USANA Q3 Revenue Up 13.4% To $296.8 Million

• Third quarter net sales of$296.8 million, an increase of 13.4% year-over-year

• Third quarter diluted earnings per share increased 27.8% year-over-year to$1.24

• Total Active Customers increased 9.2% year-over-year to 615,000

• Board increases share repurchase authorization

SALT LAKE CITY–(BUSINESS WIRE)– USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal third quarter ended September 29, 2018.

Financial Performance

For the third quarter of 2018, net sales were $296.8 million, compared with $261.8 million in the prior-year period, a 13.4% increase year-over-year. Unfavorable currency exchange rates negatively impacted net sales by $6.2 million for the quarter as compared to the prior year. The Company’s skin and personal care product category contributed approximately $9.5 million in incremental sales for the quarter. The Company’s total number of active Customers increased 9.2% year-over-year to 615,000.

Net earnings for the third quarter increased 30.6% to $31.0 million, compared with net earnings of $23.8 million reported in the prior-year period. Earnings per diluted share increased to $1.24, an increase of 27.8% on a year-over-year basis. The increase in net earnings was due primarily to higher net sales and lower relative operating expenses compared to the prior year period. Weighted average diluted shares outstanding were 25.0 million for the third quarter of 2018, compared with diluted shares of 24.6 million in the prior-year period.

“We continue to see strong momentum in most of our regions, which is reflected in our double-digit third quarter growth,” said Kevin Guest, Chief Executive Officer. “Our growth strategies and investments into the business are producing results and our team remains committed to providing the best overall customer experience at USANA.”

During the quarter, the Company repurchased 177,724 shares of common stock for an investment of $22.6 million. The Company ended the quarter with no debt, $239.8 million in cash and cash equivalents, and an additional $81.7 million invested in short-term securities. As of September 29, 2018, there was $24.4 million remaining under the current share repurchase authorization.

Regional Results

Net sales in the Asia Pacific region increased by 20.2% to $239.6 million for the third quarter of 2018. The total number of active Customers in the Asia Pacific region increased by 13.9% year-over-year. Within Asia Pacific, net sales increased:

• 6% inGreater China;

• 7% inNorth Asia; and

• 3% in the Southeast Asia Pacific region.

Sales growth in Greater China was primarily driven by a 16.7% increase in Active Customers in Mainland China, while sales growth in North Asia resulted primarily from 15.6% Active Customer growth in South Korea. Sales growth in Southeast Asia Pacific was driven by 24.0% Active Customer growth in Malaysia, and 8.6% growth in the Philippines.

Net sales in the Americas and Europe region for the third quarter of 2018 decreased by 8.5% to $57.2 million, and active Customers in this region declined 5.1%. The Company’s new European markets, which opened during the second quarter of 2018, contributed positively to the region’s third quarter performance.

“During the quarter, we hosted thousands of Associates here in Salt Lake City for our annual International Convention,” continued Mr. Guest. “In China, we launched our new skincare line, Celavive, which accounted for $4.1 million in incremental sales of the $28.5 million year-over-year growth in this market. We are now turning our attention to our China national sales meeting to be held in Macau in late November where, for the first time, we will offer products for sale at the event.”

Tariffs and Trade Policies

While the Company continues to evaluate the evolving tariffs and trade policies between the United States and other countries, the Company does not currently expect these tariffs and trade policies, as they currently exist, to have a material impact on its future operating results. Additional changes in tariffs and trade policies may have a negative impact on currency exchange rates and economic conditions generally, which could negatively affect the Company’s results of operations.

Outlook

Chief Financial Officer, Doug Hekking, commented, “Our business generated strong third quarter net sales, despite pressure from a strengthening U.S. dollar on both a sequential quarter and year-over-year basis. Although favorable currency exchange rates benefited our operating results in the first half of 2018, the U.S. dollar strengthened more than expected in the third quarter and we anticipate a similar pattern in the fourth quarter. Consequently, we have again reduced the estimated benefit to net sales from currency for the full year. This considered, and with only one quarter remaining in fiscal 2018, we have tightened our revenue outlook. Our operating results continue to be strong and, accordingly, we have tightened our range for diluted earnings per share and increased the top-end of our outlook.”

The Company is updating its outlook for 2018 as follows:

• Consolidated net sales between$1.185 and $1.20 billion, previously between $1.17 and $1.20 billion; and

• Earnings per share between$5.00 and $5.15, previously between $4.75 and $5.05.

The Company’s full-year outlook reflects:

• A year-over-year benefit to net sales of approximately$16 million from favorable currency exchange rates, which was previously estimated at $29 million;

• An estimated operating margin between 15.7% and 15.9%;

• An effective tax rate of approximately 34%; and

• An annualized diluted share count of approximately 24.8 million.

Increased Share Repurchase Authorization

The Board of Directors has authorized up to $150 million in funding for share repurchases by the Company of its outstanding common stock. This authorization is inclusive of the $24.4 million that was remaining under the prior authorization as of the end of the second quarter. Repurchases may be made from time to time, in the open market, through block trades or otherwise. The number of shares to be purchased and the timing of purchases will be based on market conditions, the level of cash balances, general business opportunities, and other factors. Additional share repurchases would represent upside to the revised EPS outlook the Company issued today.

China Preferred Customers

The Company has had a long-standing Preferred Customer program in China but, due to certain attributes of that program, had historically reported China Preferred Customers as Associates. The Company began reporting China Preferred Customers as Preferred Customers with its results for the fourth quarter of 2017.

Internal Investigation of China Operations

As the Company first disclosed in February 2017, it is voluntarily conducting an internal investigation of its China operations, BabyCare Ltd. The investigation focuses on compliance with the Foreign Corrupt Practices Act (“FCPA”) and certain conduct and policies at BabyCare, including BabyCare’s expense reimbursement policies. The Audit Committee of the Board of Directors has assumed direct responsibility for reviewing these matters and has hired experienced counsel to conduct the investigation. While the Company does not believe that the subject amounts are quantitatively material, or will materially affect its financial statements, it cannot currently predict the outcome of the investigation on its business, results of operations, or financial condition. The Company has voluntarily contacted the Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway and intends to provide additional information to both agencies as the investigation progresses. The Company cannot currently predict the duration, scope, or result of the investigation.

About USANA

USANA develops and manufactures high-quality nutritional supplements, healthy foods and personal care products that are sold directly to Associates and Preferred Customers throughout the United States, Canada, Australia, New Zealand, Hong Kong, China, Japan, Taiwan, South Korea,Singapore, Mexico, Malaysia, the Philippines, the Netherlands, the United Kingdom, Thailand, France, Belgium, Colombia, Indonesia, Germany, Spain, Romania, and Italy. More information on USANA can be found at www.usana.com.