Nature's Sunshine Products, Inc. (NATR) Earnings

Management highlights

### Strategic Plan: Vision for Growth - Long-term targets: Double company size to $1 billion in net sales, and expand adjusted EBITDA margin to 15% from the current ~10%. - Four core growth drivers: Digital channel expansion, deeper geographic penetration/new market expansion, enhanced marketing and product innovation, and accretive mergers and acquisitions. ### Leadership Updates - After former CFO Shane Jones' departure in June 2026, Chief Accounting Officer John LaNoy seamlessly maintained financial operations. Ruth Perkins was appointed new CFO, effective September 1, 2026, bringing extensive leadership experience from large blue-chip consumer product companies. - Janine Weber, a 25-year direct selling industry veteran, was appointed President of North America, effective August 10, 2026, to lead the planned reinvigoration of the North American direct selling business. ### Operational Progress on Strategic Initiatives - **Digital expansion**: The digital business is on track to hit $50 million in annual sales by end of 2026, just five years after launch. Expansion is planned for the U.S. digital channel, with opportunities for digital expansion outside the U.S. also under evaluation. - **Geographic expansion and penetration**: Japan saw strong 50% year-over-year growth, supported by a new regional base in Fukuoka, with an additional new regional opening planned for 2027. Germany launch is underway, with 150 new consultants joining per month and strong early consultant engagement. A new Asian market launch is planned for 2027 (pending regulatory approval) via the Synergy Eagle system. The U.S. will launch a full reinvigoration of its direct selling system in early 2027 to reverse years of soft performance in the core direct selling segment. - **Marketing and product innovation**: A new consumer brand campaign *Live on the Bright Side* will launch this fall. Multiple new product launches are planned for fall 2026 and early 2027. Synergy's newly launched skincare line is already contributing to growth, with targets to grow it to 10-20% of regional APAC sales over 3-5 years. Gut health products remain the top-selling category for the Nature's Sunshine brand in North America. - **M&A strategy**: Management is actively evaluating accretive acquisition opportunities that align with strategic goals, with no specific timeline for a transaction. ### Financial Operational Highlights - The company holds a clean balance sheet with $82.5 million in cash and cash equivalents and zero debt. 113,000 shares were repurchased for ~$2.5 million in the first half of 2026, with $14.8 million remaining in the authorized repurchase program.

Guidance

- Management lowered full-year 2026 net sales guidance to $490 million to $500 million, down from the prior guidance range of $500 million to $515 million. The new guidance reflects 2% to 4% year-over-year net sales growth. - Full-year 2026 adjusted EBITDA guidance was lowered to $48 million to $52 million, down from the prior range of $50 million to $54 million. - Management expects gross margins to average in the low to mid 73% range for the remainder of 2026. - Quarterly SG&A expenses are expected to remain in the $45 million to $47 million range for the remainder of 2026, as the company ramps up investments for its Vision for Growth strategic plan.

Segment performance

Overall company net sales for Q2 2026 were $117 million, an increase of 2% year-over-year (4% in constant currency), marking the strongest Q2 in company history. 1. Asia Pacific: Total Q2 sales reached $53 million, representing a 1% year-over-year increase (5% in constant currency), contributing 45.3% of total company net sales. Within the region, Japan delivered 50% year-over-year growth, while China declined 20% due to short-term operational issues. Excluding China, the Synergy Eagle system segment grew 11% year-over-year. 2. North America: Total Q2 sales hit $36 million, a 3% year-over-year increase, contributing 30.8% of total company net sales. Digital sales grew 26% year-over-year, with new customers also up 26%; auto-ship subscriptions accounted for 36% of total website orders, and social commerce revenue grew 177% year-over-year, with auto-ship making up 60% of social commerce revenue. 3. Europe: Total Q2 sales came to $26.7 million, a 4% year-over-year increase, contributing 22.8% of total company net sales. Eastern Europe drove growth with a 12% year-over-year increase, supported by improved product availability for high-demand items despite regional unrest. Gross margin for the quarter expanded 200 basis points to 73.7%, the highest in over four years. Volume incentives were 30.6% of net sales, up from 29.9% year-over-year. SG&A expenses were $44.9 million (38.4% of net sales), up from $43.7 million (38.1% of net sales) year-over-year. Adjusted EBITDA was $11.3 million, up nearly 1% year-over-year.

Risks & headwinds

- Foreign exchange rate volatility has negatively impacted reported sales growth and led to downward guidance revisions. - China's Q2 2026 sales declined 20% (a reversal from 30%+ annual growth over the past year) due to short-term operational issues, which pressured overall APAC growth below management expectations. - Core direct selling business in North America has remained under pressure for multiple years, requiring significant strategic reinvestment to reverse the trend. - Continued geopolitical unrest in Eastern Europe creates ongoing uncertainty for product supply and demand in the region. - Forward-looking performance may differ materially from management expectations due to unidentified additional factors, as outlined in the company's SEC filings. - New market expansions are long-term growth projects that do not contribute meaningfully to revenue in their first 1-2 years of operation, requiring upfront investment before returns are realized.

Analyst Q&A

• Q: Susan Anderson of Canaccord Genuity asks for more detail on North America's core business performance beyond the strong e-commerce segment, and for an update on the new Germany market launch. /

  A: Management confirms total North America sales grew 3% year-over-year, with soft performance continuing in the legacy core direct selling business. A full reinvigoration of the direct selling program, including new products, a new compensation plan, and new incentives, will launch in early 2027 to return the large core business to growth. For Germany, which just launched, management expects ~$1 million in sales this year, and hopes it will grow to tens of millions in annual sales long-term. Early traction is strong, with 150 new consultants joining per month and 400 consultants attending a paid launch summit in Berlin, as the company ramps up operations in Europe's largest supplement and direct selling market.

• Q: Anderson asks which specific products and brands drove growth across the company's regions. /

  A: Management explains most APAC growth comes from the Synergy brand, which operates in Taiwan, Korea, and Japan, and grew 11% year-over-year. Synergy's long-standing core products drive most growth, with a newly launched skincare line already contributing and targeted to reach 10-20% of regional APAC sales over 3-5 years. For the Nature's Sunshine brand (sold in North America, Europe, China, and Latin America), growth is spread across the broad product portfolio, with gut health products as the top-selling category in North America for both digital and direct selling channels.

• Q: Anderson asks for clarification on the type of acquisitions Nature's Sunshine is targeting, including sector, geographic focus, and business model preference. /

  A: Management states the company is highly selective, and will only pursue acquisitions in the supplement space, the company's core area of expertise. A key requirement is that the acquired brand's products can be manufactured in Nature's Sunshine's existing facility, which has excess capacity, to capture full manufacturing margin and synergy benefits. The company prefers acquisitions that diversify its current business mix, either via new geographies, additional direct-to-consumer or retail distribution, but will consider opportunities aligned with its strategy regardless of model, with the primary goal of delivering accretive earnings and shareholder value.