USANA Health Sciences, Inc.

Greetings and welcome to the USANA Health Sciences fourth quarter conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Andrew Masuda, Director of Investor Relations. Thank you. You may begin.

Thanks, Diego, and good morning, everyone. We appreciate you joining us to review our fourth quarter and fiscal year 2024 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 companies. 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, as well as uncertainty related to the economic and operating environment around the world, 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 Hecking, our Chief Operating Officer, Walter Knope, our Chief Commercial Officer, Brent Neidig, as well as other executives. Yesterday, after the market closed, we announced our fourth quarter and fiscal year year 2024 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.

Thank you, Andrew, and good morning, everyone. I'd like to open today's call by saying that I'm excited about USANA's future. Our direct sales business just reported a solid quarter of results at the tail end of what I consider an investment year for USANA. In 2024, it became apparent that we needed to pivot in a few key areas to position USANA to return to growth that we've had historically. Many of our 2024 initiatives are long-term focused and meant to make USANA more attractive and relevant from a product, branding, and income opportunity standpoint. An example of this is the reorganization of both the R&D department and commercial team. During the year, we put Entirely new product teams in place and they are now working faster and more efficiently We also reorganize our sales marketing communications departments into one comprehensive commercial team We are now better positioned to bring innovation and relevant products to market faster with a focused brand message that differentiates our products in the marketplace this new team structure also better positions us to execute our customer growth strategy in 2025 and which is centered on USANA delivering three fundamental benefits to our sales force. Best-in-class products, a simple brand message that highlights the superiority, differentiation, and benefits of our products, and an income opportunity that is simple, rewarding, and more compelling for associates that are looking to make extra income sooner or build their own business. With these foundational changes now firmly in place, I believe USANA is positioned to deliver long-term customer and sales growth. During the fourth quarter, we also acquired 78.8% ownership stake in Hiya Health for $205 million. Hiya is a fast-growing, cash-generating, direct-to-consumer company that is focused on children's health and wellness. This acquisition positions USANA as a leader in the expanding children's health and wellness market and strengthens our ability to reach and positively impact more health-conscious individuals and families, while simultaneously accelerating and magnifying our vision of creating the healthiest family on earth. Hiya has an experienced management team that continues to lead the company, a compelling brand, a subscription business model that is positioned to continue delivering strong and sustainable sales growth over the next several years. The Hiya team is highly engaged and focused on expanding their leadership position in the children's health and wellness market. Notably, the acquisition of Hiya came very late in the fourth quarter, so the contribution to USANA's consolidated 2024 results was minimal. Accordingly, most of today's remarks were focused on our core business. Turning now to the fourth quarter, USANA finished the year with a solid fourth quarter results that exceeded our expectations. Net sales grew 7% sequentially, and adjusted diluted EPS increased 14%. Positive response to promotional activity was a key driver of the results, particularly in the United States, where net sales grew 16% sequentially. We also saw notable strength in Australia and New Zealand with combined net sales in these two markets growing 9% year over year. Turning now towards our initiatives for 2025. After much hard work, collaboration, and focus through 2024, the new structure of our commercial team is solidly in place. We're now full speed ahead with accelerating, delivering, and executing upon our customer growth strategy. First, we're planning a higher cadence of new product launches in 2025. We have over 20 products launches and product reformulations planned to roll out globally throughout the year to both existing and new markets. We recently appointed Dr. Catherine Armstrong as our chief scientific officer, and she will play a pivotal role in leading global research development and scientific ventures. We are also hosting our global convention in Salt Lake City this August and have an amazing event plan with several product launches. We haven't held a global convention in the U.S. for several years, so we're excited to have a large group of our associates from around the world come together to celebrate their success, receive business training, and to learn about the many new products we're excited to launch. Second, we will be rolling out a strategic enhancement to our associated incentive offering in the back half of the year. These enhancements are designed to modernize our sales incentives and incent customer growth and improve pay for performance. We will be enhancing our brand message, story, and value proposition to deliver a stronger, more cohesive brand presence, support key product and incentives launches, and magnify USANA's overall brand reputation, superiority, and differentiation. Fourth, we will continue to accelerate associate engagement activities in our regions around the world. With our upcoming product launches and modifications to our associate incentive offerings, it is more important than ever to engage with our associates. We plan to hold many trainings and recognition events across key markets throughout the year with a marquee event of the Global Convention in Salt Lake City in August. Before opening the call for questions, I'd like to provide some additional thoughts on our strategic acquisition of HIA. It's been just over two months since closing the deal, and we're very excited about HIA's growth plans for 2025 and beyond. HIA's success since inception has been a culmination of new, better-for-you products that have resonated with parents and children across the country, an attractive subscription model, and an effective marketing strategy. These factors, combined with the financial discipline, have resulted in fast-growing, profitable, and highly cash-generated business. In fiscal 2024, HIA generated $112 million in revenue with an adjusted EBITDA margin over 20%. Top-line growth in 2025 is projected to remain strong, with the Hyatt team expecting to drive strong growth year over year. Key strategic priorities this year include capitalizing on recent product launches to drive further growth in its direct-to-consumer model, expanding strategic partnerships, and laying the groundwork for channel expansion. We are also working closely with the Hyatt team to identify both short and long-term synergy opportunities. Overall, we remain confident that the founder-led Hyatt team will deliver strong results this year. In closing, 2025 is proving to be an exciting year with much work ahead of us. I want to thank our employees, associates, and partners across the globe for their unwavering commitment to filling USANA's vision of creating the healthiest family on earth. With that, I'll now ask the operator to please open the line for questions.