Business Wire | Jul 21, 2020 04:17PM EDT

USANA Health Sciences Reports Second Quarter Results

Jul. 21, 2020

SALT LAKE CITY--(BUSINESS WIRE)--Jul. 21, 2020--USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal second quarter ended June 27, 2020.

Key Financial & Operating Highlights

* Continued strong demand and successful promotions combined to generate $259.0 million in net sales and $1.32 in diluted EPS during the quarter * Active customers increased 7.9% vs. the prior-year quarter * Company continued to successfully execute a virtual sales and operating strategy to deliver results * Company raises full-year 2020 Net Sales and EPS outlook

Q2 2020 Financial Performance

Consolidated Results

* +1.2% vs. prior-year quarterNet Sales $259.0 * +4.3% constant currency vs. prior-year million quarter * -$8.1 million fx impact, or -3.1%

Diluted EPS $1.32 * +45.1% vs. prior-year quarter * Diluted shares of 21.1 million, -9.6%

Active Customers 599,000 * +7.9% vs. prior-year quarter

Cash & Cash $227.4 * Ended quarter with no debtEquivalents million

"Strong consumer demand for our high-quality, health products and successful promotions drove our second quarter performance," said Kevin Guest, Chief Executive Officer and Chairman of the Board. "During the quarter, we generated nearly eight percent growth in active customers, due to double-digit customer growth in three-of-our-four regions, including the Americas and Europe region. We also continued to successfully execute a virtual sales and operating strategy to deliver our results. This strategy included USANA hosting its first all-virtual Asia Pacific Convention, as well as the facilitation of other technology-based tools that assisted our Associates in their sales efforts. Finally, we offered several promotions and incentives during the quarter that benefitted net sales and our overall results. The health, wellness and safety of our employees, Associates and customers around the world remain our top priorities and our operating plan will continue to reflect those priorities."

Mr. Guest continued, "We are raising our full-year guidance to reflect a solid second quarter as well as our expectations for the back-half of the year. We recognize that we cannot anticipate all of the challenges that might arise as a result of the ongoing COVID-19 pandemic, but we believe that we are positioned to continue adapting to an evolving operating environment. Overall, we remain confident in the strength of USANA's underlying business and the growth strategies we have in place for the remainder of 2020 and beyond."

Q2 2020 Regional Results:

Asia Pacific Region

* +1.9% vs. prior-year quarterNet Sales $209.3 million * Constant currency net sales: +4.8% * -$6.1 million fx impact, or -2.9% * 80.8% of consolidated net sales

Active Customers 463,000 * +6.9% vs. prior-year quarter

Asia Pacific Sub-Regions

Greater China

Net Sales $124.0 million * -3.8% vs. prior-year quarter * Constant currency net sales: -0.8%

Active Customers 278,000 * Flat vs. prior-year quarter * +0.4% sequentially

North Asia

Net Sales $25.9 million * +14.5% vs. prior-year quarter * Constant currency net sales: +19.5%

Active Customers 56,000 * +19.1% vs. prior-year quarter * -1.8% sequentially

Southeast Asia Pacific

Net Sales $59.5 million * +10.2% vs. prior-year quarter * Constant currency net sales: +12.2%

Active Customers 129,000 * +19.4% vs. prior-year quarter * +12.2% sequentially

Americas and Europe Region

* -1.7% vs. prior-year quarterNet Sales $49.7 million * Constant currency net sales: +2.3% * -$2.0 million fx impact, or -4.0% * 19.2% of consolidated net sales

Active Customers 136,000 * +11.5% vs. prior-year quarter * +9.7% sequentially

Balance Sheet

The Company ended the quarter with $227.4 million in cash and cash equivalents and no debt. During the quarter the Company did not repurchase any shares of common stock and, as of June 27, 2020, there was approximately $73 million remaining under the current share repurchase authorization. Beginning in the third quarter, the Company's board of directors will once again consider utilizing the Company's share repurchase authorization to return value to shareholders.

Fiscal 2020 Outlook

The Company is updating its consolidated net sales and earnings per share outlook for fiscal year 2020.

Fiscal Year 2020 Outlook

Revised Range Previous Range

Consolidated Net Sales $1.05 - $1.10 billion $1.00 - $1.08 billion

Diluted EPS $4.70 - $5.25 $4.00 - $4.90

Doug Hekking, Chief Financial Officer, said, "We offered several successful promotions and incentives during the quarter that contributed to net sales while generating solid customer growth. We are raising our guidance to reflect our expectations for the back half of the year and plan on an increased cadence of promotions and incentives, particularly in the third quarter. The expected overall impact from currency remains relatively unchanged from the update we provided following the first quarter. Finally, our revised diluted earnings per share outlook reflects savings realized from event and travel costs due to the COVID-19 environment, as well as our success in aligning spending with sales performance. Although we are managing our cost structure to align with sales and to ensure the Company's financial flexibility, we plan to continue making investments to execute our long-term growth strategies and to generate momentum in each of our regions."

Management Commentary Document and Conference Call

For more information on the Company's operating results, please see the "Management Commentary, Results and Outlook" document, which has been posted on the Company's website ( http://ir.usana.com) under the "Investor Relations" section of the site. USANA will hold a conference call and webcast to discuss today's announcement with investors on Wednesday, July 22, 2020 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, before moving directly into questions and answers.

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, healthy 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 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; 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 Six Months Ended 27-Jun-20 29-Jun-19 27-Jun-20 29-Jun-19 Net sales $ 258,991 $ 256,016 $ 525,610 $ 529,006

Cost of sales 47,674 46,494 93,733 92,395

Gross profit 211,317 209,522 431,877 436,611

Operating expensesAssociate incentives 110,852 111,511 226,921 234,041

Selling, general and administrative 60,879 66,854 126,358 136,409

Earnings from operations 39,586 31,157 78,598 66,161

Other income (expense) 393 1,355 544 2,645

Earnings before income taxes 39,979 32,512 79,142 68,806

Income taxes 12,002 11,134 24,613 23,256

NET EARNINGS $ 27,977 $ 21,378 $ 54,529 $ 45,550

Earnings per share - diluted $ 1.32 $ 0.91 $ 2.56 $ 1.93

Weighted average shares outstanding 21,129 23,370 21,340 23,648- diluted USANA Health Sciences, Inc.Consolidated Balance Sheets(In thousands)(Unaudited) As of As ofASSETS 27-Jun-20 28-Dec-19Current AssetsCash and cash equivalents $ 227,368 $ 234,830

Inventories 69,279 68,905

Prepaid expenses and other current 28,302 25,544assetsTotal current assets 324,949 329,279

Property and equipment, net 98,435 95,233

Goodwill 16,521 16,636

Intangible assets, net 29,008 29,840

Deferred income taxes 3,741 3,090

Other assets 39,497 42,856

Total assets $ 512,151 $ 516,934

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable $ 10,942 $ 12,525

Other current liabilities 128,775 123,573

Total current liabilities 139,717 136,098

Deferred income taxes 6,584 10,282

Other long-term liabilities 16,774 18,842

Stockholders' equity 349,076 351,712

Total liabilities and stockholders' $ 512,151 $ 516,934equity

USANA Health Sciences, Inc.Sales by Region(unaudited)

(in thousands)

Quarter Ended Currency % change 27-Jun-20 29-Jun-19 Change from impact excluding prior year on sales currency impact Asia PacificGreater China $ 124,001 47.9 % $ 128,946 50.3 % $ (4,945 ) (3.8 %) $ (3,874 ) (0.8 %)

Southeast Asia 59,459 22.9 % 53,960 21.1 % 5,499 10.2 % (1,096 ) 12.2 %PacificNorth Asia 25,852 10.0 % 22,575 8.8 % 3,277 14.5 % (1,127 ) 19.5 %

Asia Pacific 209,312 80.8 % 205,481 80.2 % 3,831 1.9 % (6,097 ) 4.8 %Total Americas and 49,679 19.2 % 50,535 19.8 % (856 ) (1.7 %) (1,999 ) 2.3 %Europe $ 258,991 100.0 % $ 256,016 100.0 % $ 2,975 1.2 % $ (8,096 ) 4.3 %

Active Associates by Region^(1)

(unaudited)

As of 27-Jun-20 29-Jun-19 Asia PacificGreater China 93,000 32.3 % 102,000 35.8 %

Southeast Asia 94,000 32.6 % 87,000 30.5 %PacificNorth Asia 37,000 12.9 % 33,000 11.6 %

Asia Pacific 224,000 77.8 % 222,000 77.9 %Total Americas and 64,000 22.2 % 63,000 22.1 %Europe 288,000 100.0 % 285,000 100.0 %

Active Preferred Customers by Region ^(2)(unaudited) As of 27-Jun-20 29-Jun-19Asia PacificGreater China 185,000 59.5 % 176,000 65.2 %

Southeast Asia 35,000 11.3 % 21,000 7.7 %PacificNorth Asia 19,000 6.1 % 14,000 5.2 %

Asia Pacific 239,000 76.9 % 211,000 78.1 %Total Americas and 72,000 23.1 % 59,000 21.9 %Europe 311,000 100.0 % 270,000 100.0 %

(1) Associates are independent distributors of our products who also purchaseour products for their personal use. We only count as active those Associateswho 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 useand are not permitted to resell or to distribute the products. We only count asactive those Preferred Customers who have purchased from us any time during themost recent three-month period. China utilizes a Preferred Customer programthat has been implemented specifically for that market.

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CONTACT: Investors contact: Patrique Richards Investor Relations (801) 954-7961 investor.relations@us.usana.com

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