NYSE:USNA USANA Health Sciences Q3 2024 Earnings Report $28.82 +0.45 (+1.57%) As of 12:28 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast USANA Health Sciences EPS ResultsActual EPS$0.56Consensus EPS $0.49Beat/MissBeat by +$0.07One Year Ago EPS$0.59USANA Health Sciences Revenue ResultsActual Revenue$200.22 millionExpected Revenue$208.45 millionBeat/MissMissed by -$8.23 millionYoY Revenue GrowthN/AUSANA Health Sciences Announcement DetailsQuarterQ3 2024Date10/22/2024TimeAfter Market ClosesConference Call DateWednesday, October 23, 2024Conference Call Time11:00AM ETUpcoming EarningsUSANA Health Sciences' Q2 2025 earnings is scheduled for Tuesday, July 22, 2025, with a conference call scheduled at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by USANA Health Sciences Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 23, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00And now, I'd like to hand the call over to Andrew Masuda. Please go ahead, sir. Speaker 100:00:04Thank you, Sergey, and good morning, everyone. We appreciate you joining us to review our Q3 2024 results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website. 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 100:00:32Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially from the results projected in such forward looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2024 as well as uncertainty related to the economic and operating environment around the world, our operations and financial results. We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC. I'm joined by our President and CEO, Jim Brown our Chief Financial Officer, Doug Heking our Chief Commercial Officer, Brett Neidegg as well as other executives. Yesterday, after the market closed, we announced our Q3 results posted our management commentary document on the company's website. Speaker 100:01:23We'll now hear brief remarks from Jim before opening the call for questions. Speaker 200:01:28Thank you, Andrew, and good morning, everyone. 3rd quarter net sales fell modestly short of our internal expectations as the operating environment in many of our key markets remained challenging. Notably, our China market experienced a more challenging environment in the Q3 than what we experienced during the 1st 6 months of the year. Although we increased active customer counts by 7% year over year this important market, our net sales declined by 4% due to a decrease in average spend. We anticipate a continued challenging operating environment through the remainder of the year. Speaker 200:02:02We are planning to increase promotional activity in the Q4 to support and build momentum in our business. Our updated fiscal 2024 guidance incorporates these elements. We continue to focus and execute on the strategic initiatives previously communicated. Although these initiatives have not yet meaningfully manifested themselves in our operating results, we believe they are instrumental to laying the foundation for future growth and are confident that they will drive long term customer and revenue growth. Let me share with you a few items. Speaker 200:02:32First, we continue to prioritize engaging with our associate sales leaders, who are vital to bringing in new customers to the USANA family. During the Q3, we hosted a successful American Europe convention in Las Vegas, and this was one of the best conventions we've had in terms of feedback from our associate. Training, development and recognition were key focus areas at this event, with an emphasis on actionable initiatives to help our sales leaders grow their business. Feedback has been positive and leaders are actively adopting these new initiatives. 2nd, thanks to the collaborative efforts of our sales, marketing and research and development teams, we launched our first set of products under our new commercial team structure, Celavive resurfacing serum and whey protein isolate. Speaker 200:03:19Both products were launched in the U. S. And Canada and will be available in other markets over the next couple of quarters. These product launches are illustrative of the early stages of our product innovation strategy, which includes increasing the cadence of new and upgraded high quality, relevant and premium products. Additionally, I am encouraged by the increased agility that allowed us to bring these products to market. Speaker 200:03:42We have an exciting pipeline of additional products across our product categories currently in development with plans to be introduced throughout next year. I'll close by saying that I am utmost confident in our team to execute our strategy to return USANA to longer term growth. With that, I'll now ask the operator to please open the lines for questions. Operator00:04:04Thank you, sir. Our first question comes from Anthony Lebiedzinski from Fidelity Sidoti. Please go ahead. Speaker 300:04:15Good morning and thank you for taking the questions. So I guess, first, you guys talked about the positive feedback coming out of the Las Vegas Convention. I think you touched on a couple of those. But maybe if you could just maybe share more details as to and also as far as the feedback that you're getting, I mean, how quickly can some of those inputs be put in and when you can start to see tangible benefits from that? Speaker 400:04:45Thanks, Anthony. This is Brent. I'll take that question. As you know, momentum in this business is very important. And momentum derives from trust between the company and our sales leaders. Speaker 400:04:58I think that's one of the most important things that we did in this convention and that an initiative we've tried to go forward with in 2024 is rebuilding that trust with our sales leaders. So the positive feedback that we received is that they feel the company is on the right direction. They feel that we have taken their feedback and input into account when we create new products. The tools and the systems that we presented at the convention were also in line with what it is that they were hoping for. So through that feedback mechanism, we've heard that they are extremely excited for the future. Speaker 400:05:35And like I said, it takes time for momentum to grow and but we expect this is the first part of that momentum phase. And over the course of Q4 excuse me, Q4 and into Q1 of next year, we expect that to continue to grow. Speaker 300:05:50Thank you for that, Brent. Okay. And then in terms of the faster new product development process that you guys talked about, I guess, what would be the main reason for that that you've been able to do this? And I mean, do you think you'll need to hire perhaps more people to help ensure this continues? Speaker 400:06:10I don't think more people are needed. The thing that we primarily did internally is we restructured the way that that product development process works. We've created cross functional teams that sit together and that they're able to solve problems more quickly than they used to. There's a tighter collaboration now between our research and development team and the product team. So there's increased communication that's going on. Speaker 400:06:33We're taking feedback more quickly from our markets. And we're just able to implement that much more rapidly than we ever have before. So as Jim mentioned in his opening comments, we've got a very robust product pipeline prepared for 2025, and that's really a result of all of this improvement that's been made within this product development process. Speaker 500:06:52Yes. And Anthony, this is Doug. What Brent is saying is right on point. I think the other thing is both from Brent's leadership and Jim's leadership, if we see a need to go back and invest more in those areas, it's something we're committed to do. Right now, we think we're resourced and looking to gain some efficiency from this new structure of the commercial team, but I think pretty optimistic, but definitely willing to invest for things that we think generate a return. Speaker 300:07:17Understood. And then as far as the just a follow-up on the pipeline of new products. Can you share any more details as far as timing and whether is it more SKUs than what you typically have done in the past as far as those are concerned? And will those be in all markets? Or are you just looking to introduce those new products in only some of your markets? Speaker 300:07:46Maybe if you could just speak to that? Speaker 400:07:49Sure. The way that we're approaching new product development is we have to ensure that our existing product lineup is still very compelling and competitive in the marketplace. So that's why we're placing the majority of our Speaker 600:08:01effort initially is to ensure that the existing products Speaker 400:08:01are very compelling. And first part of the rollout Speaker 600:08:05for next year are some significant upgrades to Speaker 400:08:06our existing products. You'll expect to see that very slowly in Q1 and start to pick up speed in Q2 and Q3 as the year goes by. In terms of a rollout process, it's always easiest to launch a product in the United States first given the regulatory environment and our just the process that it takes to bring a product to market. But our intention is that as the quarters go by, each of those products will begin to roll out throughout the globe. China has its own product development process that it goes through, so it may slightly differ from the rest of the markets. Speaker 400:08:51But for now, the intention is that we when necessary, we'll start to roll those products out globally. Speaker 200:08:56And this is Jim. Just a little bit more. We will see the SKU count increase a little bit at the beginning. But with the product teams, they're looking at the whole product life cycle. So over time, we'll be evaluating some of the SKUs that aren't performing as well and probably discontinuing some. Speaker 200:09:15And I would say the Speaker 500:09:16engagement that Brent's done with the field leaders and his team across the globe has more regional and local opportunities for different product offerings as well. And so that's something that's taken into consideration. Speaker 300:09:28That makes sense. Okay. And then I guess my last question before I pass it on to others. So I guess part of your lower SG and A was reduced advertising expenses. So first, I guess, do you think that perhaps reduced advertising had any sort of impact on your 3Q sales? Speaker 300:09:47And I guess secondly, how do you how should we think about advertising for 4Q and beyond that? Speaker 500:09:54Yes. I think the primary catalyst here is just moving away from certain activities that just weren't demonstrating much of a return. I think we're constantly looking to repurpose things to go back and stimulate whether that's in the form of promotions, incentives, ad spend. Those things we'll continue to look at. I think what you saw in particular, we're just moving away from a few things that just have shown not to be that effective. Speaker 300:10:18That makes a lot of sense. All right. Well, thank you very much and best of luck. Speaker 500:10:22Thanks, Anthony. Operator00:10:28And our next question comes from Linda Bolton Weiser from Davidson. Please go ahead. Speaker 700:10:34Yes, hi. So I was wondering, as you pick up the promotional activity, does that affect more the associate incentive expense line? Or does that affect the gross margin more or maybe both? Speaker 500:10:51Yes. And Brett can chime in here too, but we run different types of promotions incentives. Some are designed specifically more towards short term value initiative to drive behavior, getting people exposed the products. Others are more towards rewarding people on sales to generated by new customers they introduce. And so you see a little bit of both. Speaker 500:11:13I would say, I think in the short term, we'll probably have more of trying to go back and really continue to go back and follow-up on the engagement we have with the field and support new sales generated to new customers will be probably a heavier piece of that. And I think you'll see some increase in payout, at least that's what we've modeled. Speaker 700:11:35Okay. And then the revised guidance for the year in terms of the EPS for the Q4 that's implied, I mean, I had to reduce my estimate quite a bit, more so it seemed like on the margins. So what would be the particular things impacting margins in the 4th quarter? Is that just that increased promotional spending or is there something else going on in the cost structure? Maybe you can explain that about the margin expectations for the 4th quarter? Speaker 500:12:07Yes, I'll give you a little bit of color. With our Q3 results, EPS was actually higher than what we anticipated. There are some things that we just didn't get in motion during the Q3 and we would have expected a little bit lower margin profile in Q3 and EPS. But it's what you said and kind of what we just talked about. I would expect a higher spend on the incentive line as we step into this and support the field and continue to work on really creating some high levels of engagement. Speaker 700:12:35Okay. And then just on your new products, the whey protein, is that specifically designed for customers that are taking GLP-one drugs? I'm just curious about that. Speaker 400:12:49Hey, Linda, it's Brent. That isn't the main intention for that particular product. It could be used in that capacity just because many people that are on GLP-one drugs don't get a sufficient protein profile in their diet. But it's in general just a very premium whey protein isolate. It's very clean and it's there's a large market for that out there, especially amongst our existing distributor base. Speaker 400:13:15So that's primarily the reason why we brought that to market. Speaker 700:13:21Okay. And then I'm curious, the other product is a beauty serum. I guess it's a beauty product, right, a serum, is that correct? So I'm kind of curious like why not a new product in nutritional supplements, which is more traditionally your line your area more of strength and scale. Why necessarily these two products that are in kind of a little bit different areas? Speaker 400:13:44Well, one product that did actually come to market at our Americas and Europe convention is called Rest Complete, and that is in the nutritionals category, and that's specifically a sleep product. We didn't call that out per se, but that is a product that did come to market. You're exactly right. We've got 3 categories. Nutritionals is by far and away our largest and most popular category. Speaker 400:14:06When you look at 2025, the brunt of our product introductions and upgrades are going to be focused on the nutritionals category to ensure that we continue to maintain our premium position in that space. But we also have many new products in store for our Celavive line, which is our skin care line. This just happened to be one of the products that was ready at the time to bring to market. Speaker 700:14:35Okay. And then, I'm curious about your capital allocation thoughts. I know you discuss it frequently with the Board, but your free cash flow has come down, but it's still fairly strong. It's at least $50,000,000 a year. And so is your intent to just kind of let your cash balance build up? Speaker 700:14:57What's the trigger? I guess, what do you need to see in order to maybe go back to share repurchase or something like that? Speaker 500:15:06Yes. Linda, you alluded to. I mean, literally, the first half hour of the meeting, this Board meeting, we talked about this. This is an every quarter issue. And so the Board, along with Jim's direction, is reviewing the totality of different things that we have in the works doing this other stuff and trying to make sure that we're not being too short term thinking there I'm looking down the road and figuring out what the best use of that cash is. Speaker 500:15:32The direction from the Board and Jim is we need to find a way to put that to work to generate a return. And so we all get that. I would still say fundamentally, our orders of priority are investing in the organic business. We've been very active in looking at different opportunities in the business development side. That would be the second one. Speaker 500:15:49And then when we don't have things that we see as potential, there are some of this other stuff and we look at excess cash and redistributing that, what we've done is through share repurchase. So those remain our areas of focus and priority. Speaker 700:16:04Okay. And then my last question just has to do with China. You said, I guess, in the press release or something that you didn't think the stimulus activities there would really affect your business all that much. But I don't know. I mean, the Chinese government is doing these things because they want to try to stimulate consumer activity and the economy. Speaker 700:16:29So I mean, are you just saying you feel like it's hopeless? Or there's such a secular issue in China, a structural issue. If government stimulus won't help, then what will, I guess? And how are you planning for that in the future as it being your largest market like? Speaker 400:16:50Yes. This is Brent here. I think it's extremely optimistic that we're seeing the government take a stimulus approach or stimulus measures to incentivize economic development and growth within China. That's something that we certainly want to see and that's something that our distributors and customers in China want to see as well. I think what was mentioned in the opening remarks is that we believe the current stimulus that's been done, it's primarily been directed towards shoring up the stock market, shoring up provincial and local branches banks and governments. Speaker 400:17:27So that particular stimulus that came out, we don't see a direct impact to consumers' willingness to spend in the short term. But in my comments to Anthony previously, when I talk about momentum, I the anecdotes that we've been hearing from our customers and from our team over in China is that this is a positive sign and that it starts to change the psyche of the people over in China knowing that the government is there that's going to help shore up and support their economic efforts. So we're optimistic that, that will continue. And as it does, we believe that, that will change the sentiment of our consumers in China, and we should see that average spend per customer continue to go up from where it's currently at. Our customer acquisition throughout the year so far has been greater than in 2023. Speaker 400:18:21Our active customer count has increased as well. So those are all very positive indicators. We just now believe that as soon as that economic faith starts to pick up, then spend should match the customer count, and that will be a positive thing for us. Speaker 500:18:36Yes. And I would say, Linda, the consumers respond a little. I mean, we talk Brent talks with the group over there all the time. We hear feedback and them helping us to view it from their eyes and better understand. And I think the Chinese consumer is a little bit different than what you'd see here in the States, and they behave different. Speaker 500:18:51So I think what Brent said is spot on is that I think there is a positive response to the government starting to do things. None of those things right now are directly related to individual consumer spend, and they could go there. And I think the Chinese government's at least with what we've communicated has some intent to go back and continue to support the economy and support the growth in China. So I think we're optimistic there. But the initial measures, the response we got is that just that in and of itself doesn't go back and trigger as a catalyst to the business. Speaker 700:19:27Okay. Well, thanks for that and good luck with everything. Speaker 200:19:31Thanks, Linda. Thank you. Operator00:19:34Thank you. It appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Andrew Masuda for any additional or closing remarks. Over to you, sir. Speaker 100:19:56Thank you for your questions and for your participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-721 0. Operator00:20:09Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallUSANA Health Sciences Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) USANA Health Sciences Earnings HeadlinesUSANA Releases 2024 Sustainability ReportMay 8 at 8:56 AM | prnewswire.comKevin Guest Shares Transformative Success Strategies on Executive Coaching Day, May 1May 1, 2025 | prnewswire.comTrump’s Bitcoin Reserve is No Accident…Bryce Paul believes this is the #1 coin to buy right now The catalyst behind this surge is a massive new blockchain development…May 8, 2025 | Crypto 101 Media (Ad)USANA Celavive Postbiotic Rescue Serum Selected as a Good Housekeeping 2025 Beauty Award WinnerApril 28, 2025 | prnewswire.comUsana Health Sciences Inc (USNA) Q1 2025 Earnings Call Highlights: Strong Sales Growth and ...April 24, 2025 | finance.yahoo.comUSANA Health Sciences Sees Sales Growth Amid Earnings DeclineApril 24, 2025 | tipranks.comSee More USANA Health Sciences Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like USANA Health Sciences? Sign up for Earnings360's daily newsletter to receive timely earnings updates on USANA Health Sciences and other key companies, straight to your email. Email Address About USANA Health SciencesUSANA Health Sciences (NYSE:USNA) develops, manufactures, and sells science-based nutritional, personal care, and skincare products in the Asia Pacific, the Americas, and Europe. The company offers USANA nutritional products that comprise essentials/CellSentials, such as vitamin and mineral supplements that provide a foundation of total body nutrition for various age groups; optimizers consisting of targeted supplements that are designed to meet cardiovascular, skeletal/structural, and digestive health needs; and food that include meal replacement shakes, snack bars, and other related products. It also provides Celavive, a skin care regimen for various skin care types and ethnicities; and other products for prenatal, infant, and young child age groups. In addition, the company offers materials and online tools to assist associates in building their businesses, as well as in marketing products. It offers its products through retail stores and online. The company has a research collaboration agreement with Beijing University of Chinese Medicine; and National Sports Training Bureau. USANA Health Sciences, Inc. was founded in 1992 and is headquartered in Salt Lake City, Utah.View USANA Health Sciences ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Upwork's Earnings Beat Fuels Stock Rally—Is Freelancing Booming?DexCom Stock: Earnings Beat and New Market Access Drive Bull CaseDisney Stock Jumps on Earnings—Is the Magic Sustainable?Uber’s Earnings Offer Clues on the Stock and Broader EconomyArcher Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx Boost Upcoming Earnings Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025)Simon Property Group (5/12/2025)JD.com (5/13/2025)NU (5/13/2025)Sony Group (5/13/2025)SEA (5/13/2025)Cisco Systems (5/14/2025)Toyota Motor (5/14/2025)NetEase (5/15/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 8 speakers on the call. Operator00:00:00And now, I'd like to hand the call over to Andrew Masuda. Please go ahead, sir. Speaker 100:00:04Thank you, Sergey, and good morning, everyone. We appreciate you joining us to review our Q3 2024 results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website. 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 100:00:32Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially from the results projected in such forward looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2024 as well as uncertainty related to the economic and operating environment around the world, our operations and financial results. We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC. I'm joined by our President and CEO, Jim Brown our Chief Financial Officer, Doug Heking our Chief Commercial Officer, Brett Neidegg as well as other executives. Yesterday, after the market closed, we announced our Q3 results posted our management commentary document on the company's website. Speaker 100:01:23We'll now hear brief remarks from Jim before opening the call for questions. Speaker 200:01:28Thank you, Andrew, and good morning, everyone. 3rd quarter net sales fell modestly short of our internal expectations as the operating environment in many of our key markets remained challenging. Notably, our China market experienced a more challenging environment in the Q3 than what we experienced during the 1st 6 months of the year. Although we increased active customer counts by 7% year over year this important market, our net sales declined by 4% due to a decrease in average spend. We anticipate a continued challenging operating environment through the remainder of the year. Speaker 200:02:02We are planning to increase promotional activity in the Q4 to support and build momentum in our business. Our updated fiscal 2024 guidance incorporates these elements. We continue to focus and execute on the strategic initiatives previously communicated. Although these initiatives have not yet meaningfully manifested themselves in our operating results, we believe they are instrumental to laying the foundation for future growth and are confident that they will drive long term customer and revenue growth. Let me share with you a few items. Speaker 200:02:32First, we continue to prioritize engaging with our associate sales leaders, who are vital to bringing in new customers to the USANA family. During the Q3, we hosted a successful American Europe convention in Las Vegas, and this was one of the best conventions we've had in terms of feedback from our associate. Training, development and recognition were key focus areas at this event, with an emphasis on actionable initiatives to help our sales leaders grow their business. Feedback has been positive and leaders are actively adopting these new initiatives. 2nd, thanks to the collaborative efforts of our sales, marketing and research and development teams, we launched our first set of products under our new commercial team structure, Celavive resurfacing serum and whey protein isolate. Speaker 200:03:19Both products were launched in the U. S. And Canada and will be available in other markets over the next couple of quarters. These product launches are illustrative of the early stages of our product innovation strategy, which includes increasing the cadence of new and upgraded high quality, relevant and premium products. Additionally, I am encouraged by the increased agility that allowed us to bring these products to market. Speaker 200:03:42We have an exciting pipeline of additional products across our product categories currently in development with plans to be introduced throughout next year. I'll close by saying that I am utmost confident in our team to execute our strategy to return USANA to longer term growth. With that, I'll now ask the operator to please open the lines for questions. Operator00:04:04Thank you, sir. Our first question comes from Anthony Lebiedzinski from Fidelity Sidoti. Please go ahead. Speaker 300:04:15Good morning and thank you for taking the questions. So I guess, first, you guys talked about the positive feedback coming out of the Las Vegas Convention. I think you touched on a couple of those. But maybe if you could just maybe share more details as to and also as far as the feedback that you're getting, I mean, how quickly can some of those inputs be put in and when you can start to see tangible benefits from that? Speaker 400:04:45Thanks, Anthony. This is Brent. I'll take that question. As you know, momentum in this business is very important. And momentum derives from trust between the company and our sales leaders. Speaker 400:04:58I think that's one of the most important things that we did in this convention and that an initiative we've tried to go forward with in 2024 is rebuilding that trust with our sales leaders. So the positive feedback that we received is that they feel the company is on the right direction. They feel that we have taken their feedback and input into account when we create new products. The tools and the systems that we presented at the convention were also in line with what it is that they were hoping for. So through that feedback mechanism, we've heard that they are extremely excited for the future. Speaker 400:05:35And like I said, it takes time for momentum to grow and but we expect this is the first part of that momentum phase. And over the course of Q4 excuse me, Q4 and into Q1 of next year, we expect that to continue to grow. Speaker 300:05:50Thank you for that, Brent. Okay. And then in terms of the faster new product development process that you guys talked about, I guess, what would be the main reason for that that you've been able to do this? And I mean, do you think you'll need to hire perhaps more people to help ensure this continues? Speaker 400:06:10I don't think more people are needed. The thing that we primarily did internally is we restructured the way that that product development process works. We've created cross functional teams that sit together and that they're able to solve problems more quickly than they used to. There's a tighter collaboration now between our research and development team and the product team. So there's increased communication that's going on. Speaker 400:06:33We're taking feedback more quickly from our markets. And we're just able to implement that much more rapidly than we ever have before. So as Jim mentioned in his opening comments, we've got a very robust product pipeline prepared for 2025, and that's really a result of all of this improvement that's been made within this product development process. Speaker 500:06:52Yes. And Anthony, this is Doug. What Brent is saying is right on point. I think the other thing is both from Brent's leadership and Jim's leadership, if we see a need to go back and invest more in those areas, it's something we're committed to do. Right now, we think we're resourced and looking to gain some efficiency from this new structure of the commercial team, but I think pretty optimistic, but definitely willing to invest for things that we think generate a return. Speaker 300:07:17Understood. And then as far as the just a follow-up on the pipeline of new products. Can you share any more details as far as timing and whether is it more SKUs than what you typically have done in the past as far as those are concerned? And will those be in all markets? Or are you just looking to introduce those new products in only some of your markets? Speaker 300:07:46Maybe if you could just speak to that? Speaker 400:07:49Sure. The way that we're approaching new product development is we have to ensure that our existing product lineup is still very compelling and competitive in the marketplace. So that's why we're placing the majority of our Speaker 600:08:01effort initially is to ensure that the existing products Speaker 400:08:01are very compelling. And first part of the rollout Speaker 600:08:05for next year are some significant upgrades to Speaker 400:08:06our existing products. You'll expect to see that very slowly in Q1 and start to pick up speed in Q2 and Q3 as the year goes by. In terms of a rollout process, it's always easiest to launch a product in the United States first given the regulatory environment and our just the process that it takes to bring a product to market. But our intention is that as the quarters go by, each of those products will begin to roll out throughout the globe. China has its own product development process that it goes through, so it may slightly differ from the rest of the markets. Speaker 400:08:51But for now, the intention is that we when necessary, we'll start to roll those products out globally. Speaker 200:08:56And this is Jim. Just a little bit more. We will see the SKU count increase a little bit at the beginning. But with the product teams, they're looking at the whole product life cycle. So over time, we'll be evaluating some of the SKUs that aren't performing as well and probably discontinuing some. Speaker 200:09:15And I would say the Speaker 500:09:16engagement that Brent's done with the field leaders and his team across the globe has more regional and local opportunities for different product offerings as well. And so that's something that's taken into consideration. Speaker 300:09:28That makes sense. Okay. And then I guess my last question before I pass it on to others. So I guess part of your lower SG and A was reduced advertising expenses. So first, I guess, do you think that perhaps reduced advertising had any sort of impact on your 3Q sales? Speaker 300:09:47And I guess secondly, how do you how should we think about advertising for 4Q and beyond that? Speaker 500:09:54Yes. I think the primary catalyst here is just moving away from certain activities that just weren't demonstrating much of a return. I think we're constantly looking to repurpose things to go back and stimulate whether that's in the form of promotions, incentives, ad spend. Those things we'll continue to look at. I think what you saw in particular, we're just moving away from a few things that just have shown not to be that effective. Speaker 300:10:18That makes a lot of sense. All right. Well, thank you very much and best of luck. Speaker 500:10:22Thanks, Anthony. Operator00:10:28And our next question comes from Linda Bolton Weiser from Davidson. Please go ahead. Speaker 700:10:34Yes, hi. So I was wondering, as you pick up the promotional activity, does that affect more the associate incentive expense line? Or does that affect the gross margin more or maybe both? Speaker 500:10:51Yes. And Brett can chime in here too, but we run different types of promotions incentives. Some are designed specifically more towards short term value initiative to drive behavior, getting people exposed the products. Others are more towards rewarding people on sales to generated by new customers they introduce. And so you see a little bit of both. Speaker 500:11:13I would say, I think in the short term, we'll probably have more of trying to go back and really continue to go back and follow-up on the engagement we have with the field and support new sales generated to new customers will be probably a heavier piece of that. And I think you'll see some increase in payout, at least that's what we've modeled. Speaker 700:11:35Okay. And then the revised guidance for the year in terms of the EPS for the Q4 that's implied, I mean, I had to reduce my estimate quite a bit, more so it seemed like on the margins. So what would be the particular things impacting margins in the 4th quarter? Is that just that increased promotional spending or is there something else going on in the cost structure? Maybe you can explain that about the margin expectations for the 4th quarter? Speaker 500:12:07Yes, I'll give you a little bit of color. With our Q3 results, EPS was actually higher than what we anticipated. There are some things that we just didn't get in motion during the Q3 and we would have expected a little bit lower margin profile in Q3 and EPS. But it's what you said and kind of what we just talked about. I would expect a higher spend on the incentive line as we step into this and support the field and continue to work on really creating some high levels of engagement. Speaker 700:12:35Okay. And then just on your new products, the whey protein, is that specifically designed for customers that are taking GLP-one drugs? I'm just curious about that. Speaker 400:12:49Hey, Linda, it's Brent. That isn't the main intention for that particular product. It could be used in that capacity just because many people that are on GLP-one drugs don't get a sufficient protein profile in their diet. But it's in general just a very premium whey protein isolate. It's very clean and it's there's a large market for that out there, especially amongst our existing distributor base. Speaker 400:13:15So that's primarily the reason why we brought that to market. Speaker 700:13:21Okay. And then I'm curious, the other product is a beauty serum. I guess it's a beauty product, right, a serum, is that correct? So I'm kind of curious like why not a new product in nutritional supplements, which is more traditionally your line your area more of strength and scale. Why necessarily these two products that are in kind of a little bit different areas? Speaker 400:13:44Well, one product that did actually come to market at our Americas and Europe convention is called Rest Complete, and that is in the nutritionals category, and that's specifically a sleep product. We didn't call that out per se, but that is a product that did come to market. You're exactly right. We've got 3 categories. Nutritionals is by far and away our largest and most popular category. Speaker 400:14:06When you look at 2025, the brunt of our product introductions and upgrades are going to be focused on the nutritionals category to ensure that we continue to maintain our premium position in that space. But we also have many new products in store for our Celavive line, which is our skin care line. This just happened to be one of the products that was ready at the time to bring to market. Speaker 700:14:35Okay. And then, I'm curious about your capital allocation thoughts. I know you discuss it frequently with the Board, but your free cash flow has come down, but it's still fairly strong. It's at least $50,000,000 a year. And so is your intent to just kind of let your cash balance build up? Speaker 700:14:57What's the trigger? I guess, what do you need to see in order to maybe go back to share repurchase or something like that? Speaker 500:15:06Yes. Linda, you alluded to. I mean, literally, the first half hour of the meeting, this Board meeting, we talked about this. This is an every quarter issue. And so the Board, along with Jim's direction, is reviewing the totality of different things that we have in the works doing this other stuff and trying to make sure that we're not being too short term thinking there I'm looking down the road and figuring out what the best use of that cash is. Speaker 500:15:32The direction from the Board and Jim is we need to find a way to put that to work to generate a return. And so we all get that. I would still say fundamentally, our orders of priority are investing in the organic business. We've been very active in looking at different opportunities in the business development side. That would be the second one. Speaker 500:15:49And then when we don't have things that we see as potential, there are some of this other stuff and we look at excess cash and redistributing that, what we've done is through share repurchase. So those remain our areas of focus and priority. Speaker 700:16:04Okay. And then my last question just has to do with China. You said, I guess, in the press release or something that you didn't think the stimulus activities there would really affect your business all that much. But I don't know. I mean, the Chinese government is doing these things because they want to try to stimulate consumer activity and the economy. Speaker 700:16:29So I mean, are you just saying you feel like it's hopeless? Or there's such a secular issue in China, a structural issue. If government stimulus won't help, then what will, I guess? And how are you planning for that in the future as it being your largest market like? Speaker 400:16:50Yes. This is Brent here. I think it's extremely optimistic that we're seeing the government take a stimulus approach or stimulus measures to incentivize economic development and growth within China. That's something that we certainly want to see and that's something that our distributors and customers in China want to see as well. I think what was mentioned in the opening remarks is that we believe the current stimulus that's been done, it's primarily been directed towards shoring up the stock market, shoring up provincial and local branches banks and governments. Speaker 400:17:27So that particular stimulus that came out, we don't see a direct impact to consumers' willingness to spend in the short term. But in my comments to Anthony previously, when I talk about momentum, I the anecdotes that we've been hearing from our customers and from our team over in China is that this is a positive sign and that it starts to change the psyche of the people over in China knowing that the government is there that's going to help shore up and support their economic efforts. So we're optimistic that, that will continue. And as it does, we believe that, that will change the sentiment of our consumers in China, and we should see that average spend per customer continue to go up from where it's currently at. Our customer acquisition throughout the year so far has been greater than in 2023. Speaker 400:18:21Our active customer count has increased as well. So those are all very positive indicators. We just now believe that as soon as that economic faith starts to pick up, then spend should match the customer count, and that will be a positive thing for us. Speaker 500:18:36Yes. And I would say, Linda, the consumers respond a little. I mean, we talk Brent talks with the group over there all the time. We hear feedback and them helping us to view it from their eyes and better understand. And I think the Chinese consumer is a little bit different than what you'd see here in the States, and they behave different. Speaker 500:18:51So I think what Brent said is spot on is that I think there is a positive response to the government starting to do things. None of those things right now are directly related to individual consumer spend, and they could go there. And I think the Chinese government's at least with what we've communicated has some intent to go back and continue to support the economy and support the growth in China. So I think we're optimistic there. But the initial measures, the response we got is that just that in and of itself doesn't go back and trigger as a catalyst to the business. Speaker 700:19:27Okay. Well, thanks for that and good luck with everything. Speaker 200:19:31Thanks, Linda. Thank you. Operator00:19:34Thank you. It appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Andrew Masuda for any additional or closing remarks. Over to you, sir. Speaker 100:19:56Thank you for your questions and for your participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-721 0. Operator00:20:09Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.Read morePowered by