USANA HEALTH SCIENCES INC Q2 FY2025 earnings call

Strategic Initiatives - Changed terminology from associates to brand partners to reflect a more strategic relationship. - Reorganized commercial team to focus on delivering best-in-class products, simple income opportunity, and compelling messaging. - Modernizing compensation plan with enhancements to attract new entrepreneurs and reward existing brand partners, with more incentives rolling out in Q3. - Launched new tools in back office and mobile for brand partners to grow business. - Refined brand messaging with clear differentiators. - Enhanced in-person meeting strategy for global convention. ### Acquired Businesses - Hiya: Strong quarter with top line growth, improved profitability, launched Disney partnerships, ongoing integration with focus on synergy and efficiency in logistics and manufacturing. - Rise Bar: Double-digit top line growth in Q2, with focus on expanding product offerings and retail partnerships. ### Upcoming Investments - Significant investments in Q3 for global convention, new products, and compensation plan changes, expected to pressure operating margin in Q3.

Consolidated net sales grew 11% year-over-year. Adjusted earnings per share increased 36% from the prior year. The direct sales business contributed to these results. The acquired business Hiya had strong second quarter top line growth with improved profitability and launched new Disney partnerships. Rise Bar, acquired in 2022, delivered strong double-digit top line growth in Q2. Hiya's revenue contribution is part of the overall consolidated sales, while Rise Bar, though smaller, shows positive momentum.

- Confident in fiscal 2025 outlook. - Investments in Q3 (convention, products, compensation) are included in annual guidance and expected to create short-term pressure on operating margin in Q3. - Hiya's growth outlook remains positive with plans to expand product offering, distribution channels, and geographic footprint.

• Tariff uncertainties impacting the business, though impact so far has been minimal. - Short-term pressure on operating margin due to Q3 investments. - Uncertainty related to economic and operating environment affecting results.

Q: First, starting off with China. So your sales in your largest market outperformed our expectations even with a drop in active customers. What are you seeing there?

A: Brent Neidig mentioned tariff activity led to consumer buy-up, optimism in Chinese market long-term, and brand partners' cohesion despite economic uncertainty.

Q: And then just looking at your overall active customer count, how much do you think was macro-driven versus some of it was because of the upcoming changes in the compensation programs?

A: Brent Neidig said some decline in active customers was due to brand partners' reservation about new compensation program, but optimistic trend will turn around in Q3 as new incentives roll out.

Q: Can you just provide an example of how a new brand partner would be compensated under the new incentive program compared to the legacy incentive program?

A: Brent Neidig explained new program brings money forward in new brand partner's journey, allowing immediate income from sales to new customers/partners.

Q: Can you speak to the impact of tariffs that you think you've had on your business in the quarter? And kind of how you're thinking about that for the balance of the year?

A: Doug Hekking said impact so far minimal, operations team ahead with sourcing strategy, will evaluate and update on tariff impact.

Q: As far as Hiya's second quarter sales results, can you give a frame of reference as to how that compares to the year ago as far as the growth level there?

A: Walter Noot said Hiya had significant growth YOY, expected August to be big with Disney Princess products.

Q: On the new brand partner concept, what kind of tools or infrastructure are you focusing on or building?

A: Brent Neidig talked about enhanced IT infrastructure with data-driven tools, predictive insights, and evaluating social media tools.

Q: On RFK's Make America Healthy initiative, what opportunities does it give you?

A: Doug Hekking, Brent Neidig, and Walter Noot discussed Hiya's focus on clean natural products for kids aligning with trend, and internal team's agility to respond to trends.