Earnings call transcript Q4 2022

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Operator

Good day and welcome to today’s USANA Health Sciences Fourth Quarter Earnings Conference Call. This meeting is being recorded. At this time, I’d like to hand the call over to Andrew Masuda. Please go ahead, sir.

Andrew Masuda

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

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

I Doug fourth Kevin Officer, results Guest; we the our am Jim closed, of fiscal the and management as Financial President, Chief company’s CEO Board, our market Brown; our and the as executives. joined posted website. Yesterday, our well announced other document after Chairman XXXX our commentary quarter Hekking and by on

now We questions. remarks before for from hear call brief opening will Kevin and the Jim

Kevin Guest

XXXX We everyone. XXXX environment morning fourth announced were USANA. joining that fiscal Fiscal January you results good in and our challenging X. presented and appreciate line us. Andrew operating you, results on preliminary Thank for quarter largely a reported with USANA

well several markets. and our to continued purchasing behavior pressure supply across inflationary impact key global companies, consumers’ many chain as costs our with materials as As negatively

operating continues difficult the in navigate. to particular, be China environment In to Mainland

policy. certain two final COVID-XX following our products easing for Chinese of increase During we demand of fiscal government’s an its unexpected weeks the XXXX, in saw the of

a which critical normalized to in long-term While this is this operationally consumer still anticipate growth Notwithstanding we more early it this we China increase we China – strategically the in market. strong market, and the our is in have said, the begin has environment our Chinese will and experienced opportunity future ended. seasonality we by growth. normalized demand, business during we particularly Year too and remain That forecast during confident and are key recently long-term seen other challenges in holiday, of encouraged see that to given more demand in operating remained markets, New USANA’s many for positioned financially in XXXX

commerce and We around the their more company’s more progress has the are focus now than of year affiliate completion more select as of been made on health wellness strategic in relevant never to consumers throughout support on on the our Importantly, the ever. various initiatives program initiatives, several expansion, our market acquisitions. world X well-being launch focused including new the and markets business, digital

remains As long-term we top customers. growth active in XXXX, our begin sustainable priority generating

to become return our year momentum and where building evident generating did associates and live one and meetings and catalyst are an that of priorities to is environment, key a business. sales to our events in-person to relationships more it’s positive selling well events While adjusting this meetings Consequently, more our in invaluable virtual in possible. and excitement

at We given strong, of each half and several the absence have very of years. year events over particularly expected the Korea the planned events first be in last in China the to Macau, South these event attendance with

opportunities. evaluating force for opportunities we include our strategies readiness for acquired new expansion, Additional incentive offering and additional in new sales market our for companies year growing the increasing this acquisition two XXXX

Jim over to key our XXXX on now the Brown, like turn for operational strategies. comments call to USANA’s I’d President, his

Jim Brown

Kevin morning you, good and everyone. Thank

offerings are also managing cost inventory, promotion we growth and engagement particular, and will in offerings, efficiencies on current our management. local In margin adjustments capturing global more is sales environment top our emphasize other regional to implementing focused operating Although strategy and business. and our throughout increased we strategically customer on fewer and worldwide structure cost operational generating price to and adjusting the our XXXX, mitigate concentrate priority

As a years we chain made reminder, X stock to strategic build out levels supply and to a decision inventory ago mitigate risks.

become reduced regard this has risk we inventory. chain meaningfully supply in the the have lower, and As more is stabilized,

ensure deliver a manner. to will, efficient customer closely the and possible We our to however, to cost best monitor experience continue manage we’re in inventory able

build our USANA In XXXX closing, to our to fourth allow to XXXX. of growth strategies quarter are we of us all results year-over-year execution return optimistic on will successful in position sequentially that the in and

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

Operator

Instructions] Thank ahead. Please [Operator sir. from first comes Davidson. question you, Bolton-Weiser D.A. from Our Linda go

Linda Bolton-Weiser

Yes. Hello. morning. Good

you you I seeing And of couple what you talked more last anything continued? the terms fourth like January So in the can say about performance has in better in how was pickup so – the pickups the in And was quarter the Like originally. the if China? than projected weeks. of the a wondering obviously, Can recently? sales China there about we had are – was talk you about specifically, performance lot

Doug Hekking

Yes. Doug. this Linda, is

was the saw policy in we in change in of And of to so market. end obviously, complete kind the response year with really at the COVID really what the

see of We back of we trickle. saw Year what and of so normalize we a up. kind are level kind to just we what out how two – had coming of it’s we that remarks weeks are But this those pick bit Chinese our saw that is. we little New just and go in and that And waiting

with will we but opening our is The it adjustments to market the optimistic in create the and will that shifting market. We of forward. think market consumers positive, transitionary the have are and them make obviously some to does make have we

still evaluate to are trying we like. that what So looks

Jim Brown

there, perspective other or Brent And in color our oversees market. Brent? we China have here who Any

Brent Neidig

strong that always demand every But similarly, policy New year, there Year same saw saw the end we associated slowing. Chinese January. slowing Doug. it with we And into that that’s Doug the a said mentioned, go great with very you COVID change as is Yes, of And December at that. and January. was in hit there, the

So what February will March we as of is New going to into demand see come to out out. and and Chinese tell Year time normalize

Linda Bolton-Weiser

and you Okay. a And talk then quite just again, at the kind I results, still about worse I’d Thanks. I be just I your in with specific there look versus expecting, I that interested impacts – there. I is mean Asian guess that piece going the when of business business are Philippines, or guess on, in? was with I Southeast stuff was going both on what Can Malaysia macro just bit COVID just coupled that’s guess

Doug Hekking

Yes.

Jim have me maybe area, within top particularly that obviously, and Let Kevin off us that start in Southeast Asia, is, hit and hard. comment on COVID I has

Malaysia kind of examples and are Philippines key that. of think I

incented. level of of have by promotional been choice performance was playing issue not a all sequentially for in other choice us. the activity fourth atypical an us we region, things the into encouraged – and that we The by and to just with it both was kind the promotion-heavy. it was And and year-over-year relative us were pushed in quarter the that quarter It and didn’t a that is just

positive. market, And in that, and talk hearing is maybe we pretty going think about forward so what are Jim we from what the the leadership

Jim Brown

part and and quarters in off why we last that the the fourth to COVID, and the we’re we quarter, promotional the that’s we slower I rate. said, the traveling first and the because didn’t into of promotions just started that at mean us. planned it’s growing, the in events kind we markets were really like fourth of on very new by a of year year went this third as Doug and year year. run normalized the wanted many starting a excited down more again have positive on planning from leadership But so usually to little bring We are really heavy of

Linda Bolton-Weiser

performance when the gross – Okay. the in the quarter. just then And talked you in – margin about

in color that think or a an impact can that? the that you nature inventory mentioned more on give just continue you Is do will negative little You quarter. of one-time or valuation kind a thing in

Doug Hekking

Yes. and exposure, those from decisions. risk both the some it some making carrying more inventory, And I creates year, year. the think I just the just and mean quarter it was

it done adjustments a we’ve the so has stabilized, bodes dealt great well some inventory where you that And making a has direction But having to supply the instability with inventory. to definitely that necessary. heard we Walter risk really job team think, The and Noot’s and really going forward. as under lot managing the as operations of of prepared far that how remarks, chain and we’re of Jim’s in react

we think think I guess, strategy. now. relative good friction little in will less, a that a I we’re I bit costs so see And to spot And

Linda Bolton-Weiser

Okay.

progress. see. model, guess that I my good had I Let’s in you actually, made

$XX inventory third was the the think I at million the was the end year? the of inventory quarter. in What

Doug Hekking

It about that quarter. would the accounting you flat. I was made a third we remind And change in small

about small have $X we that million, piece, We long-term. have a in

layer you’d have past to comparable up so And to probably that be to years. have to

a I think different so about of with there the same long-term, be you’re there, on and million COVID little in period, worked but our during there is kind looked at $X with the about bit we’ve to the page accounts change that in strategy and flat.

about that about pretty range. And to – $XXX inventory. really million peaking the you’re XX%, close So we’re out is in XX% number

great adapting this So relatively has a short is we period meaningful progress. of the group done job think And a time.

Linda Bolton-Weiser

just will terms you. flow? for projection positive of go – mean And do line Okay. then about I I cash if be this like you’ve the can I to capital before any in talked have you – so a ask, outlook negative affiliate on or working the as on that, influence XXXX, to Thank

Jim Brown

some Just because the the saw and we cash spin-up definitely operating in timing fourth some flows of of quarter. the bolstered payments, of of the

end kind at And a drag just of robust sales because that see really corresponds. you’ll as lot lot a And it inventory of pretty of year. the is and came, the of that so

some generate bit a of time to the sales hadn’t revenue where when There generated we a had commissions. you so paid commissions. but pay we And between is delay actually little

have it But a isolated is I event would really but that. will kind liabilities accrued of the of little think a there. that drag, We be cause that bit

Linda Bolton-Weiser

of kind in mean still the pressures. that of millions for And outlook XXXX? dollars Okay. Is figuring any cost just of then I of pressures inflationary in terms there like some those quantifying figuring like XXXX, you’re for in you’re way in

Doug Hekking

we’ve back in obviously rest there has are the production materials, positions change on as go they in coming think little just We’ve rate. because think and seen mark into locally to The come – are key gone costs. outside different I to biggest well. positions seen And back bit select in in had we’ve more sourcing get I pressure the and world, higher environment mean their we’ve their the a left is doing I overall, of the of we’re little much that all many P&L probably Yes. they said, for on at we like a have there. address from of board, some as stabilization, just alternative as opportunity and X% and I overall of bit framework But areas, definitely the a that X% production particularly we proactive material China to think, sourcing our in look and negotiate have probably locally.

though. of to think and the priority, first having I and run executing stability stuff businesses our kind is

Linda Bolton-Weiser

remind me, the and what for And just might in pricing along on what excuse pricing maybe has and XXXX been strategy your then took Okay. plan XXXX you can you your you lines, price front? those what what us –

Doug Hekking

Yes.

still We’re XXXX. rolling out

now. off So hold I’ll probably

last having it we’ve the years probably the back. I done were, come several some is definitely unknown there below pressures would and think what just operated out in where we’ve inflationary when

would looking the that definitely some possible. pressures reflect and of we for so as do want to cost seeing current we’re that And do. price we’re Obviously, trying to as adjustments little

markets the being that. direction above. it the and probably really thoughtful range years, above we’ve leadership probably we’re arrive is each But sales been from the in Kevin Jim and environment clip Just little working just X% a in the be will a with to in and be at there. bit it in last couple will that And local of the of

Linda Bolton-Weiser

that? what’s pace talk the about and have how And is? you’re then you on this the approaching Okay. out of you country rolling just Thank just Like with matter affiliate of that is plan – of it general going Can you. talked a program. about or kind kind rollout the by and region country region? And by what it finally,

Jim Brown

We and sure. full the ago weeks we out had It Americas few affiliate was just January. launch in rolled actually a then Yes, launch, in the a a November. considered program soft for

of to months going to We’re we’re at out. look that make the few next determination going to it where a over roll

We regions. have plans affiliate countries to the earn And we that’s that to we we half how going And with programs. way be country through into to field to – approach that going earn, it. and by we it’s from want do simpler faster country, and it. also getting then And mostly to know It’s we’re they a see the will XXXX, we the some in be second way will XXXX. feedback go a not

completely. program the then out before again, see to for if ready you to we roll we it. But we We’re any working it’s it how to and need make want itself adjustments see

Linda Bolton-Weiser

it sense. Thank rest and Okay. Thank makes That will guess, take then I you. the you. leave there I offline.

Jim Brown

Linda. Thanks,

Operator

our from Canaccord Genuity. question go Anderson Susan I’ll from ahead. And next take Please

Susan Anderson

for Hi, taking thanks my question.

guess you out kind couple have questions curious to your Europe. that also here. to there? was Just reverse going declines this thoughts thoughts customer activity continue it active last of you year? the expecting the promotional to see you’re any a just play how this Are I’m of and drivers on know quarter. the I Americas then where count, And year. into your expecting on on you that just year. wanted lower I get to And this

Kevin Guest

This Kevin. Thank is you, Susan.

Americas the about talk to Europe. Just and

a our a younger demographic, traditional who not to behind maybe to a direct themselves attract launch different strategies is navigating is meaning so model. key openly the demographic sales model. very much of One a affiliate

it easy see counts may demographic increase to as in in simple key active the behind these relevant The so that And new different launching a precisely attraction Jim in in a commission especially program way affiliate we to our the more be we that. that become to and expect and is so more in receive and as space, U.S. and of customer expect markets quicker strategies a support open receiving, here marketplace. to a pay the said,

relates so the it And as States. we’re United to optimistic

customer whom We strong – we with have a have very very very, base U.S., in of many, has years. been base the a us have that many strong for many

approaching on way. to new them And going also some that really so we’re customers a upon build in focus base but new and

at compared And and again Mexico our specifically that activities we hold And promotional so as groups, it year especially, event relates Canada, again, will QX versus U.S. Europe new the going is to we event face-to-face will in that. have to the with as virtual. them were some later increase being definitely, we that targeted and, communicate to an for launch specifically where these opportunities

of I – the and remember. was So was there can’t of last then Susan, there part Doug. other question, did one part one question – I the

Susan Anderson

And to on puts in just share to complementary potentially I potential in then remarks, your how business? you seek those be then along to Thanks. about repurchases. there? was I of what it year helpful. wanted allocation. terms your active about and guys thoughts this acquisitions M&A, very ask think promotional that was And that I also, mentioned you No, between which But the capital still activity, for lines, the out you are Curious looking thinking takes something the are and customers Yes. the would just think

Doug Hekking

Yes.

kind put on me just go let of and prior reverse question that bit a to. more responded bit little just little your color Kevin So a

program of the for launched, in we lift we of the short is program think a we kind during year, ran pretty a with now markets of that things And during particularly the the I have heavy test created the ran our last that time. way PCs year. period did in One this affiliate

customer stuff, And definitely so seen our as accounts. and that that you have program expired reflect in

So, is to heightened to in opportunities, programs to context in a as and and will continue on run sequentially capital but in build we some done these really that we allocation, report base just put the to looking we little at definitely of business there fourth and far focus from and very as there. do then past, that are so we have what inorganic a looking the of color it’s similar that. bit the we development as region And kind quarter

are with two are last think we we progress. I made the year, pleased acquisitions we making

there in We hopes And have high assertive to this be time pretty companies. it’s make when some right some very things and our of and expectations capital a sense. these of good now deploy area

And so look vertical. structure, at complementary. we look question mean definitely some of type is, of We would your at I what

in looking definitely our not and are from go to in learn are business. areas participating we back some actively We that

so And we we be think of a options there. we will additive move variety very we to think million And forward had out there repurchase, as share $XX is there organization the that outstanding.

haven’t really commented what’s with Board. authorized as just But the a And so we note, on currently there. that’s specifics

Susan Anderson

are And seeing things looking at? have become that been you more Great. in you attractive valuations guys

Doug Hekking

value the palatable and years seller always between sure a gap more it’s but bit that the still how conversations palatable organization. see a were and years. couple than definitely of year It’s X buyer But or ago. ago they of we always has future argument, last been it’s it a been definitely see an the The have than we struggle, of more making that and

Susan Anderson

Thanks luck Great. Good this for much details. year. so all the

Doug Hekking

on Alright. the Thanks being for call.

Operator

go next comes Tigress Ivan our from question from ahead. Feinseth Partners. Please And Financial

Ivan Feinseth

doing for key And of that you are products? going boost of Like, give say, well, exceptionally well? Thank selling me example, new see do can you a also, some products in my you forward, color the taking what targeting? Where opportunity? for really you little areas are winter, Hi. And the bit growth immune you questions. are during let’s on

Jim Brown

last than it, back the of and are that they COVID bit have mean goes weeks the up. little China, And right, I higher we opened to it said mentioned before, we volume demand when Yes. in of couple expected. a and where environment you

So, amount. that, multiple health, products on immunity that saw saw and are we we or normal a pickup times the overall

that. off a going are little decide bit where we look backed that’s the Year, and we So, and at going after to it’s see when New China

So, on and the we do going then our new one And them. that have of kind events, of and but launch usually things to are we we about what of excited one to see it’s about throughout talked is talked do products year. around the products, big we hesitant big new before, and we it,

in two or that Asia another have beginning for of at in this We And event looking in we new the then time. innovation. one out Pacific where one we we in Asia at Pacific August or for Americas, that’s and in roll more are products have would us, year. China And point

help We are there to decisions. and looking make that’s us at delivery science out make those us or methods – the

Kevin Guest

And hopefully, know had high talking markets. asked level in more are other forward then we just of comment, of on timing these And can’t maybe you a I we but other the some about And release Ivan, market, some stuff. you bit little up international areas. the to Jim, rough about these picked that of our talk

Jim Brown

Yes.

for and the of probably when we the our we at new be market. plan new of are market, a major it would at the a So, events. And announce for we fourth one quarter launch have on that again, will looking

do work that the you the excited this, right we to We for have and to have on And literally about register, When prepared. run been have talent brought X.X last market. go we get find years that doing the market. in we successful, people very been the to

‘XX, like it we – the we just company bigger won’t excited a just will creates through on year, in we excitement So, at about to that’s are We it. ready have right They not And huge are this but opportunity the now. move the will field. to that impact impact announce It throughout look a and see we forward. announcement.

Ivan Feinseth

things also, your they are they saying are they from their feedback sellers getting associate products like what Are for? what then strongest for? And looking the that they are And seeing – customers? are demand

Doug Hekking

Yes.

it’s Ivan, I think it’s common theme. least a at fairly with us,

heightened have really a COVID health, have overall saw in their function. think think people for times have more conversations as the interested they health holistic I supplementation general, COVID engaged We taking that exercising in commented we in in we demand as to more and spike a of health. you on, their period, first that. to designed obviously, and support is entered we Jim a approach But immune commented part volume. saw high are products had the – that big several And They more. are we seen and and are and in well-being, are that

stuff has And been fairly so seen consistent. we have

new But listen what and are to and continue us. to getting formulate feedback have different we on that go are pavement definitely and always We our to product we got we back really are ear the offerings, telling and the to trying – are respond. consumers

Jim Brown

to talked Yes. And well way another new We the program. that. focus area is affiliate for as to That’s products. as earn us of about introduce a

So, be really are model influencer where realm fit talk them them price could effective program. at products that and in about looking that an with their show and to we and that affiliate well, that

program. come designed some for that year specifically you see that are affiliate will So, products out this

Ivan Feinseth

the last the of which question, on focusing in just get weren’t if diabetes, of to one sadly, we be unless going to I dietary Then we people pandemic is issues. worse the continue mean, many to would pandemic of COVID, address

the diet, diabetes do also to some working area a Are opportunity seems And of is there? thing comment in to be wellness together demand. that lot part of being or managing – can the Can well thought be that? with give a see you supplements other So, – key And with of sleep that. area, diet as what then by of that? you and all on there type on seems comes also that same you sleep as sleep managed

Kevin Guest

company and of the the what is which agree offering. and underscores we diabetes you perspective health Yes. couldn’t with on a and other talking Ivan, our about this relevance more from Kevin. are challenges, epidemic I

for spoken dips years score, onset and/or consistent have We and glycemic how or diabetes will many large meaning happen ways related sugar blood that. more the spiking symptoms in things a maintaining levels, and about help other glycemic many in to allowing index with to about your not

can at good are products, Again, enhance for and our sleep through exercise. have And take And be then of you actually, can’t of the a – we as to And foods into sleep. category. that. relates that of that in putting glycemic reformulate top on is the the we very, how our list. nutritional the and On just try consistent we foods-related many throughout most nutrients the the and that diabetes is I the diabetes us help this you foods focus are days bring do We and supplying, – products talked helping our what account look and about great are drinks a And look a at especially a our so index some couple of so Nutrimeal glucose do well in our healthy day. emphasize up Drink as but it’s involved that those holistic and and type ours, at that we top level as we you index. health it things maintain further were as one index is then really bodies. of well, a exercise important a we Sleep outside that of – as of critical of will think our and all I sleep. very of in in that low maintain are couple mouth, in is to products is that have And product of development aware ago, health glycemic our other are

things then that help the We And a product calm the also side those state help. rest in to to in have so will a again, we evening of for mental they encouraging and things do are down of are people people which calming sleep.

our things of speak we the the the accept encourage notion time be the I sleep of of I so to calm the mentally night. bodies One meditation every at rest willing notion is that will being of have and

answer that fairly to is of question health your a long can’t the to country it critical question, that’s so so and your the And I world our but be understated. think

Doug Hekking

would a bit little color. make more I And

meaningful We And towards really companies should China here. seen have and what initiative, government thinking XXXX really the more this, be Jim us proactive pretty made has have Healthy the and we back this as our far of will some out good investments we can have off in really products a that and we new really we these facility, build pushed in build foods base introduce and go that is some line.

Ivan Feinseth

big appreciate my questions you and time a and I the wishing for your associates XXXX.

Kevin Guest

Take Thanks care. Ivan.

Operator

for the any Over or sir. in Q&A there over Andrew the call [Operator Instructions] additional to queue, concludes hand As further questions closing remarks. now that Masuda no phone are to today’s to session. And I you, back like would

Andrew Masuda

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

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

Operator

Thank today’s Thank call. conference participation. you. you concludes This for your

disconnect. now may You

USANA Health Sciences (USNA) 8 Feb 232022 Q4 Earnings call transcript