USANA Health Sciences Reports Second Quarter Results

Rhea-AI Summary

USANA Health Sciences (NYSE: USNA) reported Q2 2022 net sales of $264 million, down 21% year-over-year, while diluted EPS was $1.00, a 47% decline from $1.87 in Q2 2021. Active customers decreased by 14% year-over-year to 559,000. The company reaffirmed its fiscal 2022 outlook with net sales projected between $1.015 billion and $1.065 billion and EPS between $3.85 and $4.45. CEO Kevin Guest cited ongoing COVID-related disruptions as a key factor for these results, particularly impacting sales programs in China.

Positive

• None.

Negative

• Q2 2022 net sales fell 21% year-over-year to $264 million.
• Q2 2022 diluted EPS decreased 47% to $1.00 compared to previous year.
• Active customers declined 14% year-over-year, indicating reduced engagement.
• COVID-related disruptions significantly affected sales performance in key markets.

SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal second quarter ended July 2, 2022.

Key Financial & Operating Results

• Second quarter net sales were $264 million as compared with $337 million during the second quarter of the prior year.
• Second quarter diluted EPS totaled $1.00 versus $1.87 during the second quarter of 2021.
• Company reiterates fiscal 2022 net sales and diluted EPS outlook of $1.015 billion to $1.065 billion and $3.85 to $4.45, respectively.

Q2 2022 Financial Performance

Consolidated Results
Net Sales	$264 million	-21% vs. prior-year quarter -18% constant currency vs. prior-year quarter -$10.9 million YOY FX impact, or -3% Flat sequentially in constant currency
Diluted EPS	$1.00	-47% vs. prior-year quarter -13% sequentially Diluted shares of 19.2 million, -6% year-over-year
Active Customers	559,000	-14% vs. prior-year quarter +1% sequentially

“As indicated in our preliminary results release on July 6th, we continue to experience COVID-related disruptions in several key markets, including mainland China. This caused participation in sales programs, Active Customer counts, and financial performance to come in lower than anticipated,” said Kevin Guest, Chief Executive Officer and Chairman of the Board. “Although many of these disruptions were outside of our control, and while we faced a tough year-over year comparable due to the timing of a successful sales program in 2021, our second quarter results were not up to our standards. Nevertheless, we remain committed to our business strategy which we believe will deliver sustained, long-term growth in customer counts, net sales, and EPS. Important elements of this strategy include (1) enhancing digital experience for our customers to improve the overall online shopping experience; (2) improving Associate onboarding and training to help drive and sustain customer growth; (3) exploring additional promotions and incentives on a market-specific basis; (4) launching experience centers in mainland China to promote growth in this key market; and (5) pursuing accretive business development opportunities.

"During the quarter, we streamlined our Associate onboarding program and provided Associates with additional tools to help them more efficiently and effectively setup and operate their businesses. Our team also launched improvements to our China shopping app to further improve the online shopping experience in that market. Although it takes time to recapture momentum, we are confident these strategies will deliver long-term growth.”

Q2 2022 Regional Results:

Asia Pacific Region
Net Sales	$217 million	-22% vs. prior-year quarter -18% constant currency vs. prior-year quarter +3% constant currency sequentially 82% of consolidated net sales
Active Customers	438,000	-15% vs. prior-year quarter +4% sequentially
Asia Pacific Sub-Regions
Greater China
Net Sales	$141 million	-15% vs. prior-year quarter -13% constant currency vs. prior-year quarter
Active Customers	278,000	-8% vs. prior-year quarter +9% sequentially
North Asia
Net Sales	$29 million	-23% vs. prior-year quarter -13% constant currency vs. prior-year quarter
Active Customers	57,000	-14% vs. prior-year quarter Flat sequentially
Southeast Asia Pacific
Net Sales	$48 million	-37% vs. prior-year quarter -33% constant currency vs. prior-year quarter
Active Customers	103,000	-29% vs. prior-year quarter -6% sequentially

Americas and Europe Region
Net Sales	$47 million	-19% vs. prior-year quarter -17% constant currency vs. prior-year quarter -13% constant currency sequentially 18% of consolidated net sales
Active Customers	121,000	-13% vs. prior-year quarter -7 % sequentially

Balance Sheet and Share Repurchase Activity

The Company ended the quarter with $230 million in cash and cash equivalents and did not repurchase any shares during the quarter. As of July 2, 2022, the Company had approximately $83 million remaining under the share repurchase authorization.

Fiscal 2022 Outlook

The Company is reiterating its net sales and earnings per share outlook for fiscal year 2022, which was updated on July 6, 2022.

Fiscal Year 2022 Outlook
	Range
Consolidated Net Sales	$1.015 - $1.065 billion
Diluted EPS	$3.85 - $4.45

Doug Hekking, Chief Financial Officer, said, “While we remain optimistic that our strategies will generate future growth, we believe we will continue to face a challenging operating environment in the second half of the year. Moreover, we will do so with a lower-than-anticipated Active Customer base, which will impact our top and bottom-line results for the period. Although COVID-related disruptions and inflationary pressures remain difficult, we remain steadfast in pursing investments to deliver on our business objectives. We will also continue to align our cost structure with sales performance. Despite a challenging operating environment, our debt-free balance sheet remains healthy, and we are on pace to generate meaningful cash flow for the year.”

Management Commentary Document and Conference Call

For more 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 27, 2022 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, and Italy. 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: uncertainty related to the magnitude, scope and duration of the impact of the COVID-19 pandemic (“COVID-19”) to our business, operations and financial results; the further spread of, and regulatory measures or voluntary actions that may be put in place to limit the spread of, COVID-19 in the markets where we operate, including restrictions on business operations, shelter at home, or social distancing requirements; the potential for a resurgence of COVID-19 spread in any of our markets in the future; the impact of COVID-19 on the domestic and world economies, including any negative impact on discretionary spending, consumer demand, and consumer behavior in general; regulatory risk in China in connection with the health products and direct selling business models; regulatory risk in the United States in connection with the direct selling business model; potential negative effects of deteriorating foreign and/or trade relations between the United States and China; potential negative effects from geopolitical relations and conflicts, including the Russia-Ukraine conflict; 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; global economic conditions generally, including increasing inflationary pressure around the world and any 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; adverse publicity risks globally; risks associated with our international expansion and operations; and uncertainty relating to the fluctuation in U.S. and other international currencies. 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.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
		Quarter Ended							Six Months Ended
		2-Jul-22				3-Jul-21			2-Jul-22			3-Jul-21
Net sales		$	264,474			$	336,837		$	537,341		$	644,813
Cost of sales			49,517				57,014			100,900			114,665
Gross profit			214,957				279,823			436,441			530,148
Operating expenses:
Associate incentives			119,204				153,863			238,824			288,358
Selling, general and administrative			66,387				72,240			135,184			143,873
Earnings from operations			29,366				53,720			62,433			97,917
Other income (expense), net			(58	)			590			162			729
Earnings before income taxes			29,308				54,310			62,595			98,646
Income taxes			10,151				16,076			20,969			29,791
NET EARNINGS		$	19,157			$	38,234		$	41,626		$	68,855
Earnings per share - diluted		$	1.00			$	1.87		$	2.15		$	3.31
Weighted average shares outstanding - diluted			19,244				20,446			19,362			20,771

USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
		As of			As of
		2-Jul-22			1-Jan-22
ASSETS
Current Assets
Cash and cash equivalents		$	230,370		$	239,832
Inventories			84,171			98,318
Prepaid expenses and other current assets			27,536			26,967
Total current assets			342,077			365,117
Property and equipment, net			97,827			101,780
Goodwill			17,402			17,668
Intangible assets, net			34,371			30,442
Deferred tax assets			11,265			4,839
Other assets			55,017			57,894
Total assets		$	557,959		$	577,740
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable		$	10,175		$	13,508
Other current liabilities			123,419			147,282
Total current liabilities			133,594			160,790
Deferred tax liabilities			5,142			7,497
Other long-term liabilities			15,542			14,329
Stockholders' equity			403,681			395,124
Total liabilities and stockholders' equity		$	557,959		$	577,740

USANA Health Sciences, Inc.
Sales by Region
(In thousands)
(Unaudited)
		Quarter Ended
		July 2, 2022						July 3, 2021						Change from prior year							Currency impact on sales				% change excluding currency impact
Asia Pacific
Greater China		$	140,775		53.2	%		$	165,416		49.1	%		$	(24,641	)		(14.9	%)		$	(3,062	)		(13.0	%)
Southeast Asia Pacific			47,830		18.1	%			76,101		22.6	%			(28,271	)		(37.1	%)			(3,341	)		(32.8	%)
North Asia			28,803		10.9	%			37,438		11.1	%			(8,635	)		(23.1	%)			(3,632	)		(13.4	%)
Asia Pacific Total			217,408		82.2	%			278,955		82.8	%			(61,547	)		(22.1	%)			(10,035	)		(18.5	%)
Americas and Europe			47,066		17.8	%			57,882		17.2	%			(10,816	)		(18.7	%)			(863	)		(17.2	%)
		$	264,474		100.0	%		$	336,837		100.0	%		$	(72,363	)		(21.5	%)		$	(10,898	)		(18.2	%)

Active Associates by Region(1)
(Unaudited)
		As of
		July 2, 2022					July 3, 2021
Asia Pacific
Greater China		77,000		32.9	%		88,000		29.3	%
Southeast Asia Pacific		69,000		29.5	%		104,000		34.7	%
North Asia		36,000		15.4	%		42,000		14.0	%
Asia Pacific Total		182,000		77.8	%		234,000		78.0	%
Americas and Europe		52,000		22.2	%		66,000		22.0	%
		234,000		100.0	%		300,000		100.0	%
Active Preferred Customers by Region (2)
(Unaudited)
		As of
		July 2, 2022					July 3, 2021
Asia Pacific
Greater China		201,000		61.8	%		215,000		61.1	%
Southeast Asia Pacific		34,000		10.5	%		40,000		11.4	%
North Asia		21,000		6.5	%		24,000		6.8	%
Asia Pacific Total		256,000		78.8	%		279,000		79.3	%
Americas and Europe		69,000		21.2	%		73,000		20.7	%
		325,000		100.0	%		352,000		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/20220726006014/en/

Investor contact:

Andrew Masuda

Investor Relations

(801) 954-7201

investor.relations@usanainc.com

Media contact:

Dan Macuga

Public Relations

(801) 954-7280

Source: USANA Health Sciences, Inc.

FAQ

What were USANA's Q2 2022 financial results?

USANA reported Q2 2022 net sales of $264 million and diluted EPS of $1.00.

How did USANA's sales performance compare year-over-year?

USANA's net sales decreased by 21% year-over-year in Q2 2022.

What is USANA's updated outlook for fiscal 2022?

The company reaffirmed its fiscal 2022 outlook of $1.015 billion to $1.065 billion in net sales and $3.85 to $4.45 in diluted EPS.

What factors contributed to USANA's lower sales in Q2 2022?

COVID-related disruptions in key markets, especially mainland China, were significant contributors to the lower sales results.

How many active customers does USANA have as of Q2 2022?

USANA reported approximately 559,000 active customers, a decline of 14% year-over-year.