USANA HEALTH SCIENCES INC Q3 FY2025 earnings call

• Commercial strategy: Executing comprehensive commercial strategy with enhanced compensation plan focusing on share, grow, lead to help Brand Partners succeed. Includes simplicity, early earnings potential, and pay-for-performance.
• Product innovation: New product introductions, in-house production for venture companies to improve margins, control inventory, and mitigate supply chain risk.
• Hiya updates: Made progress on ERP system implementation, logistics transition to new partner, and planned in-house manufacturing of products to improve margins, with double-digit sales growth expected in 2025.
• Rise Bar: Record third quarter net sales, year-to-date increase of 169%, with channel expansion and new products contributing to future growth.
• Cost reduction: Initiated global cost reduction process including rightsizing workforce, expecting an estimated $4.7 million onetime charge in Q4.

The company has three main segments. The direct selling segment saw third quarter results impacted by softer sales and Brand Partner productivity before the Global Convention in August, but recent activity is encouraging. The direct selling commercial strategy includes an enhanced compensation plan. Hiya has delivered 26% year-to-date sales growth, with progress on integration initiatives like ERP implementation, logistics transition, and planned in-house manufacturing, expected to generate double-digit sales growth for full 2025. Rise Bar reported record third quarter net sales and 169% year-to-date net sales increase, still a small percentage of the sales portfolio but showing progress in channel expansion and new products.

• Hiya is expected to generate double-digit sales growth for the full 2025.
• Continues to look for strategic opportunities to provide incentives for Brand Partners, with Q4 incentives possibly spilling into early 2026.
• Diversification strategy with consideration of M&A or internal expansion opportunities to make USANA stronger and more diversified.

• Third quarter results impacted by softer sales and Brand Partner productivity leading up to Global Convention in August.
• Uncertainty in economic and operating environment could cause actual results to differ from forward-looking statements.
• Dependence on successful execution of the enhanced compensation plan rollout and its impact on business trends.

Q: Anthony Lebiedzinski asks about the trajectory of business trends from July through October, region performance, Q4 incentives, and Hiya active customers.

A: Brent Neidig says there's promising trends from the new compensation plan launched in July, with more engagement, especially in mature markets like the US. Jim Brown mentions the slowdown was due to people absorbing new info and picked up after the Global Convention. Doug Hekking provides context on information rollout taking time. On Q4 incentives, Brent Neidig says there are planned incentives spilling into early 2026. Walter Noot talks about Hiya's slowdown due to Meta algorithm changes but expects it to bounce back.

Q: Susan Anderson asks about Hiya efficiencies, industry slowdown, and future DTC strategy.

A: Walter Noot discusses Hiya's in-house manufacturing plans, logistics transition improving efficiency. Jim Brown talks about the direct selling business struggling post-COVID but setting up for the future with their new offering. Doug Hekking mentions the commercial strategy as top priority and evaluating diversification opportunities.

Q: Ivan Feinseth asks about magnesium formulations and RFK's Make America Healthy initiative.

A: Kathryn Armstrong talks about magnesium data being confusing but USANA prioritizing science. Jim Brown says the RFK initiative is a tailwind for the industry and helps USANA as it aligns with the importance of supplements in diet.