from the prior year.

Jim Brown: From an execution standpoint, this was a pivotal quarter for USANA, as several strategic initiatives are in the process of being implemented. These initiatives are designed to strengthen our partnership with our brand partners, whom we used to refer to as associates, accelerate product innovation, elevate the business opportunity, and evolve our brand message. As I mentioned, we made a deliberate and intentional decision to change the terminology we use when referencing our sales leaders from associates to brand partners. The term brand partners reflects a more strategic, collaborative relationship and better represents the crucial role these individuals play in the sustainable long-term growth of our business.

Jim: Notably, we were paid our line of credit which had carried a balance since our acquisition of higher this past December and into the quarter, debt-free with 151 million in cash on the balance sheet.

Jim: From an execution standpoint. This was a pivotal quarter for USANA at several strategic initiatives are on the process of being implemented. These initiatives are designed to strengthen our partnership with our brand Partners whom we use to refer to as Associates. Accelerate product Innovation, Elevate, the business opportunity and evolve our brand messaging,

Jim Brown: If you recall, last year we reorganized our sales, marketing, and communications departments and our direct selling business into one cohesive commercial team. This team is focused on delivering three fundamental benefits to our brand partners. Best-in-class products, an income opportunity that is simple and motivates the entrepreneur with a rewarding compensation plan, and messaging that conveys product benefits and an income opportunity in a simple and compelling manner. This structure also positions us to improve the value proposition of USANA to our brand partners and customers by enhancing our already best-in-class products. Become faster and more agile in developing and releasing new products.

Jim: As I mentioned we've made a delivered and intentional decision to change the terminology. We use when referencing our sales leaders from Associates to Brand Partners the term brand Partners, reflects a more strategic collaborative relationship and better represents the crucial role. These individuals play in the sustainable long-term growth of our business.

Jim: If you recall last year, we reorganized our sales marketing and Communications departments and our direct selling business and to 1 cohesive commercial team.

Jim: This team is focused on delivering 3, fundamental benefits to our brand Partners best-in-class products.

Jim: And income opportunity that is simple, and motivates the entrepreneur for the rewarding. Compensation, Plan and messaging that conveys product benefits and an income opportunity in a simple and compelling manner,

Jim: this structure also positions us to improve the value, proposition of USANA, to our brand partners, and customers by enhancing our already best-in-class products

Jim Brown: Better understand specific brand partner and customer needs, and each of our markets deliver a more tailored experience. Provide increased opportunities for brand partner engagement, including events, meetings, and reward trips. And improve USANA's compensation offering for both part-time and full-time entrepreneurs.

Jim Brown: By making these changes, USANA will be at the forefront of today's evolving and competitive landscape for entrepreneurs. At a high level, our new opportunity entails an enhanced compensation plan, improved business building tools, and updated brand story. Our updated compensation plan is a meaningful step forward in modernizing and simplifying our direct sales model to attract, reward, and reward new generations of entrepreneurs, as well as existing brand partners. Some of these enhancement incentives have already been deployed and more incentives will roll out throughout the third quarter and fully launch by October, providing USANA brand partners with an improved opportunity and supporting resources to drive customer acquisition and retention.

Jim: Become faster and more agile and developing, and releasing new products. Better understand specific brand partner and customer needs in each of our markets to deliver. A more tailored experience, provide increased opportunities for brand partner engagement, including events, meetings, and reward trips and improve your son's compensation offering for both part-time and full-time. Entrepreneurs,

Jim: By making these changes you Sono will be at the Forefront of today's evolving and competitive landscape for entrepreneurs at a high level. Our new opportunity entails an enhanced Compensation Plan, improved, business, building tools, and updated Brand Story.

Jim: Our updated Compensation Plan is a meaningful step forward and modernizing and simplifying. Our direct sales model to attract reward and reward new generations of entrepreneurs as well as existing brand partners.

Jim Brown: The compensation enhancements also simplify the opportunity for brand partners to attract new generations of entrepreneurs by providing a better opportunity for new brand partners to earn compensation early in the USANA journey while simultaneously rewarding existing brand partners for activity that contributes to growth.

Jim: Some of these enhancements incentives have already been deployed and more incentives will roll out, throughout the third quarter and fully launched by October, providing us on our brand, partners with an improved opportunity and supporting resources to drive, customer acquisition and retention.

Jim Brown: Along with these enhancements, we've also launched new tools in our back office and mobile environment to make operating a USANA business easier than ever. For example, new functionalities will provide brand partners with data-driven recommendations on how to grow their business and maximize their earnings.

Jim: the compensation enhancements also, simplify the opportunity for brand Partners to attract new generations of entrepreneurs by providing a better opportunity for new brand Partners to earn compensation early in the USANA Journey while simultaneously, rewarding, existing brand partners for activity, that contributes to growth

Along with these enhancements, we've also launched new Tools in our back office and mobile environment to make operating a USANA business easier than ever.

Jim Brown: We have refined our brand by using clear language that highlights USANA's key differentiators and presents them in a compelling and easily repeatable format. Additionally, we continue to enhance our in-person meeting strategy and our key regions plan to host more in-person events that are upscaled and modern to attract new and younger generations.

Jim: And maximize their earnings.

Jim Brown: In conjunction with our new opportunity, we plan to announce several additional product launches along with various sales incentive offerings at our upcoming global convention next month in Salt Lake City. We expect approximately 3,500 of our best and most active brand partners from around the world to attend our global convention, and we plan to focus on recognizing their efforts and on actionable training to help them grow their businesses and to share more product. We're excited, optimistic, and confident that these changes we are making to our direct sales model will be additive to customer growth, increase engagement, and deliver long-term sustainable growth.

Jim: We have refined our brand by using clear language that highlights USA's key differentiators and presents them in a compelling and easily. Repeatable format additionally we continue to enhance our in-person meeting strategy and our key regions plan to host more in-person events that are upscaled and modern to attract new and younger Generations.

Jim: in conjunction with our new opportunity, we plan to announce several additional product, launches along with various sales incentive offerings that are upcoming Global convention next month in Salt Lake City

Jim: We expect approximately 3,500 of our best and most active brand Partners from around the world, to attend our Global convention, and we plan to focus on recognizing their efforts, and on actionable training, to help them grow their businesses and to share more product.

Jim Brown: Moving on to our Acquired Businesses. We are encouraged by the recent performance of these entities, which provide USANA the ability to reach a broader demographic of health and wellness market while providing diversification and strengthening USANA's financial profile.

We're excited, optimistic and confident that these changes we are making to our direct sales model will be added to the customer growth, increased engagement and deliver long-term sustainable growth.

Walter Noot: I'll start by sharing an update on our direct set to consumer business, HIA. HIA had another strong quarter as year-over-year top-line growth remained strong with improved profitability.

Jim: Moving on to our acquired businesses. We are encouraged by the recent performance of these entities which provide you son of the village to reach a broader demographic of Health and Wellness Market, while providing diversification and strengthening your son's Financial profile.

Jim: I'll start by sharing an update on our direct set to Consumer business higher.

Walter Noot: Overall business activity levels remained encouraging as the HIA team recently launched a new partnership with Disney and rolled out special edition Disney Lion King and Disney Princesses branded multivitamin packs.

Jim: Higher had another strong quarter as year-over-year, Topline growth remains strong with improved profitability.

Walter Noot: We completed additional integration milestones during the quarter, and as we move into the next phase of integration in the back half of the year, we will look to execute upon identified synergy and operational efficiency opportunities across logistics and manufacturing. We remain confident in HIA's growth outlook as the HIA team continues to execute its strategies to increase its market share in the children's health and wellness market by further growing and expanding its product offering, entering new distribution channels, and expanding its geographic footprint into international markets.

Jim: Overall business activity levels, remain encouraging as the higher team recently, launched a new partnership with Disney and rolled out special edition, Disney Lion King and Disney Princesses, Brandon multivitamin packs.

Jim: We completed additional integration Milestones during the quarter and as we move into the next phase of integration in the back, half of the year, we will look to execute upon identified Synergy and operational, efficiency opportunities across Logistics and Manufacturing.

Walter Noot: RISEBAR, which was acquired in 2022, delivered strong double-digit top-line growth in the second quarter, driven by solid order activity with key retail partners. While still relatively small, we are encouraged by the recent momentum and the Rise Bar team remains confident and focused on expanding its product offerings, growing further with existing retail partners, and landing new retail partners.

Jim: We remain confident. In highest growth Outlook is the highest team continues to execute its strategies to increase its market share in the children's health and wellness Market by further growing and expanding its product offering entering new distribution channels and expanding its Geographic footprint and an international markets.

Risebar which is required in 2022. Delivered, strong double digit top-line growth. In the second quarter driven by solid order activity with key Retail Partners.

Jim Brown: Please note that we are investing meaningfully in the third quarter as we hold our global convention, introduce new and updated products, and roll out exciting changes to our brand partner compensation plan. These investments, which have been included in our annual guidance, are anticipated to create short-term pressure on our operating margin during the third quarter.

Jim: While still relatively small, we are encouraged by the recent momentum. And the rise of our team remains confident and focused on expanding its product offerings growing further with existing Retail Partners and Landing New reach, Joe partners.

Jim Brown: In closing, this is an exciting time for USANA as we take meaningful steps to modernize and evolve our direct sales business. Our acquired businesses are performing well and will further allow us to expand our reach in the health and wellness market. We remain confident in our fiscal 2025 outlook and believe that the successful execution of our strategies will deliver sustainable long-term growth.

Jim: Please note that we are investing meaningfully in the third quarter as we hold our Global convention introduce new and updated products and roll out. Exciting changes to our brand partner Compensation, Plan these Investments, which have been included in our annual guidance, are anticipated to create short-term pressure on our operating monitoring margin during the third quarter.

Jim: In closing, this is an exciting time for your sauna. As we take meaningful steps to modernize and evolve our direct sales business, our required businesses are performing well and we will and will further allow us to expand our reach in the health and wellness Market.

Andrew Masuda: With that, I'll now ask the operator to open the line for questions. 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 1 on your telephone. What confirmation tone will indicate that your line is in the question queue? You may press star 2 if you would like to remove your question from For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Once again, to ask a question, press star 1 on your telephone.

Jim: We remain confident in our fiscal, 2025 Outlook and believe that the successful execution of our strategies will deliver sustainable long-term growth.

Jim: With that I'll now offer the operator to open the lines for questions.

Jim: Thank you.

Jim: And at this time, we will conduct our question and answer session.

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

Jim: A confirmation tone will indicate that your line is in the question queue.

Jim: You may press star 2 if you would like to remove your question from the queue.

Jim: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: We'll pause for a moment while we pull.

Jim: Once again to ask a question, press star 1 on your telephone keypad, we'll pause for a moment while we pull for questions.

Anthony Lebiedzinski: And our first question comes from Anthony Lebiedzinski with Sidoti and Company. Please stay. Good morning, everyone. And thanks for taking the questions. So first, starting off with China, so your sales in your largest market outperformed our expectations, even with a drop in active customers. So can you just provide more insight as to, you know, what's going on in China? What are you seeing there? What happened in the quarter? And how should we think about the balance of the year, especially with the upcoming incentive program changes?

Speaker Change: In our first question comes from Anthony leisk with sidonian company. Please State your question.

Brent Neidig: You bet, Anthony, it's Brent here. Thanks for the question. We were pleased with the performance of China throughout the quarter. Now, if you recall, there were a lot of tariff activity that took place this year, obviously, and especially with our Chinese business, we have about We have a little bit of exposure from cross-border goods that are coming from the United States into China. And because of the tariff uncertainty, we did experience some increased buy-up from our consumers in the market, which did attribute to some of the increase in performance throughout the quarter. But that tariff exposure, outside of that, we were pleased with the performance from our brand partners.

Anthony Leisk: Hi, good morning, everyone. And thanks for taking the questions. So, uh, first, uh, starting off with China. So your sales and your largest market performed, our expectations, even with a drop in active customers. So can you just provide more insight as to, you know, what's going on in China? What, what are you seeing there? What happened in the quarter and the, how should we think about the balance of the Year, especially with the upcoming incentive program changes?

friend: You bet, Anthony its friend here. Thanks for the question.

friend: About the quarter.

friend: Now, if you recall, there were a lot of tariff activity that took place this year obviously. And um especially with our Chinese business. We have about

friend: We have a little bit of exposure from cross-border Goods that are coming from the United States in the China and because of the Tariff uncertainty we did experience some increased buy up from our consumers in the market which did attribute to some of the increase in in performance for that quarter.

Brent Neidig: There still is a lot of optimism in the marketplace. We have a great management team there, and there's a lot of cohesion amongst our brand partners. So, things are still performing well. There is economic uncertainty, which we're still paying close attention to. But outside of that, I think we're very optimistic about what the long-term potential of that Chinese market is. Mm-hmm. Got it.

friend: But that tariff exposure uh, outside of that we were pleased with the performance from our brand Partners. Um, there still is a lot of optimism in the marketplace. We have a great management team there and there's a lot of cohesion amongst our brand partners

Um, so things are still performing. Well, there is economic uncertainty, which we're still saying, uh, very close paying close attention to but, uh, outside of that the, I think, uh, we're very optimistic about what the long-term potential of that Chinese market is.

Anthony Lebiedzinski: Yeah, thanks, Brent, for that.

Anthony Lebiedzinski: And then, you know, just looking at your overall active customer count, you know, so as far as the overall decline that we saw in the second quarter, you know, how much do you think was macro-driven versus some of it was because of the upcoming changes in the compensation programs, do you think? I think there's a good portion that's attributable attributable to the latter. Word did get out that we were going to be making adjustments to the incentive program. And our sales teams around the world have been working for the last month in extensive communication with our brand partners to help them understand what the changes are.

Speaker Change: Mhm, got it. Yeah. Thanks Brent for that. And then, you know, just just looking at your overall, um, active customer account the um, you know, so as far as the overall decline that we saw in the second quarter, you know how much you think was macro driven versus, um, some of it was because of the upcoming changes in the uh compensation programs. You think?

Speaker Change: I think there's a good portion that's attributable attributable to the latter. Um,

Speaker Change: word did get out that we were going to be making adjustments to the incentive program and our sales teams around the world have been working for the last month, in extensive communication, with our brand, Partners to help them understand what the changes are.

Unknown Executive: Got it. Okay.

Speaker Change: And naturally through that process, there's always going to be some reservation about learning what that new program is how that affects them. And so we did see a decrease to acquisition especially in the latter half of the quarter and that really, uh, impacts that active customer count. Uh, so that's something that we knew would happen. And we're optimistic, that that Trend will uh, turn around here in the third quarter as these new incentives continue to roll out.

Anthony Lebiedzinski: So perhaps, I mean, you could just give us an example of, you know, maybe just walk us through an example of how a new brand partner would be compensated under the new incentive program compared to the legacy incentive program.

Brent Neidig: Is this something you could just provide us kind of more details with? Yeah, sure. So we've found through our research and through our data that, especially with the current trends in the marketplace, it's becoming harder and harder for people to find success early on in their journey with USANA. And so that's something we specifically wanted to address with these enhanced The vast majority of our incentive program has remained unchanged. But there are some smaller elements of the plan that specifically relate to bonuses for behavior that we've made adjustments to. And we've brought some money forward in the beginning part of the journey of a new brand partner.

Speaker Change: Got it. Okay. So, you know, perhaps the I mean you could just um, give us an example of uh, you know, maybe just walk us through an example of how a new brand partner would be compensated under the new incentive program. Compared to the Legacy incentive program. Is this something you could just provide us kind of more details with

Speaker Change: Yeah, sure. So we found through our research and through our data that uh especially with the current trends in the marketplace, it's becoming harder and harder for people to

Speaker Change: Find success early on in their Journey with USANA. And so that's something we specifically wanted to address with these enhancements. Uh, the vast majority of our incentive program has remained unchanged. But there are some uh, smaller elements of the plan that specifically relate to, um, bonuses for behavior that we've made adjustments to

Brent Neidig: So before, you know, you might be able to a new brand partner would join. They would buy product for themselves and they would try to start selling product to other people. And oftentimes it would take them too long for them to earn their first commission check. And so with these enhancements, we've, as I said, we brought some money forward in that journey to where you can immediately start earning income off every single sale that you make to a new customer to a new brand partner. So that's a big adjustment system made. We've made some other tweaks to some of the other bonuses within the program.

Speaker Change: And we've brought some money forward in the beginning, part of the Journey of a new brand partner. So before, you know, you might be able to a new brand partner would join. They would buy product for themselves and they would try to start selling product to other people.

Brent Neidig: But as a whole, our main goal is to drive acquisition through these enhancements to make it easier for people to join, make it easier for them to earn. And as they earn more quickly, they'll feel and know that USANA is successful, that this journey was the right choice for them, and they'll want to stick with it longer.

Speaker Change: And often times it would take them too long for them to earn their first commission. Check. And so with these enhancements we've, as I said, we brought some money forward in that journey to where you can immediately start earning, uh, income off every single cell, that you make to a new customer to a new brand partner. So, that's a big adjustment that's been made. We've made some other tweaks to some of the other bonuses within the program. Um, but as a whole, our main goal is to drive acquisition through these enhancements to make it easier for people to join. Uh, make it easier for them to earn and as they earn more quickly they'll feel

Speaker Change: And know that USANA is successful that this journey was the right choice for them and they'll want to stick with it longer.

Anthony Lebiedzinski: That's very helpful.

Anthony Lebiedzinski: And just circling back to the impact of tariffs, I know you touched on this a little bit here, but just just just just overall thinking about the business as a whole, not just China, but just can you just can you speak to the impact of tariffs that you think you've had on your business in the quarter? And kind of how are you thinking about that for the balance of the year?

Doug Hecking: Anthony, this is Doug. The impact thus far has been fairly minimal. The operations and procurement team has done a really good job getting ahead of this with their sourcing strategy and really buying ahead of some of the potential exposure on the tariffs. We really haven't seen that much get put into place, and this is on kind of primarily the importing of ROS from market to market, which is not a real big part regardless. We still see a lot of positioning from negotiating power, not quite sure where that will land, and so I think we'll just keep evaluating and definitely put in a lot of effort.

That's very helpful and just circling back to the impact of tariffs. I know you touched on this a little bit here but just just just just overall thinking about the business as a whole, not just China but you just can you just can you just speak to the impact of tariffs that you think you had on your business uh in the quarter and kind of how you thinking about that? Um, for the balance of the year?

Speaker Change: Potential exposure on the tariffs. We really haven't seen that much. Get put into place.

And this is on kind of primarily the the importing of rods from Market to Market, which is, which is not a real big part.

Anthony Lebiedzinski: You can see that in our inventory build during the quarter, and we'll update as we get more visibility to see what type of... You know, tariffs or trade policy type impact we see going forward. Mm-hmm, gotcha.

Speaker Change: Uh, regardless, uh, we still, you know, we see a lot of positioning from negotiating power and not quite sure where that'll land. And so, I think we'll just keep evaluating and definitely putting a lot of effort. You can see that in our inventory build during the quarter,

Speaker Change: And we'll update as we get more. Visibility to see what type of uh

Speaker Change: You know, tariffs or uh trade policy type impact. We see going forward.

Unknown Executive: Yeah, thanks, Doug.

Anthony Lebiedzinski: And then switching gears to HIA, so as far as their second quarter sales results, we could see what you guys did here. Can you give us a sort of a frame of reference as to how that compares to the year ago as far as the growth level there? Can you speak to that? I would be curious to get your thoughts on that.

Walter Noot: I have had this is Walter, by the way, Anthony, I have had more, I mean, obviously good growth, they they at the beginning of the year, that's when they started building up customers, usually during the summer months, there's a little bit of a slowdown, which they've had. And that's, that was predicted. That's what we had our models. And then as the year picks up sales start picking up.

Speaker Change: Mhm. Got got you. Yeah, thanks, Doug. And then, um, Switching gears to higher. Um, so, you know, as far as their second quarter sales results, we can see what you guys did, if here. Can you give us a sort of a frame of reference as to how that compares to the year ago? Um, as far as the growth level there, um, Can can you speak to that? Uh, it would be curious to, to get your thoughts on on that.

Speaker Change: I, how is that? This is Walter, by the way. Anthony. Um, I had, I mean, obviously a good growth that they, they at the beginning of the year. Uh, that's when they started building up customers, usually during the summer months,

Speaker Change: There's a little bit of a Slowdown which they've had and that's that was predicted. That's what we had in our models.

Walter Noot: So we've got, you know, we've had really good growth this year over last year, significant growth if you see the numbers, but You know, we expect August, especially with Princess coming out and the Disney products coming out, we think that's going to be a big deal for those guys. Gotcha, okay.

Speaker Change: And then as the year picks up sales start picking up. So we've got, you know, we've had really good growth this year over last year. Significant growth, have you seen the numbers but

Speaker Change: You know, we expect uh, August especially with Princess coming out and and the Disney products come out, we think that that's going to be a big deal for those guys.

Unknown Executive: And then, you know, just thinking about the integration, sounds like you guys are pleased with how that's performed so far. Can you speak to the expected synergies and operational efficiencies that you may get from improved manufacturing and logistics?

Unknown Executive: And I guess the second part would be also, how are you guys thinking about expanding distribution of higher products beyond the core subscription business?

Unknown Executive: Yeah, Anthony, maybe I'll take those in reverse order.

Speaker Change: Mhm. Gotcha. Okay. And then, you know, just in thinking about the integration, it sounds like you guys are pleased with how that's performed so far. Um, can you speak to the expected synergies and operation efficiencies that you may get from, um, improved the manufacturing and the logistics? And, um, I guess the second part would be also, how, how do you guys thinking about the expanding distribution, um, of higher products, uh, beyond the core subscription business?

Unknown Executive: Walter, chime in here if you need some clarification. I think right now we're going to just focus on the HIA products within HIA. We definitely see some opportunity down the road there and we'll evaluate that over some reasonable period of time. The group has been actively working on a host of operational initiatives and integration initiatives relative to getting HIA really prepped. They got a great team and getting them ready to be part of a public company. We're making good progress on stuff, probably a little bit early to be calling our shots as far as the savings and the uplift from there.

Speaker Change: Yeah, and and maybe I'll take those in Reverse role at Walter chime in here. If he thinks some clarification, I, I think right now we're going to just focus on the higher products within higher. We definitely see some opportunity down the road there and we'll evaluate that over some reasonable period of time. The group has been actively working

Unknown Executive: As we start seeing those get realized, we'll report on those and create some visibility. Yeah. I would say without really giving numbers yet, I would say that the benefit that we're giving them is it's our expertise in operations because we have big operations teams. You know, they're, they're really great at doing DTC. They're amazing at that. And, you know, we think they've been outsourcing their manufacturing of vitamins, powders. There are 3PL that they've used, all those different things that, you know, things that we do throughout the world, we've been helping them with and we're I think you'll see, you know, in the next few quarters, you'll see, you'll start seeing progress with those things.

Speaker Change: On a host of operational, initiatives and integration initiatives relative to getting higher really prep, they got a great team and getting them ready to be part of a public company and we're making good progress on stuff. Probably a little bit earlier to become early to be calling our shots as far as the, the savings and the uplift from there. But you know, as we as we start seeing those get realized we'll report on those and create some visibility. Yeah, and I, I would say, you know, without without really giving numbers yet, I would say that the, the benefit that we're giving them is it's our expertise in operations because we have big operations teams and

Speaker Change: You know, they're they're really great at doing. Um, DTC they're they're amazing at that and you know, we think they they've been Outsourcing their manufacturing and vitamins uh powders.

Speaker Change: uh, there are 3pl that they've used all those different things that, you know, things that we do it throughout the world, we've been helping them with and we're

Jim Brown: It'll be really good.

Jim Brown: Yeah, this is Jim. Just, and we mentioned it, I mentioned in my comment at the beginning, but we are also helping them when it comes to potential international businesses and markets that they may go in. Nothing that would be immediate, but that'd be something you'd see in 2026 or later. But again, our teams are helping them because we have really good people who have done this to get us in our 25 markets around the world. Got it. Okay.

Speaker Change: I think you'll see, you know in the next few quarters you'll see you'll start seeing progress with those things. It'll be really good. Yeah, this is Jim just and we mentioned it, I mentioned in my comments at the beginning but we are also helping them when it comes to potential International businesses and markets that they may go in nothing, that would be immediate but that'd be something you'd see in 2026 or later. Um but again our teams are helping them because we have really good. Uh, people who who do have done this to get us in our 25 markets around the world.

Anthony Lebiedzinski: Yeah, thanks for that. And, and, you know, nice to see you guys accelerating the share buyback so far this year.

Unknown Executive: Just curious as to what your appetite is for additional share buybacks kind of going forward here. Yeah, we're going to be somewhat opportunistic. You know, we really haven't commented and don't comment on perspective buyback. But this is a conversation we have every board meeting. And we discuss it and kind of discuss the efficient kind of deployment and allocation of capital. And so that that'll be kind of top of mind and trying to maximize kind of the resources the company has. And I think we feel very good about the strength of our balance sheet moving forward as well.

Speaker Change: Got it. Okay yeah thanks for that and and um you know nice to see you guys accelerating the share buyback so far this year, um, just curious as to what your appetite is for additional share BuyBacks, uh, kind of going forward here.

Speaker Change: Yeah, we're we're going to be somewhat opportunistic, you know, we really haven't come in and don't come in on perspective buyback. But this is a a conversation. We have every board meeting

Speaker Change: and we discuss it and kind of discuss the ifs, kind of deployment, and allocation of capital and so that that'll be

Anthony Lebiedzinski: Gotcha. Okay.

Speaker Change: Kind of top of mind and trying to maximize kind of the resources of the company has. And I, I think we feel very good about the strength of our balance sheet, moving forward as well.

Jim Brown: And then lastly, for me, I mean, so obviously, you're still busy integrating HIA, but you know, longer term, what's your outlook about potential additional acquisition opportunities? Yeah, just like Doug mentioned, you know, we're looking at cash flow and cash management and we need to have some time to build, but we do have an active M&A department who are looking at opportunities. We'd love to find something out there again, a high-end number two or something that fits into our direction from health products.

Speaker Change: Your outlook about potential additional acquisition opportunities.

Anthony Lebiedzinski: But again, it's probably going to take a little bit of time to build up enough cash to find something that's appealing to us. But we do have that team out there looking. And you never know, something may come across their desk today and we'd have to react. Understood.

Speaker Change: Yeah, I just like Doug mentioned, you know, we're looking at cash flow and cash management and we we need to have some time to build but we do have an active m&a Department, who are looking at opportunities. We'd love to find something out there. Again, uh, high-end number 2 or something that fits into our, our direction, from Health Products. But um, again, it's probably going to take a little bit of time to build up enough cash to, to find something, um, that the people in to us. But we do have that team out there looking and you never know, something may come across their desk today and would would have to react to it.

Anthony Lebiedzinski: Well, thank you very much, guys, and best of luck. Thanks, Adam.

Speaker Change: Understood. Well, thank you very much guys. And the best of luck.

Speaker Change: Thanks. Thanks Danny.

Operator: Thank you and a reminder to the audience, to ask a question at this time, press star 1 on your telephone. To remove yourself from the queue, press star 2.

Speaker Change: Thank you and a reminder to the audience to ask a question at this time. Press star 1 on your telephone, to remove yourself from the queue Press. Start 2.

Ivan Feinseth: And your next question comes from Ivan Feinseth with TIGRES Financial Partners. Thank you for taking my question and congratulations on the results and ongoing progress. Appreciate it, Ivan.

Speaker Change: And your next question comes from Ivan Feth, with Tigress Financial Partners, please get your questions.

Ivan Feth: All right. Thank you for taking my question and congratulations on the results and ongoing progress.

Doug Hecking: Alright, so, you know, in light of RFK's Make America Healthy initiative, especially targeting ingredient in products and especially for children. What kind of opportunities do you see? that gives you a competitive advantage in where you are and what do you see as opportunities you know to follow this trend. or get in on this trend going forward.

Speaker Change: Appreciate it.

Speaker Change: All right, so, you know, in in light of rfk's, make America healthy initiative, especially targeting ingredients in products, uh, and especially for children, uh, what kind of opportunities do you see?

uh, that gives you a competitive advantage in where you are and what do you see as opportunities, you know, to

Doug Hecking: Yeah, Ivan, this is Doug. I think really foundationally the way the company's run, we've been very deliberate, very intentional. with how we develop and introduce products and what we feel really good about. It's it's really in our DNA. I think moving forward, you'll see more of that. And I think sometimes the environment fits there. And I think it'll weed out some of the, you know, products that pop up day in and day out and kind of roll off. And so I think I think that definitely provides some opportunity for us.

Speaker Change: Follow this trend uh, or get in on this trend uh going forward.

Doug: Yeah, Ivan. This is Doug I I I think really foundationally the way the companies run. We've been very deliberate, very intentional.

With how we develop and introduce products and what we feel really good about it's it's really in our DNA. I I think moving forward, you'll see more of that. And I think sometimes the environment fits there and I think it'll weed out some of the

Doug Hecking: Brent, I don't know if anything else from. Kind of our product strategy approach. Clearly, we're always taking a look at the external environment and trying to evaluate what we're doing internally to make sure that there's a good match there. I think the one thing that I'd say on this point, Ivan, is that we feel very confident in the internal team that we've developed, both on the commercial side and within the R&D function. With the leadership of those two groups and with the teams that they have created, that we can be more agile and more responsive to key trends that we see in the marketplace.

Doug: You know, products that pop up day in and day out and kind of roll off. And so I think, I think that definitely provides some opportunity for us. Uh, brand. I don't know if anything else from

Speaker Change: Kind of our product strategy approach. Uh, clearly we're always, uh, taking a look at the external environment and trying to evaluate what we're doing internally to make sure that there's a good match there. I think the 1 thing that I'd say on this point Ivan is that we feel very confident in the internal team that we've developed both on the commercial side and within the R&D function, uh, with the leadership of those 2 groups and with the teams that they have created, that we can be more agile and more responsive to, uh, key trends.

Doug Hecking: We've always been strong at that, but I think with the adjustments that we've made over the last year that we've become even more responsive. That's been a big part of the commercial team's restructure is that we want to make sure that we have a very robust product engine that is quick, that it's responsive, and that it's really responding to what's happening on the marketplace and giving our brand partners the right products that they need to succeed out in the marketplace. So, we're confident in our team's ability moving forward and we'll continue to pay attention to those trends.

That we see in the marketplace.

Walter Noot: And Ivan, this is Walter, you talked about kids. Health. I mean, that's, that's what HIA does. And they're, they're really poised for this. This is one of the reasons we were very excited about them when we saw them because They were beating all the trends in kids' vitamins because they have really clean, natural products. We really believe in what they sell, so they're going to do great.

Uh, we've always been strong at that, but I think with the adjustments that we've made over the last year that we've become, uh, even more responsive, uh, that's been a big part of the commercial teams. Restructure is that we want to make sure that we have a very robust product engine. That is quick, that is responsive, and that it's really, um, responding to what's happening out in the marketplace and giving our brand Partners, the right products that they need to succeed out in the marketplace. So we're confident in our team's ability moving forward and, uh, we'll continue to pay attention to those Trends and and Ivan this is Walter I, you know, you talk about kids,

Walter: Health, I mean that's that's what hiya does. And

Walter: And they're uh, they're really poised for this. This is 1 of the reasons, we were very excited about them when we saw them because

Walter: They were beating all the trends in kids Vitamins because they have really clean natural products. And

Walter: We really believe in what they sell, so they're going to do great.

Ivan Feinseth: Well, I think healthy habits begin early, so that is a good place to start with young people who can deviate down sometimes bad eating habits. I really like your acquisition of HIA and the progress.

Ivan Feinseth: And second on the new brand partner concept, what kind of, you know, tools or infrastructure are you focusing on or building that help them as far as let's say on the technology side? CRM system, as an example, and on the social media. using platforms like that. And, you know, it's really creating an infrastructure that brings the brand partners that are choosing to make this a career to really have the business development tools to, you know, make it a successful career.

Speaker Change: Well, I think healthy habits begin early so that is a good place to start with young people who can deviate down sometimes bad eating habits. But, uh, so I really like that your acquisition of higher and the progress that they are making with them. My second on the, the new brand partner concept. What kind of, you know, tools or infrastructure are you focusing on or building that, uh, help them as far as let's say on the technology side with a with CRM?

Speaker Change: System as an example, and on the social media side to provide brand partners with support and growing their business.

Speaker Change: Uh, you know, on on using platforms like that. And uh you know, as really creating a infrastructure that brings the brand partners that are choosing to make this a career to really have the business development tools to, you know, make it a successful career.

Brent Neidig: That's a great question. You know, in addition to providing the right product to sell, the right incentive offering for them to be successful in the sale of that product, we think one of the third leg to that stool is making sure that they have the right tools so that they can be successful. Part of this compensation enhancement that we've rolled out at the end of last quarter and into the third quarter includes exactly what you're referencing, which is an enhancement to the IT infrastructure, the tools that we're providing to our sellers. We're now trying to be more predictive and providing them with data-driven predictions about who it is they should be working with within their network, who is opportunistic to make it to the next level.

Speaker Change: Sensation enhancement that we've rolled out this last core, the end of last quarter and into the third quarter includes exactly what your referencing, which is.

Speaker Change: Uh, an enhancement to the it infrastructure or the tools that we're providing to our sellers.

Brent Neidig: So we have provided a couple of new tools as part of this launch, and there's some more tools that are going to be provided as the launch continues throughout the quarter. We are evaluating some additional tools from a social media standpoint, how to ensure our brand partners are effective in delivering the message on social media. So we have one tool that's currently being trialed with a small group of brand partners. Assuming that goes well, we may try to expand that to other parts of the country and the But we're always opportunistic in that area, and we'll continue to evaluate tools and provide our brand partners with the things that they need to be successful.

Uh, we're now trying to be more predictive and providing them with uh data driven, uh predictions about who it is. They should be working with within their Network who uh is opportunistic to make it to the next level. Um so we have provided uh a couple of new tools uh as part of this launch and there's some more tools that are going to be provided uh as the launch continues throughout the quarter.

Speaker Change: We are evaluating some additional tools from a social media standpoint. How to ensure our brand partner partners are effective in, delivering the message on social media. So we have 1 tool that's currently being trialled with a small group of brand Partners assuming that goes. Well, we may may try to expand that uh, to other parts of the country and the world. Um, but we're always opportunistic in that area and we'll continue to evaluate tools and provide our our brand partners with the

Jim Brown: Yeah, I mean, this is Jim. Another area just to add on to what Brent's talking about is we're like a lot of companies getting more and more involved with AI, and we see that as an opportunity to advance our tools for the future. We have a few. To our brands. All right. Thank you.

Speaker Change: the things that they need to be successful.

Speaker Change: Yeah. I mean this is Jim. Another area just to add on to what Brent's talking about is. We're we're like a lot of companies getting more and more involved with AI. And we see that as an opportunity to advance our tools for the future. Um, we have a few, um,

Speaker Change: Tools right now that are being evaluated. Um, got to make sure we feel comfortable with with how the AI functions with our data points. But I think it's going to be a big improvement over the next

Few quarters and years when it comes down to, you know, how we can help our brand Partners, make decisions on where to put their efforts.

Ivan Feinseth: Congratulations again and good luck going forward. Thank you. Appreciate it, Ivan.

Speaker Change: Hey, thank you. Congratulations again and good luck going forward.

Speaker Change: thank you, appreciate it, Ivan

Andrew Masuda: Thank you, and there are no further questions at this time, so I'll hand the floor back to Andrew Masuda for a closer look. Thanks for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7216. Thank you.

Speaker Change: Thank you. And there are no further questions at this time. So I'll hand the floor back to Andrew Masuda for closing remarks.

Thanks for your questions and for participation on today's conference call. If you have any remaining questions, please feel free to contact investor relations at 801-954-7210.

Operator: This concludes today's call. All parties may disconnect.

Speaker Change: Thank you. This concludes today's call. All parties. May disconnect have a good day.