USNA - Earnings call transcript Q2 2019 | USANA Health Sciences, Inc.

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Operator

Good day, and welcome to the USANA Health Sciences Second Quarter Conference Call. Today’s conference is being recorded.

At this time, I’d like to turn the conference over to Mr. Patrique Richards, Executive Director of Investor Relations and Business Development. Please go ahead, sir.

Patrique Richards

morning. Good joining to you quarter our this results. us appreciate review morning second We is via broadcast be conference being Today’s call live from website accessed our webcast at ir.usana.com. directly can and available call, replay the website. following Shortly will be on a our

forward-looking the cause this perhaps statements As will projected of call, uncertainties recent and involve factors results statements risk events with Examples with the filings you XXXX. these risks make course statements. conjunction regarding of statements materially, performance could specific future management future regarding most these our and conference outlooks financial We and a the SEC. actual include statements financial strategies our such the should that year differ, in including those reminder, or be during data from considered results for of to forward-looking company. contained fiscal in disclosures, our that Those caution in

our Operating Hekking our Guest; this Kevin President morning joined well as Chief as Financial by Chief other executives. and I’m Brown; CEO, Officer, Jim Officer, Doug

market Yesterday, our document announced posted quarter and and results results commentary management the we after company’s website. on closed, our second the outlook

We’ll remarks call questions. before from opening now for the Kevin brief hear

Kevin Guest

for you thank and us. morning, Good joining

the continue to to see in consumer we reported earlier When quarter, that would begin a first that believe second we during this but happen. month, during quarter challenging sentiment market our As China environment the reported see we did China we quarter. second results, not improve we in

during in generated sales growth meaningful promotions China. and historically incentives of We quarter the have that offered customer

consumer in industry. direct and we products health significantly was and China to anticipated, towards of selling believe continued we contribution the due the However, promotions than incentives these this sentiment is lower and lower

where meetings again Additionally, while and areas municipalities, to several in there were began unable hold some were holding meetings. we provinces we distributor

performance was the quarter. consumer Although hold primarily affected factor that our to environment our the for primary challenging was limited, ability somewhat the meetings –

during huge growth be China months may have we XXXX, long-term long-term to in And in to it USANA. seen to in our for have potential we conditions this growth consumer a confidence to opportunity we pursuing committed important several see are continues in market. challenging return, sentiment the Notwithstanding take although continue It China.

I’ll our plans the turning second-half outlook on comment that, With briefly our the XXXX, for before for over and of call questions.

will offering various and incentives continue plan, the includes the We throughout second-half execute our to which XXXX year. of promotions

at a will separate example, For promotional the also again both most quarter. product-focused of we in quarter, in Outside incentive China of during fourth and where we the Macau our China, offer activity offer our products new planned the of year a products Meeting business first will second-half in China, product and And during the will promotions. across markets. introduce offer National new introduce promotion second, we

tailored This have to to the in the we in at plan ensure that business. appropriate time strategic generate is offerings markets the appropriate momentum

our sales We’re mid-August. to for currently Salt will incentives, will force. place our in in Annual event, Lake City introduce take technology and new we Convention, which At International here this preparing products

the that pursuing in potential close long-term we and that business, long-term are the other for China I’ll in by our saying overall growth then and strategies confident markets remain our the of our health around we world.

questions. to With for now open line that, I’ll the operator ask the please

Operator

Tim Group. Ramey [Operator of Instructions] Pivotal will Research hear And you. Thank we from first

Timothy Ramey

the comments lots that of in broad-based down see times, Q? earlier in I we bad But and in was Hey, Thanks, were wasn’t mean, the Kevin. – more I line both you weakness weak. I Can issue a commingling we Asia why you Europe thought comment thought, based – do up. Southeast understand weakness comes on – broad-based than Americas did the China, there’s your morning. but month, and as more Good as I

Doug Hekking

Tim, Hey, is Doug. this

think the and that and last had Celavive there. that definitely is in factors of kind in last we I with the launch, what momentum through the of year second on promotions year quarters carrying we going the part had first and

from – in the, U.S. Europe, few flat of our did standpoint, at a for We think in little to and softness see little the issue. we’re region had other sequential example, a looking currency bit and a more I bit QX. QX roughly Americans a of was markets a that

year-over-year well. same as it.. a lot of the impact some for that, And you’ll talked think, trend But and we little not even and that’s having saw part, fine promotional We bit through China. I back tune with hopefully, And the that in we’ll comp. – figure of markets see and quick up. out high offerings, a viewing go kind we go to that we most of kind has back the we’re as those about the it a other level do But how of this we activity in

Timothy Ramey

mean, relative thought repurchase, then was – already average Can that share Okay. I to a second-half comfortable shares which were outstanding, going you million limb include in if guidance was And early it’s imply get to, in down a it activity diluted share you July. fully repurchase think, XQ? on either I share inclusion share that? the would disclose stunning pretty $XX.X how forecasting repurchase to a to there maybe repurchase, do pretty you I already big the was occurred out or in I in feel

Doug Hekking

still we’re a Tim, So, blackout. in

nothing – far. there’s that’s So happened there’s thus no

One happen small that had been noticed XXX saw – things did S&P got I’m higher bit stock of the it that than – in included index. quite as a sure we are volumes you you’ve cap at that quarter our the historically. the first of the that third

purchase basis had been. what our So Board see go the accelerated. authorized those on of But higher some efforts ability back and what to than it you is daily the still a on

Timothy Ramey

right? that market don’t is you place, it’s XXbX Doug, purchases, have in a open just

Doug Hekking

That’s correct.

Timothy Ramey

apply have the – blackout normal going will you So applied and periods forward?

Doug Hekking

Correct.

Timothy Ramey

Okay. so Thanks much.

Doug Hekking

Yes.

Operator

Lane Research. Doug comes question Lane of next our And from

Douglas Lane

everybody. morning, good Hi, Yes.

with on just more bit color Kevin. a start little China here, You

mentioned didn’t could I also you work it in different they of your in think it You just kind if promotions do time. time? was little maybe were the you releases the in past, a bit explain promotions today why and about this that what this worked and comments depth, more have wondered

Kevin Guest

a from typically And Well, based – perspective. in launch an promotions in consumer the on of past, any relates response see it a what’s the force as we happened from our China, base as sales we reactionary immediate hesitancy our the because to and been direct it’s in based attracting to somewhat the issued that. supplement sales new the there, and upon customers that’s been nutritional making linked perspective it has media difficult over with discussions from just distributors the more scrutiny

that promotions there’s exposure as in just come right so various from And hesitancy launched the now, outlets overall, because that’s the it as product a in of forward the from we’ve supplements try various China. media the market media marketplace move relates nutritional to perspective, to and

Douglas Lane

one that. forward, elaborate promotions. was mentioned that then So mostly to you you’re it that that going one, broaden to going product things little bit? promotions you Can buy a like opportunity or on And get discounting business

Kevin Guest

will promotions. is, mostly answer product incentives. The And have yes, we business-related yes,

to commented haven’t told what do. and haven’t our going publicly We we’re force yet distributor

perspective but And will to so what we’re outside the just at I do, helping specifics going be promotions. withhold would of they on on an business drive us product comment incentives from

Doug Hekking

there on I little probably a Doug, layer bit. And,

promotions product into side. and what the as didn’t on into was You And of in saw those users And USANA but it most have not it some XXXX we family. we ran it’s run the will had are of getting been coming and these though just promotions. around business XXXX what we from did diminished response, and and going more product back meaningfully more circulating the

receive. the point kind see kind of sense of those reality of is is, our we that those that I working And the have in and think a and be the Ands we’ve you hard in focal our really in markets. just going and so that responsibility will past field done broader all will target forward, didn’t

back little help a markets, bit a some have kind contribute have of those we of struggle. and go seen responsibility We where a momentum stimulate in to help

so we’ll be to continue And there. active

in active we’re we’ll I traction, think time period over sentiment kind as as out more a kind we’ll of that. coming be seeing but of improves China, consumer of And still even of this start

forward go give to something and trying them them back get and something look to to Just there. work to

Douglas Lane

to local business little more is Okay, still in And currency a because revenues And China, bit and like I’d but Americas meaningful. and digits press XXXX. down the XX% have negative comps in we’re the talking non-China of been markets, that I’m particular, which this Europe, big about XXXX makes sense. on year, looking double at not and is your as as it’s

Americas not being sort year like? something of as on there product or if wondering some portfolio the the the as really or product something is going that’s a compensation the you something and in over Is changes plan years? So in Europe I’m difficult past weakening in reception comparison so well this off is not two there else would resulted received, of a

Kevin Guest

industry those interact think the direct at as generally in climate companies whole, companies I markets, just look of Well, business selling If all changed facing. a that has the speaking, are that the just with headwinds there people how do dramatically. are we

and process, us in takes people a things and takes the they’re online business now. tools process of And introduce into a adoption move the we it them type and like doing other new time And and pivot, it As things technologies adoption to is and the some those the time. middle ability of new change the for right that that. how self-enrollment new takes time to for we’re

marketplace Some we’ve are adoption we being we from here things would the what who past economy as gig part-timer a anticipated entrepreneur Also, time who of in actually there. the full-time, to seeing from make And is bit little we’re spoken wants and an take few it the that the of and about a but years full-time would money the perspective. do executed the speak. things change over just

our and taking made to is customer time a we as an again compensation bonuses, from perspective. some an adoption transactional commissions, sales type example a and to so have And which from preferred is plan change adjustments elicit

launched remember, new And line. last year, said the comparison about flat. sequential what skincare Doug But our is compared as we whole relatively to

the a year we’re as comparison, as it by international whole which strategically launched it’s comments, about a as help new the launching time. that be will specifically, bleak help as in appear, story believe same new I not opening line we in of having at skincare regions. going So last stated think of way, products the mine are convention, these you And to relatively in

Douglas Lane

you year? I this something that CapEx have jump in end, to sense. million model Okay. in that still No, think Doug, makes looking or are And these a I big my for days? $XX

Doug Hekking

depends It now. you’ll we driving the the timing have [ph]. into see about of that basis come CapEx. longer in, depending of plan soon time, really up kind is the in that’s how period on the model on foods of is X% process us ][ph] clip of what of [The a there. on Yes, bills over the still the final these part food force sales tick a And be roughly for at of built our kind normal

Douglas Lane

lastly, then the Okay, strong. is just just side, on got Korea going really it. flip And

and I in you was Are the a to much there Americas can there or any up thing pretty is Europe, going now? on it that market-specific China think learnings quarter. the XX% or translate

Doug Hekking

trying a they team what It’s few to [they dialoguing back see sales is if our waiting And go is and [ph] back serving to notes Yes. to comparing and are mimic doing. Korea you the we’re a go game], have that response. see see collaborating and and markets similar that something and

Kevin Guest

And is see thing we several as Korean big of doing. a much other we’re younger, in much which the we being for very markets positive part move our momentum that the is we in momentum The of Korea have very demographic and Doug, optimistic we see what is beautiful And, just marketplace. us and on. that,

we’re appealing we younger demographic. initiatives to a currently launching seeing that are are a that audience, so these several of And younger

Korea. in that’s very so we pleasing that and see And

Douglas Lane

Okay, Thanks. that’s helpful.

Kevin Guest

Doug. Thanks,

Operator

from Camma Frank [Operator hear Instructions] of We’ll next Sidoti.

Frank Camma

morning, good Hey, guys.

Doug Hekking

Frank. Hi,

Kevin Guest

Frank. Hey,

Frank Camma

of Sorry. the the call. beginning I missed

regions, comp you at of so sorry impact if from I’m the difficult about on Americas? your when market the those excluding promotions kind a other you if what on selling you this. supplement created And Celavive, to bit because I China, So look understand year. in did side, stripped just already talked But have promotions, last that out a in of particularly

Doug Hekking

Frank. the impact was year in what of current the of of Not big And be and a the down that introduction of that lift out is, big year. see then phase last early we the how year little kind the The bit, had part you comp the in a was of and it. in kind average see spend Celavive, you last but rolled

had. – goes China continue So up has though in year focal some other markets. that’s we’ve think we’ve But and the back, think the forward. done of I And that one the lot of even comps having been as a we point minimal, accelerate on you’ll go to pick see don’t

Frank Camma

are Do of now might different, remembered tend indifference. from to might impacting ago? of taking for it go healthier or for can’t sort side? a I sort And part to that be you do the that problem, take years went address wide Can seemed I then be an when it or among of you just initiated customers what article you you like on of like a they Do was two think day mean, without reading is you, actually consensus how think seems vitamins the counteract part sales, you it good unhealthy – consumers I And your like your little vitamins messaging? was that? to that there, and you. coverage an about almost

Kevin Guest

the been be doing continue Medical started. after of as I think until was that’s since we think did vitamins will relates supplements. to American USANA The recognize to years there And good it of as XX I about USANA story Well, business. naysayers in anything Journal Association

and a a marketplace. to There and the not in been we of have remember to our I is From press, things base we’ll our reason. anecdotal I’m as types XX have that negative happening. perspective, involved an for I when And USANA I I’ve and in that can’t regularly, think those years hearing but continue noise distributors speak out customer didn’t time

how and that have science-based conservative I perform. and we very, it conservative serve make always very make claims that years. careful to very and to well products and over been they claims we will as what And say, our our relate the USANA on we is do proven have the nature us

We’re going to continue to that. do

Doug Hekking

would we’ve heavily, there’s kind say, the you is of of when preponderance And the group, all when Frank, propagated think, more, talked of not in our I And science many, evidence as positive – heavily the I still in press. see to depend favor articles we is if what supplementation. on

Frank Camma

Yes.

Doug Hekking

talk and with people And hang sometimes response a it’s But something. are So there, the our – bag. feel that think, mixed to I know on the to want to PhDs we getting. we when attach I comfortable pretty we

Frank Camma

was a I – the day, like out because to where with a D the – that. to translates to there about just really there, potentially versus because that’s with you some how wasn’t I in is too occurrences. that joke. be messaging in the me, USANA honest guess for Like just average example. of Lancet, as was it’s obviously, well is if other far to claims change like a something I using talking lost you’re on I The Like that to in going cancer vitamin way taking by read the don’t lead there think, as without science consumer, like, the way could And actually way know under the a violating, It making for higher restrictions just what’s consumer. I

or like, and me, maybe not I be to you refuting So I’m that? for you it’s aware active just, almost are, of to in valuable those already

Doug Hekking

back out better to call they we… clarity to a and group talk see there can kind and a of them. go that little they the them that best They And the with people respond question, have what if bit have it’s Ask Scientists. a they We called stuff can

Frank Camma

Okay.

Kevin Guest

attention same them, because I those customers only I it a base, much to Yes, I my and on that really it just science. as never especially things from I defensive as to And, point And we one-off it relates things. positive kinds of way. to in perspective, the because that, by read the customer sound And of articles draw the the want again, and article, to relevance. try have a be to raises our side strategic stay hate relates up so like from towards position. our

So engage is has your we we But generally, respond that to and and things. the customer taken make kinds with and do public in and access studies base of our scientific will and point those to published universities and large. information at to don’t continue is well gets and that, research trials clinical other sure

Frank Camma

that, of we know you says, portfolio your products product been other Okay. on pretty My – But similar the is that wish upgrading sale hearing and to wish I that your this force to “Hey, been the years? types right, that portfolio order sales. sales mean, just force whatever. any related of to of X of comes the than fat there how validated else is saying, or last of it enhance kind I product, requests? to consistent, there skincare product but you say don’t like product I with those – a might know question coming is less – you a had “Hey, and had And in it, the that has the whatever over anything you to that sort But of is.” I lot is we a involved haven’t you any burning Are sort rejuvenate we products

Kevin Guest

kinds request. of get We all Yes.

was be yes, back, require when our juice selling just the It We to coming space, have wasn’t our shiny it well. popular had have But to product. were go very object a to be years, years whole… a a And careful field in USANA way. would found actually commercial science brought very we juices us. have we and team. very the in after viable it that – We not several comes to everything to the We offering us. for that actually to created we a that when Several

Frank Camma

Okay.

Kevin Guest

products in over that fit research of would into development will that several are that that and be that released never clinical commercialization. testing phase the phase and …host and will see years several trial and mold next

Frank Camma

Understood. Thanks, guys. Okay.

Kevin Guest

you. Thank Yes.

Doug Hekking

Thanks, Frank.

Operator

Pivotal follow-up Tim from Ramey And to a we’ll go of Group. question Research

Timothy Ramey

you curve in of follow-up. kind relative just or infer meetings not feel into some are Thanks upward is permitting right, provinces sloping like that that? relevant China, the flatlined? and are the still And Should for was that there did we China the how of activity to

Kevin Guest

we So a There where to usual, is yes. But the we’re part, the settled hold as answer – very after in not back are for cautiously. promotional it seen trend, business able the usual, areas activity from China. to see but promotional still meetings do few meetings as activity. we’re our then an conduct most in last able uptick have We the down

it And the to really go so, distributor tools were sentiment relates marketplace businesses. on need they and as supplements we again, and that that be out and their and trust to and able sentiment with products nutritional consumer gaining build focused back our to in and arming

Timothy Ramey

promotions an variable were did utilized? impact with second margins? the didn’t associated have cost on And just fixed mostly quarter they sort or Were that costs them, get there of

Doug Hekking

performance these, they’re and utilization. No. Most for pay of Tim, pay for they’re

would type any format. think in thing you more I So be variable of a see

Timothy Ramey

Great. so much. Thanks

Doug Hekking

right. All Thanks.

Operator

the back Richards, for there I’d any to like time. additional no turn are queue questions this to you conference remarks. or the Mr. at And closing further in

Patrique Richards

participation for call. questions on today’s and conference your your Thank you Great. for

If any you XXX-XXX-XXXX. to at free please Investor remaining have Relations feel questions, contact

Operator

your you And would thank like so call. conclude to and may does disconnect. We now everyone the participation, for that

USANA Health Sciences (USNA) 24 Jul 192019 Q2 Earnings call transcript