USANA Health Sciences Reports Third Quarter 2023 Results

SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal third quarter ended September 30, 2023.

Key Financial & Operating Results

  • Third quarter net sales were $213 million versus $233 million during Q3 2022.
  • Third quarter diluted EPS was $0.59 as compared with $0.78 during Q3 2022.
  • Company narrows fiscal year 2023 net sales and diluted EPS outlook to $900 million to $920 million and $2.80 to $3.05, respectively (previously $900 million to $950 million and $2.65 to $3.30).

Q3 2023 Financial Performance

Consolidated Results

Net Sales

$213 million

  • -9% vs. Q3 2022
  • -7% constant currency vs. Q3 2022
  • -$5 million YOY FX impact, or -2%
  • -10% sequentially
  • -9% constant currency sequentially

Diluted EPS

$0.59

  • -24% vs. Q3 2022
  • -34% sequentially
  • Diluted shares of 19.4 million, or +1% year-over-year

Active Customers

464,000

  • -2% vs. Q3 2022
  • -5% sequentially

“Operating results for the third quarter did not meet our expectations, largely because of challenging economic conditions across many of our regions and a lower cadence of promotional activity during the quarter,” said Jim Brown, President and Chief Executive Officer. “These factors made it difficult to generate both Active Customer growth and top line momentum in our business. Notwithstanding these near-term challenges, the strength of our balance sheet and business model allowed us to continue investing in key strategic initiatives during the quarter, and we plan to continue to invest in and execute these strategies going forward. We also believe that the expanding global nutrition category, and consumers’ increased focus on health and wellness, provide a compelling opportunity for us to leverage our best-in-class health products and business opportunity. Consequently, we remain confident and optimistic that our strategies will generate long-term Active Customer and sales growth for USANA.”

Mr. Brown continued, “We made progress on several initiatives during the quarter, including the re-engagement of our Associate leaders around the world. During the quarter, we hosted a successful Americas and Europe convention in Salt Lake City. We believe that these in-person events are key to generating momentum and excitement among our Associates, and we have more events planned over the next 12 months.”

“During the quarter, we also finalized plans to commence operations in India and anticipate opening this important market prior to year-end. We continue to believe that India provides a meaningful and diverse growth opportunity for USANA, and we are excited to introduce our best-in-class nutritional products in this promising market.”

Q3 2023 Regional Results:

Asia Pacific Region

Net Sales

$170 million

  • -7% vs. Q3 2022
  • -4% constant currency vs. Q3 2022
  • -12% sequentially
  • -10% constant currency sequentially
  • 80% of consolidated net sales

Active Customers

362,000

  • Flat vs. Q3 2022
  • -6% sequentially

Asia Pacific Sub-Regions

Greater China

Net Sales

$107 million

  • -3% vs. Q3 2022
  • +2% constant currency vs. Q3 2022
  • -17% sequentially
  • -15% constant currency sequentially

Active Customers

230,000

  • +8% vs. Q3 2022
  • -8% sequentially

North Asia

Net Sales

$24 million

  • -6% vs. Q3 2022
  • -7% constant currency vs. Q3 2022
  • -5% sequentially
  • -5% constant currency sequentially

Active Customers

49,000

  • -9% vs. Q3 2022
  • -4% sequentially

Southeast Asia Pacific

Net Sales

$39 million

  • -17% vs. Q3 2022
  • -16% constant currency vs. Q3 2022
  • Flat sequentially
  • +1% constant currency sequentially

Active Customers

83,000

  • -13% vs. Q3 2022
  • +1% sequentially

Americas and Europe Region

Net Sales

$43 million

  • -14% vs. Q3 2022
  • -16% constant currency vs. Q3 2022
  • -3% sequentially
  • -3% constant currency sequentially
  • 20% of consolidated net sales

Active Customers

102,000

  • -9% vs. Q3 2022
  • -1% sequentially

Balance Sheet and Share Repurchase Activity

The Company generated $22 million in operating cash flow during the third quarter and ended the quarter with $307 million in cash and cash equivalents while remaining debt-free. The Company repurchased 180 thousand shares for a total of $12 million during the quarter. As of September 30, 2023, the Company had approximately $71 million remaining under the current share repurchase authorization.

Fiscal Year 2023 Outlook

The Company is revising its net sales and earnings per share outlook for fiscal year 2023, as follows:

Fiscal Year 2023 Outlook

 

Revised Range

Previous Range

Consolidated Net Sales

$900 - $920 million

$900 - $950 million

Diluted EPS

$2.80 - $3.05

$2.65 - $3.30

“Inflationary pressures, lower promotional activity, and the strengthening of the US dollar collectively resulted in lower than anticipated top line performance,” said Doug Hekking, Chief Financial Officer. “Additionally, we updated our annual effective tax rate estimate during the quarter, which negatively impacted third quarter EPS by approximately $0.10 per share due to the relative distribution of taxable income by market.”

Mr. Hekking continued, “We are narrowing our fiscal 2023 guidance to reflect our third quarter operating results, expected fourth quarter results, and continued pressure from unfavorable foreign currency exchange rates. We remain committed to managing costs in line with expected sales performance while we continue to invest in strategic initiatives that we believe will drive sustainable long-term growth for USANA.”

Management Commentary Document and Conference Call

For further 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, October 25, 2023 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 COVID-19 pandemic (“COVID-19”) to our business, operations and financial results; 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; compliance with data privacy and security laws and regulations in our markets around the world; potential negative effects from geopolitical relations and conflicts, including the Russia-Ukraine conflict and the conflict in Israel; 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 Nine Months Ended
30-Sep-23 1-Oct-22 30-Sep-23 1-Oct-22
 
Net sales

$

213,365

$

233,300

$

699,927

$

770,641

Cost of sales

 

42,529

 

 

46,560

 

 

134,374

 

 

147,460

 

Gross profit

 

170,836

 

 

186,740

 

 

565,553

 

 

623,181

 

Operating expenses:
Associate incentives

 

89,926

 

 

98,090

 

 

298,376

 

 

336,914

 

Selling, general and administrative

 

63,303

 

 

66,020

 

 

198,325

 

 

201,204

 

Earnings from operations

 

17,607

 

 

22,630

 

 

68,852

 

 

85,063

 

Other income (expense), net

 

2,924

 

 

594

 

 

6,990

 

 

756

 

Earnings before income taxes

 

20,531

 

 

23,224

 

 

75,842

 

 

85,819

 

Income taxes

 

9,184

 

 

8,295

 

 

28,820

 

 

29,264

 

NET EARNINGS

$

11,347

 

$

14,929

 

$

47,022

 

$

56,555

 

 
 
Earnings per share - diluted

$

0.59

 

$

0.78

 

$

2.43

 

$

2.93

 

Weighted average shares outstanding - diluted

 

19,372

 

 

19,252

 

 

19,376

 

 

19,325

 

USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
As of As of
30-Sep-23 31-Dec-22
ASSETS
Current Assets
Cash and cash equivalents

$

307,081

$

288,420

Inventories

 

60,081

 

 

67,089

 

Prepaid expenses and other current assets

 

23,298

 

 

28,873

 

Total current assets

 

390,460

 

 

384,382

 

 
Property and equipment, net

 

95,159

 

 

97,773

 

Goodwill

 

16,801

 

 

17,368

 

Intangible assets, net

 

29,462

 

 

32,432

 

Deferred tax assets

 

15,135

 

 

9,799

 

Other assets*

 

54,131

 

 

54,795

 

Total assets

$

601,148

 

$

596,549

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable

$

9,321

 

$

11,049

 

Other current liabilities

 

103,238

 

 

132,784

 

Total current liabilities

 

112,559

 

 

143,833

 

 
Deferred tax liabilities

 

4,747

 

 

4,071

 

Other long-term liabilities

 

13,448

 

 

14,173

 

 
Stockholders' equity

 

470,394

 

 

434,472

 

Total liabilities and stockholders' equity

$

601,148

 

$

596,549

 

*Includes noncurrent inventories of $3,720 and $3,479 as of 30-Sep-23 and 31-Dec-22, respectively. Total inventories were $63,801 and $70,568 as of 30-Sep-23 and 31-Dec-22, respectively.
USANA Health Sciences, Inc.
Sales by Region
(In thousands)
(Unaudited)
 
Quarter Ended
September 30, 2023 October 1, 2022 Change from prior year Currency
impact on
sales
%
change
excluding
currency
impact
Asia Pacific
Greater China

$

106,609

50.0

%

$

109,682

47.0

%

$

(3,073

)

(2.8

%)

$

(5,377

)

2.1

%

Southeast Asia Pacific

 

39,151

 

18.3

%

 

47,308

 

20.3

%

 

(8,157

)

(17.2

%)

 

(532

)

(16.1

%)

North Asia

 

24,244

 

11.4

%

 

25,667

 

11.0

%

 

(1,423

)

(5.5

%)

 

487

 

(7.4

%)

Asia Pacific Total

 

170,004

 

79.7

%

 

182,657

 

78.3

%

 

(12,653

)

(6.9

%)

 

(5,422

)

(4.0

%)

 
Americas and Europe

 

43,361

 

20.3

%

 

50,643

 

21.7

%

 

(7,282

)

(14.4

%)

 

745

 

(15.9

%)

$

213,365

 

100.0

%

$

233,300

 

100.0

%

$

(19,935

)

(8.5

%)

$

(4,677

)

(6.5

%)

Active Associates by Region(1)
(Unaudited)
 
As of
September 30, 2023 October 1, 2022
Asia Pacific
Greater China

69,000

34.0

%

73,000

32.5

%

Southeast Asia Pacific

55,000

 

27.1

%

68,000

 

30.2

%

North Asia

33,000

 

16.2

%

34,000

 

15.1

%

Asia Pacific Total

157,000

 

77.3

%

175,000

 

77.8

%

 
Americas and Europe

46,000

 

22.7

%

50,000

 

22.2

%

203,000

 

100.0

%

225,000

 

100.0

%

Active Preferred Customers by Region (2)
(Unaudited)
 
As of
September 30, 2023 October 1, 2022
Asia Pacific
Greater China

161,000

61.7

%

140,000

56.2

%

Southeast Asia Pacific

28,000

 

10.7

%

27,000

 

10.9

%

North Asia

16,000

 

6.1

%

20,000

 

8.0

%

Asia Pacific Total

205,000

 

78.5

%

187,000

 

75.1

%

 
Americas and Europe

56,000

 

21.5

%

62,000

 

24.9

%

261,000

 

100.0

%

249,000

 

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.

 

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

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

Source: USANA Health Sciences, Inc.