Nature's Sunshine (NATR) Q3 2026 Earnings Call Transcript

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DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ken Romanzi
• Chief Financial Officer - Ruth Perkins
• General Counsel - Nate Brower

TAKEAWAYS

• Net Sales -- $116.6 million, representing a 9% reported decline and a 7% decline on a constant currency basis due to weakness in China and North America.
• Lowered Full Year 2026 Revenue Guidance -- $460 million to $470 million, reduced from the previous range of $490 million to $500 million due to ongoing headwinds in Asia and normalization in digital channels.
• Lowered Full Year 2026 Adjusted EBITDA Guidance -- $44 million to $48 million, down from the prior range of $48 million to $52 million.
• Asia-Pacific Sales -- $55 million, declining 11% in constant currency because of significant operational disruptions in China and weakness in Taiwan.
• China Sales -- 52% decline in constant currency, reflecting the loss of key regional leaders and the implementation of more restrictive distributor compliance policies.
• North America Sales -- $34 million, a 6% decrease driven by softer direct selling trends and a high year-over-year comparison in the digital segment.
• Digital Sales -- 1% decline in North America, following several years of growth and the lapping of a viral product success in 2025.
• Autoship Penetration -- 40% of total digital sales, increasing from 30% in the prior year as the company builds a larger recurring revenue base.
• Social Commerce Autoship -- 53% of revenue, compared to 9% last year, driven by the shift toward subscription models in social channels.
• Europe Sales -- $22.1 million, a 1% increase in constant currency as 7% growth in Eastern Europe was partially offset by Central Europe weakness.
• Gross Margin -- 72.9%, a decrease of 42 basis points versus 73.3% in the prior year primarily due to unfavorable foreign exchange impacts.
• Adjusted EBITDA -- $11.1 million, a decrease from $15.2 million in the prior year period resulting from lower total revenue.
• GAAP Net Income -- $1.9 million, or $0.11 per diluted share, compared to $5.3 million, or $0.30 per diluted share, in the third quarter of 2025.
• Selling, General, and Administrative Expenses -- $42.3 million, down from $45.7 million due to lower variable selling costs and expense management.
• Cash and Liquidity -- $89.4 million in cash and cash equivalents with zero debt as of Sept. 30, 2026.
• Share Repurchases -- 232,000 shares repurchased for $3.5 million at an average price of $15.27 per share during the third quarter.
• Operating Cash Flow -- $10.8 million, down from $18.5 million in the prior year, reflecting lower net income and changes in working capital.
• Capital Expenditures -- $6.8 million for the nine months ended Sept. 30, 2026, compared to $4.1 million in the same period last year.
• Volume Incentives -- 32.0% of net sales, increasing from 30.7% in the prior year due to the timing of promotional incentives.

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RISKS

• CEO Romanzi stated, "Our business declined in the quarter, primarily due to soft performance in two areas that have historically been growth engines for us, Asia and North America, and it will take a few quarters to work our way through these issues," indicating a prolonged recovery period.
• Romanzi warned that in China, "The unexpected passing of two of our key leaders in one region earlier this year had a greater and more lasting impact than we initially anticipated."
• CFO Perkins indicated that the company expects China to remain a headwind into 2027 as the consultant leadership base adapts to new compliance changes.
• Romanzi noted that paid search in the digital business has become less effective due to the emergence of new AI agents, requiring additional investment in software tools to maintain search visibility.

SUMMARY

Nature's Sunshine Products, Inc. (NASDAQ:NATR) reported a third quarter decline in revenue and profitability, prompting management to lower its full year 2026 guidance. The company cited operational disruptions in China, including leadership transitions and the enforcement of stricter compliance standards, as major factors for the 52% constant currency sales drop in that market. Management reported that the North American digital business is currently normalizing following several years of rapid expansion, particularly on TikTok. Despite these near-term challenges, the company maintained its long-term Vision for Growth goal of reaching $1 billion in annual sales and a 15% Adjusted EBITDA margin through digital expansion, geographic growth in markets like Germany and Japan, and a planned relaunch of the U.S. direct selling business in mid-2027.

• Management abandoned a potential acquisition after a 30-day due diligence period, with CEO Romanzi stating the company "didn't want to inherit another falling knife" due to concerns regarding the target's revenue profile.
• The company plans to launch a new women's health product named Lunea across the Synergy system in Japan, Korea, and Taiwan this month to stimulate consultant activity.
• A third consultant base is scheduled to open in Osaka, Japan, in 2027 to expand geographic penetration beyond current Tokyo and Fukuoka operations.
• Management noted that the digital business peaked in the first quarter of 2026 and is currently investing in SaaS tools to improve merchandising and subscription capabilities.
• The company expects its gross margin to remain in the low 72% range for the fourth quarter due to ongoing unfavorable foreign exchange trends.
• A relaunch of the U.S. direct selling business in mid-2027 will feature a new product bundle focused on gut health and a revised compensation plan.
• The company is awaiting government licensing approval for the launch of an additional Asian market, though the specific timing remains undetermined.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP financial measure that excludes interest, taxes, depreciation, amortization, and other non-recurring or non-cash items to evaluate operating performance.
• Autoship: A recurring subscription program where products are automatically shipped to customers at regular intervals.
• Constant Currency (CC): A method of reporting financial results that eliminates the effects of foreign exchange rate fluctuations to compare underlying business performance.
• Direct Selling: A business model where products are sold directly to consumers through a network of independent consultants rather than in a fixed retail location.
• Social Commerce: The use of social media platforms, such as TikTok, to facilitate the marketing and sale of products.
• Synergy WorldWide: One of Nature's Sunshine's primary brands, predominantly marketed through a global network of independent distributors.
• Vision for Growth: The company's strategic roadmap aimed at doubling revenue to $1 billion and increasing profitability margins.

Full Conference Call Transcript

Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Nature's Sunshine's financial results for the third quarter ended September 30, 2026. Joining us today are Nature's Sunshine CEO, Ken Romanzi, CFO, Ruth Perkins, and General Counsel, Nate Brower. Following the remarks, we'll open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Brower as he reads the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Nate, please go ahead.

Nate Brower: Thank you, Marissa. Good afternoon, and thanks for joining our conference call to discuss our third quarter 2026 financial results. I'd like to remind everyone that this call is available for replay via telephonic dial-in through November 18 and via a live webcast that will be posted in the investor relations portion of our website at ir.naturessunshine.com. The information on this call contains forward-looking statements. These statements are often characterized by terminology such as hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements.

Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K, quarterly reports on Form 10-Q, our earnings release issued today, and other reports filed with the Securities and Exchange Commission. The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now I would like to turn the call over to the CEO of Nature's Sunshine, Ken Romanzi. Ken?

Ken Romanzi: Thank you, Nate, and good afternoon, everyone. Thank you for joining our third quarter earnings call. Simply put, we had a poor quarter that fell well short of our expectations. Nature's Sunshine is a company built for growth, with the tailwinds of the natural supplement category to fuel us. As I celebrate my first year anniversary with the company, I am convinced now more than ever that we can accelerate our growth well into the future. But our business declined in the quarter, primarily due to soft performance in two areas that have historically been growth engines for us, Asia and North America, and it will take a few quarters to work our way through these issues.

Asia declined primarily due to weakness in China, where the unexpected passing of two of our key leaders in one region earlier this year had a greater and more lasting impact than we initially anticipated. In addition, the actions we took in the second quarter to address certain distributor sales practices that were inconsistent with our policies disrupted recruiting and business-building activity among portions of our consultant leadership base. We expect the impact to continue as our consultants adjust their business-building practices and work to rebuild our productive base. Despite this, our long-term outlook in China is positive.

China is a very large direct selling and supplement market, and we've had great success building the business there to $40 million in revenue in 2025 with an effective consultant base. With China's burgeoning middle class and expanding focus on health and wellness, we see a significant opportunity to continue to build our business there. Asia was also down due to softness in Taiwan, which has been declining over the last two years after rapid growth the previous six years. Recent Taiwan performance has been masked by exceptional performance in Japan and Korea. However, the performance in these two regions just could not offset Taiwan's weakness in this last quarter.

Our issues in Taiwan stem from a declining consulting base, which we're addressing through new recruiting efforts. In North America, our growth stalled due to our digital business normalizing following several years of exceptional growth, creating a more challenging comparison as we work to establish its next phase of growth. Our digital business has grown over the past few years from zero in 2021 to $40 million in 2025, peaking in the first quarter of this year. This was the first quarter our digital business has experienced a decline due to more normalized comparisons in our TikTok business and lapping the results of a product that went viral in 2025.

But despite this challenging quarter, we remain and expect our digital business to grow for the year, and we remain bullish on the business long term. To really make North America a key growth engine for us again is to not only grow our digital business, but also to grow our core U.S. direct selling business, a business that has been soft for years. Today, our strategy in the U.S. is an AND strategy, meaning we expect to grow both our direct selling business and our digital e-commerce business. I'll share a bit more detail of this on our plans later on the call.

For now, I'd like to turn the call over to our new Chief Financial Officer, Ruth Perkins, to discuss our third quarter performance in more detail. Ruth has been at Nature's Sunshine for only two months, but she already has a terrific command of our business and is adding all the value I hoped for as the last piece of the puzzle to our executive leadership team. I'm delighted Ruth is on our team and confident she will help us steer our company back to profitable growth. Ruth?

Ruth Perkins: Thank you, Ken, and good afternoon, everyone. It is a privilege to join you for the first time as Nature's Sunshine Chief Financial Officer. I also want to thank Jon Lanoy, our Chief Accounting Officer, for his leadership and partnership throughout the transition. Over the past two months, I have had the opportunity to meet with our teams and gain a deeper understanding of our business. What I have seen reinforces my belief that Nature's Sunshine has significant strengths, including trusted brands, a 50-year heritage of herbal expertise, and a high-quality, vertically integrated manufacturing platform.

While our third quarter performance was disappointing and below expectations, it does not change my view of the quality of the business or the long-term opportunity ahead. Let me now turn to our third quarter results. Net sales in the third quarter were $116.6 million, a 7% decline versus prior year, excluding the impact of foreign exchange rates. Unfavorable foreign exchange reduced reported net sales by an additional 2 percentage points, resulting in a 9% decline versus the year-ago quarter. While the decline was measured against a record third quarter in 2025, and absolute net sales remain generally consistent with second quarter levels, these results were below our expectations.

The shortfall in the quarter was driven primarily by the factors Ken discussed, most notably the continued challenges in China and slower growth in our digital business. Turning to our individual markets, total Asia-Pacific third quarter sales were $55 million, down 11% year-over-year on a constant currency basis. Unfavorable foreign exchange reduced sales by an additional 4 percentage points, resulting in a reported decline of 15%. China accounted for the majority of the decline, with sales down 52% in constant currency year-over-year, due primarily to the challenges discussed earlier. As our consultant leadership base adapts to the changes we have implemented and we work to rebuild momentum, we expect China to remain a headwind into 2027.

Outside of China, weakness in Taiwan was partially offset by continued growth in Japan. In North America, third quarter sales declined 6% year-over-year to $34 million. Digital sales declined 1% versus the prior year after several quarters of strong growth, reflecting more challenging comparisons as we lapped the rapid expansion of our social commerce business. Despite the slower growth, subscription autoship trends remained strong. Autoship represented 40% of total digital sales compared to 30% last year. Within social commerce, autoship accounted for 53% of revenue, up from 9% a year ago, helping build a larger recurring revenue base. Our North America direct selling trends also remained soft during the quarter, consistent with the longer-term trends in the business.

In Europe, third quarter sales increased 1% on constant currency basis year-over-year to $22.1 million. Growth of 7% in Eastern Europe was largely offset by softer results in Central Europe. We also continue to make progress in Germany, where our market launch remains on track. Turning to gross margin. We continue to make progress on initiatives designed to improve supply chain efficiency. Third quarter gross margin was 72.9%, down slightly versus last year's levels of 73.3%, primarily due to unfavorable foreign exchange. For the fourth quarter, we expect gross margin to be in the low 72% range, slightly below the prior year, primarily due to continued unfavorable foreign exchange.

Selling, general, and administrative expenses during the third quarter were $42.3 million compared to $45.7 million a year ago. The decrease in SG&A dollars was primarily driven by lower variable costs and disciplined expense management across the organization as we responded to softer sales trends. Adjusted EBITDA, as defined in our earnings release, was $11.1 million compared to $15.2 million in the prior year, primarily due to lower revenue. Our balance sheet remains strong with cash and cash equivalents of $89.4 million and no debt. Net cash provided by operating activities during the quarter was $10.8 million compared to $18.5 million in the prior year.

During the quarter, we repurchased 232,000 shares for approximately $3.5 million, or $15.27 per share, leaving $11.3 million remaining under our share repurchase authorization, which we intend to use as market conditions warrant. Reflecting on our third quarter performance and updated expectations for the balance of the year, we are lowering our full year 2026 outlook. We now expect net sales of $460 million-$470 million and Adjusted EBITDA of $44 million-$48 million. That compares with the ranges we gave in August of $490 million-$500 million and $48 million-$52 million. The major drivers of this lowered outlook are continued year-over-year declines expected in China, ongoing weakness in Taiwan, and more normalized comparisons in our digital business.

While we are taking actions to improve performance, we expect these factors to continue affecting results in the near term. While our third quarter results were disappointing and we have adjusted our outlook accordingly, we are taking action to address the issues affecting performance and remain focused on strengthening the business for the long term. With that, I'll turn the call back to Ken.

Ken Romanzi: Thank you, Ruth. Despite softness in our business in the short term, we still have very strong conviction in our Vision for Growth. While we expect the challenges in China to continue in 2027, we believe the actions we're taking are important to position that business for sustainable long-term growth. At the same time, we remain focused on advancing our digital growth initiatives and executing all the strategies behind our Vision for Growth that we developed earlier this year. As a reminder, even with a soft quarter, the goals of our Vision for Growth are to double the size of this company to $1 billion in sales and improve our EBITDA margin to 15% over time.

The four key growth drivers of our Vision for Growth will be, number one, continued digital expansion. We're planning to increase investment in marketing and SaaS tools in our digital business to improve our search, merchandising, and subscription capabilities of our digital storefront. Number two, geographic penetration and expansion. We'll continue to build out our newest market, Germany, and we'll open a third consultant base in Japan in 2027. In the U.S., our largest market, we will be introducing a reimagined direct selling program by mid-2027 featuring a new product lineup, a new compensation plan, and new recruiting and incentive programs. Lastly, as we've shared before, we are preparing to launch another Asian country, awaiting only government licensing approval.

So, timing is still yet to be determined. Number three, superior marketing and product innovation. This month, we'll begin the launch of a women's health product called Lunea across our entire Synergy system in Asia, including Japan, Korea, and Taiwan. In the U.S., we're planning the launch of a new gut health product lineup in 2027 as part of the relaunch of our U.S. direct selling business. Number four, last but not least, we still plan to use M&A to help drive us to our billion-dollar goal, but as I've mentioned in previous calls, we can't predict when we'll execute an acquisition. We'll expand further on our 2027 business plans against these strategies when we share our fourth quarter results.

In summary, we are very disappointed in our third quarter performance and do not underestimate the work we have in front of us to get our business back on the growth track over the next few quarters. I could not be happier with the leadership team we built at Nature's Sunshine, nor more enthusiastic with the opportunities to accelerate our growth globally. Thank you for your time and attention today and for your continued support of Nature's Sunshine. I would now like to turn the call back to the operator for questions. Operator?

Operator: Thank you, Mr. Romanzi. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. Should you wish to remove your hand from the queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. Just a moment for your first question. Your first question comes from Susan Anderson with Canaccord Genuity. Please go ahead.

Susan Anderson: Hi, good evening. Thanks for taking my questions. I guess maybe just a follow-up on the digital business. Maybe if you could talk about in North America particularly, I guess, what kind of drove the slowdown? I know it had been really strong and there was some tough compares, but kind of what changed that trajectory? Then I guess in China, maybe if you could talk about the operational disruptions that you mentioned a little bit more detail and when you think that'll be resolved. Thanks.

Ken Romanzi: Thanks, Susan. Thanks for joining us. First of all, in our digital business, that business, as you know, has been growing dramatically over the last few years, the last few quarters, 20% and 30% and 40%. Last year, we entered a whole new channel in TikTok. We are starting to overlap that as well as a product that went viral that has settled back down to much higher levels before the product went viral, but settled back down. TikTok is now doing consistent business. It is just the growth versus year ago is a lot less.

In addition, we have seen, like many companies have seen, that paid search in the digital business is not working quite as effectively given the new AI agents that are out there. We are investing in this, as I mentioned in the script, we are investing in SaaS tools to be able to deal with these AI agents so that we get back to having our paid search and agentic search be more effective. Traffic has slowed down a little bit. We have identified what those areas are, and altering our plans to be able to boost traffic back up, not just on our own website, but on a large portion of our business, Amazon.

The fundamentals of our digital business is strong, and we expect to continue to grow that business going into the future. In terms of China, again, to be clear, as we mentioned, as we discussed last quarter, there was really two bases that were in China that were significantly affected. One was the unfortunate passing of two leaders in charge of one base. It is going to take time to build up that leadership base without the people that were running that facility. Lastly, the second area was we have intentionally tightened up the selling practices of another consultant base, quite frankly, because we always want to do business the right way at Nature's Sunshine.

We want to make sure all of our independent consultants are compliant, and we basically curtailed some of the more aggressive practices that they were pursuing, which does hurt near-term sales, but does not really create the core function of what they do. They just have to build back their distributor base in a more systematic and more compliant way. When we faced this in the last quarter, we said, "Hey, this just started, and we do not know really what the net effect is." We are seeing kind of the flesh out of that in the last quarter, and we now need to rebuild from a lower base. But the market still is very attractive.

We just have to make sure our independent consultant base is doing it in the way that we have prided ourselves in doing it the right way globally over the past 50 years.

Susan Anderson: Yeah. Okay, great. Yeah, no, that's helpful. I guess just on the M&A front, I guess, what are you guys seeing out there? Are you seeing any attractive valuations, any opportunities that would fit with your portfolio? Or I guess, how long do you think it's going to take to find something that could potentially make sense for you?

Ken Romanzi: Well, Susan, as you know, you can't predict when something's going to come along that's attractive. I will say that we did enter in the last quarter a period of due diligence with an opportunity. We had a 90-day exclusive, and after 30 days, we shut it down. Good news, bad news. The good news was it fit the profile of what we were looking for, as we discussed several times, that fit the profile of cost synergies that could be adopted into our facility. So we kind of proved out that the model could really work. The reason why we didn't pursue it was we were very concerned about their revenue profile.

Their revenue profile was shaky, and even though we could have bought the business and incurred a lot of cost synergies to pay for it, we didn't want to inherit another falling knife, so to speak. So we, uncertain with the revenue, we're not just going to do something to have a short term. We want to do something that has some growth potential to it, and we were not satisfied with the details of the revenue makeup. There was too much going on, and we just didn't want to buy into that type of risk.

Susan Anderson: Yeah.

Ken Romanzi: Having said that, with a new CFO, it's not like we've been that aggressive, but now that Ruth has got her feet on the ground, we're going to step up the outreach. To date, we've only looked at things that have crossed our desk. We need to put a little bit more of a strategic plan together for us to go out and search for potential candidates, because quite frankly, all we've done right now is evaluate things that have come across our desk. But we know we want to produce something, get something that provides us enough scale that will drive cost synergies, that will actually have a good impact on our P&L.

So there's a lot of smaller stuff out there, call it $20 million-$50 million in revenue. That really doesn't help us all that much. It's a lot of work. It takes as much work to buy a $20 million business than it does to buy a $100 million business. There's a lot of small stuff. We just need to find things that are big enough that will have a good impact on our P&L, that will give us revenue diversity and growth potential.

Susan Anderson: Got it. Okay, great. That sounds good. Thanks so much for all the details. Good luck the rest of the year.

Ken Romanzi: Thank you.

Operator: As a reminder, if you'd like to ask a question, please press star followed by one. Your next question comes from Andrew Tompkins with D.A. Davidson. Please go ahead.

Andrew Tompkins: Hey, this is Andrew from D.A. Davidson on for Matt. I just had a question about Japan. Given the strength you have been seeing, how should we think about a more normalized rate of growth going forward? As you kind of move into 2027, do you think that the bigger opportunity for expansion is within Japan or potentially increasing productivity in other markets?

Ken Romanzi: I will take it. Well, Japan had an outsized quarter in the second quarter. I think we were up something like 50% in the second quarter, so we cannot expect that ongoing. This quarter, it still grew nicely, so we expect continued growth in Japan. It has been growing for several years, and with this new leadership base that we will be establishing, we talk about geographic expansion and penetration. Expansion could be a new country like Germany, but in Japan, we historically were a Tokyo-based market, and a few years ago, we introduced a second base in southern Japan, a city called Fukuoka, and that has been fueling growth.

We just made an agreement to open up a third location in the city of Osaka. It is kind of just north of Tokyo. Within the country, we can continue to expand, which allows us to expand our consultant base, which is really what drives the business. So we are going to expect Japan to be a growth engine. It just did not grow enough to offset weaknesses in Taiwan. Taiwan is a little smaller market, right?

It is not quite as large as Japan in terms of size, but it has done actually sales that are outsized for that market, and now we need to reach a new growth plan there, because Taiwan is a very, very developed market, which is why we have kind of softened over the last couple of years. But we still believe there is potential. We are certainly not saturated in the market yet.

Andrew Tompkins: Got it. That makes sense. Regarding innovation, looking ahead, can you just give us a sense of what the innovation pipeline looks like?

Ken Romanzi: Well, as I mentioned on our call, in order to achieve the growth expectations of the Asia Synergy system, which I mentioned is Japan, Taiwan, and Korea, the new women's health product, along with their recently launched skincare line, are initiatives for them to keep driving and getting new consultants on board to continue to build the business. So those new products will only be successful if they can attract new consultants to keep driving the business forward. So in Asia, we're pretty much set for a while with continued opportunity for the skincare line, which is totally incremental to our supplement line in terms of consumer use.

That is still only single-digit percentages, depending on the country you look at, in terms of the overall business. So we want to have that skincare line be a double-digit percentage of their business. With this new women's healthcare product, they have another new product to sell to continue to build out productive consultants' bases. So we hope that these help fuel the growth that we will expect in the Synergy system, Japan, Taiwan, Korea, in 2027.

In terms of the U.S. direct selling business, it's a total relaunch across the business that's centered around a new product bundle that's designed for our direct selling business only, around gut health, which is a very big issue these days in consumer health. Gut health products are actually our top-selling category in the United States and in many areas around the world. So we've got new products as well as some repositioned older products to have a new consultant base take our new U.S. direct selling business to another way. So it's not innovation just for the consumer, it's innovation to get our consultants to help recruit new people to get more consumers involved with our business over time.

So those are really the two major new product news that we're going to rely on at least for the next 18 months. In the direct selling world, we can't overload them with too many new products because they got to focus on kind of simple product news one at a time, and we hope that these are going to be a growth engine for us for 18 months or so.

Andrew Tompkins: Got it. Thank you, guys.

Ken Romanzi: And I would add, when you look at the world of consumer health, gut health and women's health are two really big, big growing areas of opportunity and of consumer concern, and we have a right to play in both of those areas with really terrific products.

Operator: At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Romanzi for closing remarks.

Ken Romanzi: Thank you, operator. Just want to say thank you for everybody's engagement and time and attention, and we look forward to continuing to report on our progress going forward. Appreciate it.

Operator: Ladies and gentlemen, this does conclude today's conference. You may now disconnect your lines at this time. We thank you for your participation.

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