Nature's Sunshine Products Q1 Earnings Call Highlights

Key Points

• Very strong Q1: Net sales were $122.9 million (up 9% year-over-year) and adjusted EBITDA rose 33% to $14.6 million, with gross margin improving 116 basis points to 73.2%.
• Growth was driven by digital and subscription autoship adoption—North America digital sales rose 42% and autoship accounted for 48% of website sales, while China’s autoship went from near zero to >25% of revenue—supported by expanding independent consultants globally.
• Management reiterated 2026 guidance of $500–$515M in net sales and $50–$54M in adjusted EBITDA, but said near‑term EBITDA growth will be moderated as the company ramps investments toward its long‑term "Vision for Growth" to double sales to $1B and reach a 15% EBITDA margin.

Nature's Sunshine Products NASDAQ: NATR reported what management called a “very strong” start to 2026, highlighting first-quarter sales growth of 9% and adjusted EBITDA growth of 33% as the company continued to push deeper into digital channels and subscription programs while expanding its consultant base globally.

CEO Ken Romanzi said the quarter reflected “continued momentum across our key strategic initiatives,” pointing to sales growth across all regions and strength in North America driven by the company’s digital channel strategy and “strong engagement from both new and returning customers.” Romanzi added that an increase in active consultants “across the globe also drove solid growth.”

First-quarter results and profitability trends

CFO Shane Jones said first-quarter net sales were $122.9 million, “our strongest first quarter in company history and our third-largest quarter ever.” The figure represented a 9% increase from the year-ago period, or 7% growth excluding foreign exchange impacts.

Profitability improved alongside higher sales. Gross margin increased 116 basis points to 73.2% from 72.1% a year earlier. Jones attributed the improvement to ongoing gross margin initiatives and favorable market mix, including renegotiated logistics contracts, manufacturing efficiency efforts, improved sourcing, and “more disciplined pricing.” He said the company still anticipates “continued modest improvement” in gross margin, with 2026 gross margins “likely to average around 73%.”

Operating income rose 53% to $9.5 million, or 7.8% of net sales, compared with $6.2 million, or 5.4% of net sales, in the prior-year quarter. GAAP net income attributable to common shareholders was $5.1 million, or $0.28 per diluted share, up from $4.7 million, or $0.25 per diluted share, a year earlier. Adjusted EBITDA increased to $14.6 million from $11.0 million.

SG&A expenses were $43.5 million, up from $40.6 million. As a percentage of net sales, SG&A was 35.4% compared to 35.8% in the year-ago quarter. Jones said the increase primarily reflected variable costs tied to higher sales and compensation costs. While first-quarter spending came in below the quarterly SG&A range previously communicated due to timing, Jones said the company expects quarterly SG&A of $45 million to $47 million for the rest of 2026 as strategic investments ramp.

Regional performance driven by digital, autoship, and consultant growth

Jones said the company posted constant-currency growth “across all our business units, North America, Asia, Europe, and Latin America,” supported by digital expansion, adoption of subscription autoship, new customer acquisition, and engagement with independent consultants.

North America: Sales increased 9% year-over-year to $38.3 million, which Jones called the company’s “best growth in over 5 years.” Digital sales rose 42% in the quarter, driven by customer acquisition and subscription autoship adoption. Jones said new digital customers increased 60% in Q1, and autoship represented 48% of digital sales through the company’s website. He also pointed to “triple digits year-over-year” growth in social commerce, noting autoship in that channel—launched in the second half of last year—already accounted for 23% of social commerce revenue. Given momentum, Jones said the company expects “continued mid to high single-digit revenue growth in North America throughout 2026.”

Asia Pacific: Sales grew 7% year-over-year to $52.2 million, or 6% on a constant-currency basis. Excluding FX impacts, Jones said sales rose 40% in China, 16% in Japan, and 14% in Korea. He attributed the turnaround in China to autoship adoption—growing from “nothing at this time last year to more than 25% of total revenue today”—and a double-digit increase in independent consultants, plus field activation efforts during the quarter. However, he cautioned that China’s 40% growth rate in Q1 is “unlikely to be repeated in the coming quarter.” In Japan and Korea, Jones said results were driven by the launch of L’amara skincare products and increases in independent consultants.

Europe: Sales rose 9% to $26.4 million, or 6% on a constant-currency basis, led by 11% growth in Eastern Europe in local currency terms. Jones said improved product availability and “appropriate in-stock levels” supported growth, alongside strong execution by independent consultants and “some economic stabilization in the region,” despite the ongoing war. He said the company expects “continued mid-single-digit growth in Europe” for the remainder of 2026.

Jones added that the company continues to monitor geopolitical tensions in Ukraine for potential impacts on inflation and consumer behavior, though he said “consumer demand remains strong” so far.

Balance sheet, cash flow, and capital allocation

Jones said the company ended the quarter with $87.6 million in cash and cash equivalents and “zero debt.” Inventory declined to $67.1 million, down $1.2 million from the end of Q4, though Jones said the company expects a “moderate increase” in inventory during 2026 to support demand and maintain in-stock levels.

Net cash used in operating activities was $1.8 million, compared with $2.6 million provided in the prior-year period. The company also repurchased 20,000 shares for approximately $0.5 million at an average price of $24.54 per share, with $16.9 million remaining under its repurchase authorization.

Guidance reiterated as investments ramp

Jones reiterated the company’s prior full-year outlook, calling for 2026 net sales of $500 million to $515 million, compared to $480 million in 2025, implying growth of 4% to 7%. Adjusted EBITDA guidance remained $50 million to $54 million, representing expected growth of 1% to 9%.

Jones said the outlook reflects a “cautious stance” on potential impacts of the Ukraine conflict on demand and costs, and also incorporates investments to improve technology infrastructure, drive customer acquisition, support geographic expansion, expand penetration in existing markets, and accelerate product innovation. He said those investments are expected to ramp in Q2 and Q3, “temporarily reducing the double-digit EBITDA growth rate seen historically and in Q1, 2026,” as the company positions for “sustained rapid growth in 2027 and beyond.”

Long-term “Vision for Growth” and margin framework

Romanzi outlined what he called the company’s “Vision for Growth,” with long-term goals of doubling sales to $1 billion and achieving a 15% EBITDA margin “over time.” He listed several initiatives supporting the plan, including continued expansion of digital, exploring select U.S. brick-and-mortar retail distribution in a way that complements existing channels, deeper penetration in direct selling markets such as the U.S. and China, and expansion into new markets.

Romanzi said the company expects to enter Germany this year, describing it as “our largest new market that we've entered since China in 2016, and the largest supplement market in Europe.” He also said the company plans to expand to additional Asian markets using its “Synergy Asia sales system,” while driving growth through “sharper brand positioning and product innovation” and leveraging supply chain scale, including automation investments.

During Q&A, Jones offered a breakdown of how management expects to move toward the 15% EBITDA margin target. From the company’s current level “a little over 10%,” he described “three blocks” of improvement:

• About 1 point from gross margin improvement, including benefits from scale and higher utilization of the manufacturing plant;
• About 2 points from lower volume incentives as the business mix shifts toward digital channels with lower commission expense;
• About 2 points from SG&A leverage as revenue grows, which Jones said is “not reducing headcount” but leveraging existing costs.

Management also discussed the recent appointment of a chief technology officer, which Romanzi linked to broader investments across IT infrastructure, digital growth, AI, and digital tools for independent consultants. Romanzi cited a newly launched app that allows consultants to run their business by phone and said the company sees additional opportunities to enhance those capabilities.

Looking ahead on product activity, Romanzi said Nature’s Sunshine is the brand used in the U.S., Latin America, Europe, and China, while Synergy is used across much of Asia-Pacific outside China. He also previewed a coming “Pan-Asian launch” of the same product across Korea, Japan, and Taiwan at the same time, though he declined to specify the product ahead of launch.

About Nature's Sunshine Products NASDAQ: NATR

Nature’s Sunshine Products, Inc is a global manufacturer and direct seller of nutritional supplements, herbal remedies, and personal care products. The company’s core business centers on research, development and distribution of vitamins, minerals, botanicals and essential oil-based formulations designed to support overall health and wellness. Operating under a network-marketing model, Nature’s Sunshine works through a network of independent distributors who promote and sell its product line directly to consumers.

The company’s product portfolio spans dietary supplements such as single-ingredient vitamins, proprietary herbal blends, sports nutrition formulas and weight-management solutions, along with skin and hair care items based on botanical extracts and essential oils.

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