USANA Health Sciences Reports Second Quarter 2024 Results

Rhea-AI Summary

USANA Health Sciences (NYSE: USNA) reported Q2 2024 financial results, with net sales of $213 million, down 11% from Q2 2023. Diluted EPS decreased 39% to $0.54. The company updated its fiscal year 2024 outlook, revising net sales to $850-$880 million (previously $850-$920 million) and diluted EPS to $2.40-$2.55 (previously $2.40-$3.00).

Key highlights include:

• Active customers: 468,000, down 4% year-over-year
• Asia Pacific net sales: $171 million, 80% of consolidated net sales
• Americas and Europe net sales: $42 million, 20% of consolidated net sales
• Cash and cash equivalents: $332 million, debt-free

The company cited ongoing macroeconomic pressures impacting consumer spending and challenges in attracting new customers as reasons for the lower-than-expected results.

Positive

• Strong cash position with $332 million in cash and cash equivalents
• Debt-free status maintained
• Generated $8 million in operating cash flow during Q2
• Implemented strategic changes to counter challenges, including restructuring commercial team and expanding into India

Negative

• Q2 net sales decreased 11% year-over-year to $213 million
• Diluted EPS declined 39% year-over-year to $0.54
• Active customers decreased 4% year-over-year to 468,000
• Lowered fiscal year 2024 outlook for net sales and EPS
• Ongoing macroeconomic pressures impacting consumer spending and sales momentum
• Strengthening U.S. dollar creating downward pressure on net sales and operating margin

Insights

Financial Analyst

USANA Health Sciences' second quarter results reveal several pertinent insights for investors. The 11% decline in net sales and a 39% drop in diluted EPS from Q2 2023 are significant concerns. These figures suggest that the company is struggling with both revenue generation and profitability, a trend that is particularly worrisome for long-term investors. Furthermore, the company's updated fiscal year outlook, reducing their net sales target to a range of $850 million to $880 million and EPS to $2.40 to $2.55, reflects their anticipation of continued challenges.

USANA has noted ongoing macroeconomic pressures and unfavorable currency exchange rates as key factors affecting their performance. While these external factors are somewhat out of the company's control, the decrease in active customers (down 4% year-over-year) is a red flag indicating potential issues with customer retention and acquisition strategies.

From a financial health perspective, the company remains strong with $332 million in cash and equivalents and no debt. However, the lack of share repurchases during the quarter could be interpreted as a cautious approach, possibly due to uncertainties about future performance. For a retail investor, this indicates that while the company is currently stable, the outlook is uncertain and thus, a more cautious stance on investment might be prudent.

Market Research Analyst

USANA's performance across different regions provides a nuanced view of their market position. The Asia Pacific region remains critical, contributing 80% of consolidated net sales. However, a 12% decline in this region's sales from Q2 2023 highlights substantial headwinds, particularly in Greater China and North Asia. With active customers in these regions either flat or declining, it appears that market saturation or competitive pressures may be impacting growth.

In contrast, the Americas and Europe region saw a smaller decline of 5% in net sales, but this region only contributes 20% to overall sales. This disparity suggests that while USANA may have a more stable market in the Americas and Europe, its over-reliance on Asia Pacific is a vulnerability.

Investors should monitor how USANA's strategic initiatives, like expanding into India and a renewed focus on product innovation, will play out. These moves could potentially mitigate some of the regional declines, but the execution and market response will be critical. For retail investors, the current regional performance indicates a cautious approach, emphasizing the need to watch for concrete results from these strategies before making investment decisions.

Tech Expert

The mention of product innovation by USANA is a critical point that shouldn't be overlooked. Innovation in the health sciences sector can often be a game-changer, driving new customer acquisition and retention. However, the details on what these innovations entail, their development stage, or how they differentiate from competitors are absent. Investors should be cautious as the impact of such initiatives is uncertain without further specifics.

USANA also plans to leverage technology for greater Associate engagement through events and a robust promotional calendar. While these efforts can enhance sales channels and customer relations, their success largely depends on execution and market reception. Investors should look for detailed updates in future reports to gauge the effectiveness of these initiatives.

From a tech perspective, any significant shift in product or service offerings driven by innovation could potentially provide a competitive edge, but as of now, the lack of detailed information makes it difficult to quantify potential impacts. For tech-savvy investors, staying updated on future announcements regarding product innovations and technological applications will be crucial.

SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal second quarter ended June 29, 2024.

Key Financial & Operating Results

• Second quarter net sales were $213 million versus $238 million during Q2 2023.
• Second quarter diluted EPS was $0.54 as compared with $0.89 during Q2 2023.
• Company updates fiscal year 2024 net sales and diluted EPS outlook to $850 million to $880 million and $2.40 to $2.55 (previously $850 million to $920 million and $2.40 to $3.00).

Q2 2024 Financial Performance

Consolidated Results
Net Sales	$213 million	-11% vs. Q2 2023
		-8% constant currency vs. Q2 2023
		-7% sequentially
		-6% constant currency sequentially
		-$5 million YOY FX impact, or -2%
Diluted EPS	$0.54	-39% vs. Q2 2023
		-37% sequentially
Active Customers	468,000	-4% vs. Q2 2023
		-5% sequentially

“Second quarter operating results were below our expectations,” said Jim Brown, President and Chief Executive Officer.

“Ongoing macroeconomic pressures in several of our key markets continue to impact consumer spending. This in turn creates challenges in our ability to attract and engage new customers and generate sales momentum. To counter these challenges, we have made several strategic changes in our business over the past few quarters, including (i) restructuring our commercial team, (ii) heightening our focus on product innovation, (iii) increasing our efforts to engage our sales leaders with an Associate-first approach, (iv) expanding into India, and (v) evaluating more business development activities.

“Next month, we will be hosting our Americas & Europe Convention in Las Vegas, Nevada along with other Associate engagement-focused events in the back half of the year. We are also planning to offer a more robust promotional calendar throughout the remainder of the year.”

Q2 2024 Regional Results:

Asia Pacific Region
Net Sales	$171 million	-12% vs. Q2 2023
		-9% constant currency vs. Q2 2023
		-8% sequentially
		80% of consolidated net sales
Active Customers	369,000	-4% vs. Q2 2023
		-7% sequentially
Asia Pacific Sub-Regions
Greater China
Net Sales	$116 million	-10% vs. Q2 2023
		-8% constant currency vs. Q2 2023
		-9% sequentially
Active Customers	250,000	Flat vs. Q2 2023
		-9% sequentially
North Asia
Net Sales	$20 million	-23% vs. Q2 2023
		-19% constant currency vs. Q2 2023
		-8% sequentially
Active Customers	42,000	-18% vs. Q2 2023
		-7% sequentially
Southeast Asia Pacific
Net Sales	$35 million	-10% vs. Q2 2023
		-7% constant currency vs. Q2 2023
		-2% sequentially
Active Customers	77,000	-6% vs. Q2 2023
		+1% sequentially

Americas and Europe Region
Net Sales	$42 million	-5% vs. Q2 2023
		-5% constant currency vs. Q2 2023
		-1% sequentially
		20% of consolidated net sales
Active Customers	99,000	-4% vs. Q2 2023
		Flat sequentially

Balance Sheet and Share Repurchase Activity

The Company generated $8 million in operating cash flow during second quarter and ended the quarter with $332 million in cash and cash equivalents while remaining debt-free. The Company did not repurchase any shares during the quarter. As of June 29, 2024, the Company had approximately $62 million remaining under the current share repurchase authorization.

Fiscal Year 2024 Outlook

The Company is updating its net sales and earnings per share outlook for fiscal year 2024, as follows:

Fiscal Year 2024 Outlook
	Revised Range	Previous Range
Consolidated Net Sales	$850 - $880 million	$850 - $920 million
Diluted EPS	$2.40 - $2.55	$2.40 - $3.00

“While we anticipated lower sequential operating results following a successful promotional period in the first quarter, lower than anticipated active customer counts negatively impacted our second quarter results,” said Doug Hekking, Chief Financial Officer. “Additionally, the strengthening of the U.S. dollar created downward pressure on both net sales and operating margin during the quarter.”

Mr. Hekking continued, “We are revising our fiscal 2024 outlook to reflect year-to-date operating results, our expectation for a continued challenging operating environment across many of our markets, higher than anticipated unfavorable currency exchange rate impact on operating results, and an increased effective tax rate. We recognize the need to continue investing in strategic initiatives while also aligning costs with sales performance. Our balance sheet remains strong with $332 million of cash, zero debt, and we continue to generate solid cash flow.”

Management Commentary Document and Conference Call

For further information on the USANA’s operating results, please see the Management Commentary document, which has been posted on the Company’s website (http://ir.usana.com) under the Investor Relations section. USANA’s management team will hold a conference call and webcast to discuss today’s announcement with investors on Wednesday, July 24, 2024 at 11:00 AM Eastern Time. Investors may listen to the call by accessing USANA’s website at http://ir.usana.com. The call will consist of brief opening remarks by the Company’s management team, followed by a questions and answers session.

Non-GAAP Financial Measures

The Company prepares its financial statements using U.S. generally accepted accounting principles (“GAAP”). Constant currency net sales, earnings, EPS and other currency-related financial information (collectively, “Financial Results”) are non-GAAP financial measures that remove the impact of fluctuations in foreign-currency exchange rates (“FX”) and help facilitate period-to-period comparisons of the Company’s Financial Results that we believe provide investors an additional perspective on trends and underlying business results. Constant currency Financial Results are calculated by translating the current period's Financial Results at the same average exchange rates in effect during the applicable prior-year period and then comparing this amount to the prior-year period's Financial Results.

About USANA

USANA develops and manufactures high-quality nutritional supplements, functional foods and personal care products that are sold directly to Associates and Preferred Customers throughout the United States, Canada, Australia, New Zealand, Hong Kong, China, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, the United Kingdom, Thailand, France, Belgium, Colombia, Indonesia, Germany, Spain, Romania, Italy, and India. More information on USANA can be found at www.usana.com.

Safe Harbor

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Our actual results could differ materially from those projected in these forward-looking statements, which involve a number of risks and uncertainties, including: global economic conditions generally, including continued inflationary pressure around the world and negative impact on our operating costs, consumer demand and consumer behavior in general; reliance upon our network of independent Associates; risk associated with governmental regulation of our products, manufacturing and direct selling business model in the United States, China and other key markets; potential negative effects of deteriorating foreign and/or trade relations between or among the United States, China and other key markets; potential negative effects from geopolitical relations and conflicts around the world, including the Russia-Ukraine conflict and the conflict in Israel; compliance with data privacy and security laws and regulations in our markets around the world; potential negative effects of material breaches of our information technology systems to the extent we experience a material breach; material failures of our information technology systems; adverse publicity risks globally; risks associated with commencing operations in India and future international expansion and operations; uncertainty relating to the fluctuation in U.S. and other international currencies; and the potential for a resurgence of COVID-19, or another pandemic, in any of our markets in the future and any related impact on consumer health, domestic and world economies, including any negative impact on discretionary spending, consumer demand, and consumer behavior in general. The contents of this release should be considered in conjunction with the risk factors, warnings, and cautionary statements that are contained in our most recent filings with the Securities and Exchange Commission. The forward-looking statements in this press release set forth our beliefs as of the date hereof. We do not undertake any obligation to update any forward-looking statement after the date hereof or to conform such statements to actual results or changes in the Company’s expectations, except as required by law.

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
		Quarter Ended
		June 29, 2024				July 1, 2023
Net sales		$	212,869			$	238,202
Cost of sales			40,333				43,326
Gross profit			172,536				194,876
Operating expenses:
Associate incentives			90,371				102,380
Selling, general and administrative			64,325				68,096
Total operating expenses			154,696				170,476
Earnings from operations			17,840				24,400
Other income (expense):
Interest income			2,763				2,224
Interest expense			(51	)			(43	)
Other, net			(349	)			229
Other income (expense), net			2,363				2,410
Earnings before income taxes			20,203				26,810
Income taxes			9,771				9,518
Net earnings		$	10,432			$	17,292
Earnings per common share
Basic		$	0.55			$	0.89
Diluted		$	0.54			$	0.89
Weighted average common shares outstanding
Basic			19,073				19,321
Diluted			19,159				19,427

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
		As of June 29, 2024			As of December 30, 2023
ASSETS
Current assets
Cash and cash equivalents		$	332,423		$	330,420
Inventories			61,832			61,454
Prepaid expenses and other current assets			24,826			25,872
Total current assets			419,081			417,746
Property and equipment, net			97,686			99,814
Goodwill			16,837			17,102
Intangible assets, net			28,637			29,919
Deferred tax assets			18,190			13,284
Other assets*			50,988			54,892
Total assets		$	631,419		$	632,757
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	6,648		$	10,070
Line of credit - short term			—			786
Other current liabilities			97,248			107,989
Total current liabilities			103,896			118,845
Deferred tax liabilities			4,653			4,552
Other long-term liabilities			10,662			12,158
Stockholders' equity			512,208			497,202
Total liabilities and stockholders' equity		$	631,419		$	632,757

*Other assets include noncurrent inventories of $3,075 and $3,128 as of 29-Jun-24 and 30-Dec-23, respectively. Total inventories were $64,907 and $64,582 as of 29-Jun-24 and 30-Dec-23, respectively.

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES SALES BY REGION (in thousands) (unaudited)
		Quarter Ended												Change from prior year				Percent change			Currency impact on sales				% change excluding currency impact
		June 29, 2024						July 1, 2023
Asia Pacific
Greater China		$	115,513		54.3	%		$	128,749		54.1	%		$	(13,236	)		(10.3	%)		$	(3,085	)		(7.9	%)
Southeast Asia Pacific			35,402		16.6	%		$	39,337		16.5	%			(3,935	)		(10.0	%)			(1,221	)		(6.9	%)
North Asia			19,710		9.3	%		$	25,529		10.7	%			(5,819	)		(22.8	%)			(870	)		(19.4	%)
Asia Pacific Total			170,625		80.2	%			193,615		81.3	%			(22,990	)		(11.9	%)			(5,176	)		(9.2	%)
Americas and Europe			42,244		19.8	%			44,587		18.7	%			(2,343	)		(5.3	%)			(94	)		(5.0	%)
		$	212,869		100.0	%		$	238,202		100.0	%		$	(25,333	)		(10.6	%)		$	(5,270	)		(8.4	%)

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES ACTIVE ASSOCIATES AND ACTIVE PREFERRED CUSTOMERS BY REGION (unaudited)
	Active Associates by Region(1)
	(unaudited)
	As of June 29, 2024					As of July 1, 2023
Asia Pacific:
Greater China	68,000		35.2	%		71,000		34.1	%
Southeast Asia Pacific	52,000		27.0	%		57,000		27.4	%
North Asia	28,000		14.5	%		33,000		15.9	%
Asia Pacific Total	148,000		76.7	%		161,000		77.4	%
Americas and Europe	45,000		23.3	%		47,000		22.6	%
	193,000		100.0	%		208,000		100.0	%

	Active Preferred Customers by Region(2)
	(unaudited)
	As of June 29, 2024					As of July 1, 2023
Asia Pacific:
Greater China	182,000		66.2	%		180,000		64.5	%
Southeast Asia Pacific	25,000		9.1	%		25,000		9.0	%
North Asia	14,000		5.1	%		18,000		6.4	%
Asia Pacific Total	221,000		80.4	%		223,000		79.9	%
Americas and Europe	54,000		19.6	%		56,000		20.1	%
	275,000		100.0	%		279,000		100.0	%

(1) Associates are independent distributors of our products who also purchase our products for their personal use. We only count as active those Associates who have purchased from us any time during the most recent three-month period, either for personal use or resale.

(2) Preferred Customers purchase our products strictly for their personal use and are not permitted to resell or to distribute the products. We only count as active those Preferred Customers who have purchased from us any time during the most recent three-month period. China utilizes a Preferred Customer program that has been implemented specifically for that market.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240723833865/en/

Investor contact:

Andrew Masuda

Investor Relations

(801) 954-7201

investor.relations@usanainc.com

Media contact:

Amy Haran

Public Relations

(801) 954-7280

Source: USANA Health Sciences, Inc.

FAQ

What were USANA's Q2 2024 financial results?

USANA reported Q2 2024 net sales of $213 million, down 11% from Q2 2023, and diluted EPS of $0.54, down 39% year-over-year.

How has USANA updated its fiscal year 2024 outlook?

USANA revised its fiscal year 2024 outlook, projecting net sales of $850-$880 million (previously $850-$920 million) and diluted EPS of $2.40-$2.55 (previously $2.40-$3.00).

What is USANA's current cash position as of Q2 2024?

As of June 29, 2024, USANA had $332 million in cash and cash equivalents and remained debt-free.

How many active customers did USANA have in Q2 2024?

USANA reported 468,000 active customers in Q2 2024, a 4% decrease compared to Q2 2023.

What strategic changes has USANA implemented to address current challenges?

USANA has restructured its commercial team, focused on product innovation, increased efforts to engage sales leaders, expanded into India, and is evaluating more business development activities.