USANA HEALTH SCIENCES INC Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• USANA had a solid start to the year with first quarter results in line with internal expectations.
• Executed Associate first strategy with leadership events across various markets, including a strong attendance at the China National Sales Meeting in Nanjing where new products were introduced.
• Expanded product offering in several markets during the first quarter and has new product launches planned for the second-half of the year.
• Addressed tariff impact by proactively building inventory over several quarters and exploring alternative sourcing relationships to mitigate tariff exposure.

Segment Performance:

• Direct Selling: Consolidated net sales grew 12% year-over-year in constant currency, including Hiya's first full quarter contribution. Sequential net sales and active customers in the direct selling business grew modestly for the second consecutive quarter. In Mainland China, sequential first quarter net sales grew 6% and active customers grew 4%.
• Hiya: The team continued to deliver robust results with strong growth in net sales and active monthly subscribers. Kids Daily Greens, launched in Q3 2024, sold higher than expected. Revenue contribution % not explicitly stated but Hiya is a new segment with growing performance.

Guidance:

• Direct selling business remains on track to meet the sales guidance range provided at the beginning of the year.
• Hiya plans meaningful new product launches throughout the year, including a significant launch of a new relationship in early May, focusing on children's health and wellness and broadening the product offering.

Risks:

• Uncertainty related to trade policies and tariffs, which remain highly uncertain. Exposure to tariffs on certain raw materials sourced from around the globe, though steps have been taken to build inventory to mitigate impact.

Q: China and South Korea posted net sales and active customer count increases on a sequential basis. What are the plans for additional incentives in these countries?

A: Brent Neidig said China had good quarter helped by product promotions before Chinese New Year, and they are always evaluating promotions with plans for promotional incentives throughout the year. Korea also had good first quarter, and there was a strong event in China with 13,000 attendees.

Q: With respect to Hiya, can you share more specifics about new product launches planned for this year?

A: Doug Hekking said timing of new product launches will happen systematically over the year, with a meaningful launch of a new relationship in early May, focusing on product innovation and broadening the offering for children's health and wellness.

Q: Now that you've had Hiya for four months, any updated thoughts on synergy opportunities?

A: Walter Noot said there are synergies, with collaboration on IT and operational aspects, but taking a measured approach to not overwhelm Hiya's team.

Q: Update on India's progress?

A: Brent Neidig said India is a promising market with high expectations, slow roll but Chief Sales officer is there meeting leaders, and plans in place with optimism for growth.

Q: Regarding potential tariff impact, how long will the higher inventory of raw materials last?

A: Walter Noot said they built up raw material inventory, especially for nutritional products, starting in February, with 6% of raw materials coming from China, and the inventory is built to prepare for tariffs but impact isn't as bad due to previous work on multiple sourcing.