[Management View]
USANA reported strong Q2 2025 results, with consolidated net sales growing 11% YoY and adjusted EPS increasing 36%. Management emphasized strategic modernization in direct selling, transitioning from "associates" to "brand partners" to foster a more entrepreneurial relationship. Key initiatives include compensation plan enhancements, new product launches, and technological tools to support brand partners. Acquisitions of HYA and RiseVAR continue to diversify the company’s portfolio and contribute incremental growth.

[Outlook]
Management remains optimistic about long-term growth, supported by strategic investments in global conventions, product innovation, and compensation plan rollouts. Short-term margin pressure is anticipated in Q3 due to these investments. HYA and RiseVAR are expected to deliver further synergies and operational efficiencies, with HYA expanding into international markets by 2026. The company plans to remain opportunistic in share buybacks and is actively exploring future acquisition opportunities.

[Financial Performance]
USANA achieved 11% YoY net sales growth and a 36% YoY increase in adjusted EPS for Q2 2025. The company ended the quarter debt-free with $151 million in cash. Active customer count declined, attributed to communication about upcoming compensation program changes. Sales in China exceeded expectations despite economic uncertainty and a drop in active customers.

[Q&A Highlights]

Question 1: Can you provide more insight into the performance in China, especially with the drop in active customers?
Answer: Sales in China outperformed expectations due to increased buy-up driven by tariff uncertainty. Despite economic challenges, management remains optimistic about the market's long-term potential, citing strong cohesion among brand partners and a capable local management team.

Question 2: What caused the decline in active customer count in Q2, and how do you expect this trend to evolve?
Answer: The decline was primarily due to communication about upcoming changes to the incentive program, which created temporary reservations among brand partners. Management expects the trend to reverse in Q3 as new incentives roll out.

Question 3: How does the new incentive program differ from the legacy program, and how does it benefit new brand partners?
Answer: The new program accelerates early income for new brand partners by providing immediate earnings on sales, addressing challenges in achieving early success. Adjustments to bonuses aim to simplify acquisition and retention, fostering long-term engagement.

Question 4: What impact did tariffs have on the business in Q2, and what is the outlook for the rest of the year?
Answer: Tariff impact was minimal due to proactive inventory management and sourcing strategies. Management continues to monitor trade policies and adjust procurement strategies accordingly.

Question 5: How did HYA perform in Q2, and what are the expectations for integration and distribution expansion?
Answer: HYA posted strong YoY growth, supported by Disney-branded product launches. Integration milestones in logistics and manufacturing are progressing, with synergies expected in upcoming quarters. Distribution expansion beyond the subscription model is under evaluation.

Question 6: What is the company’s approach to share buybacks and future acquisitions?
Answer: Share buybacks will be opportunistic, guided by efficient capital allocation discussions at board meetings. The company is actively exploring acquisition opportunities but will prioritize cash accumulation before pursuing new deals.

Question 7: How does USANA plan to leverage trends like RFK’s Make America Healthy initiative?
Answer: USANA’s deliberate product development aligns with health trends, particularly in children’s wellness through HYA’s clean-label products. The company’s agile R&D and commercial teams are positioned to respond quickly to market demands.

Question 8: What tools and infrastructure are being developed to support brand partners?
Answer: USANA is enhancing IT tools to provide data-driven recommendations and predictive analytics for brand partners. Social media tools are being trialed, and AI-driven functionalities are under evaluation to improve decision-making and operational efficiency.

[Sentiment Analysis]
Analysts expressed optimism about USANA’s strategic initiatives and acquisitions, with questions focusing on growth drivers, operational efficiencies, and market trends. Management maintained a confident tone, emphasizing long-term growth potential and proactive strategies to address challenges.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | YoY Change (%) |
|----------------------------|-----------------|-----------------|----------------|
| Consolidated Net Sales | $11% growth | $10% growth | +1% |
| Adjusted EPS | +36% | +30% | +6% |
| Active Customer Count | Declined | Increased | N/A |
| Net Debt Position | Debt-free | $50M debt | N/A |

[Risks and Concerns]
1. Near-term margin pressure due to investments in global conventions, product launches, and compensation plan rollouts.
2. Economic uncertainty in China, which could impact future performance.
3. Decline in active customer count, though expected to recover with new incentives.
4. Tariff exposure and potential trade policy changes remain areas of concern.

[Final Takeaway]
USANA’s Q2 2025 results highlight the company’s strategic modernization efforts and successful integration of acquisitions like HYA and RiseVAR. While short-term challenges such as margin pressure and customer count decline persist, management’s proactive approach to compensation enhancements, product innovation, and operational efficiencies positions the company for sustainable long-term growth. Investors should monitor the rollout of new initiatives and the performance of acquired businesses as key drivers of future success.