8-K: USANA Health Sciences Reports Mixed Q4 and Full Year 2024 Results, Provides Optimistic 2025 Outlook After Hiya Acquisition

USANA Health Sciences reports a decrease in net sales and earnings for Q4 and fiscal year 2024, but anticipates growth in 2025 following the acquisition of Hiya Health Products.

Summary

• USANA Health Sciences announced its Q4 and full-year 2024 financial results, which include less than a week of Hiya's operating results due to the acquisition closing on December 23, 2024.
• Q4 net sales were $214 million, down from $221 million in Q4 2023, while net earnings decreased to $4.5 million from $16.8 million.
• Diluted EPS for Q4 was $0.23, compared to $0.87 in the prior year, and Adjusted diluted EPS was $0.64, down from $0.87.
• Adjusted EBITDA for Q4 was $25 million, versus $32 million in the prior year.
• Active Customers decreased to 454,000 from 483,000.
• For the full year, net sales were $855 million, down from $921 million in 2023, and net earnings were $42.0 million, compared to $63.8 million.
• Diluted EPS for the year was $2.19, down from $3.30, and Adjusted diluted EPS was $2.59, compared to $3.30.
• Adjusted EBITDA for the year was $110 million, versus $128 million in the prior year.
• The company is providing fiscal year 2025 outlook with consolidated net sales between $920 million and $1.0 billion.
• Net earnings are projected between $29 million and $41 million, with Diluted EPS between $1.50 and $2.20.
• Adjusted Diluted EPS is expected to be between $2.35 and $3.00, and Adjusted EBITDA between $107 million and $123 million.
• The 2025 outlook includes net sales from USANA of $775 to $840 million and from Hiya of $145 to $160 million.
• The company expects an unfavorable currency exchange rate impact of approximately $30 million, or -4% on net sales.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the acquisition of Hiya and the projected growth in 2025, but tempered by the disappointing results in 2024 and the challenges in the Asia Pacific market.

Positives

• USANA delivered fourth quarter results above internal expectations, highlighted by 7% sequential net sales growth.
• The Americas & Europe region showed positive momentum with year-over-year and sequential sales growth.
• The company completed the acquisition of Hiya Health Products, LLC, which is expected to contribute to long-term sustainable growth.
• USANA ended the year with a healthy balance sheet, holding $182 million in cash and cash equivalents.
• The company is implementing several key initiatives to drive growth in 2025, including new product launches, incentive enhancements, and brand strengthening.
• Gross margin increased 110 basis points from the prior year to 82.0% of net sales.
• Hiya's strategic priorities include capitalizing on recent product launches, expanding strategic partnerships, and laying the groundwork for channel expansion.

Negatives

• Q4 net sales decreased to $214 million from $221 million in Q4 2023.
• Net earnings for Q4 decreased significantly to $4.5 million from $16.8 million in the prior year.
• Active Customers decreased to 454,000 from 483,000.
• Full year net sales decreased to $855 million from $921 million in 2023.
• Full year net earnings decreased to $42.0 million from $63.8 million.
• Full year Adjusted EBITDA decreased to $110 million from $128 million.
• Full year Diluted EPS decreased to $2.19 from $3.30.
• Full year Adjusted diluted EPS decreased to $2.59 from $3.30.
• Full year operating results reflected continued, cautious consumer sentiment in many of USANA's key Asia Pacific markets.
• North Asia net sales decreased 25% year-over-year.
• The year-to-date effective tax rate increased to 44.9% for fiscal 2024 compared to the 37.7% for fiscal 2023.

Risks

• Global economic conditions, including continued inflationary pressure, could negatively impact operating costs, consumer demand, and consumer behavior.
• Reliance on the network of independent Associates poses a risk if the compensation plan does not produce desired results.
• Governmental regulation of products, manufacturing, and the direct selling business model in key markets could pose risks.
• Deteriorating foreign and/or trade relations between the United States, China, and other key markets could have negative effects.
• Geopolitical relations and conflicts around the world, including the Russia-Ukraine conflict and the conflict in Israel, could pose risks.
• Material breaches of information technology systems could have potential negative effects.
• Uncertainty relating to the fluctuation in U.S. and other international currencies could pose risks.
• The Hiya acquisition could disrupt each company's current plans and operations.
• The ability to successfully integrate Hiya's business with USANA's business is a risk factor.

Future Outlook

USANA anticipates consolidated net sales between $920 million and $1.0 billion for fiscal year 2025, with net earnings between $29 million and $41 million, and Adjusted EBITDA between $107 million and $123 million.

Management Comments

• USANA delivered fourth quarter results above our internal expectations, highlighted by 7% sequential net sales growth.
• We also completed our acquisition of Hiya during the quarter, which is a meaningful milestone for USANA and an exciting addition to our business.
• Our growth strategy for the direct sales business in 2025 is centered on our Associate sales force and providing them with the resources needed to generate sustainable active customer growth.
• We are introducing our consolidated fiscal 2025 outlook, which now includes additional non-GAAP financial metrics to help provide transparency and comparability with prior years following our acquisition of Hiya.

Industry Context

USANA's performance is affected by consumer sentiment in the direct selling and nutritional supplement industry, particularly in the Asia Pacific region. The acquisition of Hiya reflects a strategy to diversify into the children's wellness market and leverage a direct-to-consumer model.

Comparison to Industry Standards

• It is difficult to compare USANA directly to other companies due to its unique direct selling model.
• Companies like Herbalife Nutrition and Nu Skin Enterprises also operate in the direct selling space, but their geographic focus and product mix may differ.
• The growth of Hiya will be benchmarked against other direct-to-consumer children's wellness brands.
• The company's focus on science-backed products aligns with a broader industry trend towards premium and high-quality nutritional supplements.

Stakeholder Impact

• Shareholders may be concerned about the decreased financial performance in 2024 but optimistic about the projected growth in 2025.
• Associates will be impacted by the changes to the incentive program and the increased focus on customer growth.
• Customers may benefit from the new product launches and improvements to existing products.
• Employees will be involved in the implementation of the new growth strategies and the integration of Hiya.

Next Steps

• USANA plans to roll out new product launches and improvements to existing products.
• The company will implement strategic enhancements and modifications to its Associate incentive offering.
• USANA will strengthen its brand messaging, story, and value proposition.
• The company will accelerate Associate engagement activities, including the Global Convention in August.
• Hiya will focus on capitalizing on recent product launches, expanding strategic partnerships, and laying the groundwork for channel expansion.

Key Dates