NYSE:USNA USANA Health Sciences Q2 2024 Earnings Report $30.40 +0.98 (+3.33%) Closing price 05/27/2025 03:59 PM EasternExtended Trading$30.27 -0.13 (-0.43%) As of 05:10 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast USANA Health Sciences EPS ResultsActual EPS$0.54Consensus EPS $0.65Beat/MissMissed by -$0.11One Year Ago EPS$0.89USANA Health Sciences Revenue ResultsActual Revenue$212.87 millionExpected Revenue$218.64 millionBeat/MissMissed by -$5.77 millionYoY Revenue GrowthN/AUSANA Health Sciences Announcement DetailsQuarterQ2 2024Date7/23/2024TimeAfter Market ClosesConference Call DateWednesday, July 24, 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 TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by USANA Health Sciences Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 24, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Hello, and welcome to the USANA Health Sciences Second Quarter Earnings Call. My name is Jeff, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. I will now hand over to your host, Andrew Masuda, to begin today's call. Operator00:00:37Thank you. Speaker 100:00:39Thank you, Jess, and good morning, everyone. We appreciate you joining us to review our Q2 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 100:01:09Those 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, Brent Neidig as well as other executives. Yesterday, after the market closed, we announced our 2nd quarter results and posted our management commentary document on the company's website. Speaker 100:02:04We'll now hear brief remarks from Jim before opening the call for questions. Speaker 200:02:10Thank you, Andrew, and good morning, everyone. During the Q2, we saw continued macroeconomic pressure in several of our key markets, which continue to impact our associates' productivity and consumer spending. We continue to take action to strategically address these challenges, including making USANA's overall value proposition more attractive. Our strategy includes restructuring our commercial team to better drive our initiatives, heightening our focus on product innovation, increasing our efforts to engage our sales leaders with an associate first approach, expanding into India and continuing to pursue M and A activities. These strategic initiatives are a meaningful undertaking and are focused on driving long term performance. Speaker 200:02:53This effort will be a multiyear endeavor and will take time to fully realize the rewards of these efforts. Before providing a few highlights from the quarter, I'd like to provide an overview on the restructuring of our commercial team. Over the past several months, we have reorganized our sales, marketing and communications departments into 1 commercial team to better position us to execute our customer growth strategy. A significant part of this strategy is centered on our ability to deliver 3 fundamental things to our sales force: best in class products, a simple message that highlights the benefits of these products and an income opportunity that is simple, rewarding and worthy of our associates' time and effort. Accordingly, our new commercial team is comprised of 3 core global teams: product, opportunity and brand, as well as our regional and local business units. Speaker 200:03:45Our global teams are designed to do the following: The product team is responsible for ensuring that we bring innovative best in class nutritional products to the market. Accordingly, this team is focused on increasing our market share and driving customer growth with science remaining at the core of our business. The opportunity team is focused on delivering a rewarding compensation plan with an associate first approach offering for both part time and full time entrepreneurs. The brand team will deliver USANA's story and brand framework, which will align all company messaging both internally and externally, improving messaging's effectiveness and bolstering our global reputation. I believe the collective output of the new commercial team will better position USANA to make these fundamental deliveries to our sales force and position USANA to achieve long term customer growth. Speaker 200:04:37Now on to some strategic highlights for the quarter. I recently returned from India after spending a week in our offices in Girgaon with our local leadership team and sales force. While I was there, I saw the energy and excitement for USANA's brand and products with our sales force and customers. Our local leadership team led by Regional Vice President and Managing Director, Puneet Madan, continues to attract high quality leaders and we remain very excited about the long term potential that this important market presents. As we have consistently communicated, sales contribution from this important opportunity is currently small. Speaker 200:05:14However, we plan to consistently and systematically build this market over the next several years. We also strengthened our leadership team across the company during the Q2. Doctor. Kathryn Armstrong joined USANA as our new Executive Vice President of R and D. Doctor. Speaker 200:05:31Armstrong received her PhD in biochemistry from Notre Dame and is a seasoned scientific leader with 17 years experience in consumer products, direct selling and consulting. She brings a wealth of knowledge, technical prowess and extensive expertise in product development and innovation. Doctor. Armstrong will be instrumental in helping lead USANA's product development and innovative initiatives. Peter Wong has been promoted to Global Vice President and General Manager of China. Speaker 200:06:00Peter joined USANA Baby Care in January of 2022. Since then, he has been instrumental in driving a transformation with our China sales business. He worked closely with the team to successfully launch China's Healthy Family strategy, which is focused on ensuring China's continued growth over the next several years. It played a pivotal role in driving sales, building close relationships with sales leaders, optimizing our business model, creating innovative growth strategies and developing our organization. I'm truly excited about Peter's future contributions as well as his dedication, enthusiasm and leadership in this important market. Speaker 200:06:40I'll close by saying that we operate our business with a focus on building sustainable long term success in the form of customer growth. I'm confident that successful execution of these strategies will position USANA to return to growth. With that, I'll now ask the operator to please open the lines for questions. Operator00:07:16And our first question comes from the line of Anthony Lebiedzinski from Sidoti and Co. Please go ahead. Speaker 300:07:24Good morning and thank you for taking the questions. So I mean overall I think you guys did a pretty good job of explaining your 2Q results in the press release and the management commentary. So I'll focus most of my questions on forward looking topics. But first, I just wanted to follow-up, Jim, on one of the things that you said at the beginning of the call. One of the things that you're looking to do is to make the value proposition more attractive. Speaker 300:07:51Can you expand on that? What that means in terms of pricing or just how should we think about that? And then I have a couple of other questions. Speaker 200:08:02Yes. When I talk about the value proposition, you can get into specific products and how those are priced and how the opportunity rewards for the consumption of those products. But we always look at it as our team, our associates in the field need to be value adding in general. We want to supply more than just products and a great opportunity. We want to have other ads there that their customers and associates can then depend on to want to stay as a community, as a family with USANA. Speaker 200:08:31But of course, it comes down to nuts and bolts as well and how we price our products. But we will continue, as I stated in the opening comments, to be a science based company and have premium products. And that's where we've had for the last 30 years and we'll continue down that path. Anthony, this is Doug. Maybe you Speaker 400:08:49chime in here. A lot of the value proposition when we look at it is conveying the differentiation of the products, also the innovation that we have on the horizon that Jim mentioned. So there's a host of things that go in there. And so you probably should not perceive this as just pushing down a path of price adjustments. It's value add and making sure the consumer true differentiation of our products in addition to a great deal of product innovation on the horizon. Speaker 300:09:16Got you. Okay. Yes, thanks for that. And then so just to follow-up on the product innovation side, so just wanted to get a better understanding of that. So as you're looking to focus more on new products, so I guess when you look at your product innovation now process, what's on average the typical timeframe when you guys think of an idea to bring out to the market? Speaker 300:09:45So what is that now and what's the expectation going forward with the changes that you're making? It might be I know it's a simple question, maybe not a simple answer for you, but just wanted to I talked Speaker 200:10:00about it I talked about it with the restructuring. And we've gone as far as restructuring internally and have 3 product teams over our product lines of nutritionals, skincare and foods. And right it takes about 1.5 years to 2 years from the initial decision to go down a path on a product, the science, the testing and everything else, and we're just not happy with that. We think we should be able to do it within a year's time, And those teams will be the catalyst to get that done. They have ownership. Speaker 200:10:29They're looking at the entire product lifecycle. And of course, innovation and new ingredients or systems will help with that as well. But it's longer and that's one of the reasons that we made the decision to do some restructuring and get more of a team focus with cross functional teams together to be able to get stuff done quicker. Speaker 300:10:53Got you. So this restructuring was completed, I believe, soon after Jim, you became CEO. So as far as like what's a reasonable time frame for you guys to see tangible benefits from this? I know it's going to take some time, but could we see something by next year or do you think it will take longer for that to play out? Speaker 500:11:16Hey, Anthony, it's Brent here. I'll take that question. As Jim mentioned, historically, it takes upwards of 3 years in some instances to develop a product. And that's just not satisfactory for us. So with this restructure, we've been able to accelerate the time it takes from ideation to commercialization. Speaker 500:11:40As Jim's repeatedly mentioned, we're scientific based and science takes time. So we expect, especially on our most premium differentiated products, that scientific research aspect is still going to be time intensive. But once that science has come to a point where we want to take the product through the commercialization process, we believe that through our transformation that's taken place internally, we could see 50%, 75% improvements or reductions in the time it takes to bring a product to market. More recently, we've seen from ideation to commercialization as quick as 6 months, which is a dramatic improvement for us internally. We're going to continue to push hard on that process to make it as quick as possible because the market is always changing and we need to ensure that we're meeting the market where it's at, not trying to play catch up all the time. Speaker 500:12:33So we'll see improvements. We have some additional products that are going to come to market here soon this year, which we're happy about. We're planning many more upgrades and new products that are going to be launched in 2025. So we're already starting to see the fruits of the restructure and it's only going to get quicker over time. Speaker 400:12:57Yes. And Anthony, I would chime in. Both Brent Nidegg and Walter Knott had as Jim assumed the mantle of CEO, took on additional responsibility. And so a good part of the back half of last year is Brent was meeting with everybody, trying to go back and assess where it's at. And the bulk of the changes in the actual structure, the right people in the right place has been something that's really been more recent than that. Speaker 400:13:21And so I think you've got the structure in place. I think it's the right alignment. But I just want you to have a kind of a correct understanding of kind of timing of that. Speaker 500:13:30Yes, it was really this past quarter when we really made significant changes to the team size, to the structure. So within just a quarter, we've made dramatic improvements and it's only going to accelerate over time. Speaker 300:13:44That's great to hear. And then just switching gears, I know in the release and the commentary you guys talked a little bit more about your acquisitions strategy there. As far as the pipeline that you have, can you talk to speak to that as far as what could be as far as potential acquisitions and then share buybacks? How are you guys thinking about that in light of the current stock price? Speaker 600:14:11So for this is Walter. No, so for acquisitions, we've got a full pipeline. We've been talking to companies. I mean, we've been very, very busy. And our biggest issue is that we want to make sure that we acquire companies that have a really good cash return. Speaker 600:14:31And so that's what we spend a lot of time with our banks and vetting companies. I think things are opening up a little bit right now. If you look at just generally in the market, there seems to be more opportunities and more companies that are becoming available. And like I said, there's a huge list right now. So we're very excited. Speaker 200:14:50Yes. And one other thing too, when we're looking at business opportunities, we want a very strong management team that will stay on and run those businesses. We're looking at it from a long term opportunity and not just something where you're just going in and trying to manage something and then go down a path of selling it. Ours is a long term strategy to bring great businesses on to be part of the USANA structure. Speaker 400:15:14Yes. And Anthony, this is Doug. I'll follow on really on kind of the broader capital allocation narrative. It's a very similar discussion that we've had in the past. This is Jim leads a lot of these conversations with the Board about capital allocation and where we're at. Speaker 400:15:29And so at any given time, we're evaluating a number of different opportunities and evaluating this stuff. Share repurchase is definitely in our arsenal, but we're evaluating that in context of many of the other things that we're currently evaluating as well. So it is a discussion every quarter with the Board and we spend some amount of time on it. And so we'll get you updated. We really don't have any comments at this point as far as future plans in the immediate near term. Speaker 300:15:58Understood. Well, thank you very much and best of Speaker 200:16:00luck. Thanks, Anthony. Thank you. Operator00:16:04The next question comes from the line of Linda Bolton Weiser from D. A. Davidson. Please go ahead. Speaker 700:16:13Yes, hi. So I was curious, like what happened sort of in Mainland China region in the quarter? I guess I was rather encouraged by the performance last quarter, with some growth there. And then it seems like the growth kind of went away even against, I think it was an easier prior year comparison. Is it just the promotions that you ran promotions in the Q1, but none in the Q2? Speaker 700:16:39Maybe a little more color on China. Thanks. Speaker 400:16:43Yes. Linda, this is Doug. I'm going to give you kind of a brief response of kind of what we've said historically here and then I'm going to let Brent respond who has far more market insight to that key market for us. We had said at the end of our Q1 stuff that we would expect a softer Q2 just because of the promotional cadence. China had both prior year and sequential quarter had a more prominent promotion calendar during those periods and that's something that we had called out a little bit. Speaker 400:17:10But I think you can give you that context and I'll let Brent go back and kind of respond. Speaker 500:17:16Hi, Linda. There certainly was a softness in the results and I think that was really primarily 2 pronged. First and foremost was the cadence of the promotional calendar that we have. We try to space those things out according to market need, not necessarily to hit a revenue target, but really what are the needs on the ground in the market. And if you pile them on too quickly, too fast, then it can have more damaging effects long term than the positive upside. Speaker 500:17:52So I think the promotional calendar and then the second is, you certainly heard in the news that there is certainly an economic softness headwinds that we're seeing within the market right now. And I think that was part of the issue. And that's one of the reasons why we continue to look at strengthening our value proposition. So that even though there is economic softness, people are still willing to pay for premium solutions that are going to solve a need that they have in their life. So the better we can cut through that noise within the marketplace, people will continue to choose USANA, and that's what we're striving towards. Speaker 400:18:28Yes. And Linda, I would also say and Brent's kind of brought this to the forefront, we're really excited about the management team over there and the elevation of Peter Wang. I think really solid team that allows Brent to operate in a broader sense. So we're quite excited about the team structure there as well. Speaker 700:18:47Okay. And then I guess on the opposite side of it, the Americas and Europe kind of region did quite a bit better actually than our projection. Can you call out something there that made the performance there sort of different and better? Speaker 400:19:06Yes. I think it's just really the continued effort at addressing the current environment. The team's done a nice job. I would call out, I think Canada has done a really good job and we've been pleased with some of the progress in Canada, I think particularly in a sequential sense. And so I think we're getting some traction leaning into it, Brent, more from a kind of a Speaker 500:19:27Yes. We're really pleased with our leadership that we have here in market. And they've been aggressively going after our associate first strategy and reengaging local leaders both in Canada and the Americas. And that strategy is really I think starting to take hold and we're starting to develop some positive momentum that we're excited about. And that's going to really parlay into our Americas Europe Convention that's taking place here this next month in Las Vegas. Speaker 500:19:57We're really excited about that and many key initiatives that we're going to be launching in the second half of the year. So we're optimistic in the long term trajectory of the market. Speaker 700:20:08Okay. And then with regard to your gross margin actually in pretty much what I had projected. I'm just curious and it's really stable seemingly. What is it that is making the gross margin stable despite the sales declines on the top line? Like how are you managing to maintain that gross margin? Speaker 400:20:34Yes, I mean, we've had a host of things and there's a lot of things that go into the equation. 1, currency rates are operating against us. The non variable costs, we're seeing some pressure relative to a little bit softer top line. So all those things go into what you said. If you look dynamically at China, China has robust gross margins. Speaker 400:20:55They make up a little bit bigger share of the overall. We see some improvements there. But we've also seen the operations team procurement team do a good job in kind of managing the environment. So it really is a combination of a variety of things. There's a few risk factors there with currency, a little bit of softness on the top line. Speaker 400:21:13We do have a little bit of a mix dynamic relative to what we've seen as China has picked up a little bit. We see some improved gross margins just from there. And then I think just internal efforts to keep working on securing good prices and favorable outcomes factors in there as well. Speaker 700:21:34Okay. And then, I guess, just in a bigger one thing with the direct selling companies that I've been seeing over the years is a lot of times what the distributors want is like more training, more training and programs that can help them as well as their downlines know better how to sell the product and how to actually go about their business on a day to day basis. I don't really hear you talking much about training initiatives. Is there anything there that you think you need to focus on more? Or is it just not something that's relevant to your business? Speaker 500:22:14Linda, it's Brent here, and you're speaking music to our ears. I think you really hit it on the head there that part of that value proposition that we provide for our associate first strategy is not only providing a rewarding compensation opportunity. And of the to find success. A big part of that is training. It's a massive part and it really plays into their effectiveness and ability to go out and portray the message to the prospects that they have. Speaker 500:22:58So I would say the training takes up much of our commercial team's resources to figure out how we can deliver in a very compelling, short, concise package all the information that a new person would need in order to be successful right out of the gate. That's one of the primary objectives of our brand team that Jim mentioned is their sole focus is trying to figure out how to create a short, concise, compelling message in training material for our new sellers. And then as you go along the whole associate journey, once a person has been in for a certain period of time, their training needs change over time. And we continue to provide education, certification resources on our products, on the opportunity, really so that they can become their best self and their best customer so that they can present themselves in a very compelling way to all their prospects. Speaker 700:23:57Okay. Thank you. That's all for Speaker 200:24:01me. Thanks, Linda. Operator00:24:04The next question comes from the line of Doug Lane from Water Tower Research. Speaker 800:24:13Just looking at your revised guidance and trying to sort of back into some second half trends we can expect, I think the 2 things I'd just like to drill down on is, in my math, the sales is looking to be in the second half somewhere close to flat to down maybe mid single digits, which is obviously an improvement from the first half trend. So what drives you to believe that the trends will improve in the second half versus the first half? Speaker 400:24:44Yes. Doug, this is the alternative Doug, your alter ego here. I think a great deal kind of what Jim talked about with the commercial team and kind of what Brent's executing there and some of the things we see in the product pipeline, the innovation really is kind of what we outlined in those key strategic initiatives. One of the things that Brent has done and given direct to the team is this associate first and the effort and engagement to go back and get out and talk with them and just take any option we have to go back and engage with them is really a critical part about our business. And I think we really heard this in kind of loud tones coming out of COVID. Speaker 400:25:24And so to me, I think that's the number one thing. I think the timing and cadence of different promotional activity, as Brent said, we want to be smart. We want to do things that are value add to them and not overwhelm them. But we see some of the things that we have kind of planned and baked in are additive, but it is it's just one part of a kind of a broader approach and strategy. Jim, anything else there big picture? Speaker 200:25:48Yes. I mean, it's just it's a cadence on promotions, and we're going to address that some in the 3rd Q4. But it's really the strategy and getting the alignment there. And our like Doug talked about, our associate distributor first strategy and getting them the tools to be successful. Linda just talked about training. Speaker 200:26:08We didn't spend a lot of time on that, but that's probably one of the biggest jobs that our GMs across the world do is train and continue to support that distributor to find more consumers of our products. Speaker 800:26:21Okay. Thank you. That's helpful, Jim. And I guess in the second thing I want to focus on is the operating margin where you have you're advised to range, but not very much despite the sales shortfall. And again, according to my numbers, the first half operating margin was what 9.5%, 9.6%. Speaker 800:26:43And so you back into the second half, it's going to be below 9%. And I just wondered why despite the improving trends, although still possibly down sales, or the operating margin is going to be lower in the second half versus in the first half? Speaker 400:26:59Yes. I think it really is just the dynamic of seeing a softer top line, the loss of leverage and some of the infrastructure costs. We've definitely been selective in pairing back some infrastructure costs that we don't deem as adding value going forward and doing this other stuff. At the same time, we've been investing in the strategic initiatives that Jim outlined in his opening remarks and we'll continue to go back and invest in the future. And I would just say the strength in our balance sheet allows us to have that mentality and lean into things and lean into things efforts that we think will help grow the company. Speaker 400:27:33Okay. Speaker 800:27:33I mean that makes sense. If you up your investment, then hopefully your sales trends will improve. And just last thing on the tax rate. I know you talked about in your commentary, and I get it. But I just the tax rate has just shot up here in these last couple of years and into the now into the 40% range after forever being in the upper 20s, low 30s. Speaker 800:27:50So just what is different about USANA today that's driving that higher tax rate? Speaker 400:27:55I think just the dynamics from a tax book standpoint of where that income sits. That's the primary thing. I think we've had several years of currency adjustments on this other stuff. And with our concentration in the U. S. Speaker 400:28:08And our concentration of overhead here in the U. S, just the currency alone creates some operating leverage dynamics. And I think the softness in sales and where we're at and where many of the investments are happening on these strategic initiatives is still domestic here. I think there's some opportunity here, but there's nothing going to be kind of a real quick fix to that. And I think we're looking at things longer term to make sure we're making good decisions for the health of the company long term. Speaker 800:28:37Well, I mean, I know you're not giving guidance for next year in the out years, but just directionally, are we here to stay in the 40s? Or is there something you can do to get back into the 30s near term in the next year or 2? Speaker 400:28:48Well, as we go back and roll these strategic initiatives and execute much of what Brent and Walter and Jim's leadership is directing us to, I think that top line momentum will really help out. And we'll just see as we look to allocate some of the capital to different opportunities that may have an impact on how some of that stuff looks as well. Speaker 800:29:12Okay. Thanks, Doug. Operator00:29:16We currently have no questions in the queue. We have no further questions in the queue. So I will turn the call back over to your hosts for any closing remarks. Speaker 100:29:39Thank you, Jess, and thank you, everyone, for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7210. Operator00:29:56Thank you for joining today's call. You may now disconnect your line.Read morePowered by Key Takeaways USANA has restructured its commercial team into three global pillars—Product, Opportunity, and Brand—plus regional units to better deliver premium products, clear messaging, and a rewarding compensation plan, aiming for long-term customer growth. The company is expanding into India, where early visits revealed strong enthusiasm but small current sales, with a systematic multiyear plan to build the market under Regional VP Puneet Madan. Leadership has been bolstered with Dr. Kathryn Armstrong joining as EVP of R&D to drive scientific innovation and Peter Wong promoted to Global VP and GM of China to steer growth in the country. A new cross-functional product innovation process aims to cut ideation-to-market timelines from 18–24 months to under 12 months (recent launches have taken as little as six months). USANA is actively pursuing acquisitions with a full pipeline focused on high-return, long-term businesses with strong existing management, while keeping share repurchases in its capital allocation toolkit. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallUSANA Health Sciences Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) USANA Health Sciences Earnings HeadlinesUSANA Health Sciences (NYSE:USNA) Stock Rating Upgraded by Wall Street ZenMay 25 at 3:25 AM | americanbankingnews.comShareholders in USANA Health Sciences (NYSE:USNA) are in the red if they invested five years agoMay 21, 2025 | finance.yahoo.comThis Signal Only Flashes Once Every 4 Years – And It Just TriggeredThis same signal has appeared twice before in the past 8 years — both times, it kicked off major moves in crypto. Now it’s back, and the smart money is already positioning. A free training reveals the step-by-step strategy and altcoin picks designed to help you capitalize on the next wave.May 28, 2025 | Crypto Swap Profits (Ad)USNA Q1 Earnings Call: Product Expansion and Market Momentum Drive OutperformanceMay 13, 2025 | finance.yahoo.comUSANA Releases 2024 Sustainability ReportMay 8, 2025 | prnewswire.comKevin Guest Shares Transformative Success Strategies on Executive Coaching Day, May 1May 1, 2025 | prnewswire.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 Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsBooz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong Earnings Upcoming Earnings Costco Wholesale (5/29/2025)Marvell Technology (5/29/2025)Canadian Imperial Bank of Commerce (5/29/2025)Dell Technologies (5/29/2025)National Grid (5/29/2025)Royal Bank of Canada (5/29/2025)CrowdStrike (6/3/2025)Broadcom (6/5/2025)Oracle (6/10/2025)Adobe (6/12/2025) 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. 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There are 9 speakers on the call. Operator00:00:00Hello, and welcome to the USANA Health Sciences Second Quarter Earnings Call. My name is Jeff, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. I will now hand over to your host, Andrew Masuda, to begin today's call. Operator00:00:37Thank you. Speaker 100:00:39Thank you, Jess, and good morning, everyone. We appreciate you joining us to review our Q2 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 100:01:09Those 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, Brent Neidig as well as other executives. Yesterday, after the market closed, we announced our 2nd quarter results and posted our management commentary document on the company's website. Speaker 100:02:04We'll now hear brief remarks from Jim before opening the call for questions. Speaker 200:02:10Thank you, Andrew, and good morning, everyone. During the Q2, we saw continued macroeconomic pressure in several of our key markets, which continue to impact our associates' productivity and consumer spending. We continue to take action to strategically address these challenges, including making USANA's overall value proposition more attractive. Our strategy includes restructuring our commercial team to better drive our initiatives, heightening our focus on product innovation, increasing our efforts to engage our sales leaders with an associate first approach, expanding into India and continuing to pursue M and A activities. These strategic initiatives are a meaningful undertaking and are focused on driving long term performance. Speaker 200:02:53This effort will be a multiyear endeavor and will take time to fully realize the rewards of these efforts. Before providing a few highlights from the quarter, I'd like to provide an overview on the restructuring of our commercial team. Over the past several months, we have reorganized our sales, marketing and communications departments into 1 commercial team to better position us to execute our customer growth strategy. A significant part of this strategy is centered on our ability to deliver 3 fundamental things to our sales force: best in class products, a simple message that highlights the benefits of these products and an income opportunity that is simple, rewarding and worthy of our associates' time and effort. Accordingly, our new commercial team is comprised of 3 core global teams: product, opportunity and brand, as well as our regional and local business units. Speaker 200:03:45Our global teams are designed to do the following: The product team is responsible for ensuring that we bring innovative best in class nutritional products to the market. Accordingly, this team is focused on increasing our market share and driving customer growth with science remaining at the core of our business. The opportunity team is focused on delivering a rewarding compensation plan with an associate first approach offering for both part time and full time entrepreneurs. The brand team will deliver USANA's story and brand framework, which will align all company messaging both internally and externally, improving messaging's effectiveness and bolstering our global reputation. I believe the collective output of the new commercial team will better position USANA to make these fundamental deliveries to our sales force and position USANA to achieve long term customer growth. Speaker 200:04:37Now on to some strategic highlights for the quarter. I recently returned from India after spending a week in our offices in Girgaon with our local leadership team and sales force. While I was there, I saw the energy and excitement for USANA's brand and products with our sales force and customers. Our local leadership team led by Regional Vice President and Managing Director, Puneet Madan, continues to attract high quality leaders and we remain very excited about the long term potential that this important market presents. As we have consistently communicated, sales contribution from this important opportunity is currently small. Speaker 200:05:14However, we plan to consistently and systematically build this market over the next several years. We also strengthened our leadership team across the company during the Q2. Doctor. Kathryn Armstrong joined USANA as our new Executive Vice President of R and D. Doctor. Speaker 200:05:31Armstrong received her PhD in biochemistry from Notre Dame and is a seasoned scientific leader with 17 years experience in consumer products, direct selling and consulting. She brings a wealth of knowledge, technical prowess and extensive expertise in product development and innovation. Doctor. Armstrong will be instrumental in helping lead USANA's product development and innovative initiatives. Peter Wong has been promoted to Global Vice President and General Manager of China. Speaker 200:06:00Peter joined USANA Baby Care in January of 2022. Since then, he has been instrumental in driving a transformation with our China sales business. He worked closely with the team to successfully launch China's Healthy Family strategy, which is focused on ensuring China's continued growth over the next several years. It played a pivotal role in driving sales, building close relationships with sales leaders, optimizing our business model, creating innovative growth strategies and developing our organization. I'm truly excited about Peter's future contributions as well as his dedication, enthusiasm and leadership in this important market. Speaker 200:06:40I'll close by saying that we operate our business with a focus on building sustainable long term success in the form of customer growth. I'm confident that successful execution of these strategies will position USANA to return to growth. With that, I'll now ask the operator to please open the lines for questions. Operator00:07:16And our first question comes from the line of Anthony Lebiedzinski from Sidoti and Co. Please go ahead. Speaker 300:07:24Good morning and thank you for taking the questions. So I mean overall I think you guys did a pretty good job of explaining your 2Q results in the press release and the management commentary. So I'll focus most of my questions on forward looking topics. But first, I just wanted to follow-up, Jim, on one of the things that you said at the beginning of the call. One of the things that you're looking to do is to make the value proposition more attractive. Speaker 300:07:51Can you expand on that? What that means in terms of pricing or just how should we think about that? And then I have a couple of other questions. Speaker 200:08:02Yes. When I talk about the value proposition, you can get into specific products and how those are priced and how the opportunity rewards for the consumption of those products. But we always look at it as our team, our associates in the field need to be value adding in general. We want to supply more than just products and a great opportunity. We want to have other ads there that their customers and associates can then depend on to want to stay as a community, as a family with USANA. Speaker 200:08:31But of course, it comes down to nuts and bolts as well and how we price our products. But we will continue, as I stated in the opening comments, to be a science based company and have premium products. And that's where we've had for the last 30 years and we'll continue down that path. Anthony, this is Doug. Maybe you Speaker 400:08:49chime in here. A lot of the value proposition when we look at it is conveying the differentiation of the products, also the innovation that we have on the horizon that Jim mentioned. So there's a host of things that go in there. And so you probably should not perceive this as just pushing down a path of price adjustments. It's value add and making sure the consumer true differentiation of our products in addition to a great deal of product innovation on the horizon. Speaker 300:09:16Got you. Okay. Yes, thanks for that. And then so just to follow-up on the product innovation side, so just wanted to get a better understanding of that. So as you're looking to focus more on new products, so I guess when you look at your product innovation now process, what's on average the typical timeframe when you guys think of an idea to bring out to the market? Speaker 300:09:45So what is that now and what's the expectation going forward with the changes that you're making? It might be I know it's a simple question, maybe not a simple answer for you, but just wanted to I talked Speaker 200:10:00about it I talked about it with the restructuring. And we've gone as far as restructuring internally and have 3 product teams over our product lines of nutritionals, skincare and foods. And right it takes about 1.5 years to 2 years from the initial decision to go down a path on a product, the science, the testing and everything else, and we're just not happy with that. We think we should be able to do it within a year's time, And those teams will be the catalyst to get that done. They have ownership. Speaker 200:10:29They're looking at the entire product lifecycle. And of course, innovation and new ingredients or systems will help with that as well. But it's longer and that's one of the reasons that we made the decision to do some restructuring and get more of a team focus with cross functional teams together to be able to get stuff done quicker. Speaker 300:10:53Got you. So this restructuring was completed, I believe, soon after Jim, you became CEO. So as far as like what's a reasonable time frame for you guys to see tangible benefits from this? I know it's going to take some time, but could we see something by next year or do you think it will take longer for that to play out? Speaker 500:11:16Hey, Anthony, it's Brent here. I'll take that question. As Jim mentioned, historically, it takes upwards of 3 years in some instances to develop a product. And that's just not satisfactory for us. So with this restructure, we've been able to accelerate the time it takes from ideation to commercialization. Speaker 500:11:40As Jim's repeatedly mentioned, we're scientific based and science takes time. So we expect, especially on our most premium differentiated products, that scientific research aspect is still going to be time intensive. But once that science has come to a point where we want to take the product through the commercialization process, we believe that through our transformation that's taken place internally, we could see 50%, 75% improvements or reductions in the time it takes to bring a product to market. More recently, we've seen from ideation to commercialization as quick as 6 months, which is a dramatic improvement for us internally. We're going to continue to push hard on that process to make it as quick as possible because the market is always changing and we need to ensure that we're meeting the market where it's at, not trying to play catch up all the time. Speaker 500:12:33So we'll see improvements. We have some additional products that are going to come to market here soon this year, which we're happy about. We're planning many more upgrades and new products that are going to be launched in 2025. So we're already starting to see the fruits of the restructure and it's only going to get quicker over time. Speaker 400:12:57Yes. And Anthony, I would chime in. Both Brent Nidegg and Walter Knott had as Jim assumed the mantle of CEO, took on additional responsibility. And so a good part of the back half of last year is Brent was meeting with everybody, trying to go back and assess where it's at. And the bulk of the changes in the actual structure, the right people in the right place has been something that's really been more recent than that. Speaker 400:13:21And so I think you've got the structure in place. I think it's the right alignment. But I just want you to have a kind of a correct understanding of kind of timing of that. Speaker 500:13:30Yes, it was really this past quarter when we really made significant changes to the team size, to the structure. So within just a quarter, we've made dramatic improvements and it's only going to accelerate over time. Speaker 300:13:44That's great to hear. And then just switching gears, I know in the release and the commentary you guys talked a little bit more about your acquisitions strategy there. As far as the pipeline that you have, can you talk to speak to that as far as what could be as far as potential acquisitions and then share buybacks? How are you guys thinking about that in light of the current stock price? Speaker 600:14:11So for this is Walter. No, so for acquisitions, we've got a full pipeline. We've been talking to companies. I mean, we've been very, very busy. And our biggest issue is that we want to make sure that we acquire companies that have a really good cash return. Speaker 600:14:31And so that's what we spend a lot of time with our banks and vetting companies. I think things are opening up a little bit right now. If you look at just generally in the market, there seems to be more opportunities and more companies that are becoming available. And like I said, there's a huge list right now. So we're very excited. Speaker 200:14:50Yes. And one other thing too, when we're looking at business opportunities, we want a very strong management team that will stay on and run those businesses. We're looking at it from a long term opportunity and not just something where you're just going in and trying to manage something and then go down a path of selling it. Ours is a long term strategy to bring great businesses on to be part of the USANA structure. Speaker 400:15:14Yes. And Anthony, this is Doug. I'll follow on really on kind of the broader capital allocation narrative. It's a very similar discussion that we've had in the past. This is Jim leads a lot of these conversations with the Board about capital allocation and where we're at. Speaker 400:15:29And so at any given time, we're evaluating a number of different opportunities and evaluating this stuff. Share repurchase is definitely in our arsenal, but we're evaluating that in context of many of the other things that we're currently evaluating as well. So it is a discussion every quarter with the Board and we spend some amount of time on it. And so we'll get you updated. We really don't have any comments at this point as far as future plans in the immediate near term. Speaker 300:15:58Understood. Well, thank you very much and best of Speaker 200:16:00luck. Thanks, Anthony. Thank you. Operator00:16:04The next question comes from the line of Linda Bolton Weiser from D. A. Davidson. Please go ahead. Speaker 700:16:13Yes, hi. So I was curious, like what happened sort of in Mainland China region in the quarter? I guess I was rather encouraged by the performance last quarter, with some growth there. And then it seems like the growth kind of went away even against, I think it was an easier prior year comparison. Is it just the promotions that you ran promotions in the Q1, but none in the Q2? Speaker 700:16:39Maybe a little more color on China. Thanks. Speaker 400:16:43Yes. Linda, this is Doug. I'm going to give you kind of a brief response of kind of what we've said historically here and then I'm going to let Brent respond who has far more market insight to that key market for us. We had said at the end of our Q1 stuff that we would expect a softer Q2 just because of the promotional cadence. China had both prior year and sequential quarter had a more prominent promotion calendar during those periods and that's something that we had called out a little bit. Speaker 400:17:10But I think you can give you that context and I'll let Brent go back and kind of respond. Speaker 500:17:16Hi, Linda. There certainly was a softness in the results and I think that was really primarily 2 pronged. First and foremost was the cadence of the promotional calendar that we have. We try to space those things out according to market need, not necessarily to hit a revenue target, but really what are the needs on the ground in the market. And if you pile them on too quickly, too fast, then it can have more damaging effects long term than the positive upside. Speaker 500:17:52So I think the promotional calendar and then the second is, you certainly heard in the news that there is certainly an economic softness headwinds that we're seeing within the market right now. And I think that was part of the issue. And that's one of the reasons why we continue to look at strengthening our value proposition. So that even though there is economic softness, people are still willing to pay for premium solutions that are going to solve a need that they have in their life. So the better we can cut through that noise within the marketplace, people will continue to choose USANA, and that's what we're striving towards. Speaker 400:18:28Yes. And Linda, I would also say and Brent's kind of brought this to the forefront, we're really excited about the management team over there and the elevation of Peter Wang. I think really solid team that allows Brent to operate in a broader sense. So we're quite excited about the team structure there as well. Speaker 700:18:47Okay. And then I guess on the opposite side of it, the Americas and Europe kind of region did quite a bit better actually than our projection. Can you call out something there that made the performance there sort of different and better? Speaker 400:19:06Yes. I think it's just really the continued effort at addressing the current environment. The team's done a nice job. I would call out, I think Canada has done a really good job and we've been pleased with some of the progress in Canada, I think particularly in a sequential sense. And so I think we're getting some traction leaning into it, Brent, more from a kind of a Speaker 500:19:27Yes. We're really pleased with our leadership that we have here in market. And they've been aggressively going after our associate first strategy and reengaging local leaders both in Canada and the Americas. And that strategy is really I think starting to take hold and we're starting to develop some positive momentum that we're excited about. And that's going to really parlay into our Americas Europe Convention that's taking place here this next month in Las Vegas. Speaker 500:19:57We're really excited about that and many key initiatives that we're going to be launching in the second half of the year. So we're optimistic in the long term trajectory of the market. Speaker 700:20:08Okay. And then with regard to your gross margin actually in pretty much what I had projected. I'm just curious and it's really stable seemingly. What is it that is making the gross margin stable despite the sales declines on the top line? Like how are you managing to maintain that gross margin? Speaker 400:20:34Yes, I mean, we've had a host of things and there's a lot of things that go into the equation. 1, currency rates are operating against us. The non variable costs, we're seeing some pressure relative to a little bit softer top line. So all those things go into what you said. If you look dynamically at China, China has robust gross margins. Speaker 400:20:55They make up a little bit bigger share of the overall. We see some improvements there. But we've also seen the operations team procurement team do a good job in kind of managing the environment. So it really is a combination of a variety of things. There's a few risk factors there with currency, a little bit of softness on the top line. Speaker 400:21:13We do have a little bit of a mix dynamic relative to what we've seen as China has picked up a little bit. We see some improved gross margins just from there. And then I think just internal efforts to keep working on securing good prices and favorable outcomes factors in there as well. Speaker 700:21:34Okay. And then, I guess, just in a bigger one thing with the direct selling companies that I've been seeing over the years is a lot of times what the distributors want is like more training, more training and programs that can help them as well as their downlines know better how to sell the product and how to actually go about their business on a day to day basis. I don't really hear you talking much about training initiatives. Is there anything there that you think you need to focus on more? Or is it just not something that's relevant to your business? Speaker 500:22:14Linda, it's Brent here, and you're speaking music to our ears. I think you really hit it on the head there that part of that value proposition that we provide for our associate first strategy is not only providing a rewarding compensation opportunity. And of the to find success. A big part of that is training. It's a massive part and it really plays into their effectiveness and ability to go out and portray the message to the prospects that they have. Speaker 500:22:58So I would say the training takes up much of our commercial team's resources to figure out how we can deliver in a very compelling, short, concise package all the information that a new person would need in order to be successful right out of the gate. That's one of the primary objectives of our brand team that Jim mentioned is their sole focus is trying to figure out how to create a short, concise, compelling message in training material for our new sellers. And then as you go along the whole associate journey, once a person has been in for a certain period of time, their training needs change over time. And we continue to provide education, certification resources on our products, on the opportunity, really so that they can become their best self and their best customer so that they can present themselves in a very compelling way to all their prospects. Speaker 700:23:57Okay. Thank you. That's all for Speaker 200:24:01me. Thanks, Linda. Operator00:24:04The next question comes from the line of Doug Lane from Water Tower Research. Speaker 800:24:13Just looking at your revised guidance and trying to sort of back into some second half trends we can expect, I think the 2 things I'd just like to drill down on is, in my math, the sales is looking to be in the second half somewhere close to flat to down maybe mid single digits, which is obviously an improvement from the first half trend. So what drives you to believe that the trends will improve in the second half versus the first half? Speaker 400:24:44Yes. Doug, this is the alternative Doug, your alter ego here. I think a great deal kind of what Jim talked about with the commercial team and kind of what Brent's executing there and some of the things we see in the product pipeline, the innovation really is kind of what we outlined in those key strategic initiatives. One of the things that Brent has done and given direct to the team is this associate first and the effort and engagement to go back and get out and talk with them and just take any option we have to go back and engage with them is really a critical part about our business. And I think we really heard this in kind of loud tones coming out of COVID. Speaker 400:25:24And so to me, I think that's the number one thing. I think the timing and cadence of different promotional activity, as Brent said, we want to be smart. We want to do things that are value add to them and not overwhelm them. But we see some of the things that we have kind of planned and baked in are additive, but it is it's just one part of a kind of a broader approach and strategy. Jim, anything else there big picture? Speaker 200:25:48Yes. I mean, it's just it's a cadence on promotions, and we're going to address that some in the 3rd Q4. But it's really the strategy and getting the alignment there. And our like Doug talked about, our associate distributor first strategy and getting them the tools to be successful. Linda just talked about training. Speaker 200:26:08We didn't spend a lot of time on that, but that's probably one of the biggest jobs that our GMs across the world do is train and continue to support that distributor to find more consumers of our products. Speaker 800:26:21Okay. Thank you. That's helpful, Jim. And I guess in the second thing I want to focus on is the operating margin where you have you're advised to range, but not very much despite the sales shortfall. And again, according to my numbers, the first half operating margin was what 9.5%, 9.6%. Speaker 800:26:43And so you back into the second half, it's going to be below 9%. And I just wondered why despite the improving trends, although still possibly down sales, or the operating margin is going to be lower in the second half versus in the first half? Speaker 400:26:59Yes. I think it really is just the dynamic of seeing a softer top line, the loss of leverage and some of the infrastructure costs. We've definitely been selective in pairing back some infrastructure costs that we don't deem as adding value going forward and doing this other stuff. At the same time, we've been investing in the strategic initiatives that Jim outlined in his opening remarks and we'll continue to go back and invest in the future. And I would just say the strength in our balance sheet allows us to have that mentality and lean into things and lean into things efforts that we think will help grow the company. Speaker 400:27:33Okay. Speaker 800:27:33I mean that makes sense. If you up your investment, then hopefully your sales trends will improve. And just last thing on the tax rate. I know you talked about in your commentary, and I get it. But I just the tax rate has just shot up here in these last couple of years and into the now into the 40% range after forever being in the upper 20s, low 30s. Speaker 800:27:50So just what is different about USANA today that's driving that higher tax rate? Speaker 400:27:55I think just the dynamics from a tax book standpoint of where that income sits. That's the primary thing. I think we've had several years of currency adjustments on this other stuff. And with our concentration in the U. S. Speaker 400:28:08And our concentration of overhead here in the U. S, just the currency alone creates some operating leverage dynamics. And I think the softness in sales and where we're at and where many of the investments are happening on these strategic initiatives is still domestic here. I think there's some opportunity here, but there's nothing going to be kind of a real quick fix to that. And I think we're looking at things longer term to make sure we're making good decisions for the health of the company long term. Speaker 800:28:37Well, I mean, I know you're not giving guidance for next year in the out years, but just directionally, are we here to stay in the 40s? Or is there something you can do to get back into the 30s near term in the next year or 2? Speaker 400:28:48Well, as we go back and roll these strategic initiatives and execute much of what Brent and Walter and Jim's leadership is directing us to, I think that top line momentum will really help out. And we'll just see as we look to allocate some of the capital to different opportunities that may have an impact on how some of that stuff looks as well. Speaker 800:29:12Okay. Thanks, Doug. Operator00:29:16We currently have no questions in the queue. We have no further questions in the queue. So I will turn the call back over to your hosts for any closing remarks. Speaker 100:29:39Thank you, Jess, and thank you, everyone, for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at 801-954-7210. Operator00:29:56Thank you for joining today's call. You may now disconnect your line.Read morePowered by