Nature's Sunshine's Q3 2025 Earnings Call: Contradictions Emerge on Digital Channel Strategy, Autoship Impact, and China Market Outlook

Date of Call: None provided

Financials Results

• Revenue: $128.3M, up 12% YOY (11% ex-FX); vs $114.6M in the year-ago quarter
• EPS: $0.30 per diluted share, compared to $0.23 in the year-ago quarter
• Gross Margin: 73.3%, up 200 bps vs 71.3% a year ago; expected to settle into the upper-72% range next quarter and next year
• Operating Margin: 7.0% of net sales (operating income $9.0M), compared to 4.6% (operating income $5.3M) in the year-ago quarter

Guidance:

• Full-year 2025 net sales raised to $476M–$480M (up ~5%–6% YoY; prior guide $460M–$475M)
• Adjusted EBITDA raised to $47M–$49M (up ~16%–21% YoY; prior guide $41M–$45M)
• Implied Q4 revenue $119.7M–$123.7M and Q4 EBITDA $9.6M–$11.6M
• Q4 APAC likely flat to slightly down; Europe and North America expected mid-single-digit growth in 2026
• Q4 SG&A expected $46M–$47M (includes $1M–$2M nonrecurring); gross margin to settle in upper-72% range

Business Commentary:

* Record Quarterly Sales and Digital Growth: - Nature's Sunshine reported record net sales of $128.3 million for Q3 2025, representing a 12% increase year-over-year or 11% excluding foreign exchange rates. - - The growth was driven by acceleration across Asia Pacific, North America, and Europe, as well as strong digital capabilities and digital marketing enhancements.

• Regional Performance and Digital Momentum:
• In North America, digital business experienced 52% year-over-year growth in Q3, contributing to a 7% increase in overall sales.

• Growth was supported by a successful shift to an improved platform, leveraging digital tools, and enhancing customer lifetime value.

• APAC Recovery and Field Activation:

• APAC region delivered 17% year-over-year net sales growth to $64.7 million, with notable increases in Japan, China, and Korea.

• Strong performance was due to consumer-friendly product bundles, improved subscription auto-ship programs, and effective field activation initiatives.

• Strong Gross Margin Improvement and Cost Management:

• Gross margin increased by 200 basis points to 73.3%, reflecting benefits from gross margin initiatives and favorable market mix.

• The improvement was supported by disciplined cost management, renegotiated logistics contracts, and more efficient manufacturing.

• Investment in Digital Marketing and Shareholder Value:

• SG&A expenses were 35.6% of net sales, with a $4.7 million increase related to digital ad spend.
• Nature's Sunshine prioritized digital advertising investments due to favorable customer acquisition costs and strong returns, enhancing shareholder value.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "We're pleased to report our best quarter ever." Management raised full-year sales and adjusted EBITDA guidance and highlighted digital acceleration, autoship growth and improved gross margins as drivers of momentum.

Q&A:

• Question from Brian Holland (D.A. Davidson): Are you seeing particular success reaching consumers within digital; which digital channels are working; how is that informing investment levels into 2026? Also, can you double-click on APAC/China momentum — is it macro-driven or execution-driven? And Ken, where will you focus in your first 100 days?
  Response: Digital is performing across Amazon, DTC and social commerce (notably TikTok) with materially lower CAC/strong ROAS, so management will continue to invest where returns are attractive; China/APAC reacceleration is execution-driven (autoship rollout + stabilized macro), and Ken will prioritize frontline engagement, learning the business and leveraging the consultant network.

• Question from Susan Anderson (Canaccord Genuity): Was the step-change to double-digit growth driven by one key factor or the combined strategy? Is the new power line a global rollout or phased? And is the SG&A step-up a new run rate or flexible depending on returns?
  Response: The quarter reflects multiple initiatives aligning (digital acceleration, APAC field activations and some timing), the power line will be phased starting in the U.S. then other markets, and SG&A will remain flexible—guided at $46M–$47M next quarter but increased when digital returns justify investment.

Contradiction Point 1

Digital Channel Performance and Investment Strategy

It involves differing perspectives on the performance and investment strategy in the digital channel, which is crucial for the company's growth in consumer reach and acquisition.

What factors are driving success in North America's digital business, particularly in consumer reach and channel performance, and how should investment be balanced to sustain customer acquisition and retention momentum through 2026? - Brian Holland(D.A. Davidson)

20251107-2025 Q3: We're really pleased with what we're seeing in our digital channel. Our Amazon business is doing very well. Our DTC business is doing well and our social commerce business is also doing very well. So very encouraged by what we're seeing is the most encouraging is we've seen an opportunity to really invest in digital advertising at a much lower CAC, customer acquisition costs than what we've seen in the past and which is driving a lot of new customers, which is obviously a good thing for the business now and go forward. So we will continue to invest as long as our return on ad spend and our CAC continue to be at advantageous rates. - Shane Jones(CFO)

Can you discuss the success in reaching consumers through digital channels, which ones are performing well, and how this is influencing investment decisions? - Brian Holland(D.A. Davidson & Co., Research Division)

2025Q3: The digital channel is performing well across multiple areas, including Amazon, DTC, and social commerce. The most encouraging aspect is the opportunity to invest in digital advertising with lower customer acquisition costs, driving new customer growth. - Shane Jones(CFO)

Contradiction Point 2

Autoship Program Impact on Customer Retention

It highlights differing interpretations of the impact of the autoship program on customer retention, which is crucial for sustaining growth and recurring revenue.

Given the ongoing inflection in the North America segment's digital business, can you clarify which digital channels are driving success in reaching consumers and how - Brian Holland(D.A. Davidson)

20251107-2025 Q3: And the most encouraging is we've seen an opportunity to really invest in digital advertising at a much lower CAC, customer acquisition costs than what we've seen in the past and which is driving a lot of new customers, which is obviously a good thing for the business now and go forward. So we will continue to invest as long as our return on ad spend and our CAC continue to be at advantageous rates. - Shane Jones(CFO)

What's driving positive momentum in China despite the challenging macroeconomic environment? - Brian Holland(D.A. Davidson & Co., Research Division)

2025Q3: TikTok has emerged as a successful social commerce platform for Nature's Sunshine. Autoship programs, especially when combined with the first purchase, enhance retention and drive strong customer numbers. - Kenneth Romanzi(CEO)

Contradiction Point 3

Growth Expectations in North America and Digital Marketing Strategy

It reflects differing expectations for growth in North America and the strategic focus on digital marketing, which are crucial for the company's overall performance and market positioning.

What are the key drivers of success in North America's digital business, including which channels are most effective and how investment decisions are being informed, especially regarding the balance between new customer acquisition and retention, and what is the optimal investment strategy to sustain this momentum through 2026? - Brian Holland(D.A. Davidson)

20251107-2025 Q3: We're really pleased with what we're seeing in our digital channel. Our Amazon business is doing very well. Our DTC business is doing well and our social commerce business is also doing very well. So very encouraged by what we're seeing is the most encouraging is we've seen an opportunity to really invest in digital advertising at a much lower CAC, customer acquisition costs than what we've seen in the past and which is driving a lot of new customers, which is obviously a good thing for the business now and go forward. So we will continue to invest as long as our return on ad spend and our CAC continue to be at advantageous rates. - Shane Jones(CFO)

What's your growth expectation for digital marketing in North America this year and next year? - Brian Holland(D.A. Davidson & Co., Research Division)

2025Q2: Digital marketing in North America is expected to grow approximately 6% to 8%. - Kenneth Romanzi(CEO)

Contradiction Point 4

Macroeconomic Environment and China Market Performance

It highlights differing views on the macroeconomic environment and its impact on the company's performance in the China market, which is crucial for overall growth and market share.

Has there been improvement in the macro backdrop for your core consumer in China, or is it primarily execution and self-help at year-end with no significant changes in the underlying conditions? - Brian Holland(D.A. Davidson)

20251107-2025 Q3: The macroeconomic environment there, we've seen it stabilize. So I wouldn't say that it's gotten a lot better, but it hasn't gotten worse either. And just getting the stabilization there has helped us then to do some of the fundamental changes that we need to do to be able to reaccelerate that market. - Shane Jones(CFO)

How did 1Q results compare to internal expectations, and did they exceed them? - Brian Holland(Davidson)

2025Q1: Our guidance is taking a conservative stance, assuming macroeconomic instability, tariff impacts, and a potential recession-like environment. - Shane Jones(CFO)