Greetings, and welcome to the USANA Health Sciences 1st quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Andrew Masuda. Please go ahead, sir.
Thank you, Carrie, good morning, everyone. We appreciate you joining us to review our first quarter results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website. As a reminder, during the course of this conference call, management will make forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ, perhaps materially, from the results projected in such forward-looking statements. Examples of these statements include those regarding our strategies and outlook for fiscal year 2026, uncertainty related to the economic and operating environment around the world, and our operations and financial results.
We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC. I'm joined by our Chairman and Chief Executive Officer, Kevin Guest, our Chief Financial Officer, Doug Hekking, our Chief Commercial Officer, Brent Neidig, our Chief Operating Officer, Walter Noot, as well as other executives. Yesterday, after the market closed, we announced our first quarter results and posted our management commentary document on the company's website. We'll now hear brief remarks from Kevin before opening the call for questions.
Thank you, Andrew, good morning, everyone. Our first quarter results reflect USANA's continued and deliberate transformation from a single channel direct sales business to a diversified omnichannel health and wellness platform. That evolution is the defining story of this company right now, and the progress we are making across our three business segments reinforces our confidence that this strategy will deliver sustained compounding value over time. In our core nutritional business, we saw sequential improvement in Q1. Net sales of $204 million grew 7% sequentially, driven by active customer growth, particularly in our China market, which benefited from customer acquisition activity around the Lunar New Year. The sequential improvement is encouraging and consistent with our view that the actions we are taking to stabilize the business are beginning to take hold. These actions are organized around three clear priorities.
First, we are advancing the rollout of our enhanced Brand Partner compensation plan, which is designed to strengthen the business opportunity and improve the productivity and retention of our distributor network. Second, we are accelerating new product launches, bringing a robust pipeline of new and upgraded formulations to market. Third, we are accelerating our technology initiatives to modernize our core systems and fundamentally improve how customers experience our brands while driving future cost efficiencies across our IT infrastructure. Taken together, we remain confident that these initiatives will continue to stabilize active customer accounts and position the core nutritional business we are returning to sustainable growth. Turning to our omnichannel brands, Hiya and Rise Wellness, they are expanding the aperture of what USANA can be, reaching consumers and new channels and through innovative formats.
Hiya generated $32 million in net sales in the first quarter, with active monthly subscribers of 186,000, reflecting modest sequential improvement from Q4. The business has been navigating a period of elevated customer acquisition costs stemming from disruptions in the Meta-advertising environment beginning in the third quarter of 2025. The Hiya team is deploying the resources and capabilities needed to re-accelerate subscriber growth, and we expect the second half of 2026 to reflect stronger performance. Several important milestones position Hiya well for that recovery. The brand launched in Canada in January and in the United Kingdom in March, establishing its first international direct-to-consumer markets. Hiya also expanded into retail and products are now available at Target, representing the brand's first partner in brick-to-mortar retail. Lastly, I want to point out how we are leveraging USANA's assets to accelerate growth and improve margins.
Since the acquisition a little over a year ago, we have implemented a new ERP system, transitioned 3PLs, leveraged our R&D team to develop new products, leveraged our market expansion team to expand internationally, and brought manufacturing and packaging of Hiya products in-house. A strategic shift that we expect will generate incremental margin efficiencies beginning in the back half of 2026. We continue to project full year 2026 net sales of $140 million-$155 million for Hiya. Rise Wellness delivered $14 million in net sales for the first quarter, more than 8 times the prior year's first quarter which is 143% sequential increase. This performance was driven by the national launch of Protein Pop Plus into Costco.
Protein Pop's journey from concept to national shelf placement in a matter of months is compelling proof of this team's ability to capitalize on speed and execution. While this market has proven to be a competitive and evolving marketplace, Protein Pop has gained meaningful share in the market and emerged as a leading brand that we expect to see on shelves across many more retailers in the coming months and years. Rise Bar also continues to benefit from the retail distribution relationships established last year. As with Hiya, we have been able to leverage our significant assets and expertise to benefit the 2 Rise Wellness brands. We are manufacturing Rise Bars on USANA's high-speed, high-tech bar line. Our world-class operations team is managing inventory and demand and planning for both Rise and Protein Pop to create efficiencies.
Lastly, our R&D team is reformulating existing products and developing future products for these brands to ensure our customers have an excellent experience while also receiving the best nutritional products possible. We are pleased with the market reception and remain confident in the long-term potential of this segment. We are reaffirming our full year 2026 guidance across all metrics, projecting consolidated net sales of $925 million-$1 billion. Omnichannel net sales are on track to represent more than 20% of the total net sales this year, up from 16% in 2025 and approximately 1% just 2 years ago. That trajectory speaks to how quickly our omnichannel platform is taking shape.
Please note that our guidance includes an incremental but modest investment for our Technology Modernization Initiatives, which we are funding primarily through a repurposing of existing resources as well as savings generated from operational efficiencies and the initiatives which underscore our commitment to innovate without sacrificing fiscal discipline. Let me close by putting this quarter in context. We came into 2026 with a clear strategy. Stabilize the core nutritional business, scale our omnichannel brands, and modernize the platform that ties it all together. The first quarter showed progress on all 3 fronts. Active customers in the core business grew sequentially. Hiya reached new markets and a new retail channel. Rise Wellness delivered a strong launch in the quarter at Costco and Target, and we have formalized technology investment plans that will improve how we operate and how consumers experience our brand. None of this happens overnight.
We are committed to making impactful investments that generate robust returns. Our balance sheet is strong, our people are aligned, and our strategy is clear. We have solid, three solid segments, an evolving omnichannel platform, and a mission that resonates with health-conscious consumers around the world. We remain committed to executing with focus and delivering sustainable long-term value for our shareholders. With that, I will now turn the call back over to the operator for Q&A.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star 1 if you would like to ask a question. Our first question will come from Anthony Lebiedzinski with Sidoti & Company.
Good morning, everyone, thank you for taking the questions. Yeah, it's really nice to see the better than expected results. Specifically, I wanted to start with China, actually. You know, saw some improvement there in Q1, which is good to see. Just wondering if you've seen any notable changes from a macro perspective in China or maybe elsewhere as it relates to increased fuel prices since the Iran conflict started. Just, you know, wondering what you've seen to just from a broader consumer perspective as it relates to higher fuel prices.
Yeah, Brent, I'd like you to respond to that. He's our Chief Commercial Officer. Brent?
Yeah, Anthony, good morning. It's good to hear from you.
Likewise.
As of this point, we haven't. I'd say the macro environment in China is pretty stable relative to the rest of the globe. They've been somewhat insulated from different inflationary pressures that the rest of the markets have been under. I think it still is a little too early to tell in terms of the Iran conflict and what we might see with fuel prices there. Everything that we've seen and that I'm hearing from our Brand Partners there and from our leadership there is that there's no material impact as of yet.
That's good to hear. As it relates to the core nutritional business, you talked about accelerating product development and also as far as the timelines are concerned for that. Can you share any more specifics as far as maybe like the number of new products that are in the pipeline, or anything else that you can share as to what you or what you have coming up as far as new product development?
Yeah, Anthony, we have our Chief Scientific Officer, Dr. Kathryn Armstrong here. Kathryn, will you go ahead and handle that question?
Yeah. Hi, Anthony. Good to talk with you.
Good morning.
You know, for us, a lot of the focus has been on how we better leverage our skill sets internally and externally across all of the different product formats that we now offer, against the expanded brand portfolio. When we talk about the number of products under development, you know, obviously there are products for development in all of our sections, as well as in our team in China. It's certainly over 20, I wouldn't go into specifics on launch dates and in which categories they fall under, but we have a plethora of products we're developing for all of the brands and for all of the markets.
The focus for us is really on how do we help more people ingest the products that we are making across the brands and how do we leverage things we've learned in our different channels that appeal to different types of consumers or to different types of use occasions. How do you expand each of the channels to allow for more of those consumers to engage across those channels. For example, you can expect to see us bring in things to our direct sales channel that are aligned with key insights we've had around how consumers are evolving their experience desires for product usage, and really pulling those learnings together to make sure we have products in each of the channels that are appealing to the right consumers to meet them where they are on their health journey.
Hey, Anthony, this is Kevin. Just to jump in, and I'm gonna ask Walter to comment on this as well. To your point and what Kathryn just alluded to, one of the things that I've been very optimistic about is how we're leveraging the expertise and knowledge base from other sales channels into our core business and the learnings that we're gaining from that from a direct-to-consumer approach and how that helps lend itself in other categories. Walter, just again, to Anthony's point about just our product strategy overall as it relates to the omnichannel and how that's affecting each other. Be curious to hear your thoughts on that.
Yeah, I mean, cross-platform. I mean, I think what it's done is it's, you know, we've been traditionally, we've been a direct sales business and it's an international business. With the rapid growth we've had with retail, for instance, with Protein Pop launching that new product recently, we've just seen how quickly trends change. Right now, there's obviously some really big trends around weight loss and using protein to be able to supplement that weight loss. That's been a really big benefit. We've seen that we've been able to leverage that and use product development and the teams we've got to be able to help us to design and develop new products for the direct sales channel.
I think you're gonna see some of the things that we do in retail and direct-to-consumer, you'll see those bleed over into the direct sales channel.
That sounds, you know, like you certainly are leveraging all your assets, which sounds promising. Now, just switching gears to Hiya. You know, definitely, it was good to see sequential uptick in sales. Though, you know, the SG&A was higher than the fourth quarter, and higher than last year. Is that just seasonality of the business as far as marketing costs, or is there anything else that's impacting the SG&A?
Yeah. Anthony, this is Doug. As Kevin alluded to and Walter kind of contributed as well, Hiya is diversifying within its own channel, and it had the initial foray into retail towards the latter part of the quarter and also entered both Canada and the U.K. Those things consume some operational resources as well. The other aspect that you see is kind of this Meta algorithm that we've talked about a few times. The cost of acquiring a customer in that short term was definitely present there on a year-over-year comparison.
Mm-hmm. Can you give us an update as to how Hiya is doing so far in Canada, the U.K., and selling at Target?
Canada, for Canada, I think we've put some targets in place and we've exceeded those targets in Canada, and I think that's only because I think a lot of people in Canada have probably seen Hiya. They understand the brand. It kind of bleeds over. With the U.K., it's a new market for us. It's, it's brand new territory. We're using Meta also in advertising there. I would say it's very new for us. I mean, we've been out about a month, probably about little bit, maybe a month, maybe five weeks. I would say again, it's very slow start for us because it's a new market, but we have very high hopes for the U.K.
I mean, we went across the world and looked at what the best markets are for the Hiya products, and we believe that with the DTC appetite in the U.K. and with the competitive landscape there, we think Hiya is gonna do really well. As far as Target goes, Target's really been. I think it's been two weeks, maybe a little more than two weeks that it's been on shelf. About a week ago, many of the Targets, I would say, most of the Targets have put end caps in place with Hiya products. We went live with Target, then we put end caps in place. We're gonna see. We really don't know. I think in the next few weeks, we'll have much better idea.
The placement in the store, the amount of attention that Target has given us gives us high hopes, and that's why we've kept our guidance in place.
Yeah, I would say, Anthony, that things are going according to plan. As we kind of step into this area, it's even maybe expanded into Amazon a little bit more than we have in the past, things are going according to plan. We expect it to be kind of a build as we go on here, and we're very early stage. The other thing that Walter and the biz dev team has worked with the Hiya team on, and what they communicate, is the diversification with their own advertising and consumer spend of different ways to reach the consumer and being a little bit more insulated relative to being too, you know, committed to just one channel for advertising. They've always been diversified, but they've continued to work on that aspect as well.
Mm-hmm. Okay, just switching gears to Rise. You spoke highly of your relationship with Costco. Just curious, you know, after the initial sell into Costco, have you seen reorder activity from them? As far as any other retailers, have you seen new order placements?
We are seeing reorder placements on a weekly basis with Costco, we are selling through. Obviously, we've had to If you look at our balance sheet, we've used up a lot of cash for. A lot of that was building up Costco inventory, and we're selling through that to Costco. That's going on. I would say it's still, you know, with any retailer, you know, Target has been in place for a while. We've had Target in place, I think, since September of last year or August to September, something like that. Target has been very consistent for us, and we know the cadence, and we know what that business looks like. I think Costco is still we've gone through multiple iterations.
We had a discount for a couple of weeks that we agreed to upfront with Costco, and that gave us a lot of sell-through. You kind of see a little bit of up and down as you go through that process. I wouldn't say we know exactly how that's gonna go in the long term, but we have a lot of conversations with them about new products that we're gonna put out, different types of Protein Pop products that they're interested in. I think that, I mean, at least the relationship is really good, and I think the opportunity continues.
Mm-hmm. Okay. Just quickly to follow up, as far as other retailers, will you be selling to others in this quarter or in the second half of the year?
Yes. We have already agreed. We have nine more retailers, major retailers that we've set up for this year. Some will be in second quarter and some in third quarter, major retailers in the U.S., and Protein Pop will continue to expand. We are in 500 Walmart stores already, and that's been good. The Walmart buyers like us, and they feel like that's a good product for them. We hope to expand that, but we are gonna be adding more retailers throughout the U.S. Yes.
Okay. Sounds good. Well, thank you very much and best of luck.
Thank you.
Thanks, Anthony.
Our next question will come from Ivan Feinseth with Tigress Financial Partners.
Congratulations on the great results and the success with Hiya and Rise.
Thank you.
Can you give me some insight into your R&D initiatives and where you see some new growth opportunities going forward?
Yeah.
Hi, Ivan. It's good to talk with you again. This is Kathryn. You know, our focus continues to really deepen into women's health and children's health and looking across our brands and the integration of Oola into our direct sales brand. I think that's a very logical place for us to be across all of the channels we're in. You can expect to see us continuing to push further into the real science behind women's health and children's health. We've done a lot of investment in terms of true research and working on clinical research to really understand how we can more meaningfully impact the health for both of those sort of segments of the population.
We also have a strong focus, you know, obviously our direct sales business is essential to us, and we have a strong focus on how we can ensure that that product pipeline is both continually updated as well as streamlined to help people navigate it more efficiently and really get the health benefits that they're seeking, in order to sort of achieve what they're looking for. I would say those are our big focus areas right now, Ivan, so women's, kids, and then ensuring that our core product line is updated and streamlined to enable consumer efficiency.
How about additional focus on gut health, which, you know, seems to be like the major focus, the you know, driving of overall health? Also any updates or insight to, you know, products in your active nutrition category?
When we think about gut health, it impacts, you know, all segments of humanity. You know, women have some unique gut health topics that need to be addressed. You know, people tend to think about gut health still in our less developed, microbiome-focused markets in terms of just digestion and obviously the expansion into all possible health benefits beyond digestion and immunity. For women, you'll see us putting a focus there on what does that look like for women in all of the various aspects of what addressing gut health can do for them holistically, physiologically. Obviously for children, we have probiotic lines and fiber lines, and those will continue to expand and continue to be leveraged as appropriate across our channels.
Active nutrition, you know, we are hearing, as there was a reference earlier, a lot of focus on protein and how to help consumers consume protein in ways that are more aligned with their needs and their desired consumption profiles. You can expect to see more products in those categories as well, coming to market to really ensure that people are being supported both on their weight loss journeys as well as on their health and sort of muscle building journeys.
Ivan, this-
Congratulations. Oh, I'm sorry.
This is Brent here. Just to add a little bit more color in terms of the active nutrition. In first quarter of this year, we relaunched new active nutrition shakes, so weight management, weight loss shakes in China. We made an investment into manufacturing equipment, filling equipment in that facility so that we could do it in-house and do it ourselves, and we upgraded our formulas. That was launched in Q1 with a lot of excitement from our Brand Partners, and we have a really strong weight management campaign that's currently running there. It's still a big focus for us, and we'll continue to invest in that area.
All right. Thanks, and congratulations again. Good luck for a big 2026.
Thanks, Ivan.
Thanks, Ivan.
This now concludes our question and answer session. I would like to turn the floor back over to Andrew Masuda for closing comments.
Thanks for your questions and participation on today's conference call. If you have any remaining questions, please feel free to contact investor relations at 801-954-7210.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.