USANA Health Sciences, Inc.

Greetings and welcome to the USANA Health Sciences first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the 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. Please go ahead, sir.

Thank you, Carrie, 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.isana.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 2026, 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 Chairman and Chief Executive Officer, Kevin Guest, our Chief Financial Officer, Doug Hecking, our Chief Commercial Officer, Brent Neidig, our Chief Operating Officer, Walter Note, 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 Kevin before opening the call for questions.

Thank you, Andrew, and good morning, everyone. Our first quarter results reflect USANA's continued and deliberate transformation from a single-channel direct sales business to a diversified omni-channel health and wellness platform. That evolution is the defining story of this company right now, and the progress we are making across our three business segments reinforces our confidence that this strategy will deliver sustained compounding value over time. In our core nutritional business, we saw sequential improvement in Q1. Net sales of 204 million grew 7% sequentially, driven by active customer growth, particularly in our China market. which benefited from customer acquisition activity around the Lunar New Year. The sequential improvement is encouraging and consistent with our view that the actions we are taking to stabilize the business are beginning to take hold. These actions are organized around three clear priorities. First, we are advancing the rollout of our enhanced brand partner compensation plan, which is designed to strengthen the business opportunity and improve the productivity and retention of our distributor network. Second, we are accelerating new product launches, bringing a robust pipeline of new and upgraded formulations to market. And third, we are accelerating our technology initiatives to modernize our core systems and fundamentally improve how customers experience our brands while driving future cost efficiencies across our IT infrastructure. Taken together, we remain confident that these initiatives will continue to stabilize active customer accounts and position the core nutritional business we are returning to sustainable growth. Turning to our omnichannel brands, Hiya and Rise Wellness, they are expanding the aperture of what USANA can be reaching consumers and new channels and through innovative formats. AYA generated 32 million in net sales in the first quarter with active monthly subscribers of 186,000, reflecting modest sequential improvement from Q4. The business has been navigating a period of elevated customer acquisition costs stemming from disruptions in the meta advertising environment beginning in the third quarter of 2025. The HIA team is deploying the resources and capabilities needed to re-accelerate subscriber growth, and we expect the second half of 2026 to reflect stronger performance. Several important milestones position HIA well for that recovery. The brand launched in Canada in January and in the United Kingdom in March, establishing its first international direct to consumer markets. Haya also expanded into retail, and products are now available at Target, representing the brand's first partner in brick-to-mortar retail. Lastly, I want to point out how we are leveraging USANA's assets to accelerate growth and improve margins. Since the acquisition a little over a year ago, we have implemented a new ERP system, transitioned three PLs, leveraged our R&D team to develop new products, leveraged our market expansion team to expand internationally, and brought manufacturing and packaging of HIA products in-house. A strategic shift that we expect will generate incremental margin efficiencies beginning in the back half of 2026. We continue to project full-year 2026 net sales of $140 million to $155 million for HIA. Rise Wellness delivered 14 million in net sales for the first quarter, more than eight times the prior year's first quarter, which is a 143% sequential increase. This performance was driven by the national launch of Protein Pop Plus into Costco. Protein Pop's journey from concept to national shelf placement in a matter of months is compelling proof of this team's ability to capitalize on speed and execution. While this market has proven to be a competitive and evolving marketplace, Protein Pop has gained meaningful share in the market and emerged as a leading brand that we expect to see on shelves across many more retailers in the coming months and years. Rise Bar also continues to benefit from the retail distribution relationships established last year. As with Hiya, we have been able to leverage our significant assets and expertise to benefit the two Rise Wellness brands. We are manufacturing Rise bars on USANA's high-speed, high-tech bar line. Our world-class operations team is managing inventory and demand and planning for both Rise and Protein Pop to create efficiencies. Lastly, our R&D team is reformulating existing products and developing future products for these brands to ensure our customers have an excellent experience while also receiving the best nutritional products possible. We are pleased with the market reception and remain confident in the long-term potential of this segment. We are reaffirming our full-year 2026 guidance across all metrics. projecting consolidated net sales of $925 million to $1 billion U.S. Omnichannel net sales are on track to represent more than 20% of the total net sales this year, up from 16% in 2025, and approximately 1% just two years ago. That trajectory speaks to how quickly our omnichannel platform is taking shape. Please note that our guidance includes an incremental but modest investment for our technology modernization initiatives, which we are funding primarily through a repurposing of existing resources as well as savings generated from operational efficiencies and the initiatives, which underscore our commitment to innovate without sacrificing fiscal discipline. Let me close by putting this quarter in context. We came into 2026 with a clear strategy. Stabilize the core nutritional business, scale our omnichannel brands, and modernize the platform that ties it all together. The first quarter showed progress on all three fronts. Active customers in the core business grew sequentially. Higher reach new markets and a new retail channel Rise Wellness delivered a strong launch in the quarter at Costco and Target, and we have formalized technology investment plans that will improve how we operate and how consumers experience our brand. None of this happens overnight. We are committed to making impactful investments that generate robust returns. Our balance sheet is strong, our people are aligned, and our strategy is clear. We have solid three solid segments, an evolving omnichannel platform, and a mission that resonates with health-conscious consumers around the world. We remain committed to executing with focus and delivering sustainable long-term value for our shareholders. With that, I will now turn the call back over to the operator for Q&A.