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Operator: Greetings. Welcome to the USANA Health Sciences First Quarter Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Andrew Masuda, Director, Investor Relations. Thank you. You may begin.

Andrew Masuda: Thank you, Diego, and good morning, everyone. We appreciate you joining us to review our first quarter results. Today’s conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website. As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ perhaps materially from the results projected in such forward-looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2025, uncertainty related to the economic and operating environment around the world and our operations and financial results.

We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC. I’m joined by our President and CEO, Jim Brown; our Chief Financial Officer, Doug Hekking; our Chief Operating Officer, Walter Noot; our Chief Commercial Officer, Brent Neidig as well as other executives. Yesterday, after the market closed, we announced our first quarter results and posted our management commentary document on the company’s website. We’ll now hear brief remarks from Jim before opening the call for questions.

Jim Brown: Thank you, Andrew, and good morning, everyone. USANA is off to a solid start to the year. Our first quarter results were in line with our internal expectations as consolidated net sales grew 12% year-over-year in constant currency, which includes our first full quarter of contribution from Hiya. Net sales and active customers in our direct selling business grew modestly on a sequential basis for the second consecutive quarter. While consumer sentiment in some of our key markets continues to reflect an overall cautious tone, we are seeing some pockets of strength. For example, sequential first quarter net sales and active customers in our largest market, Mainland China, grew 6% and 4%, respectively. We continue to execute our Associate first strategy that prioritizes associate engagement on multiple levels.

Accordingly, we held several leadership events across various markets during the quarter and have many events planned throughout the remainder of the year. Early in the second quarter, we hosted our China National Sales Meeting in Nanjing, China. Attendance was strong while we focus on business building, strategy and training, leadership recognition and USANA Associate first commitment. We also use this event to broaden our product offering in China with the introduction of additional products. Both attendees and our executive team came away from this event energized and motivated. We also successfully expanded our product offering in several other markets with the rollout of new products during the first quarter. Simultaneously, the team continued to increase their efforts on several new product launches that are planned to be announced in the second-half of the year.

For instance, Dr. Kathryn Armstrong, our Chief Scientific Officer, traveled to several of our Asia Pacific markets where she met with leaders and our local management teams to gather valuable insights and customer feedback, as well as collaborate on future product ideas. Overall, our direct selling business remains on track to meet the sales guidance range we provided at the beginning of the year. Moving to our newly acquired Hiya business. The team continues to deliver robust results with strong growth in net sales and active monthly subscribers. Hiya continues to see increasing subscriber adoption of both its core product offering as well as new products. For example, Kids Daily Greens, which was launched in the third quarter of 2024, has continued to sell at a higher-than-expected pace.

We expect this year-over-year growth in highest momentum to continue as the management team executes its plans to launch several new products this year, unveiling another strategic partnership and expand to additional channels. We’re confident in the continued growth of the business and are proud to be reaching a new customer demographic and children’s health and wellness. Before opening the call for questions, I’d like to provide some thoughts on USANA’s position as it relates to tariffs and other trade-related actions by the U.S. and its trading partners around the world. The impact of potential trade policies and tariffs remain highly uncertain at this time. As such, we have not reflected any potential impact in our financial guidance. As a reminder, we manufacture in China for our China market and manufacture for the rest of the world here in the U.S. While this structure does afford some insulation from recently enacted tariffs, we do source certain raw materials from various markets around the globe and therefore, have exposure to tariffs.

Our primary focus for now is on the potential tariff impact associated with importing certain raw materials from China into the U.S. and importing certain raw materials from the U.S. into China. Our team responsible for supply chain management has proactively built inventory over the last several quarters to mitigate tariff exposure and has continued to explore alternative sourcing relationships. Our team will continue to evaluate and pursue these strategies to address the potential impact of tariffs and emerging trade policies as they evolve. And we plan to provide additional information as we gain greater visibility. With that, I’ll now ask the operator to please open the lines for questions.

Operator: Thank you. And at this time, we will conduct our question-and-answer session. [Operator Instructions] Our first question comes from [Anthony Lebiedzinski] (ph) with Sidoti & Company. Please state your question.

Anthony Lebiedzinski: Yes, good morning everyone and thanks for taking the questions. So first, China and South Korea that posted net sales and active customer count increases on a sequential basis. You guys talked about incentive offerings helping those out at the start of the year. So just curious as to what your plans are for additional incentives in these countries? And elsewhere, how do you guys think about that as far as that’s concerned? Would love to hear your thoughts on that.

Brent Neidig: Sure thing, hey Anthony, it’s Brent here. Good morning.

Anthony Lebiedzinski: Good morning.

Brent Neidig: China did have a good quarter. It was helped at the beginning of the year, we had a couple of product promotions that took place before Chinese New Year, and those were all very, very successful and which helped drive the quarterly results. We’re always opportunistic, and we’re always looking at promotions when they’re going to make the most sense, how we can drive the best value for our distributors and customers around the world. So we are always going to continue to evaluate promotions. And throughout every one of the quarters, the rest of this year, we do have promotional incentives planned. So that’s currently on the docket. Korea, it also was a good first quarter relative to Q4 of last year. I think in both of those markets, we’re starting to see some really positive momentum, especially with our event that we had in China during the first quarter — first part of the second quarter, really great event that we had there in Nanjing with 13,000 attendees.

It just really strong momentum and great things that we’re seeing there.

Anthony Lebiedzinski: That’s encouraging to hear. Thanks for that. And then with respect to Hiya. So you talked about the seasonality of the business, which is understandable. As far as the new product launches that are planned for this year, can you share some more specifics about the timing and kind of what’s embedded in your guidance?

Doug Hekking: Yes, they have plans. I think the timing, you’ll see that systematically kind of happen over the year. They have — right now, there’s a plan for a pretty meaningful launch of kind of a new relationship at the beginning of May. But the team is always bringing different ideas and really is a point to go back and engage a broader funnel and engage more customers and acquiring those customers. And so this is probably the primary part of their growth strategy right now is on product innovation, broadening that product offering out. You also see them exploring channel opportunities and really kind of evaluating, kind of, that experience with the customer, which has, I think, been a real strength of theirs. And so I think we see a continuation of that.

But it really is — continues to be focused on the children’s health and wellness category, and that will be squarely in focus as they move forward here. And so I think there’s quite a few opportunities they’re encouraged by and some that may play a little bit different potentially in different channels than what they currently operate.

Anthony Lebiedzinski: Thanks, Doug. And so now that you’ve had Hiya for four months, do you guys have any updated thoughts on the synergy opportunities?

Walter Noot: Yes. Hey, this is Walter. Yes, we’ve been working with Hiya, especially operationally because it’s one of our strengths. We do manufacturing, we understand supply chain real well, and we can really help them with that. So there are definitely synergies. There are a lot of things we’re helping with them with IT. So yes, lots of projects going on right now where both teams are collaborating.

Jim Brown: Yes, we’re taking a very systematic approach. The one thing that we have to be careful with is with a lot of opportunities for synergies. We don’t want to overwhelm the Hiya team and somehow distract them from their strategy for 2025 and 2026. So we’re taking a very measured approach when we’re looking at ways to improve them from an operational standpoint.

Doug Hekking: Yes. And I would say many of these things, Anthony, I think the yields and the benefits you’re not going to see on an immediacy basis, you’ll see the kind of systematically layered in there as we do that. And so we’re really focused on things that will be additive and beneficial to both parties.

Anthony Lebiedzinski: Got it. Really that makes sense. And can you give us any update on India, how that’s progressing?

Brent Neidig: Yes, India is still a promising market for us. We still have high expectations and high hopes for it to become a very solid, stable market for us in the future. It still is a slow roll, as we’ve mentioned in previous quarters. Our Chief Sales officer is over there currently right now, meeting with our leaders and our leadership team over there. We have a lot of energy and emphasis is being placed on that market to see it start to pick up its growth momentum. So we have a few plans in place and we’re optimistic about where it’s going to go.

Anthony Lebiedzinski: Goit it. Thanks, Brent. And then lastly for me. As far as the potential tariff impact. So I know you guys brought in some additional inventories to try to get ahead of that. So do you think what you have done so far, like is this for one quarter out as far as the higher inventory? Or is it more than that? I mean just trying to — obviously, it’s still a very fluid and dynamic environment as it relates to tariffs. But just maybe if you could expand on that as far as the level of inventory that you have for raw materials? Is it good — how long of a period of time should that be good for?

Walter Noot: This is Walter. As far as raw material, we’ve built that up, especially for our nutritional products, because that’s a lion’s share of our revenue, a lot of it comes from there. We — in February, we started recognizing that there might be tariffs coming. So we bought ahead. But again, the real issue — I mean, it’s a little bit of what Jim said earlier, we don’t have a ton of inventory coming, for instance, from China to the U.S. It’s 6% of our overall raw materials that come from China. So we’ve worked on that for the last four years. The impact isn’t as bad, but it’s still — there’s still money there to be made. And so we want to make sure we had inventory ready. We’ve also been manufacturing finished goods and getting them out to markets just again, to prepare for tariffs.

Jim Brown: Yes. And over the last few years to Walter and the supply chain team, and we’ve mentioned this has really worked on multiple sources, and they can come from different geographic locations as well. So that has also lessens the impact some.

Anthony Lebiedzinski: That makes a lot of sense. Well, thank you very much, guys, and best of luck.

Jim Brown: Thank you.

Operator: Thank you. [Operator Instructions] Our next question comes from Ivan Feinseth with Tigress Financial Partners. Please state your question

Ivan Feinseth: Hi congratulations on the great start to the year and the success with the Hiya acquisition. And thanks for taking my question. So just starting with China, what have been some of the new products that were launched there and the reception that you’re getting and what do you see as some of the new categories that you’re going to be launching?

Brent Neidig: Sure thing, Ivan. So at our event in the second quarter, so first part of the second quarter there in Nanjing, we only had a couple of new products that were launched. One was a new chewable calcium product for our children, and that was really well received. It beat our forecast. And then a couple of other products that were launched through our cross-border e-commerce channel. They were some of our existing USANA nutritional’s products that were then introducing into China for the first time, and those were also very well received. So at the beginning of the year, it is more of a slow roll. As we’ve talked about in the past, the product introductions and enhancements that are going to take place will accelerate in the back half of the year.

So that is going to be the same for here in the United States and in China and in our other markets around the world. So we expect in the second-half of the year, you should see a greater acceleration of new product introductions.

Jim Brown: Yes, Ivan, as you know from the past that we have our international convention in August. And we usually use big meetings like that, like, for example, what Brent was talking about in China has launching point. So when we talk about the second-half, a lot of it will come around that mid-August time frame.

Ivan Feinseth: Okay. And then for my big question is that there are a lot of competing products on the market that contain a lot of bad ingredients. And now what do you think your opportunity is as RFK starts to implement the elimination of a lot of these colors, dies artificial ingredients and you tend to lean toward a more natural product. How do you feel that the opportunity — how do you feel that, that will create an opportunity for you?

Doug Hekking: Hi, Ivan, this is Doug. I think we’ve always been well positioned just from the ethos of the company to capitalize on that. And I think one of the things Brent and his team have really done is focused a lot more on gauging the story and telling the differentiation. And I think as we continue to perfect that message, you get it out there, that resonates at a greater and greater level. And so yes, I think it’s an opportunity for us. It’s something that we’ve always done. We’ve always had that as part of our identity, and have some of those things come to light, I think, provides us ability to tell a more differentiated story moving forward.

Jim Brown: Yes, it actually goes into Hiya well. They’re in the same boat, very clean products. So this again is an opportunity for both Hiya and USANA.

Ivan Feinseth: Yes. Thank you. Congratulations again and wishing you a great year.

Jim Brown : Thanks, Ivan.

Doug Hekking: Thanks, Ivan.

Operator: Thank you. [Operator Instructions] And there appears to be no additional questions at this time. I’ll hand the floor back to Andrew Masuda for closing remarks.

Andrew Masuda: Thanks for your questions and participation on today’s conference call. If you have any remaining questions, please feel free to contact Investor Relations at (801) 954-7210.

Operator: Thank you. This concludes today’s call. All parties may disconnect. Have a good day.