Business Wire | Oct 26, 2021 04:19PM EDT

USANA Health Sciences Reports Third Quarter Results

Oct. 26, 2021

SALT LAKE CITY--(BUSINESS WIRE)--Oct. 26, 2021--USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal third quarter ended October 2, 2021, which were modestly ahead of the preliminary outlook the Company provided on September 16, 2021.

Key Financial & Operating Highlights

* Third quarter net sales were $274.4 million as compared with $298.5 million during the third quarter of the prior year. * Third quarter diluted EPS were $1.36 versus $1.44 during the third quarter of 2020. * Reiterates fiscal 2021 net sales and diluted EPS outlook, which was provided on September 16, 2021. * Company expects to generate approximately $130 million of free cash flow in fiscal 2021.

Q3 2021 Financial Performance

Consolidated Results

* -8% vs. prior-year quarterNet Sales $274.4 million * -11% constant currency vs. prior-year quarter * +$9.9 million YOY FX impact, or +3%

Diluted EPS $1.36 * -6% vs. prior-year quarter * Diluted shares of 20.2 million, -5%

Active 576,000 * -11% vs. prior-year quarterCustomers

"As we indicated a month ago, the operating environment remains challenging across several of our key markets due, in great part, to disruptions and lockdowns related to the COVID-19 pandemic," said Kevin Guest, Chief Executive Officer and Chairman of the Board. "Additionally, the year-over-year comparison was difficult given the significant short-term sales program that we offered in the prior year quarter. Notwithstanding these challenges, we continue to execute our growth strategy, which is centered on generating sustainable customer growth."

Q3 2021 Regional Results:

Asia Pacific Region

* -9% vs. prior-year quarterNet Sales $220.9 million * Constant currency net sales: -12% * 81% of consolidated net sales

Active Customers 443,000 * -12% vs. prior-year quarter * -14% sequentially

Asia Pacific Sub-Regions

Greater China

Net Sales $123.2 million * -9% vs. prior-year quarter * Constant currency net sales: -15%

Active Customers 246,000 * -13% vs. prior-year quarter * -19% sequentially

North Asia

Net Sales $33.1 million * +14% vs. prior-year quarter * Constant currency net sales: +12%

Active Customers 63,000 * +5% vs. prior-year quarter * -5% sequentially

Southeast Asia Pacific

Net Sales $64.6 million * -15% vs. prior-year quarter * Constant currency net sales: -15%

* -15% vs. prior-year quarterActive Customers 134,000 * -7% sequentially



Americas and Europe Region

Net Sales

$53.5 million

* -7% vs. prior-year quarter * Constant currency net sales: -9% * 19% of consolidated net sales

Active Customers

133,000

* -10% vs. prior-year quarter * -4% sequentially

Mr. Guest added, "We made progress on several strategic initiatives during the quarter. Enhancing the overall shopping experience for our customers remains a high priority, and to that end, we rolled out additional features and functionality within our China shopping app, as well as a new web-based shopping cart in China. Although our introduction of certain new products has been delayed until 2022, we are actively engaged in bringing new and innovative products to market. Overall, we remain confident that the successful execution of our strategy will deliver long-term, sustainable growth."

Balance Sheet and Share Repurchase Activity

The Company ended the quarter with $249 million in cash and cash equivalents and no debt after repurchasing 523,000 shares for $50 million. Diluted shares outstanding totaled 20.2 million during the third quarter of 2021. As of October 2, 2021, the Company had approximately $137 million remaining under the share repurchase authorization, following the Company's increase of the repurchase authorization on September 16, 2021.

Fiscal 2021 Outlook

The Company is reiterating its net sales and earnings per share outlook for fiscal year 2021, which was provided on September 16, 2021.

Americas and Europe Region

* -7% vs. prior-year quarterNet Sales $53.5 million * Constant currency net sales: -9% * 19% of consolidated net sales

Active Customers 133,000 * -10% vs. prior-year quarter * -4% sequentially

Mr. Guest added, "We made progress on several strategic initiatives during the quarter. Enhancing the overall shopping experience for our customers remains a high priority, and to that end, we rolled out additional features and functionality within our China shopping app, as well as a new web-based shopping cart in China. Although our introduction of certain new products has been delayed until 2022, we are actively engaged in bringing new and innovative products to market. Overall, we remain confident that the successful execution of our strategy will deliver long-term, sustainable growth."

Balance Sheet and Share Repurchase Activity

The Company ended the quarter with $249 million in cash and cash equivalents and no debt after repurchasing 523,000 shares for $50 million. Diluted shares outstanding totaled 20.2 million during the third quarter of 2021. As of October 2, 2021, the Company had approximately $137 million remaining under the share repurchase authorization, following the Company's increase of the repurchase authorization on September 16, 2021.

Fiscal 2021 Outlook

The Company is reiterating its net sales and earnings per share outlook for fiscal year 2021, which was provided on September 16, 2021.

Fiscal Year 2021 Outlook

Range

Consolidated Net Sales $1.18 - $1.20 billion

Diluted EPS $5.80 - $6.00

The Company maintains a 52/53-week fiscal year. Fiscal 2020 was a 53-week year and included one additional week of sales in the fourth quarter of 2020 compared to Fiscal 2021.

Doug Hekking, Chief Financial Officer, said, "We are reiterating our outlook for fiscal 2021 with third quarter results coming in just ahead of the projections we provided on September 16th. Our outlook incorporates ongoing investments required to achieve long-term growth objectives that may impact near-term operating margins."

Management Commentary Document and Conference Call

For more 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 27, 2021 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. Free cash flow is a non-GAAP financial measure that we believe provides investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. We believe it provides a measure of our ability to fund various discretionary business initiatives, including acquisitions and share repurchase. Free cash flow is calculated by subtracting net capital expenditures from net cash provided by operating activities.

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 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 Nine Months Ended

2-Oct-21 26-Sep-20 2-Oct-21 26-Sep-20

Net sales $ 274,352 $ 298,513 $ 919,165 $ 824,123

Cost of sales 50,715 56,358 165,380 150,091

Gross profit 223,637 242,155 753,785 674,032

Operating expenses:Associate incentives 116,222 131,144 404,580 358,065

Selling, general and 66,645 65,656 210,518 192,014 administrativeEarnings from operations 40,770 45,355 138,687 123,953

Other income (expense), (420 ) (1,080 ) 309 (536 )netEarnings before income 40,350 44,275 138,996 123,417 taxesIncome taxes 13,020 13,769 42,811 38,382

NET EARNINGS $ 27,330 $ 30,506 $ 96,185 $ 85,035

Earnings per share - $ 1.36 $ 1.44 $ 4.68 $ 4.00 dilutedWeighted average shares 20,156 21,170 20,566 21,283 outstanding - dilutedUSANA Health Sciences, Inc.Consolidated Balance Sheets(In thousands)(Unaudited) As of As of

2-Oct-21 2-Jan-21

ASSETSCurrent AssetsCash and cash equivalents $ 248,695 $ 311,917

Inventories 96,316 90,224

Prepaid expenses and other current assets 23,414 23,145

Total current assets 368,425 425,286

Property and equipment, net 100,957 100,445

Goodwill 17,510 17,367

Intangible assets, net 30,312 30,796

Deferred tax assets 5,465 4,640

Other assets 56,277 62,353

Total assets $ 578,946 $ 640,887

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable $ 13,706 $ 18,195

Other current liabilities 144,258 149,878

Total current liabilities 157,964 168,073

Deferred tax liabilities 7,840 12,009

Other long-term liabilities 14,063 19,155

Stockholders' equity 399,079 441,650

Total liabilities and stockholders' equity $ 578,946 $ 640,887

USANA Health Sciences, Inc.Sales by Region(unaudited)(in thousands) Quarter Ended Currency % change October 2, 2021 September 26, 2020 Change from prior impact excluding year on currency sales impactAsiaPacificGreater $ 123,235 44.9 % $ 136,013 45.5 % $ (12,778 ) (9.4 %) $ 7,457 (14.9 %)ChinaSoutheast 64,570 23.5 % 76,313 25.6 % (11,743 ) (15.4 %) 85 (15.5 %)AsiaPacificNorth 33,068 12.1 % 28,969 9.7 % 4,099 14.1 % 770 11.5 %AsiaAsia 220,873 80.5 % 241,295 80.8 % (20,422 ) (8.5 %) 8,312 (11.9 %)PacificTotal Americas 53,479 19.5 % 57,218 19.2 % (3,739 ) (6.5 %) 1,570 (9.3 %)andEurope $ 274,352 100.0 % $ 298,513 100.0 % $ (24,161 ) (8.1 %) $ 9,882 (11.4 %)

Active Associates by Region^(1)(unaudited) As of October 2, 2021 September 26, 2020Asia PacificGreater China 81,000 29.8% 91,000 29.1%

Southeast Asia Pacific 90,000 33.1% 113,000 36.1%

North Asia 39,000 14.3% 39,000 12.4%

Asia Pacific Total 210,000 77.2% 243,000 77.6%

Americas and Europe 62,000 22.8% 70,000 22.4%

272,000 100.0% 313,000 100.0%

Active Preferred Customers by Region ^(2)(unaudited) As of

October 2, 2021 September 26, 2020

Asia PacificGreater China 165,000 54.3% 193,000 57.3%

Southeast Asia Pacific 44,000 14.4% 45,000 13.4%

North Asia 24,000 7.9% 21,000 6.2%

Asia Pacific Total 233,000 76.6% 259,000 76.9%

Americas and Europe 71,000 23.4% 78,000 23.1%

304,000 100.0% 337,000 100.0%

(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/20211026006199/en/

CONTACT: Investor contact: Patrique Richards Investor Relations (801) 954-7961 investor.relations@usanainc.com Media contact: Dan Macuga Public Relations (801) 954-7280