USANA Health Sciences, Inc. (NYSE:USNA) Q4 2023 Earnings Call Transcript

And so it really is a balanced act. And to Brent’s point, we hear different feedback from different of our sales leaders, and we try to work with them to get aligned. Anything else, Brent? You good? All right, I think we’re good.

Ivan Feinseth : Second, in discussions and what’s going on in the world with the GLP drugs and primarily driving reduced food consumption is going to lead to the need for nutritional supplements and additional protein supplements. And have you been progressing in your thoughts about addressing those market opportunities?

Jim Brown : Ivan, we think the same way, quite honestly. We see this as an opportunity for people to need nutritionals to balance out as they’re eating less. And we have a great product offering. We’ll look at products that would marry up well with that new market that’s being created. I mean it is — it’s huge right now the people who were taking that and having success with it. But we see that as an opportunity, and our R&D teams will look at products to basically balance out that.

Ivan Feinseth : And do you feel that confident you’ll continue to develop these products in-house? Or this will be part of your M&A thought process or both?

Jim Brown : Yes, I would say both. But initially in-house, we’re working on that now, and it takes time to develop, get the right products, test it and everything else. But again, from an M&A standpoint, if we find someone in that space or whatever, we’ll definitely look at them. One of the areas that we want to make sure is just from kind of competing with ourselves that we broaden our reach when we do M&A. And if we can do it ourselves, I think with the operations that we have and we’re just premium products, and we do a great job of it, we could — we can do it better, that’s what USANA is.

Doug Hekking : Yes. And I would say our current product offering goes to specifically addressing people who need better nutrition. So I don’t think we need to — even though I think we’re opportunistic with M&A. So I think we’re well suited to go back and do this. The discussion is going on. There’s been some development, and we want to be responsible with how we approach it and continue to be additive to someone’s health and wellness journey.

Operator: [Operator Instructions] And our next question is from Doug Lane with Water Tower Research.

Doug Lane : I just have a couple of quick questions on China, I’m following up on the discussion here. You’ve got a direct selling model in China. So I would — should we view the active customer count is really a leading indicator going forward?

Doug Hekking : I think you always should. We always try to give some color to the activity that was in the quarter, so you can use that in perspective. Typically, when you have a higher level of activity in bringing on new customers during the quarter, you’re not going to have that same level stick, and that’s why we give some of that context. It’s not disproportionate to what the average numbers are, but there is kind of the elevated customer acquisition. And so I think it just provides context. And we’ve tried to be very transparent throughout our history and how we communicate that.

Doug Lane : No, it’s very helpful. I always sort of base my models off the customer count figuring that that’s really directionally where the business is going. But I just wanted to double check. I thought that you did run the direct selling business in China, right? BabyCare?

Walter Noot : Yes, that’s accurate, Doug.

Doug Lane : Yes. A lot of people don’t — a lot of other companies in this space operate different models in China because of the complexity of the regulations there. And that’s the other thing I wanted to talk about is that a year ago in the fourth quarter, we were still in Zero COVID, I think, in China, and that came off at the end of the year. So I just wondered if you could put some color on the overall regulatory environment in China and how that’s impacting your business.

Brent Neidig : Yes. So this is Brent. During COVID, it was an interesting environment for those 3 years where the country was pretty much locked down, no one from USANA was able to travel into the country. What happened, many of the regulators didn’t matter what they oversaw, they really were repositioned to help fight COVID. So a lot of the historical meetings, interactions that we would have had with the government agencies really went quiet during COVID because they were so focused on fighting COVID. Well, now that COVID’s passed and things are back to normal, more or less, we’ve started to reengage with the government agencies. And I would say it’s very typical to what it was like before COVID. There’s a good working relationship.