Good day, welcome to today's USANA Health Sciences first quarter year earnings call. This meeting is being recorded. At this time, I'd like to hand the call over to Andrew Masuda. Please go ahead, sir. Thank you 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 be making 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 2023, as well as uncertainty related to the economic and operating environment around the world, 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 CEO and Chairman of the Board, Kevin Guest, our President, Jim Brown, our Chief Financial Officer, Doug Hekking, as well as other executives. Yesterday, after market closed, we announced our first quarter results and posted our management commentary document to the company's website. We'll now hear brief remarks from Kevin and Jim before opening the call for questions. Thank you, Andrew, and good morning, everyone. We appreciate you joining us. We're pleased to report solid first quarter results, which were modestly ahead of our expectations. The team did an excellent job of executing market-specific initiatives, which included various in-person events, promotions, and the launch of our new Affiliate Program in certain markets. As a result, we continued to see stabilization in active customer counts and sequential quarter net sales growth. Accordingly, we have raised the lower end of our net sales and earnings per share guidance for the full year. The global operating environment for our business remains dynamic as ongoing inflationary pressures worldwide continue to meaningfully impact the purchasing decisions of our customers. Despite these challenges, demand for health and wellness products continues to proliferate, and we remain well-positioned to execute our growth strategy. As we mentioned in our previous call, we saw a meaningful increase in demand for our health products in China during the fourth quarter following the government shift in COVID policy. This demand carried over to the first few weeks of the first quarter and added approximately $12 million to net sales. Note that this is a temporary lift in net sales and had a comparable lift in our active customer counts as well. Toward the end of the first quarter, we announced annual price increases in many of our markets, and customer purchasing increased by an estimated $13 million ahead of these increases. While we have historically seen a trend of increased purchasing ahead of price increases, the amount was higher than anticipated. Separate from these events, our business continued to show signs of further stabilization in the first quarter. As we discussed with you in February, we are making a strategic effort to return to live meetings around the world where possible and are off to a great start. We held several meetings and events in the first quarter, and following the end of the quarter, we held our China National Sales Meeting in Macau. This is our first large-scale event in this region in three years, and we are pleased to host nearly 10,000 associates in attendance. The associate engagement we have seen and the feedback that we've received from these meetings and events has been excellent. Gathering and collaborating in person is critical to our business as it generates excitement, momentum, and renews trust with our sales force. We have events planned for each of our regions throughout the remainder of the year, and we remain optimistic that these will generate future growth. Notably, we continue to make progress on preparing to open a new market later this year. We plan to announce this new market at our Asia Pacific Convention in South Korea next week. Although this market will not open until later this year, we are optimistic about the long-term growth opportunities it will present, and most importantly, the opportunity it brings to introduce USANA's world-class health products to a new country, culture, and demographic. While we can't discuss the specifics of this market today, we look forward to making this announcement live in South Korea next week. Stay tuned and watch for a press release with this announcement. Before turning the call over to USANA's President Jim Brown, I'd like to comment on our plans for succession in the CEO role. In early February, we announced my plans to transition to the role of Executive Chairman effective July first. With this transition, Jim will be named CEO of the company, and I speak for myself and the entire board when I say that USANA has full confidence in Jim and his leadership and ability to curate active customers. It has been my great privilege to be part of USANA for over 30 years and to serve as CEO for the last eight years and chairman of the board since 2020. It's been extremely satisfying to play a part in advancing USANA's position as one of the foremost leaders in health and wellness. I look forward to continually to be deeply involved in USANA's strategy and mission in this new role. I want to express that I am not retiring. I'm just shifting strategic roles. I also want to express my sincere appreciation for and confidence in Jim as USANA's CEO, as well as USANA's extraordinary management team, employees, and associates. With that, I'll turn the time over to Jim, USANA's future CEO. Thank you, Kevin. I, too, want to thank Kevin for his devotion to USANA and for his mentorship. I look forward to working alongside him in his new role as Executive Chairman, and I'm appreciative of his continued guidance and involvement in our overall strategy and mission. Turning back to the quarter, generating customer engagement and growth is our top priority in 2023, and we're off to a solid start as we saw stabilization and sequential growth in both active customers and net sales during the first quarter. In the second quarter, we plan to focus on more localized and smaller scale promotions as compared to the single large promotion held over the last several years. As such, year-over-year comparisons in the first half of 2023 will be a challenge. We believe, however, that these smaller, more focused promotions, coupled with a return to live events, will generate growth for the company in the long term. The management team is looking forward to reengaging with our associates and customers on a personal level and already have a full calendar of events scheduled throughout this year. As Kevin previously mentioned, global inflationary pressures continue to impact USANA's operations. Historically, we've been fairly modest with our annual price adjustments to the magnitude of 1%-2%. This year, however, we are implementing a slightly higher price adjustment to help manage the elevated materials and supply chain costs we are facing. These price adjustments were implemented across most markets near the end of the first quarter and will be implemented across all the remaining markets in the second quarter. We believe these adjustments are necessary to mitigate our increased cost structure and the current operating environment. Inventory management remains a focal point for USANA, Our inventories ended the first quarter at $68 million, which is $2 million down from the fourth quarter and down $29 million year-over-year. We continue to work with key material suppliers to mitigate our overall risk profile and optimize costs. We will continue to align our inventory levels with the current and expected sales performance while focusing on delivering the best possible customer experience in a cost-effective manner. We are pleased with our first quarter results, and we remain confident that the successful execution of our strategies will deliver sustainable long-term growth. I now ask the operator to please open the lines for questions. Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad, and please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. First question comes from Linda Bolton-Weiser from D.A. Davidson. Please go ahead. Hello. I was just curious just on the cost side. You talked about that a little bit. You did mention that gross margin had some benefit from year-over-year transportation cost decline. I was curious if you could give a little more detail on that. Do you kind of foresee in the next quarter or two that other costs will start to be down year-over-year, or is that still quite a ways away that other costs will also be down year-over-year? Thank you. Yeah. Linda, thanks for your question. This is Doug. The primary decline in transportation costs were just the absence primarily of air shipping stuff that we had to really be creative during some of the high pressure and just disruption in kind of the service of the supply chain. That's the primary thing. We have seen costs stabilize there in just basic ocean cargo, which is kind of the preferred way to ship stuff and plan ahead of time. The primary pickup is not air shipping as much stuff as we had in the past. As it relates to other costs, the raw materials, you know, out of our U.S. plant and the sourcing there, we're probably up 7%-9% in raw material costs. We've definitely seen that stabilize and not continue to get worse. The procurement team and the operations team led by Walter have done a great job kind of mitigating that and branching out to additional suppliers to help, as Jim indicated, really kind of manage our risk there. We hope to see some progress. Right now, we're just not getting as long-term commitment from some of these suppliers and prices what we've seen historically. Jim. Yeah, this is Jim. Another area we talked about was inventory, and that's down, you know, pretty substantially from last year's quarter. A lot of that is just what Doug talked about, the stabilization of the shipping lanes that we can count on shipping at this point in time. We're able to reduce our work in process over the next few months. You know, it's really because of that improvement in the shipping lanes. We have Walter Noot in here as well, and he maybe has a few comments on... Yeah. The other thing that's gonna drive COGS up, and I think we'll still continue to drive it up a little bit, is labor costs because we manufacture our own products. That's always gonna be an issue. As far as inventories, I think we've driven inventories pretty low at this point. We're gonna start driving it up. You'll see inventories going up between $2 million and $5 million by end of the year, I'm sure, from where it's at. Yeah. Part of that's related to the new market, and part of it is really to emphasize what Jim talked about with the customer experience. We don't want... Our policy and holding inventory to go back and disrupt the customer experience. We try to do more products that are land-based for sourcing, for raw materials and packaging, things like that. There's still a transition we're making on that. Okay. Thank you. With regard to the price increases that you mentioned, I mean, there was quite a bit of pre-buying, it seems like, ahead of those anticipated price increases. I'm surprised to hear that there's still more to come in the second quarter on the price increases, in which case, will second quarter benefit as well from pre-buying or was just all that pre-buying like a first quarter phenomenon? We think the vast majority has happened with the market that it's touched. We saw the main influence in China and Korea and Malaysia. Some of the other markets that are rolling in the second quarter are smaller in nature. We wouldn't anticipate the same level of pickup there. We typically see a little bit of this behavior, and so it's not atypical to see it. I think it was a little larger than we anticipated and definitely a little bit additive to the quarter as a result of that. Okay. I just wanted to ask about... just back on the pricing. Sorry. Sorry if you said this, but did you say the quantification of the price increases this year? Yeah. Up to five? Yeah. Yeah, we did, but just under 4% on a weighted average basis globally. Okay. Okay. Then, I was curious about China because, despite the pre-buying phenomenon, you know, the, I guess, stocking up people on the immunity type products, I guess that's what you're explaining, right? I was surprised that it didn't meet our expectation, even with that boost in buying of those products. I'm kind of thinking that China is still not coming around or maybe you could just give some more color on how you feel that market is progressing now that it's reopening? Yeah. Let me give you some high level from metrics. We have Brent Neidig, who oversees the market in here, and he'll do a far better job kind of articulating what he sees in the markets, and he's been over there a few times this year already. You got to make sure when you're comping to the period. The fourth quarter also had that boost from the last two weeks of those immunity products. And the comparable year, we started running, you know, these large promotions we had done in each of 2019, 2020 and 2021. Or excuse me, 2020, 2021 and 2022. That comp made it a little bit difficult on a year-over-year basis as well. Those two things factored in. I think what we're hearing is very positive. Maybe Brent, kind of what you're seeing in the market. Sure. Thanks, Doug. Hi, Linda. I think that the comparable issue, what Doug touched on, that was the biggest impact, in my opinion, to the first quarter for China. I was just over there. I've been there in February and as well back in April for our convention. There are a lot of positive signs coming from the market. We haven't been able to meet back in person for three years, and we were finally able to do that with nearly 10,000 people at our event in Macau. There was a lot of optimism there. People are very excited to be back together and reengaged. I'm very optimistic for what the future holds and, you know, I think this momentum that we'll create out of this event should bode well for us for the back half of the year. Okay. Well, since you mentioned the comparisons on top line growth, you know, when you look at the, or like the constant currency revenue growth in 2022, to be honest with you, the comparisons in the third and fourth quarter do not look a lot easier than the comparisons in the first and second quarter. I guess I'm still trying to understand from a comparison perspective, why is that such a benefit in the second half? I'm not understanding that. Yeah. It was really to do with that large promotion that we ran each of the last three years. It was the tail end of the first quarter and a good portion of the second quarter. I think it does get a little bit easier. You're right. I mean, it's still adjusting and we're really, you know, similar to what we've talked about in the past. We're building from the base we're at in the fourth quarter, and we're confident in that sequential progress we've spoken about. That's really kind of the primary metric we're building from now. That's how the sales team is functioning, how they're building it, and you can't go back and reverse the clocks. We're really building from that level in Q4 going forward. Would you say that in second half 2023, the promotional activity will be more than in the second half of 2022? Is that a fair statement? No, because the bulk of the one in 2022 was really tail end of the first quarter and the second quarter. I think what we're doing this year is repurposing some of that effort to be more at the local and regional level. We're still formulating plans from some of the stuff that's happening right now and seeing how this goes and how they're gonna go back and pivot in the back half of the year. You'll, you'll still have some activity. We're, you know, we're still a sales organization. We wanna go back and support our associates and our field leaders, and we'll still be active there. We just wanna do things that we think add sustainable growth in both revenue and customer accounts and not do anything as just short-term blips. Okay. Then, I'm sort of curious about the acquisitions that you did several months ago and the plans for those, are you just kind of gonna let them run the way they are or are you going to introduce those products and offerings into the broader sales force? What are the plans for those acquisitions? Our strategy for acquisition is to keep the companies separate and let them run their businesses. When we acquire a company, we look for good management, which with both companies we've acquired so far, we've got that, and they're operating really well. We do have synergies where we work together. As an example, with Rise Bar, we now manufacture all of their bars here at USANA instead of them doing it themselves. We feel like that's a great cost savings for them, and it gives us a lot more ability to ramp things up very quickly because as an example, we've been selling through Costco. They've had big orders, we can fulfill those out of our facilities here in Salt Lake. They're still running that business and we're there advising them and helping them. It's the same thing with Oola. Oola is a company that has really great management. We trust those people and we're really helping them by developing products for them. At USANA, we've actually formulated, developed products. We're helping them manufacture products. There's synergies between both companies. Our strategy with M&A is to acquire companies that have products, have expertise, have management, and we'll keep doing that. Just a comment. This is Kevin on that. Just also, diversification is a huge part of our long-term strategy here. Even though some of these acquisitions or these acquisitions are small in comparison to USANA as a company, they're a great place for us to gain core competencies and to diversify our competency level while leveraging our manufacturing and expertise that we have here as a company. We're also looking for areas where we could integrate some of the learnings and/or some of their core competencies into the USANA world, which would help grow sales and active customer counts here at USANA as they continue to run on their own, like Walter said. There is also a, you know... We're looking for areas where we can have some sort of growth in these, but also we're not losing sight on USANA and growing the core business. These companies really are additionally positive to what we're trying to accomplish in growing our active customer accounts. Okay. That sounds good. In terms of your new market launch that you'll be announcing, I guess, pretty soon in May, are there particular expenses that will show up maybe in SG&A related to that launch later in the year? Yeah. I mean, we've been incurring those for some time now. It'll start ramping up as we get closer to market opening, and then you'll obviously see some sales to help buffer that a little bit. But yeah, it'll be a year of expense investing for that market, which is very important to the success of it. Jim, maybe anything else there? Yeah. We've done a really good job of finding great individuals for that management team. Just like Doug said, you have to start early to build up and be ready for the market to launch in the third or fourth quarter. I'm excited about it. It's gonna be a great launch. We actually have David Mulham here, who is our Chief Sales Officer that's overseeing our new market launch. Obviously, we can't say too much, but you've been in and out working with people and working hard. Just a comment on the new markets since you brought it up. Yeah. Good morning, Linda. I think following on Jim's comment, we've got a, you know, we've got the best of the leadership team that we've been developing over recent months ready to go with, gotta careful what I say. The office has been established. We've got a good product grouping. All of the pieces are in place. Of course, when we launch next week, we expect very positive response from, not just from our existing leadership group, but from around our distributors around the world. Is this new market something that could add a couple percentage points to growth in 2024? Is that the scale of it? Yeah. I think we're hopeful that the market can be something that definitely registers on the radar to help kind of boost growth. You'll probably see not a whole lot this year as we kind of get acclimated and kind of build from that base and we give more color as we kind of proceed down the year and after we open the market. Okay. Finally, I guess, what are you seeing in the U.S. market? I guess, if I'm recalling, it was still kind of a decline year-over-year. How do you think the market will adapt to the price increases in the U.S.? Well, on any of these price increases, we are working with the sales team, and the sales teams are making the ultimate call. There's still some just commercial responsibility there they have to take, but they're making the call. They're gauging kind of the appetite of their customers. We're being pretty thoughtful, and we've definitely trailed kind of our cost increases with what we've done. That's something I think we've done intentionally. We've taken a little bit of a overall operating margin hit as a result of that. I still think it's the right strategy as we kind of step into it. David and his team have been working on several initiatives, which would include the Affiliate launch in some of his markets. I'll let David comment on that. Yeah, Linda. The affiliate's been running just on 12 weeks since soft launch, and so it's early days. The indications are really positive response to it in terms of, it's a simple, simpler way for us to acquire and simpler way to sell. It's really a new channel opportunity for us. Yeah, we're in the U.S., Canada and Mexico, and we've got some other markets that we're looking at towards sometime next year, but we wanna get it right. Particularly in the U.S., we're seeing a lot of traction with it. Yeah, it's been a very positive response to date. Okay. Finally, you know, your cash flow, free cash flow, I mean, I'm projecting it will be positive in 2023, and you do still have a lot of cash on your balance sheet. I'm just surprised that you're not engaging in share repurchase even though you would like to make acquisitions. Can you comment on that? Yeah. What I can tell you is it's something we take up at the board meetings each and every quarter, and I'll kind of restate kind of our priorities on kind of use of cash. First and foremost is investing for continued organic growth in our direct selling business. Second, where we see these opportunities, and we've been looking at far more opportunities than we really have in the company's history about different business development, you know, primarily through M&A and what that can go back and bring to core competencies and potential synergies down the road. When those things are done and there's excess cash, we'll look to go back and address some of that excess through what we've done historically is primarily that share repurchase program. We have about 83 million outstanding. It is a discussion point every quarter in the board. It's top of mind on our capital allocation efforts. Okay. Thank you. That's all for me. Thank you, Linda. Thank you. Therefore, there are currently no further questions in the queue. As a reminder, to ask a question, please signal by pressing star one. We will pause for just a moment to allow you to signal. It appears we have no further questions in the queue. With this, I'd like to hand the call back over to Andrew for any additional or closing remarks. Over to you, Andrew. Thank you 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. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.