USANA Health Sciences (USNA) Q2 2012 Earnings Call July 25, 2012 11:00 am ET Executives Patrique Richards David A. Wentz - Chief Executive Officer G. Douglas Hekking - Chief Financial Officer Analysts John P. San Marco - Janney Montgomery Scott LLC, Research Division Rommel T. Dionisio - Wedbush Securities Inc., Research Division Frank A. Camma - Sidoti & Company, LLC Timothy S. Ramey - D.A. Davidson & Co., Research Division Presentation Operator
I'm joined this morning by Dave Wentz, our Chief Executive Officer; and Doug Hekking, our Chief Financial Officer. We'll hear first from Dave, who will discuss our business activities during the quarter, as well as our strategies moving forward. We will then hear from Doug, who will discuss our financial results and 2012 updated financial outlook. I'll now turn the call over to Dave.David A. Wentz Thanks, Pat, and good morning, everyone. I'm pleased to report that USANA delivered another quarter of record results both on the sales and EPS lines. While there were many positive developments during the quarter, the highlight was certainly the launch of our new Lifetime Matching Bonus. For several years, USANA has offered a matching bonus to our Associates around the world. However, many Associates viewed it as a short-term incentive and did not result in the long-term benefits we hoped for. Additionally, the old matching bonus was successful only in certain regions and underutilized in other regions, especially North America. We have attempted to change it's dynamic with the introduction of the new Lifetime Matching Bonus. As the name suggests, the Lifetime Matching Bonus is a long-term incentive. It rewards Associates for helping those they sponsor become successful over the life of their business. This new bonus is intended to incent our Associates develop long-term, enduring sales organizations by developing and continuing to mentor new Associates they bring into the business. We launched the Lifetime Matching Bonus at the end of April in front of thousands of Associates worldwide. It has been received by our sales force with overwhelming support and enthusiasm, and we are confident that the Associates in all of our regions will utilize the bonus to grow their organizations. We also launched the Lifetime Matching Bonus with an 8-week promotion that we have offered with success in the past. The objective of this promotion was to immediately increase the number of Associates who will receive the Lifetime Matching Bonus. This 8-week promotion proved to be successful again and helped fuel our record results for the quarter.
Operationally, we expect that the Lifetime Matching Bonus will relieve pressure on Associate incentives by reducing monies being paid out for the wrong behaviors and provide us with flexibility to implement market-specific incentives to drive sales and customer growth in each of our regions. We intend to continue providing a rewarding compensation plan for our Associates that is sustainable long term.I'd now like to discuss our regional results and then update you on our strategies and expectations for the remainder of 2012. We continue to see strong momentum in our Asia Pacific region where sales increased by 11% and the number of active Associates increased by 10%. This growth was driven by solid results in Southeast Asia/Pacific and Greater China. The Philippines, which increased 124.4% in sales, was a significant contributor to our growth in the region. We continue to see impressive growth in this market where our Filipino Associate leaders include highly educated professionals who have capitalized on the unique earning potential under the USANA compensation plan, which is often more rewarding than their current profession. In addition to the Philippines, we saw growth in almost every other Asia Pacific market in this quarter. Factors that led to this growth include increased Associate counts in many markets, price increases in certain markets and increased Associate productivity from the introduction of the Lifetime Matching Bonus and the related short-term promotion we offered during the quarter. Also included in our results for Southeast Asia/Pacific this quarter were sales for Thailand. Our initial results in this market were softer than expected primarily because our customer base currently consists of more consumer-minded customers as opposed to the entrepreneurial Associate leaders. Fortunately, we have a well-experienced Thailand management team that is focusing their efforts on developing Associate leaders and organizations in this market. In May, these efforts focused on our grand opening event, which was very well attended by our Thailand Associates and prospects. Although growth in Thailand will come in a slower pace than originally anticipated, we believe that this market will be a meaningful addition to the region. Read the rest of this transcript for free on seekingalpha.com