Full Press Release Details
USANA Health Sciences Reports Third Quarter Results
SALT LAKE CITY--(BUSINESS WIRE)--October 25, 2022--USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal third quarter ended October 1, 2022.
Key Financial & Operating Results
Third quarter net sales were $233 million as compared with $274 million during the third quarter of the prior year.
Third quarter diluted EPS totaled $0.78 versus $1.36 during the third quarter of 2021.
Company revises fiscal 2022 net sales and diluted EPS outlook to $955 million to $975 million and $3.15 to $3.40, respectively.
Q3 2022 Financial Performance
| Consolidated Results | ||
| Net Sales | $233 million | -15% vs. prior-year quarter -9% constant currency vs. prior-year quarter -$15 million YOY FX impact, or -6% -9% sequentially in constant currency |
| Diluted EPS | $0.78 | -43% vs. prior-year quarter -22% sequentially Diluted shares of 19.3 million, -4% year-over-year |
| Active Customers | 474,000 | -18% vs. prior-year quarter -15% sequentially |
"The challenging operating environment in Asia Pacific and the strengthening U.S. dollar negatively affected our operating results in the third quarter," said Kevin Guest, Chief Executive Officer and Chairman of the Board. "COVID-related
disruptions and challenging economic conditions resulting from those disruptions negatively impacted our results in several key Asia Pacific markets where city-wide lockdowns and other COVID restrictions persisted. This difficult operating
environment has impacted our entire industry."
Guest continued, "While we remain committed to our long-term business strategy, our team is evaluating and executing several short-term initiatives to regain momentum in our business. These initiatives include new and modified incentives in
various markets and regions to make our overall incentive offering more rewarding and attractive to our sales force. They also include more targeted, relevant in-person communications amongst our management team and Associate leaders, as well
as accelerating our return to live sales force meetings and events in markets where that is possible. In that regard, in August we held a successful 30th Anniversary Global Convention in Salt Lake City. The four-day event attracted 4,000
in-person and more than 50,000 virtual attendees. In-person gatherings of this nature, as well as smaller more targeted gatherings, have been, and will continue to be, invaluable in generating momentum for our business. Finally, we continued
to make progress on our digital strategy during the quarter by improving our consumer online shopping experience and will continue to execute our digital strategy going forward."
Q3 2022 Regional Results:
| Asia Pacific Region | ||
| Net Sales | $183 million | -17% vs. prior-year quarter -11% constant currency vs. prior-year quarter -13% constant currency sequentially 78% of consolidated net sales |
| Active Customers | 362,000 | -18% vs. prior-year quarter -17% sequentially |
| Asia Pacific Sub-Regions | ||
| Greater China | ||
| Net Sales | $110 million | -11% vs. prior-year quarter -6% constant currency vs. prior-year quarter |
| Active Customers | 213,000 | -13% vs. prior-year quarter -23% sequentially |
| North Asia | ||
| Net Sales | $26 million | -22% vs. prior-year quarter -10% constant currency vs. prior-year quarter |
| Active Customers | 54,000 | -14% vs. prior-year quarter -5% sequentially |
| Southeast Asia Pacific | ||
| Net Sales | $47 million | -27% vs. prior-year quarter -21% constant currency vs. prior-year quarter |
| Active Customers | 95,000 | -29% vs. prior-year quarter -8% sequentially |
| Americas and Europe Region | ||
| Net Sales | $51 million | -5% vs. prior-year quarter -4% constant currency vs. prior-year quarter +9% constant currency sequentially 22% of consolidated net sales Includes $2.3 million of Q3 2022 sales contribution from recent acquisitions |
| Active Customers | 112,000 | -16% vs. prior-year quarter -7 % sequentially |
Balance Sheet and Share Repurchase Activity
The Company generated $29 million in operating cash flow during the third quarter and ended the quarter with $247 million in cash and cash equivalents, and debt-free. We did not repurchase shares during the quarter and, as of October 1,
2022, the Company had approximately $83 million remaining under the share repurchase authorization.
The Company is revising its net sales and earnings per share outlook for fiscal year 2022 as follows:
| Fiscal Year 2022 Outlook | ||
| Revised Range | Previous Range | |
| Consolidated Net Sales | $955 - $975 million | $1,015 - $1,065 million |
| Diluted EPS | $3.15 - $3.40 | $3.85 - $4.45 |
"Third quarter top line results reflected the negative impact that macro- and local-economic factors had on our Active Customer counts in several of our key markets," said Doug Hekking, Chief Financial Officer. "Additionally, we experienced
greater than expected downward pressure from the stronger U.S. dollar both on net sales and operating margins.
"We are adjusting our fiscal 2022 outlook to reflect the lower Active Customer base at the end of the third quarter, along with continued expectations of COVID-related, inflationary and economic challenges in many of our markets. The
revised guidance also incorporates our expectations that margins will continue to be pressured in the short- to mid-term.
"Despite the near-term disruptions, we remain committed to achieving our long-term strategic initiatives. We believe these initiatives will position USANA to deliver sustainable net sales and EPS growth over the long-term. Over the
short-term, we are actively evaluating and implementing actions to minimize the impact of the macro-operating environment on our financial performance. Our balance sheet remains debt-free and we expect to generate operating cash flow of
approximately $80 million in fiscal 2022."
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 26, 2022 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.
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.
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 magnitude, scope and duration of the impact of the COVID-19 pandemic ("COVID-19") to our business, operations and financial
results; the further spread of, and regulatory measures or voluntary actions that may be put in place to limit the spread of, COVID-19 in the markets where we operate, including restrictions on business operations, shelter at home, or social
distancing requirements; 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; potential negative effects from geopolitical relations and conflicts, including the Russia-Ukraine conflict; 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 | ||||||||||||
| 1-Oct-22 | 2-Oct-21 | 1-Oct-22 | 2-Oct-21 | ||||||||||
| Net sales | $ | 233,300 | $ | 274,352 | $ | 770,641 | $ | 919,165 | |||||
| Cost of sales | 46,560 | 50,715 | 147,460 | 165,380 | |||||||||
| Gross profit | 186,740 | 223,637 | 623,181 | 753,785 | |||||||||
| Operating expenses: | |||||||||||||
| Associate incentives | 98,090 | 116,222 | 336,914 | 404,580 | |||||||||
| Selling, general and administrative | 66,020 | 66,645 | 201,204 | 210,518 | |||||||||
| Earnings from operations | 22,630 | 40,770 | 85,063 | 138,687 | |||||||||
| Other income (expense), net | 594 | (420 | ) | 756 | 309 | ||||||||
| Earnings before income taxes | 23,224 | 40,350 | 85,819 | 138,996 | |||||||||
| Income taxes | 8,295 | 13,020 | 29,264 | 42,811 | |||||||||
| NET EARNINGS | $ | 14,929 | $ | 27,330 | $ | 56,555 | $ | 96,185 | |||||
| Earnings per share - diluted | $ | 0.78 | $ | 1.36 | $ | 2.93 | $ | 4.68 | |||||
| Weighted average shares outstanding - diluted | 19,252 | 20,156 | 19,325 | 20,566 |
| USANA Health Sciences, Inc. | ||||||
| Consolidated Balance Sheets | ||||||
| (In thousands) | ||||||
| (Unaudited) | ||||||
| As of | As of | |||||
| 1-Oct-22 | 1-Jan-22 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 246,879 | $ | 239,832 | ||
| Inventories | 67,278 | 98,318 | ||||
| Prepaid expenses and other current assets | 26,997 | 26,967 | ||||
| Total current assets | 341,154 | 365,117 | ||||
| Property and equipment, net | 95,228 | 101,780 | ||||
| Goodwill | 17,104 | 17,668 | ||||
| Intangible assets, net | 32,158 | 30,442 | ||||
| Deferred tax assets | 13,019 | 4,839 | ||||
| Other assets | 57,400 | 57,894 | ||||
| Total assets | $ | 556,063 | $ | 577,740 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 10,362 | $ | 13,508 | ||
| Other current liabilities | 115,484 | 147,282 | ||||
| Total current liabilities | 125,846 | 160,790 | ||||
| Deferred tax liabilities | 4,801 | 7,497 | ||||
| Other long-term liabilities | 14,317 | 14,329 | ||||
| Stockholders' equity | 411,099 | 395,124 | ||||
| Total liabilities and stockholders' equity | $ | 556,063 | $ | 577,740 |
| USANA Health Sciences, Inc. | ||||||||||||||||||||||||||
| Sales by Region | ||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | Change from prior year | Currency impact on sales | % change excluding currency impact | ||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||
| Greater China | $ | 109,682 | 47.0 | % | $ | 123,235 | 44.9 | % | $ | (13,553 | ) | (11.0 | %) | $ | (6,199 | ) | (6.0 | %) | ||||||||
| Southeast Asia Pacific | 47,308 | 20.3 | % | 64,570 | 23.5 | % | (17,262 | ) | (26.7 | %) | (3,969 | ) | (20.6 | %) | ||||||||||||
| North Asia | 25,667 | 11.0 | % | 33,068 | 12.1 | % | (7,401 | ) | (22.4 | %) | (4,006 | ) | (10.3 | %) | ||||||||||||
| Asia Pacific Total | 182,657 | 78.3 | % | 220,873 | 80.5 | % | (38,216 | ) | (17.3 | %) | (14,174 | ) | (10.9 | %) | ||||||||||||
| Americas and Europe | 50,643 | 21.7 | % | 53,479 | 19.5 | % | (2,836 | ) | (5.3 | %) | (875 | ) | (3.7 | %) | ||||||||||||
| $ | 233,300 | 100.0 | % | $ | 274,352 | 100.0 | % | $ | (41,052 | ) | (15.0 | %) | $ | (15,049 | ) | (9.5 | %) |
| Active Associates by Region (1) | ||||||||||
| (Unaudited) | ||||||||||
| As of | ||||||||||
| October 1, 2022 | October 2, 2021 | |||||||||
| Asia Pacific | ||||||||||
| Greater China | 73,000 | 32.5 | % | 81,000 | 29.8 | % | ||||
| Southeast Asia Pacific | 68,000 | 30.2 | % | 90,000 | 33.1 | % | ||||
| North Asia | 34,000 | 15.1 | % | 39,000 | 14.3 | % | ||||
| Asia Pacific Total | 175,000 | 77.8 | % | 210,000 | 77.2 | % | ||||
| Americas and Europe | 50,000 | 22.2 | % | 62,000 | 22.8 | % | ||||
| 225,000 | 100.0 | % | 272,000 | 100.0 | % |
| Active Preferred Customers by Region (2) | ||||||||||
| (Unaudited) | ||||||||||
| As of | ||||||||||
| October 1, 2022 | October 2, 2021 | |||||||||
| Asia Pacific | ||||||||||
| Greater China | 140,000 | 56.2 | % | 165,000 | 54.3 | % | ||||
| Southeast Asia Pacific | 27,000 | 10.9 | % | 44,000 | 14.4 | % | ||||
| North Asia | 20,000 | 8.0 | % | 24,000 | 7.9 | % | ||||
| Asia Pacific Total | 187,000 | 75.1 | % | 233,000 | 76.6 | % | ||||
| Americas and Europe | 62,000 | 24.9 | % | 71,000 | 23.4 | % | ||||
| 249,000 | 100.0 | % | 304,000 | 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. |