Q2 2025 Nature's Sunshine Products Inc Earnings Call
Good afternoon, everyone.
Thank you for participating in today's conference call to discuss Nature's Sunshine <unk> financial results for the second quarter ended June 30th 2025.
Joining us today, our nature's Sunshine CEO Terrence Moorehead.
Yes, Hello, Shane Jones, and General Counsel Nate Brower.
Following their remarks, we'll open the call for analyst questions.
Before we go further I would like to turn the call over to Mr. Brower as he reads the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.
It provides important cautions regarding forward looking statements Nate. Please go ahead.
Thank you and good afternoon.
I'd like to remind everyone that this call is available for replay.
Telephonic dialing through August 14th in via a live webcast that will be posted on the investor relations portion of our website.
I R Dot Nature's Sunshine dotcom.
The information on this call contains forward looking statements.
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May anticipate expect will and other similar expressions.
Forward looking statements are not guarantees of future performance and the actual results may be materially different from the results implied by forward looking statements.
That could cause results to differ materially from those implied there in <unk>.
Include but are not limited to.
Those factors disclosed in the company's annual report on Form 10-K.
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Information on this call speaks only as of today's date.
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Now I would like to turn the call over to the CEO of Nature's Sunshine Terrence Moorehead Terence.
Thank you Nate and good afternoon, everyone I want to thank you for joining today's call to discuss our second quarter results.
Today I'll provide some context for our second quarter performance and offer some insights into how the business is building momentum.
From there Shane will take you through our financials in more detail.
In the second quarter nature Sunshine continued to build on the momentum we saw in Q1 with another quarter of strong performance.
Our team is focused on our team is focused the strategies are holding steady and we continue to position the company for long term sustainable growth.
For the quarter revenue came in at $115 million up 4% versus the prior year or 2% in constant currency.
Q2, adjusted EBITDA was also strong coming in at $11 million, an 8% increase versus the prior year's adjusted EBITDA of $10 million. These.
These results restrict.
It reflects strong execution across the business with standout performance in Japan continued strength in central Europe, and improved traction in North America, where we saw a notable acceleration in our digital business.
As we move into the back half of the year, we remain focused on unlocking long term value through strong consumer engagement and continued execution of our sales and marketing strategies.
We delivered these results despite ongoing uncertainty from the current macroeconomic environment.
And the evolving trade and tariff situation.
Fortunately, we've taken strong proactive measures to minimize our exposure and safeguard our business.
We're also closely monitoring consumer spending patterns and where their household budgets come under increased pressure having.
Having said that our focus remains unchanged as we continue to implement strategies to drive customer growth and strengthen our value proposition with targeted investment new innovation and more reliable service.
As a result, we believe our growth strategy continues to demonstrate significant long term potential.
Looking at our business by geography Asia Pacific saw sales in the second quarter increased 5% or 2% on a local currency basis.
Growth in the region was driven by another exceptional quarter in Japan, where sales increased 27%.
Our focus on attracting younger consumers, while leveraging our subscribing thrive auto ship program continues to pay dividends as we saw softer as we saw a strong growth in both customers and orders in the second quarter.
Taiwan, and South Korea experienced strong growth for the past three quarters, but we saw softer results this quarter as consumer spending slowed.
In the second quarter, both Taiwan, and South Korea faced a more challenging macroeconomic environment driven.
Driven by slowing exports fragile domestic demand and increased uncertainty surrounding trade policy.
I want slashed, it's GBP forecast as tariff fears it escalated, while south Korea narrowly avoided recession, and grappled with weak consumption and the threat of new import duties.
In both markets inflationary pressure political instability, and a ship and a shifting global trade environment have raised new challenges as we move into the back half of the year, we expect tough comparisons to pressure our year over year growth trends in these markets, but we're confident in the strength of our underlying fundamentals and expect to see them.
Proved performance as the macroeconomic environment stabilizes.
Asia Pacific will continue to be a key growth driver of our business.
In North America, we continued to make significant progress as sales increased 4% versus prior year driven by strong performance in our digital business, which grew 34% and continued to build momentum.
This further validates the strength the strength and potential of our digital strategy and puts us on track to deliver our long term objectives.
We also continued to build momentum in our subscribing thrive auto ship program, which remains the most attractive way for consumers to buy our products.
The program continued to expand in the second quarter and now represents over 50% of DTC DTC sales.
And we expect this to help drive further sales growth as we optimize and improve the experience.
As we continue to strengthen our digital capabilities, we believe our digital footprint will continue to expand and grow.
Another important factor driving north America's second quarter performance was the significant improvement in field fundamentals disciplined and sales support or.
Our specialty retailers nutritional health practitioners and affiliates responded well to increased touch management and targeted field activation as sales with this very importantly improved in the quarter.
Moving to Europe sales were up 1%, but down 2% in constant currency, reflecting the timing of price changes between Q1 and Q2.
Notably we experienced robust growth in central Europe, which was supported by this by strong management and disciplined execution across the region.
The success of our power line products continue to look to drive customer growth and help expand customer activation, including expansion and the Baltic States.
We also saw average order increase which in this case is a strong sign of consumer loyalty and engagement as our positive sales trends continued overall, we remain confident in the underlying direction of the business.
In summary, the strategy we've outlined.
Sharpening digital execution stabilizing the core business in North America, and driving focus growth in key international markets is working.
Importantly, we're seeing progress on these fronts at an accelerated pace and we believe the momentum is sustainable.
Jamie is going to talk about this in a little a little bit later, but as a result of our strong first half performance and increased visibility into the back half of the year, we're increasing our full year guidance to remove some of the risks associated with market uncertainty and to reflect the positive direction of the business.
Based on the momentum we're seeing.
We have a more positive outlook for our full year sales and adjusted EBITDA.
We will provide more details and insights in a moment, but with that I want to turn the call over to our Chief Financial Officer, Shane Jones Jane.
Thank you Terrence, let's dive into our results.
Net sales in the second quarter were $114 $8 million compared to $110 $6 million and a year ago quarter, a 4% increase versus the prior year or a 2% increase excluding the impact of foreign exchange rates.
As Terrence discussed this was driven by a resurgence of growth in North America as we accept as we saw acceleration in both digital and the core.
Looking at sales by market in Q2, I'll start with North America, North America sales grew 4% on both a reported and local currency basis. This represents the best quarter for North America and over a year and reflects an acceleration in both the digital and the core businesses.
Digital grew 34% in the quarter driven by increases in number of ordering accounts, a 180 basis point improvement in retention and a step up in conversion. We also saw a meaningful increase in our subscriber thrive auto ship program and now constitutes 53% of DTC revenue.
Likewise, the core business continues to show steady sequential improvement driven by strong distributor engagement and better field activation.
Cited about the momentum that we see in both parts of the North America business and expect continued growth in the quarters ahead.
In Asia Pacific, we reported growth of 5% to $52 $7 million or up 2% when excluding the impact of foreign exchange.
This was driven by very strong growth in Japan, where sales on a local currency basis grew 27% fueled by continued growth in customers and orders as well as strong participation in our auto ship program that makes up nearly 50% of sales in Japan.
Japan has now seen 20% plus growth for four consecutive quarters validating the strategic adjustments made last year.
In addition, we have seen some sequential improvement in China sales trends were Q2 sales were essentially flat.
<unk> the decline seen for over a year now while we are certainly seeing some stabilization and expect that to continue China continues to be impacted by a difficult macroeconomic environment.
Results in Taiwan were challenged this quarter with reported sales up only 3% after exceptional growth over the past three quarters.
While some of this is driven by timing, we do expect tough comparisons in Q3, and Q4 to impact year over year growth trends. This year. Therefore, we expect low to mid single digit growth from Asia Pacific for the balance of this year.
Sales in Europe during Q2 increased 1% on a reported basis, but were down 2% on a local currency basis.
Central Europe continue to perform well with reported sales up 15% driven by strong execution and disciplined cost management across the region.
Our power line product focus and growing customer engagement across the Baltics region continued to drive robust growth in both customers and orders.
The strength in Central Europe was offset by a 5% decline in eastern Europe, driven by the year over year timing of price increases between Q1 and Q2.
Looking at Q1, and Q2 combined provides a more accurate depiction of the eastern European business, where sales increased 2% over that period.
The strength in Central Europe, combined with continued low single digit growth in eastern Europe gives us confidence in our strategy as well within our ability to continue to deliver mid single digit growth in that region.
Gross margin in the second quarter increased 36 basis points to 71, 7% compared to a year ago, driven by our gross margin savings initiatives. Despite the year over year expansion Q2 gross margin results were muted by headwinds from market mix and foreign exchange.
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Looking forward as we continue to execute against our pricing and sourcing initiatives and as the impact of foreign exchange rates diminishes. We expect continued modest improvement in gross margin.
This improvement will be despite the impact from tariffs and continued trade volatility.
We have a diverse supply chain and have already taken measures to prepare for and mitigate changes in trade policy. Therefore, we believe we are well positioned to be able to adapt and adjust as necessary and expect no impact to gross margin in 2025.
Volume incentives as a percentage of net sales were 29, 9% compared to 31, 4% in the year ago quarter.
The decrease was primarily due to the strong growth in our digital business along with changes in market mix.
Selling general and administrative expenses during the second quarter were $43 $7 million compared to $38 6 million in the year ago quarter.
The increase was primarily primarily related to timing of compensation digital ad spend and nonrecurring expenses.
As a percentage of net sales SG&A expenses increased to 38, 1% in the second quarter compared to 34, 9% a year ago.
Operating income decreased to $43.
$243 million or three 7% of net sales compared to $5 $6 million or five 1% of net sales in a year ago quarter.
GAAP net income attributable to common shareholders for the second quarter was $5 3 million or 28 cents per diluted common share compared to net income of $1 3 million or seven cents per diluted share in a year ago quarter.
Adjusted EBITDA as defined in our earnings release increased 8% to $11 3 million compared to $10 $4 million in the year ago quarter.
Our balance sheet remains clean with cash and cash equivalents of $81 $3 million and zero debt.
Inventory increased to $69 $3 million at the end of the second quarter.
A $4 $4 million increase versus Q1, as we purchased additional raw materials to prepare for and mitigate the impact of tariffs or potential supply chain disruptions.
Net cash provided by operating activities was $7 million compared to $3 $5 million in the prior year period.
We repurchased one 1 million shares for approximately $12 $3 million during the six months ended June 30th 2025.
With $21 $4 million remaining on our share repurchase program.
This repurchase activity includes our participation in the secondary offering and demonstrates our confidence in the business and commitment to driving long term shareholder value.
Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives.
Now turning to our 2025 outlook.
Based on the improved momentum in the business, especially in North America, we are raising our guidance for 2025.
We now expect full year revenue.
$460 million to $475 million.
Impaired to previous guidance of <unk>.
445 million to $470 million.
This new range equates to year over year growth of 1% to 5%.
For adjusted EBITDA, we are now guiding to $41 million to $45 million versus the prior range of $38 million to $44 million.
This new range equates to year over year growth between 1% and 11%.
This assumes that gross margin will be modestly higher in Q3, and Q4, and accordingly, SG&A will be $41 million to $42 million.
Overall, we continue to believe the business is well positioned to capitalize on.
Current market opportunities and remain very optimistic regarding future growth prospects.
Strategic initiatives, we've been implementing are working and we are confident in our ability to accelerate growth in sales profitability and cash flow.
Now I will turn the time back to the operator.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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One moment. Please for your first question.
Your first question comes from Brian Holland of D. A Davidson.
Your line is already open.
Yeah.
Yes, thanks, good afternoon, and congratulations on the strong results this quarter.
Thanks, Brian good to hear from you.
Good.
Thanks.
Just picking up where she left off on the guidance.
One to plus 11 on year over year, EBITDA still seems to imply like a pretty wide range. So just curious.
What youre thinking about on both ends of that range.
What's being contemplated that you would end up at plus one and what would have to happen for you to get the plus 11.
Shanghai to grab that sure happy happy to do that.
So we're seeing good momentum in the business as we've talked about especially in North America and have a lot of confidence in that we've got several initiatives that were.
Yeah.
Beginning or continuing to accelerate into the latter half of this year and expecting very good results from that I think the big thing that will be.
The difference there will be really on our digital business. We've seen an acceleration of that acceleration continues will be near the top end of that if we can if we don't that's where.
There will likely be a little bit lower not lower than the guidance range, but lower in the range.
Understood.
Right.
Right.
Okay, and then I think the other thing is Asia, sorry, Yeah, sorry, the other one would be Asia and Taiwan, we've seen.
A little bit of a deceleration in the growth rate there we expect that to.
Be very strong in Q3 and in Q4, but we are having a very tough comps and so depending on how that ends out there could be slightly different as well.
Okay, and then I appreciate the color on the SG&A line for the second half of the year, but if I just kind of widen. This back again. This is just my number so.
Be apples and oranges to some extent, but I think it would be EBITDA in my model in the first half by about $3 5 million. If you took the guide up $2 million I'm. Just curious if there is anything changing in the second half versus original expectations that maybe the thing that I wanted to double click on what's your.
Obviously, the SG&A any number in Q2 included digital investment I'm, just wondering if thats something that youre doubling down on <unk>.
Given the momentum that you talked about specifically in this quarter and the inflection in the North America business in particular.
Yes.
Good catch there we did have we saw some great results in our digital and we did apply some additional funding there to our digital media about $1 million extra which paid out an additional sales as well as we go through the rest of the year, we'll be very thoughtful about how we do that and if we continue to see the strong returns that we're seeing.
I will spend a little bit more but that'll be.
Have a very strong return on that investment, but we do want to keep that digital growth moving going forward.
We like to see it in that plus or minus 30% range and we're investing to make that happen.
First I think you mentioned in your prepared remarks, you talked about innovation.
Uh huh.
I'm just curious.
In my sort of core consumer packaged goods space, we're really seeing the impact of kind of this make America healthy again movement.
We see that in a number of forms.
Curious to what extent you're seeing that.
Is your business.
The extent to which you are or can be.
Being nimble from an innovation standpoint to sort of meet the moment.
Yes, I definitely think there's there's momentum behind that especially with the consumers that we would want to talk to their already in that space, they're very motivated by that the innovation that we're putting out in the market is it's new it's fresh we've got some first mover opportunities for us that are doing quite well new products like our Murray.
Glo.
Marine based collagen is kind of very exciting so again theres freshness, there that comes from new products, but also having that first mover position.
In the right areas is critical for us and we're going to keep to keep pushing that lever.
Okay. Thanks, and last one from me and I'll get out of the way.
You've talked previously about the Capex investments.
And the cost savings coming from increased automation et cetera. Obviously this opens up a fair amount of incremental capacity within your manufacturing network. Your advantage within the industry to the extent that you do self manufacture.
Just curious if you could kind of talk about the pipeline either from an M&A or co manufacturing standpoint.
Thereby you would be able to leverage that capacity.
With either another brand or brands or some other partnerships.
To me to be a huge leverage opportunity, but just kind of curious if that pipeline is this.
As we look out over the next six months to 18 months through the end of 'twenty six.
Yes, Brian Youre exactly right, we have done a lot of work to improve our throughput and efficiency.
Efficiency in the plant, which has freed up capacity and we're actively looking at ways to fill that capacity both by driving growth both organic growth within the business, but also through.
And a possible third party opportunities Shane I don't know if you want to add any color to that or not.
Yes, we have.
Couple of opportunities that we're working through right now and are very early stages, probably not a lot that we can.
Talk publicly about that yet, but the opportunity is there and we're actively pursuing those opportunities with as you mentioned that just helps the economics of our business and the efficiency of our operations.
Fair enough I appreciate all the color keep up the great work.
Thanks, Brian Great hearing from you take care.
Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Your next question comes from Susan Anderson of Canaccord Genuity.
Your line is already open.
Thanks, Susan good equal hi, nice job on the quarter you guys.
I guess, maybe just going back to North America, obviously, great result, and the digital business. It sounded like the core business with the practitioners in the retail partners also improved I guess I'm curious did you see a return to growth there and then I think you mentioned just kind of some better engagement and better Field Act.
And maybe if you could expand a little bit on kind of what's driving that improvement and then your expectation there for the rest of the year.
Yes on the core we didn't quite see growth across all those segments combined but we did see.
Fast improvement in activation and ads.
<unk> sales overall, so I think we're really pleased with what's going on there in.
In terms of of the things that we're doing to drive that.
Our activation I spoke a little bit about just improved touch management in the field.
Sure that.
We're spending time with those folks providing appropriate just putting discipline, it's basic field fundamentals blocking and tackling.
Can't tell you how.
Thank you and I have spoken about the importance of this in the past of just getting that blocking and tackling kind of right, which is important in any sales organization no matter, where you are making sure that we're giving people the right sales tools, we've changed some staffing.
In the field organization. So we've got some new people out there are some new talent that is really driving change driving results built out our sales support team as well just to make sure that we're giving people the right level of support.
Cross the business. So those are just a series of things that we're doing and I think we're seeing some momentum as a result of that.
Okay, great that sounds good and then I guess, just looking out to the back half by region. You mentioned, some tough compares and EJ timing I guess, how should we think about the puts and takes in terms of growth and the drivers there as we look out in the back half should we expect maybe north America to kind of start to be more of a.
The driver of growth there versus the international markets, we've seen over the last few quarters. Thanks.
Yes, I think we would expect to see continued acceleration in North America.
That's going to occur.
With the momentum we've got on the core side of the business is going to continue but digital as well. So we've got a really solid I think proposition building in North America, and we will get that to where we want to by the end of the year.
As we mentioned we've got some very tough comps in in Asia Pacific.
But it's a strong business and saying you want to provide some additional commentary on APAC, yes.
So we're looking for the back half of the year to be low single digit to high to mid single digit low to mid single digit for APAC and if you look at what we'll likely see and there we will see some growth in Taiwan, but it'll be more muted than what we've seen in the past hour, we're likely to see stabilization in China and some growth there Korea.
Continues to struggle so it maybe flattish there, but then.
Japan will continue to do very very well and that will be what will really drive that region. So we do expect continued growth. It will just not be at the double digit levels that we've seen over the last few quarters and remember Susan.
Last year, Q3, and Q4 were largest quarters in the history of <unk>.
Of the region, so to change point Youre talking about huge numbers that they are that they are going up against so still very strong performance in Asia Pacific going forward just cut it off.
The growth multiple that we've seen in the past right and then as we move to Europe, We do expect growth in Europe as well most of that will be coming from central Europe. As we expect double digit growth to continue and central Europe, and then likely low single digit growth in eastern Europe.
But good results in Europe as well and then this is Terrence talked about North America, that's where we see the most acceleration. We're most excited about that largely because digital will continue to grow at that 25% plus level and as that happens and then the base business also.
As close to flat.
It's going to result in better numbers from from North America likely in the mid single digit range.
Okay, great that was really helpful.
And then I guess, maybe just touching on the gross margin really click as well I think well to get to your annual I guess at the back.
<unk> has been a little bit higher maybe just talk about kind of the drivers there versus them.
The first half.
It's really we've been working on our gross margin initiatives for some time and those gross margin initiatives have been muted by headwinds from <unk>.
From from FX, and those FX headwinds are going to abate or at least they appear to be going to abate here.
Rates come down.
And those in those regions, especially in the APAC region and additional that we've had a headwind from mix that headwind from mix, just because north America tends to have a little bit lower gross margin than APAC and as more as North America does better in APAC does not quite as well as it has in the past there is a little bit of a headwind there.
Some of that will continue.
But really as our gross margin initiatives take hold we would expect as we've said modest improvement in the back half of the year.
Okay, Great and then one last one maybe just looking out at the new product pipeline.
For the rest of the year, we've noticed some new stuff on the web site.
You mentioned, the marine grow College, and I guess, how should we think about these new products do they kind of make an immediate impact or is it take time to build them to really kind of helped to drive that growth I know the power line is obviously a really huge success. So I guess just in context, how should we think about these other new products and then do you have anything else coming out there.
Yep. Thanks.
I think that.
Obviously, it depends on the new product, but.
Certainly they do provide consumer energy they provide consumer acquisition.
So activation excuse me as well as new customer acquisition.
So I think they are important we have such a large portfolio and a large business I don't know if a single product is necessarily going to move the year, but they but they certainly will build momentum over time and our goal with products like <unk> with things like the power line is to move the business over time, the goal with something like like Marine.
<unk> and getting into collagen, which is such an important area of vibrant growing area.
<unk> growing 15% to 20%, it's going to continue to grow at that pace over the next several years, so kind of being in that space and having a relevant position in a high intensity growth.
Segment like that is very important and so again, we're going to continue to make sure that where were placing products in the right areas to help us get momentum over time to help us attract new customers to help us reactivate consumers and so I think that's kind of how we think about it Susan it really always about customer acquisition, and then getting repeat purchase.
And these are the types of products that are very well suited to do that because people want to use them and they do use them every single day. So.
On an ongoing basis. So I think we should expect to see the cumulative effect of our innovation and new product development to really make a difference to the business going forward.
And on that Marine <unk>, we actually launched just over a month ago. So it's fairly new product doing really well, beating our expectations at this point in time I'm. So excited about the potential that it has but as tenants noted, it's not going to drive a huge increase in our numbers right off the bat.
Yes.
Great. Thanks, so much for all the details yes. Good luck the rest of the year.
Thanks, Susan Great talking to you.
There are no further questions at this time I would hand over the call to Mr. Moorehead for closing remarks. Please go ahead.
Okay. Thank you Ellen.
I'd like to thank everybody for listening to today's call and we look forward to speaking with you. When we report our third quarter 2025 results in November. So thanks, again for joining us and have a great day take care everybody.
Ladies and gentlemen.
This concludes today's teleconference. You may now disconnect and thank you for your participation.
Okay.