Nature's Sunshine Q3 2025: Contradictions in Digital Marketing, International Markets, and SG&A Costs

Date of Call: November 6, 2025

Financials Results

• Revenue: $128.3M in Q3, up 12% YOY (vs $114.6M a year ago); +11% excluding FX
• EPS: $0.30 per diluted share, compared to $0.23 per diluted share in the prior year quarter
• Gross Margin: 73.3%, up 200 basis points versus 71.3% a year ago (highest in 15 quarters)
• Operating Margin: 7% of net sales (operating income $9.0M), compared to 4.6% ($5.3M) in the year-ago quarter

Guidance:

• FY2025 net sales raised to $476M–$480M (prior $460M–$475M), implying +5%–6% YOY.
• FY2025 adjusted EBITDA raised to $47M–$49M (prior $41M–$45M), implying +16%–21% YOY.
• Implied Q4 revenue $119.7M–$123.7M; Q4 EBITDA $9.6M–$11.6M.
• Q4 SG&A expected $46M–$47M (includes $1M–$2M of nonrecurring items).
• Gross margin expected to settle in the upper-72% range next quarter and into 2026.
• Regional outlook: NA strong; APAC likely flat to slightly down in Q4 but mid-single-digit growth expected next year; Europe mid-single-digit growth.

Business Commentary:

* Strong Financial Performance and Revenue Growth: - Nature's Sunshine Products reported net sales of $128.3 million for Q3, a 12% increase compared to the year ago quarter, excluding the impact of foreign exchange rates. - The growth was driven by acceleration across Asia Pacific, North America, and Europe, reflecting the traction of transformation initiatives.

• Digital Business Surge:
• North American digital business experienced 52% year-over-year growth in Q3.

• This growth was driven by moving to an improved platform, leveraging digital tools, optimizing digital marketing, and enhancing customer experience, resulting in increased new customers and improved retention.

• Asia Pacific Market Performance:

• Asia Pacific region delivered 17% year-over-year net sales growth in Q3, with notable increases in Japan (32%), China (36%), and Korea (12%).

• The growth was attributed to consumer-friendly products, enhanced auto-ship programs, and effective field activation initiatives.

• Gross Margin Improvement:

• Gross margin increased by 200 basis points to 73.3% compared to the year ago quarter.
• The improvement was due to ongoing gross margin initiatives, including renegotiating logistics contracts, better conversion costs, and disciplined pricing strategies.

• Positive Macroeconomic Factors in China:
• Nature's Sunshine's China market showed a resurgence, with an autoship program accounting for over 12% of total sales.
• While the macroeconomic environment stabilized, the improvement in fundamentals was primarily driven by the implementation of an autoship program, enhancing customer acquisition and retention.

Sentiment Analysis:

Overall Tone: Positive

• "We're pleased to report our best quarter ever."; "We are raising our guidance for 2025."; Management repeatedly stated the transformation initiatives are working and described record adjusted EBITDA (+42% to $15.2M) and raised FY guidance, signaling confidence in continued growth and margin expansion.

Q&A:

• Question from Brian Holland (D.A. Davidson & Co., Research Division): Where are you seeing particular success reaching consumers within digital (which channels) and how is that informing investment levels as you head into 2026?
  Response: Digital performance across Amazon, DTC and social commerce (notably TikTok) has driven low CAC and strong new-customer acquisition; company will continue investing in digital as long as CAC/ROAS remain advantageous and will push autoship to improve retention.

• Question from Brian Holland (D.A. Davidson & Co., Research Division): Can you double-click on APAC — what drove the reacceleration, particularly in China, Japan and Korea?
  Response: Reacceleration driven by autoship adoption, consumer-friendly bundles and field activation timing; China launched autoship earlier this year now ~12% of sales, and Japan autoship ~50%, which materially improved economics.

• Question from Brian Holland (D.A. Davidson & Co., Research Division): Is the improvement in China due to a better macro backdrop for your core consumer or mainly execution/self-help?
  Response: The macro has stabilized (not markedly improved), and that stability plus execution (autoship and other fundamentals) enabled the market's reacceleration.

• Question from Brian Holland (D.A. Davidson & Co., Research Division): As the new CEO, where will you spend disproportionate time in your first ~100 days and what capabilities will you apply to accelerate growth?
  Response: Focus on learning the business and frontline leaders, applying consumer marketing and general-management experience to mobilize hundreds of thousands of consultants, prioritize high-leverage initiatives and accelerate international market engagement.

• Question from Alec Legg (Canaccord Genuity) for Susan Anderson: Was there one key factor behind the step change to double-digit growth this quarter, or was it the cumulative strategy execution?
  Response: It was cumulative: digital acceleration, APAC field activation/timing (about $2M shifted from Q4 to Q3), strong European execution, improved gross margins and cost containment combined to produce the step change.

• Question from Alec Legg (Canaccord Genuity) for Susan Anderson: Is the new power line launch a global rollout or starting regionally?
  Response: The power line rollout will be phased: launching in the U.S. first and then expanding to other markets.

• Question from Alec Legg (Canaccord Genuity) for Susan Anderson: With SG&A stepping up, is this a new baseline going forward or is it flexible depending on returns?
  Response: Short-term SG&A is guided to $46M–$47M (including $1M–$2M nonrecurring), but spending is flexible and the company will continue to invest when digital ad returns are strong.

Contradiction Point 1

Digital Marketing Investment and Strategy

It involves changes in the company's digital marketing strategy and investment decisions, which are critical for business growth and investor expectations.

Where are we seeing success in digital consumer engagement, and how is this shaping our investment strategies? What is the optimal investment level to sustain momentum through 2026? - Brian Holland(D.A. Davidson & Co., Research Division)

2025Q3: We've found opportunities to invest in digital advertising at lower customer acquisition costs, which has driven significant new customer growth. We'll continue to invest as long as our return on ad spend and customer acquisition costs remain advantageous. - Shane Jones(CFO)

Did you outperform EBITDA by $3.5M in H1 and raise guidance by $2M, and is there a change in H2 vs. original expectations? - Brian Patrick Holland(D.A. Davidson & Co., Research Division)

2025Q2: Yes, we did apply some additional funding to our digital media, which led to a significant increase in sales. We'll continue to be thoughtful about our digital spending based on the results we're seeing. - Terrence O. Moorehead(CEO)

Contradiction Point 2

International Market Performance and Strategy

It involves changes in the company's strategic focus and performance expectations for international markets, which are crucial for business expansion and investor confidence.

Can you explain the positive performance in the China market and its turnaround despite the challenging macroeconomic environment? Have there been improvements in the underlying macroeconomic conditions, or is it due to internal execution? - Brian Holland(D.A. Davidson & Co., Research Division)

2025Q3: The improvement in China is primarily due to the implementation of a subscription autoship program, which now accounts for over 12% of sales. This has driven growth and stabilized the market, although the macro environment has only stabilized, it hasn't improved significantly. - Shane Jones(CFO)

What are the key growth drivers for the second half? Will North America become the primary growth driver compared to international markets in recent quarters? - Susan Kay Anderson(Canaccord Genuity Corp., Research Division)

2025Q2: Asia Pacific will see growth, albeit at a lower pace due to tough comparisons, with Japan performing well while other markets stabilize. - Terrence O. Moorehead(CEO)

Contradiction Point 3

Digital Revenue and Strategy

It involves different perspectives on the digital revenue and strategy, which are crucial for understanding the company's growth trajectory and investor expectations.

Where are we seeing success in digital consumer engagement? How does this inform investment strategies? What is the optimal investment level to sustain this momentum into 2026? - Brian Holland (D.A. Davidson & Co., Research Division)

2025Q3: We're seeing success across multiple digital channels, including Amazon, DTC, and social commerce. We've found opportunities to invest in digital advertising at lower customer acquisition costs, which has driven significant new customer growth. We'll continue to invest as long as our return on ad spend and customer acquisition costs remain advantageous. - Shane Jones(CFO)

What percentage of revenue is digital in North America for Q4 or the year? - Linda Bolton-Weiser (D.A. Davidson)

2024Q4: North America saw about 25% of sales from digital channels. - Terrence Moorehead(CEO)

Contradiction Point 4

Asia Pacific Market Dynamics

It highlights differing views on the causes and expected trajectory of growth in the Asia Pacific market, which is a significant region for the company's overall performance.

What drove the positive surprise in the China market despite the challenging macroeconomic environment? Is the growth due to macroeconomic improvements or better execution and self-help? - Brian Holland (D.A. Davidson & Co., Research Division)

2025Q3: The improvement in China is primarily due to the implementation of a subscription autoship program, which now accounts for over 12% of sales. This has driven growth and stabilized the market, although the macro environment has only stabilized, it hasn't improved significantly. - Shane Jones(CFO)

What factors are driving the accelerated growth in Asia? What is your outlook for the region moving forward? Are the macroeconomic pressures more regional (North America) or global in scope? - Susan Anderson (Canaccord)

2024Q4: In Asia Pacific, we have great momentum due to strategies like rebalancing consumer propositions with easy-to-use product packs, which led to a 21% sales increase in the fourth quarter. Taiwan and Japan had strong growth of 29% and 27% respectively. We expect continued robust growth from Asia, though we don't anticipate another 20% growth. - Terrence Moorehead(CEO)

Contradiction Point 5

Investment in Digital Advertising and SG&A Costs

It reflects differing views on the company's investment in digital advertising and its impact on SG&A costs, which are critical for financial forecasting and operational efficiency.

Is the SG&A increase due to new investments or market conditions/advertising opportunities? - Unknown Analyst (Canaccord Genuity)

2025Q3: We are investing in digital advertising where we see strong returns. Our guidance for the next quarter reflects this, with SG&A expected to be in the $46 million to $47 million range, including $1 million to $2 million of nonrecurring expenses. We'll continue to invest when opportunities for favorable returns arise. - Shane Jones(CFO)

Is the North America digital business upgrade 100% complete, including both e-commerce and distributor components? When will the new distributor tools be implemented? Could you provide more details on the tools being added for distributors? - Susan Anderson (Canaccord)

2024Q4: We continue to focus on enhancing our digital platform, which we believe is a key competitive differentiator. Our 2024 investments in this area include ongoing platform enhancements and upgrades that will better equip our distributors to engage with and sell products to consumers. - Terrence Moorehead(CEO)