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USANA Health Sciences Reports Second Quarter Results

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SALT LAKE CITY, July 26, 2022--(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/

Contacts

Investor contact:
Andrew Masuda
Investor Relations
(801) 954-7201
investor.relations@usanainc.com

Media contact:
Dan Macuga
Public Relations
(801) 954-7280