USANA reports Q3 net earnings down at US$14.9M from US$27.3M a year ago, with net sales down at US$233.0M from US$274.0M a year ago; results impacted by COVID-19 disruptions and economic conditions in Asia, strengthening US dollar

Sample article from our Health Care Sector

SALT LAKE CITY , October 27, 2022 (press release) –

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.

Fiscal 2022 Outlook

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.

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 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221025005968/en/

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.

Released October 25, 2022

 

 

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