USNA - Earnings call transcript Q2 2022 | USANA Health Sciences, Inc.

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Operator

Good day and welcome to USANA Health Sciences' Second Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Andrew Masuda, Director of Investor Relations. Please go ahead, sir.

Andrew Masuda

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

be specific the Officer, materially Financial contained that conjunction most joined projected Yesterday, forward-looking that the Guest; those of to Examples caution second year as in the for now these We'll company. closed, As from before the regarding conference the and SEC. the well Doug as uncertainty scope, remarks of Kevin after commentary our CEO with statements will of risks our by Those posted well data questions. Jim President, from of our financial other opening Kevin considered and pandemic I'm regarding events quarter statements fiscal call, our statements differ impact call magnitude, including should and disclosures, in the related financial we future COVID-XX executives. uncertainties as this announced filings our Factors and website. or operations, company's a with Hekking; Chairman We involve market in these Board, recent results forward-looking you financial for the management Brown; Chief the our on making our document hear brief and Risk to statements. results. could such the business, performance statements management results during duration to the future reminder, perhaps cause strategies course actual be include of results and and XXXX, of as outlook our our

Kevin Guest

short-term and disruptions These for to by remain performance on in was good also yesterday, program business, during final appreciate and markets. regional sales key future morning, offered operating several our our in quarter lockdowns, to prospects we [Technical growth. you, review earnings our during prerelease the and Difficulty] everyone. and the COVID-related sales customer us quarter negatively the effect We we Thank second added disruptions impacted our for release second quarter other Andrew, disruptions the results. negative our our restrictions Despite strategy joining quarter. business you and confident second the

Although, continue to balance position we our sheet the spending prioritize in USANA near-term, will of of flow making sales growth. the generation investments necessary free continue our performance the to of us for alignment to cash and allow the health with future

progress to business. including on in base launch associate provide the onboarding of additional long-term. process areas to We and will setup our with support streamline this program, believe operate and and their the During increase the help strategy our we the onboarding several associates made to introduction enhancements quarter, over our tools associate which

X,XXX associates strategy Additionally, in event for be XXth remains upcoming moving to of focus our and City forward few will our a Lake in-person primary Global with celebrating virtually. approximately our a of attendance our anniversary participating expected in Salt digital team Convention This an look hybrid forward. weeks. thousands a tens We at

strategies operator line events We the globally. overall ask remain and the modest With excitement event. the growth that, In this to for generate open also activities long-term planned please selected in to closing, for of questions. I'll celebration business now have potential in our help conjunction in the health in our long-term and our markets confident with surrounding the are promotional we pursuing we

Operator

And we'll to Thank Stephanie [Operator Jefferies. Wissink Instructions]. go first with you.

Chris Neamonitis

everyone, Chris taking Hey Neamonitis questions. it's for on the Thanks for Steph.

I one first The have.

which diverging versus performance holding bit really which associates' trending a preferred be between little understand to up are You counts, kind down. maybe help seem the customers, us better of

kind look of can typically like? you from does you is what maybe structural conversion customers something, reconcile offer two there And kind preferred of, to, is again, So colors associates? should what there us those to then that so, about, can or remind if we potential thinking pieces? be And

Doug Hekking

why strategies Europe out on that's But you a was this really in things months, see in QX I'll programs big Europe PC couple in scheduled on change priority. done. of we've last what particular. bit in Chris, approaching the We've we in building it it and that making and miss been leaned little customers. from, is you let structural sequential that far Kevin the is we to you base and focusing kind from and over Tested really into how as business been here. on if end really a customer we've preferred been of of the a several kind customers give we've region, Americas testing narrative as, jump Jim picture know, and of had Doug, a from have bumped Yes. But March, something and mix of preferred and years the several Americas that I the program We've really to and QX.

associates an The consumption believe, associate, with best think. lot of customer? that heavy the opportunity product. that, preferred movement some doesn't for the is as I as Yes, much available. happen is and the of But there or those think, and you're passionate second opportunity transition in if of part is, you that It are an from believe, really product starts that our are becoming

does high happen. think clip not now. it's right just that a It real I So

Chris Neamonitis

Got it.

Kevin Guest

your to sorry. just -- I oh, answer I'm wanted

Chris Neamonitis

Go ahead.

Kevin Guest

wanted question. to your just answer I

want and will products would because that an associates. elect they you? will able You an our asked don't of becoming we they that don't top preferred conversion be and customers I that experience rate a them sell off the I head to products had be effectively. my sell with of have can. more customers the associates. know to Doug. can the the about actually have from possibility become if preferred and associate hope Yes, they great transition to They if

Doug Hekking

the provides, prove really the think move, have really I to but low-to-date, successful been in ones be and understanding their because It's of think I the associates product. that made belief

Kevin Guest

this. a who's really And I being excellent excellent they just we done and want some at, historically We, experience. XX-years-old, share on and selling earning some we distributor looked or an experience, meaning -- and building to have had someone mining as color income a research business data an little have really add product our a and

someone experience has focus we our receive customers we why over they'll simply critical deal customer main Our feel so how else. been when of the probably seamless competitors has experience because they strategy interact do to come That's because they that the that and is at just one a last experience go with is who it recently months, XX somewhere expect to our seamless, the our to least digital take if and company experience interact our with to growth wants and a products. company, of isn't be for and the

you our we So day. increase care And the the we at can the of end that about business. day, every customer see overall the part strategy, of being counts our as utilizing in success of products grow that the people really

strategy. expansion of just it's overall an so, our And

Chris Neamonitis

of, Any the color on trends And the all coming that. on maybe it. super associates kind to in -- of just any the new into you context seeing, -- follow-up a especially, Could your us business? give the Got onboarding helpful trends program? your you're as That's color. enhanced

Kevin Guest

this not one our normally tell is early releasing focus again. Well, first overall key our this but connection. connect of one -- to onboarding just barely the the had especially is too Kevin basis. in we high-level We days, -- onboarding on to And It's we've another COVID would key customer to and is connecting, a the as personal at versions opportunity retention strategy these the objectives are of point. program, of the

heightened onboarding business. interaction of more And journey, journey a process becoming points, building and whole as a throughout they so associates and And go connection interaction this move customer is critical. through just our and connection is more and their of touch level as their our

Chris Neamonitis

into markets, related then have improved headlines look disruptions obviously of briefly next given touched in top-line, COVID to the Greater performance the kind COVID-related question. you that it. is of sequentially, But China restriction. especially these there, on I'm you kind which we surprised Got your across but all And as segways softening my actually

others wrong? why So perform on sequential than better basis I'm assume a China would I would perhaps market which like a does but restrictive, less be

Doug Hekking

I our And our improvement markets we're and performed. QX. running pops that this, year that and quarter. that's to and tweaking and three that and kind plans to noted and short-term testing do as China with we up their in back why is But right. exactly think our growth go you're other for markets changes a improvements something think trying structural we're you traction more saw and restrictive and than other the what catalyst program is sequential I -- saw you QX of China create get we've second release, I not to from in disappointed that committed evaluating sustainable and this making is, back in generally see that run It years the an stuff. of, been in for later how why we've just Well, program think, And it's across and the we moved really last adjusting going to most the the comments from sales

there COVID, continues what of oversees of having I but made is I the team Neidig, those said what the having I we've And factors of are tough some out had with past. and I and lockdowns, some scale they've the go market making so going a pay think Kevin who digital lesser there, on to to, dividends investments the And out, think But environment. challenging go things, the drag made, and some just his strategy. select really Brent the creates still our to that on China in pursue going think really not-too-distant it to that, back environmental related a in maybe the consumers economy, to change forward, have changes on think are and that than choices

Kevin Guest

here Asia through negative interacting. just a versus the where on about things in Philippines color, get just see we a markets doing like as completely business environment I United are in has where people to from and shut lot are a working When business office but the really strong. business, think is an speaking just the most for States that their Yes. lens dependent and Malaysia we're they're "will-call" a in but shipped. receiving we of States that we other take in United products, place we're COVID And upon more markets impact, And restrictions and really, tend moving huge in how little if I all myself forward, you look and down, the global

United the the just so States how And of person business. side impact has things a us of for person do inherently -- because bigger of outside they

Chris Neamonitis

then size in noticing off. That's of hand maybe about question it. on transactions, overall I any are that great. anything Got last the Are or by terms maybe And -- number average being the there? basket top-line different before driven purchases it color you Maybe primarily we the should softer number be thinking so the of made. just

Kevin Guest

Yes.

I defended simple I enough. think off spin we're I not mean think quarter. on that's the anything we're seeing bit this long-term, answer the little average a

of think I meaningfully relevant activity that tethered a seen and different. within be those not close promotional what can during to some as happens a and be trend that whole, cycles. pretty really range that we've But the

Operator

Lane Lane next to go Doug We'll Research. with

Doug Lane

I at we're If the was Yes. the promotionally the related. the what Hi, bump particularly more second bit went understand China half with on sequentially everybody. good looking in a here. morning, customers preferred quarter, little in on, second Staying

first see quarter to settle quarter should back half the probably in looking second and that of the where it we year. to So fourth the was

Doug Hekking

And takes numbers, how nature customer that to Yes, softening have just think to place. that accurate, customers. bit think calculation of that's but Yes. of see expect just we we the a things on, count we would I going from market. relative how a We'd lot active that little the on expect Doug. important real I the But

Kevin Guest

that as we we But coming and year, half really normally everyone a feel long-term remind move maintain pursue we in or those into we're an of second necessarily health pace the the continues of the we playing isn't activities is do that out Doug, our as level these activities just promotional we've done normal as times forward. some business in the in we're and marketplace more business and here. of to the Kevin. can't this excitement we move where especially of like best And I to of of it the interest keep as traditionally company would. And game long-term promotional a to unprecedented want try

we've the strategic long-term we're our so perspective choosing a forward. the documents company from in for route going as betterment of this And stated

mode again, And look business so kind the the of of we on of company. as of up our environment activity long-term we're switching the purpose at health changing because

Doug Lane

I continues yes, again, And with Okay. I get quite weak. to macro I in impact Southeast of expected sense. through and with bad as not others I the and sticking maybe mean, a results like mean maybe in thinking particularly what and be that China doing And there. makes Asia today, you're which Pacific, lot environment worse the results COVID,

we end from Pacific in if more bigger the to pandemic, So that the it business do Asia-Pacific actually versus -- reading Southeast to out be at this meaning it this was the am day, COVID is impact than really ever that Southeast right? of I That and Asia will the come bounce the China. of disruptive your China

Doug Hekking

I market has would the lockdowns. been been impacted because that that's China say a of strict just

change freed well. to and I -- had think if accustomed the think been market is stuff, infrastructure market China up in-person to really an has environment. time an were a us said, density doing a and there, for in we what dramatic that tough they to services Kevin get It's availability do And added going that market. which a that so has I some Kevin? with go of as stuff Philippines, business of and population, incredible the back The has lead on. handle ability for of better

Kevin Guest

in to very out environment really, that know, China people, in some which and understand Yes. Brent, very, opportunity team our give on to products talk but little one It's team the you our color different to if really in a a this. in our And just get I help some credit lockdown to to creative have thing, of performed. that finding kind Doug we you to didn't and even want to getting ground don't Brent, markets, our want might being to dynamics our in just ways China the difficult a situation products bit.

Brent Neidig

that I different the preference infrastructure environment. than Southeast to switch China, willing that in some just already throughout first slightly a for mentioned we of In Doug products think logistically, Yes. to markets. there's But us the a China experienced or it's throughout our of higher was easier to really we distribute the that what virtual Asia those other the And to quarter the country in lockdown Philippines being been the deliver disrupted Sure. that, see people than product. second and quarter specifically ability

quarter. switch our fly, throughout And distributors allowed get adjust mile in that continue so did distribution recognize we to we XPLs, through revenue order ability to to our creative to And network to us way to the final product that shippers, our very customers. had the on to get switch quickly to the

Doug Hekking

play way came more kind velocity around were higher really on to that, kind Brent sales us add of world. in and investments sorry, everybody reach already responsive allow audience COVID environment. the and of studios made some percentage manage on a market of happening in-person would for China that in before that. Brent, add content Yes. non in even a also had their the in high I to I'd into also that

we yes, your I we've forward a up doing markets accustomed think Doug. standpoint, tough build original a individuals have had And a and and set going but question, that. were confidence. see that, the from key think to they Southeast so business there's Yes. couple back there quarters to And people like Asia I now But were here, in few we yes,

go opportunity see in we way. little stable get staff think tracked with an there's environment back a confident can go I of more back and and if that to a a we're there. really And bit good the start and

Kevin Guest

the and Philippines was you the Doug, some Walter, here there, color just on today experienced kind just in and also able seeing the who's seeing be recently future. And for what a the on to of what might in give Walter there, Philippines Chief Officer, you're ground Operations you're being you what our

Walter Noot

everybody's they've the -- that you have to and really masks Well, wearing because because still passports vaccination any basically you of still in building. Philippines, have got had lockdowns get to and have into

-- a haven't people so And been having meetings. of lot in-person

the over was teams pickup In fact, to was up the gone went COVID volume part We've I out the and they other some meetings the centers center meeting and the and to nobody when period. each where there, -- first -- of they've pickup we pickup our lot their have distributors, they And during volume down down several were of the been with interacting that empty. we -- spend starting in-person time almost have centers was the with the have were they that's where last nothing other. has a with in our It showing there.

people so again, to a now. through going comfortable And in-person open but cultural it's feel through. again. they're to change feel gradual that that's have have that go to They back out. up changes getting have meeting right things They those comfortable to And are starting

think there in believe like you and So going that should think to Doug, that's some this growth I just mentioned that said, I you be those I there markets. happen

personal interaction, You're going near there. to and start seeing I future, activity better to going think in interaction see more the some we're

Operator

go to Davidson. Bolton We’ll Linda Weiser Instructions]. next [Operator with D.A.

Linda Bolton Weiser

guess going little you little U.S.? color the had U.S. was than what's the of a Can give a about market bit in I Hi, I on bit modeled. so weaker us

Doug Hekking

one we part kind that comparisons, some running a think of there for that some of on structural opportunity see a transitioned the it going from of potential we quarter forward. structural, some bit first were real from out we the campaign timing I the little

I the not that kind think U.S. narrative The sequentially we was the the quarter. in second saw run that this biggest with of program did sales U.S.

comp really that that. And a with saw ran. just have more so year-over-year success the generally tough they we program And last year we in

Linda Bolton Weiser

promotional in second a, You the plan program some half?

Doug Hekking

we'll a of that the a long-term and the done And I quite on really and the that's just and have to we've engage see things and and On was for market stuff, of not additive focusing basis, think local you'll it's sustainable historically. these that local absolutely And doing magnitude programs consumers basis. other some be a narrative going but products our Kevin's sure what sales market here we're but learned through we'll adjust accordingly, that something sure. we've doing making on activity bit experiences

year and You will that, from markets. from meaningful be that's probably a have year in standpoint the coming for not do there'll a biggest half back build that promotional We something we see off a excitement. the activities as campaigns that's events company and But and really big magnitude of whole surrounding all promotional reaches XXth to our across thing. the that of kind condition to have the stuff the some

Linda Bolton Weiser

like on like like remind What like sales can subscription a percentage of me kind done you or kind of the U.S. month? And every your what in accepting customer is of the basis where product percentage?

Doug Hekking

head. front to have off think subscription of top Mid of but of are I our high-XX%, number probably on happening business. sales the I we're high-XX% Yes. me, in don't my

Linda Bolton Weiser

this weakening be, do if going we business Okay. see think And your do on? recession consumer will then you how resistant

Doug Hekking

Yes.

for of more see. story little been a our The all I bit maybe the historically we'll bit think you new of you a channel. activity us. see on economy; I think has in when is mean, environment a little see I pressure this

totally we're a than is We're the just in time. taking and we're feedback We're of short experienced And out. of things. reacting different we've customers. soliciting actively think reaching end period opinions these pretty and this environment I a actively what

And so, time tell there. will

more I than and think been. they've people are more health ever health aware conscious

of and going of I a help bit think and their wellbeing kind we have take forward. back better products back that go little go charge can them

we consumers really I and go have mind out -- think and continue work a to of that's have and be So back and big front go there. communicate that opportunity back that's to the to we to

Linda Bolton Weiser

do was It and to second inventory Okay. your down that in you both it And sequentially? good see. half then the did down. Do noticed again come that expect to like, good I down quarter decrease year-over-year you think is well, was sequentially, inventory will third be which continue down

Doug Hekking

change can see you bit we'll you it a Walter, in QX a from would QX. but bit, to think here, little expect see go little to not and of I I same down to saw jump the

go inventory sell we seen think do back we that a intentional with the stuff, choice align make customers. had and we I other that performance demand And to as to have we've same on thing actively trying back to now to very has team our our levels market we and those go horizon. with been have to sure management, and expense and made things that that trying this that inventory the

Walter Noot

Yes. shipping That year, intentionally saw saw last was very we intentional. we What we issues because inventory did up coming worldwide. up building COVID-related and started middle we

little goods out We we had about up built raw we during we disruptions whole finished up down. And materials we've us build actually down then bit, saved again. more building unless seeing bringing more -- back then going the It we a supply that period. back keep doubled of slowly we're amount concerned chain. throughout the to in our in because year going been back it that chain, So that and start were bringing markets. We're to supply

Doug Hekking

I would say Yes. --

Walter Noot

inventory. having worth It's

Doug Hekking

Yes.

in an that think do process. own respond we from allows real products. we benefit us that's bit a making to standpoint that huge our operational supply been out quicker aspect a this other core little with a chain environment is one more have I competency in taking The player And

we've that as through so as this definitive we've well. advantage a seen gone And

across still Our transport is challenge the biggest shipping. still It's ocean.

are Salt still in been for Southeast and high. a still or challenge a bit to very Lake reason inventories it else, somewhere it that's little make we generally That's intentional. Asia ships if us. the And So that's

Linda Bolton Weiser

cash the curious, just have I or number quarter? for And half do the you first operating was flow an Okay.

Doug Hekking

we did. Yes,

$XX pull Let operating year-to-date. million about We it QX. in And did up up. me flow can in cash you I pull

$XXX we're what something year million think is $XXX range. that to million I generally that, expecting the for

Linda Bolton Weiser

Thank And adjust then conditions. than taking? SG&A little to to of you some actions business lower a Can the had about you did you're to kind you. was the like Okay. just expense reduction alluded what we taking look actions me And it your like expected. talk cost to

Doug Hekking

Yes.

I think work of performance-based we're short-term, that media in execution are the margin. that generating just takes perspective operating most more still that a seen the vary and we've have variable are things and how what or it from things We relate to to our several operational do environment quarters. usually

I what's our those the growth to business said, executing what prioritized, products. of going get that's just put to agile of of what going and that but more and prioritizing that to think a mission we and for consuming things is kind go kind we we're long-term customers really resources to very benefiting to need of to are intentional best And have in company. do and be Kevin individuals think on the be do the -- the families really and feel back catalyst vision being

Operator

further this at time, no questions. there And are

Kevin Guest

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

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

Operator

participation. your We thank conclude today's for you does conference. This

USANA Health Sciences (USNA) 27 Jul 222022 Q2 Earnings call transcript