USANA Health Sciences Inc.’s 2026 Q2 Earnings Call: China Macro Contradictions, Hiya Retail Timelines Clash

Date of Call: Aug 5, 2026

Guidance:

• Lowering full-year outlook due to Hiya's tougher digital marketing environment and lower near-term sales from Rise Wellness.
• Core nutritional outlook largely in line with expectations.

Business Commentary:

Core Nutritional Business Performance:

• USANA's core nutritional business demonstrated stability and momentum, with sales in Greater China showing signs of renewed strength.
• The performance was supported by strong leadership and strategic execution in China, which contributed to the resilience of the brand partners and customers in that market.

Hiya's Direct-to-Consumer Challenges and Strategy:

• Hiya faced a tougher and more expensive digital marketing environment, impacting subscriber growth and leading to a preliminary non-cash goodwill impairment charge of $29 million.
• The challenges were primarily due to increased customer acquisition costs and issues with Meta's algorithms; Hiya is now diversifying its advertising efforts, focusing on platforms like TikTok and expanding into retail and international markets.

Rise Wellness Packaging Issue and Outlook:

• Rise Wellness experienced a packaging issue that disrupted sales execution in the quarter, leading to a lower full-year sales forecast.
• Despite this short-term disruption, the brand maintains strong retail relationships and distribution growth, with plans for new product innovation to drive future performance.

Financial Overview and Tax Rate Concerns:

• USANA reported a pre-tax loss of $19 million for the quarter, with $9 million in income tax expense, impacting overall financial performance.
• The elevated tax rate was a result of misalignment between revenue generation and cost incurrence, primarily due to challenges in the venture companies, with expectations for improvement as these issues are addressed.

Technology and Innovation Investments:

• USANA is investing in modernizing technology to enhance consumer interaction and product innovation, such as the launch of Glow, a skin health supplement.
• These investments are part of a strategic effort to evolve into a diversified omni-channel health and wellness company, leveraging science and consumer loyalty.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges near-term challenges with Hiya and Rise Wellness but expresses confidence in long-term potential and strategic direction. Statements include: 'Our core nutritional business is performing in line with our expectations' and 'I remain more convinced than ever that the path we’re on is the right one.'

Q&A:

• Question from Anthony Lebiedzinski (Dodiyan Company): As it relates to China, what do you think are the main factors driving the slight uptick in sales, and do you think the sales gains are sustainable going forward?
  Response: Sales uptick driven by tail from prior quarter's incentive/product launches, resilient brand partners/customers, and strong leadership; expects continued momentum from scheduled back-half initiatives.

• Question from Anthony Lebiedzinski (Dodiyan Company): Maybe if you could just take a stab at explaining what’s going on there [North Asia down 20%], and what are you taking as far as steps to improve that trend?
  Response: North Asia (Korea) slowdown due to leadership transition and market softness; new general manager and upcoming product launches expected to drive rebound.

• Question from Anthony Lebiedzinski (Dodiyan Company): Just wondering how is the core direct U.S. subscription business doing. I don’t know if you are prepared to give us exact number, but just wondering how it’s doing on an organic basis.
  Response: Hiya's direct U.S. subscription business has seen increased customer acquisition cost (CAC) due to Meta algorithm issues, with recent improvements; outlook assumes adding more subscribers alongside retail growth.

• Question from Anthony Lebiedzinski (Dodiyan Company): Just wondering, what are your thoughts on shifting some of the advertising more towards, let’s say, TikTok, for example, maybe using some influencers on there.
  Response: Hiya is actively diversifying advertising to TikTok and retail; transition from subscription-only model presents future growth opportunities.

• Question from Anthony Lebiedzinski (Dodiyan Company): Is it possible for you guys to quantify the impact of the packaging issue in the second quarter and the related costs associated with that?
  Response: Packaging issue caused a sales stoppage and ~$29M goodwill impairment; revenue impact roughly $30M-$40M top line and $4M-$5M margin pressure; viewed as a short-term disruption.

• Question from Anthony Lebiedzinski (Dodiyan Company): How do we think about the tax rates for the back half of the year?
  Response: Elevated tax rate expected due to misalignment from venture company challenges; rate should come down as execution improves.

• Question from Ivan Feinseth (Tigress Financial Partners): Beyond some of the near-term operational and the goodwill issues, could you talk bigger picture? It looks like you’re evolving to me from a direct seller to an omni-channel distributor... Can you give some your thoughts on how you’re growing that?
  Response: Strategy is to grow consumers via omni-channel approach (e.g., Glow launch), leveraging integrated R&D/manufacturing for product extensions and acquisitions to serve broader wellness market.

Contradiction Point 1

Macroeconomic Impact on China's Business

Contradiction on the economic environment's effect on core nutritional sales in China.

Anthony Lebiedzinski (Dodiyan Company) - Anthony Lebiedzinski (Dodiyan Company)

2026Q2: The sales uptick in China was driven by a tailwind from a robust Q1 incentive and new product launch offering, the resiliency of brand partners and customers in a soft economy... - [Brent Neidig](CCO)

What are the main factors driving the recent sales increase in China, and are these gains sustainable? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2026Q1: The macro environment in China is stable and insulated from inflationary pressures. The impact of the Iran conflict on fuel prices is still early to tell, but there is no material impact as of yet based on feedback from brand partners and leadership. - [Brent Neidig](CCO)

Contradiction Point 2

Status and Performance of Hiya Business in Target/Retail

Contradiction on the maturity and performance timeline of Hiya's retail expansion.

Anthony Lebiedzinski (Dodiyan Company) - Anthony Lebiedzinski (Dodiyan Company)

2026Q2: The Hiya direct U.S. subscription business has seen increasing customer acquisition costs (CAC) due to Meta algorithm issues, but there has been improvement in recent months. The back-to-school season is a positive factor. The flat outlook for the year assumes adding more subscription customers on top of existing retail growth at Target. - [Walter Noot](COO)

Can you quantify the impact of the packaging issue in the second quarter and the related costs for Rise Wellness? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2026Q1: For Target, the business is consistent and predictable. The company has agreements with 9 more major U.S. retailers for this year, with some placements expected in Q2 and Q3. - [Walter Noot](COO)

Contradiction Point 3

Hiya Business Performance and Outlook

Contradiction on Hiya's growth momentum and advertising challenges.

Anthony Lebiedzinski (Dodiyan Company) - Anthony Lebiedzinski (Dodiyan Company)

2026Q2: The Hiya direct U.S. subscription business has seen increasing customer acquisition costs (CAC) due to Meta algorithm issues, but there has been improvement in recent months. - [Walter Noot](COO)

Can you quantify the impact of the packaging issue in Q2 and the associated costs? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2025Q4: For Hiya, the launch in Canada has been strong, with upcoming launches in the U.K. (April) and Target (U.S. in April) are expected to drive growth. - [Walter Noot](COO)

Contradiction Point 4

Financial Impact and Outlook for New Ventures (Hiya & Rise Wellness)

Contradiction on the financial pressure and tax rate impact from new ventures.

Anthony Lebiedzinski (Dodiyan Company) - Anthony Lebiedzinski (Dodiyan Company)

2026Q2: Due to the near-term pressures in the venture companies (Hiya and Rise Wellness), the company expects an elevated tax rate for the remainder of the year, higher than the Q2 catch-up and higher than desired. - [Doug Hekking](CFO)

How should we assess tax rates for the back half of the year? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2025Q4: Achieving the top end of revenue guidance is key to reaching the top end of EPS guidance. The range reflects uncertainty around the performance of new ventures Rise Wellness and Hiya. - [Doug Hekking](CFO)

Contradiction Point 5

Timeline for Hiya Operational Efficiencies

Contradiction on when manufacturing in-house will improve Hiya's margins.

What are Dodiyan Company's earnings results for the quarter? - Anthony Lebiedzinski (Dodiyan Company)

2026Q2: The Hiya team is actively diversifying its advertising efforts, with plans to use TikTok and influencer marketing as a major mechanism for growth in the transition from a pure subscription model. - [Walter Noot](COO), [Kevin Guest](CEO)

Are you considering shifting advertising efforts to TikTok, leveraging influencers, to diversify beyond Meta given their algorithm changes? - Susan Anderson (Canaccord Genuity Corp., Research Division)

2025Q3: Key initiatives include transitioning Hiya's product manufacturing in-house, which is expected to improve margins in the late second quarter and back half of 2026. - [Walter Noot](COO)