Q - USANA HEALTH SCIENCES

Previous wording

Direct selling: Direct selling is our primary business with approximately 84% of consolidated net sales. Our direct selling customer base is primarily comprised of two types of customers: “Associates” and “Preferred Customers,” referred to together as “active Customers.” Our Associates also sell our products to retail customers. Associates share in our company vision by acting as independent distributors of our products in addition to purchasing our products for their personal use. In 2023, we launched our Affiliate program in the United States, Canada, and Mexico and are evaluating introducing the program in other markets. This program offers another sales and compensation opportunity to individuals who are interested in selling USANA products. Affiliates are discussed and reported in the report as part of our Associates. Preferred Customers purchase our products strictly for personal use and are not permitted to resell or to distribute the products. We only count as active Customers those Associates and Preferred Customers who have purchased from us at any time during the most recent three-month period. As of March 29, 2025, we had approximately 459,000 active Customers worldwide in our direct selling business.

Current wording

Direct selling: Direct selling is our primary business with approximately 84% of consolidated net sales during the six months ended June 28, 2025. Our direct selling customer base is primarily comprised of two types of customers: “Brand Partners” (previously Associates) and “Preferred Customers,” referred to together as “active Customers.” To demonstrate our commitment to our sales leaders, we are refining the terminology to reference our sales leaders from "Associates" to "Brand Partners." The term Brand Partner reflects a more strategic, collaborative relationship, and better represents the crucial role these individuals play in the sustainable long-term growth of the business. Our Brand Partners also sell our products to retail customers. Brand Partners share in our company vision by acting as independent distributors of our products in addition to purchasing our products for their personal use. In 2023, we launched our Affiliate program in the United States, Canada, and Mexico, which offers another sales and compensation opportunity to individuals who are interested in selling USANA products. Affiliates are discussed and reported in the report as part of our Brand Partners. Preferred Customers purchase our products strictly for personal use and are not permitted to resell or to distribute the products. We only count as active Customers those Brand Partners and Preferred Customers who have purchased from us at any time during the most recent three-month period. As of June 28, 2025, we had approximately 418,000 active Customers worldwide in our direct selling business.

Previous wording

We have direct selling operations in multiple markets, with sales and expenses being generated and incurred in multiple currencies. Our reported U.S. dollar sales and earnings can be significantly affected by fluctuations in currency exchange rates. In general, our operating results are affected positively by a weakening of the U.S. dollar and negatively by a strengthening of the U.S. dollar. During the three months ended March 29, 2025, net sales outside of the United States represented 91.0% of direct selling net sales. In our net sales discussions that follow, we approximate the impact of currency fluctuations on net sales by translating current year sales at the average exchange rates in effect during the comparable periods of the prior year.

Current wording

We have direct selling operations in multiple markets, with sales and expenses being generated and incurred in multiple currencies. Our reported U.S. dollar sales and earnings can be significantly affected by fluctuations in currency exchange rates. In general, our operating results are affected positively by a weakening of the U.S. dollar and negatively by a strengthening of the U.S. dollar. During the six months ended June 28, 2025, net sales outside of the United States represented 91.3% of direct selling net sales. In our net sales discussions that follow, we approximate the impact of currency fluctuations on net sales by translating current year sales at the average exchange rates in effect during the comparable periods of the prior year.

Previous wording

Hiya direct-to-consumer: Hiya operates and sells products to customers in the United States. Hiya's customers purchase Hiya products for personal use primarily through a subscription model, which is intended to provide a steady, predictable income stream for Hiya. The ongoing nature of subscriptions fosters stronger relationships with customers by making it easier for them to receive products regularly, which we believe leads to retention and loyalty. Hiya's subscription model also provides important data on customer preferences and behaviors, which enables personalized offerings, efficient marketing and data-driven innovation insights. We evaluate Hiya's customer counts and behavior through their monthly subscribers and only count as "active Monthly Subscribers" those Hiya customers who have purchased from Hiya at any time during the most recent month. As of March 29, 2025, Hiya had approximately 224,000 active Monthly Subscribers.

Current wording

Hiya direct-to-consumer: Hiya operates and sells products to customers in the United States. Hiya's customers purchase Hiya products for personal use primarily through a subscription model, which is intended to provide a steady, predictable income stream for Hiya. The ongoing nature of subscriptions fosters stronger relationships with customers by making it easier for them to receive products regularly, which we believe leads to retention and loyalty. Hiya's subscription model also provides important data on customer preferences and behaviors, which enables personalized offerings, efficient marketing and data-driven innovation insights. We evaluate Hiya's customer counts and behavior through their monthly subscribers and only count as "active Monthly Subscribers" those Hiya customers who have purchased from Hiya at any time during the most recent month. As of June 28, 2025, Hiya had approximately 200,400 active Monthly Subscribers.

Previous wording

The following table summarizes operating results as a percentage of net sales for thecurrent and prior-year periods, as indicated:

Current wording

The following tables summarize operating results as a percentage of net sales for thecurrent and prior-year periods, as indicated:

Previous wording

The following table summarizes the approximate percentage of total product revenue for our direct selling segment that has been contributed by our major product lines and our top-selling products for the current and prior-year periods, as indicated:

Current wording

The following table summarizes the approximate percentage of total product revenue for our direct selling segment that has been contributed by major product lines and our top-selling products for the current and prior-year periods, as indicated:

Previous wording

The following table summarizes the approximate percentage of total product revenue for our Hiya direct-to-consumer segment that has been contributed by our major product lines for the current period, as indicated:

Current wording

The following table summarizes the approximate percentage of total product revenue for our Hiya direct-to-consumer segment that has been contributed by major product lines for the current period, as indicated:

Previous wording

Because we sell our products to a direct selling customer base of independent Associates and Preferred Customers, we increase our sales by increasing the number of our active Customers, the amount they spend on average, or both. Our primary focus continues to be increasing the number of active Customers. We believe this focus is consistent with our vision of improving the overall health and nutrition of individuals and families around the world. Increases or decreases in product sales are typically the result of variations in the volume of product sold relating to fluctuations in the number of active Customers purchasing our products. The number of active Customers is, therefore, used by management as a key non-financial indicator to evaluate our operational performance.

Current wording

Because we sell our products to a direct selling customer base of independent Brand Partners and Preferred Customers, we increase our sales by increasing the number of our active Customers, the amount they spend on average, or both. Our primary focus continues to be increasing the number of active Customers. We believe this focus is consistent with our vision of improving the overall health and nutrition of individuals and families around the world. Increases or decreases in product sales are typically the result of variations in the volume of product sold relating to fluctuations in the number of active Customers purchasing our products. The number of active Customers is, therefore, used by management as a key non-financial indicator to evaluate our operational performance.

Previous wording

Sales to Associates acco unted for approximately 50% of direct selling segment sales during the three months ended March 29, 2025, with the remainder of our sales generated from Preferred Customers. Associates and Preferred Customers represented approximately 40% and 60%, respectively, of the total active Customer base for the quarter in the direct selling segment. The table below summarizes the changes in our active Customer base for our direct selling segment by geographic region, rounded to the nearest thousand as of the dates indicated:

Current wording

Sales to Brand Partners accounted for approximately 51% of direct selling segment sales during the six months ended June 28, 2025, with the remainder of our sales generated from Preferred Customers. As of June 28, 2025, Brand Partners and Preferred Customers represented approximately 41% and 59%, respectively, of the total active Customer base for the quarter in the direct selling segment. The table below summarizes the changes in our active Customer base for our direct selling segment by geographic region, rounded to the nearest thousand as of the dates indicated:

Previous wording

We believe that presentation of certain non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. Management believes these measures reflect an additional way of viewing aspects of our business that, when viewed with our U.S. GAAP results, provide a more complete understanding of factors and trends affecting our business. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. We provide such non-GAAP financial information for informational purposes only. Readers should consider the information in addition but not instead of or superior to, our Consolidated Financial Statements prepared in accordance with U.S. GAAP, accompanying this report.

Current wording

We believe that presentation of certain non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. Management believes these measures reflect an additional way of viewing aspects of our business that, when viewed with our U.S. GAAP results, provide a more complete understanding of factors and trends affecting our business. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. We provide such non-GAAP financial information for informational purposes only. Readers should consider the information in addition but not instead of or superior to, our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP, accompanying this report.

Previous wording

Net sales for the first quarter of 2025 increased 9.5% to $249.5 million, an increase of $21.7 million, compared with the prior-year quarter. The addition of Hiya was the primary catalyst to year-over-year growth in consolidated net sales while the direct selling segment experienced modest declines during the quarter. A challenging economic and operating environment contributed to a decrease in active Customers in the direct selling segment, which was a key factor in the lower year-over-year performance. Additionally, unfavorable changes in currency exchange rates negatively impacted net sales by an estimated $5.6 million in the current year quarter.

Current wording

Net sales for the second quarter of 2025 increased 10.8% to $235.8 million, an increase of $23.0 million, compared with the prior-year quarter. The addition of Hiya was the primary catalyst to year-over-year growth in consolidated net sales while the direct selling segment experienced modest declines during the quarter. A challenging economic and operating environment contributed to a decrease in active Customers in the direct selling segment, which was a key factor in the lower year-over-year performance, partially offset by an increase in average spend per customer. While we've experienced an unfavorable impact from changes in currency exchange rates over the past several quarters, the impact was minimal on the current quarter.

Previous wording

Net earnings attributable to USANA for the first quarter of 2025 were $9.4 million, a decrease of 43.1% compared with $16.5 million during the prior-year quarter. Several items contributed to lower year-over-year net earnings during the current year quarter including amortization costs of acquired intangible assets as well as lower net interest income attributable to deploying cash reserves related to the acquisition of Hiya. The impact of a strong U.S. dollar on our operating model and lower net sales in the direct selling segment also contributed to lower year-over-year net earnings.

Current wording

Net earnings attributable to USANA for the second quarter of 2025 were $9.7 million, a decrease of 7.4% compared with $10.4 million during the prior-year quarter. Several items contributed to lower year-over-year net earnings during the current year quarter including amortization costs of acquired intangible assets as well as lower net interest income attributable to deploying cash reserves related to the acquisition of Hiya. Lower net sales in the direct selling segment also contributed to lower year-over-year net earnings.

Previous wording

Our Hiya direct-to-consumer net sales for the three-month period ended March 29, 2025 were $37.1 million. There were no sales in the corresponding period of 2024 as the acquisition of Hiya occurred in the fourth quarter of 2024.

Current wording

Our Hiya direct-to-consumer net sales for the three-month period ended June 28, 2025 were $33.9 million. There were no sales in the corresponding period of 2024 as the acquisition of Hiya occurred in the fourth quarter of 2024.

Previous wording

Gross profit decreased 210 basis points to 79.0% of net sales, down from 81.1% in the prior-year quarter. The decrease in gross profit is largely attributed to an approximate 300 basis point unfavorable impact on consolidated results from Hiya, which carries lower gross margins relative to the direct selling business. Gross margin in the direct selling business improved 90 basis points from the prior year to 81.9% of segment net sales. The increase in gross profit for the direct selling segment can primarily be attributable to the reorganization of our commercial team, a favorable change in market sales mix, and modest price increases, partially offset by unfavorable changes in currency exchange rates.

Current wording

Gross profit decreased 240 basis points to 78.7% of net sales, down from 81.1% in the prior-year quarter. The decrease in gross profit is largely attributed to an approximate 250 basis point unfavorable impact on consolidated results from the inclusion of Hiya, which carries lower gross margins relative to the direct selling business. Gross margin in the direct selling business improved 10 basis points from the prior year to 81.2% of segment net sales. The increase in gross profit for the direct selling segment can primarily be attributable to the reorganization of our commercial team, a favorable change in market sales mix, and modest price increases, partially offset by unfavorable changes in currency exchange rates.

Previous wording

Associate incentives expense is incurred only in the direct selling segment. Associate incentives within the direct selling business increased 40 basis points to 42.4% of segment net sales, up from 42.0% in the prior-year quarter. The relative increase can be attributed to increased spend on promotional incentives, partially offset by market mix and modest price increases. On a consolidated basis, Associate incentives decreased 590 basis points to 36.1% of net sales, down from 42.0% in the prior-year quarter. This decrease can be attributed to inclusion of Hiya sales where no Associate incentives are paid.

Current wording

Brand Partner incentives expense is incurred only in the direct selling segment. Brand Partner incentives within the direct selling business increased 60 basis points to 43.1% of segment net sales, up from 42.5% in the prior-year quarter. The relative increase canbe attributed to an unfavorable shift in market mix and higher accruals for incentive trips and awards in the current year quarter, partially offset by modest price increases. On a consolidated basis, Brand Partner incentives decreased 560 basis points to 36.9% of net sales, down from 42.5% in the prior-year quarter. This decrease can be attributed to inclusion of Hiya sales where no Brand Partner incentives are paid.

Previous wording

Selling, general and administrative expenses increased$27.1 million in absolute terms during the current year quarter, or 830 basis points relative to net sales. The increase reflects an approximate 460 basis point unfavorable impact on consolidated results from the Hiya direct-to-consumer segment, which has a higher mix of selling, general and administrative expenses compared to the direct selling segment. Hiya's first quarter reflected normal seasonality of higher marketing spend, as well as the inclusion of amortization costs of acquired intangible assets. Our direct selling segment increased 370 basis points from the prior year to 32.0% of segment net sales. The increase is primarily due to a loss of leverage on lower year-over-year net sales and also reflects the change in the activities and organization of the commercial team.

Current wording

Selling, general and administrative expenses increased $17.6 million in absolute terms during the current year quarter, or 450 basis points relative to net sales. The increase reflects an approximate 300 basis point unfavorable impact on consolidated results from the Hiya direct-to-consumer segment, which has a higher mix of selling, general and administrative expenses compared to the direct selling segment. Hiya's second quarter reflected normal levels of marketing spend, as well as the inclusion of amortization costs of acquired intangible assets. Relative selling, general and administrative expenses for our direct selling segment increased 150 basis points from the prior year to 31.7% of segment net sales. The increase is primarily due to a loss of leverage on lower year-over-year net sales and the change in the activities and organization of the commercial team, partially offset by a decrease in costs for distributor events.

Previous wording

Diluted EPS attributable to USANA decreased to $0.49 as compared to $0.86 reported in the prior-year quarter. This decrease can be attributed to lower net earnings attributable to USANA driven, in great part, by amortization costs of acquired intangible assets, lower net interest income, an unfavorable impact from currency exchange rates, and lower net sales in the direct selling segment.

Current wording

Diluted EPS attributable to USANA decreased to $0.52 as compared to $0.54 reported in the prior-year quarter. This decrease can be attributed to lower net earnings attributable to USANA driven, in great part, by amortization costs of acquired intangible assets, lower net interest income, and lower net sales in the direct selling segment.

Previous wording

Net sales in our direct selling business for the three-month period ended March 29, 2025 were $212.5 million, down 6.7% when compared to the corresponding period of 2024. On a constant currency basis, net sales in the direct selling segment declined 4.5%. A generally lower cadence of promotional activity during the current year quarter and a decrease in active Customer counts were the primary contributors to lower net sales in the direct selling segment. This decrease was partially offset by modest price increases and higher sales per active Customer.

Current wording

Net sales in our direct selling business (discussed withour "other" category)for the six-month period ended June 28, 2025 were $414.4 million, down 6.0% when compared to the corresponding period of 2024. On a constant currency basis, net sales in the direct selling segment declined 4.7%. A generally lower cadence of promotional activity during the current year period and a decrease in active Customer counts were the primary contributors to lower net sales in the direct selling segment. This decrease was partially offset by modest price increases and higher sales per active Customer.

Previous wording

Asia Pacific: Net sales declined 6.3%, or 4.2% on a constant currency basis, in this region during the current year quarter. Active Customers in this region declined 5.3% year-over-year. This decline reflects a lower cadence of promotional activity that was partially offset by higher sales per active Customer and modest price increases throughout the region. This decline was primarily concentrated in China and South Korea. Local currency net sales declined 5.3% in China on a 7.4% decrease in active Customers, partially offset by an increase of 2.3% in average spend per customer. Local currency net sales declined 3.6% in South Korea that was primarily attributable to a 5.6% decrease in average spend per customer, partially offset by a 2.3% increase in active Customers.

Current wording

Asia Pacific: Net sales declined 5.4%, or 4.5% on a constant currency basis, in this region during the current year period. Active Customers in this region declined 7.1% year-over-year. This decline reflects a lower cadence of promotional activity partially offset by 2.9% higher average spend per customer and modest price increases throughout the region. This decline was primarily concentrated in China, South Korea, Australia, and Malaysia. Local currency net sales declined 3.9% in China on a 7.8% decrease in active Customers, partially offset by an increase of 4.2% in average spend per customer. Local currency net sales declined 7.5% in South Korea primarily attributable to a 4.8% decrease in active Customers and a 2.4% decrease in average spend per Customer. Local currency net sales declined 5.5% in Australia primarily attributable to a 10.7% decrease in active Customers, partially offset by a 6.0% increase in average spend per Customer. Local currency net sales declined 11.4% in Malaysia on an 8.2% decrease in active Customers and a 3.1% decrease in average spend per Customer.

Previous wording

Americas and Europe: Net sales declined 9.8%, or 5.5% on a constant currency basis, in this region during the current year quarter. Active Customers in this region declined 14.1% year-over-year. Year-over-year results in this region reflect a continued challenging environment to attract new customers as well as the variability of the timing and type of promotional activity offered during the quarter. Net sales decreased 8.2% in the United States that was attributable, in great part, to a 16.7% decrease in active Customers and was partially offset by a 10.2% increase in average spend per customer. Local currency net sales decreased 8.4% in Mexico on lower active Customer counts.

Current wording

Americas and Europe: Net sales declined 10.6%, or 7.6% on a constant currency basis, in this region during the current year period. Active Customers in this region declined 15.7% year-over-year, while average spend per customer increased 9.6% year-over-year. Year-over-year results in this region reflect a continued challenging environment to attract new customers as well as the variability of the timing and type of promotional activity offered during the quarter. Net sales decreased 10.6% in the United States attributable, in great part, to a 16.9% decrease in active Customers and was partially offset by a 7.6% increase in average spend per customer. Local currency net sales decreased 6.8% and 3.6% in Mexico and Canada, respectively, primarily due to a decrease in active Customers of 17.6% and 13.8%, respectively, partially offset by an increase in average spend per Customer of 13.0% and 11.9%, respectively.

Previous wording

Income taxes increased to 44.5% of pre-tax earnings from the 39.0% reported in the comparable period of 2024, or 44.9% for fiscal 2024. The higher effective tax rate can be attributed primarily to the change in market mix of pre-tax income.

Current wording

Income taxes increased to 44.5% of pre-tax earnings, up from 43.0% of pre-tax earnings for the six months ended June 29, 2024. The higher effective tax rate can be attributed primarily to the change in market mix of pre-tax income.

Previous wording

Cash and cash equivalents decre ased to $179.6 million as of March 29, 2025, from $181.8 million as of December 28, 2024. Cash flow provided by operating activities was$15.5 million, offset by cash used in financing activities of $14.5 million, and cash used in investing activities of $3.9 million. Additionally, favorable changes in currency exchange rates have impacted cash and cash equivalents, and restricted cash by $0.7 million.

Current wording

Cash and cash equivalents decre ased to $151.3 million as of June 28, 2025, from $181.8 million as of December 28, 2024. Cash flow provided by operating activities was$27.7 million, offset by cash used in financing activities of $53.1 million, and cash used in investing activities of $8.0 million. Additionally, favorable changes in currency exchange rates have impacted cash and cash equivalents, and restricted cash by $3.0 million.

Previous wording

Net cash flow provided by operating activities was $17.7 million for the first three months of 2024. Net earnings attributable to USANA combined with adjustments of non-cash items contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay the 2023 annual employee bonus, accrued associate incentives and prepaid expenses.

Current wording

Net cash flow provided by operating activities was$27.7 million for the firstsix months of 2025. Net earnings combined with adjustments of non-cash items and an increase in accounts payable contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay the 2024 annual employee bonus, accrued Brand Partner incentives, and the purchase of inventories.

Previous wording

Net cash flow provided by operating activities was$15.5 million for the first three months of 2025. Net earnings combined with adjustments of non-cash items contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay the 2024 annual employee bonus, accrued associate incentives, and the purchase of inventories.

Current wording

Net cash flow provided by operating activities was $25.7 million for the first six months of 2024. Net earnings combined with adjustments of non-cash items contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay accounts payable, accrued Brand Partner incentives, and the 2023 annual employee bonus.

Previous wording

We believe our current cash balances, future cash provided by operations, and amounts available under our line of credit will be sufficient to cover our operating and capital needs in the ordinary course of business for the foreseeable future. If we experience an adverse operating environment or unanticipated and unusual capital expenditure requirements, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available to us at all or on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, mergers and acquisitions, share repurchase, or for other reasons. Such financing may include the use of debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders.

Current wording

We believe our current cash balances, future cash provided by operations, and amounts available under our line of credit will be sufficient to cover our operating and capital needs in the ordinary course of business for the foreseeable future. If we experience an adverse operating environment or unanticipated and unusual capital expenditure requirements, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available to us at all or on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, mergers and acquisitions, share repurchases, or for other reasons. Such financing may include the use of debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders.