USNA

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide an understanding of USANA’s financial condition, results of operations and cash flows by reviewing certain key indicators and measures of performance. The MD&A is presented in six sections as follows: •Overview •Products •Customers •Non-GAAP Financial Measures •Results of Operations •Liquidity and Capital Resources This discussion and analysis from management's perspective should be read in conjunction with the Unaudited condensed consolidated financial statements and Notes thereto that are contained in this quarterly report, as well as Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 3, 2026 (“2025 Form 10-K”), filed with the SEC on March 16, 2026, and our other filings, including the Current Reports on Form 8-K, that have been filed with the SEC through the date of this report. Forward-looking statements in Part I, Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements and Certain Risks” on page 1 and the risk factors provided in Part II, Item 1A for discussion of these risks and uncertainties). Overview We develop and manufacture high quality nutritional supplements, functional foods and personal care products that are sold throughout the world. Historically, we have distributed our products through the direct selling channel, because we believe it is conducive to our vision of improving the overall health and nutrition of individuals and families around the world. On December 23, 2024, we acquired a 78.85% controlling ownership interest in Hiya, a leading provider of high-quality children's health and wellness products. We believe that the addition of Hiya to our business promotes our vision and adds a diversified layer of growth in the direct-to-consumer channel. In 2022, we acquired Rise and have expanded Rise's product offering, distribution channel, and customer base over the last three years. Consequently, through our Core Nutritional business, Hiya, and Rise, we now operate and sell products through an omni-channel platform, which includes direct selling, direct-to-consumer, third-party marketplace and retail channels and organize our business into three reportable segments: Core Nutritional, Hiya, and Rise. Core Nutritional: Core Nutritional is our primary business with approximately 84% of consolidated net sales during the six months ended July 4, 2026. Our Core Nutritional customer base is primarily comprised of two types of customers: “Brand Partners” and “Preferred Customers,” referred to together as “active Customers.” Our Brand Partners also sell our products to retail customers. Brand Partners share in our company vision by acting as independent distributors of our products in addition to purchasing our products for their personal use. In 2023, we launched our Affiliate program in the United States, Canada, and Mexico, which offers another sales and compensation opportunity to individuals who are interested in selling USANA products. Affiliates are discussed and reported in the report as part of our Brand Partners. Preferred Customers purchase our products strictly for personal use and are not permitted to resell or to distribute the products. We only count as active Customers those Brand Partners and Preferred Customers who have purchased from us at any time during the most recent three-month period. As of July 4, 2026, we had approximately 384,000 active Customers worldwide in the Core Nutritional business. We have Core Nutritional operations in multiple markets, with sales and expenses being generated and incurred in multiple currencies. Our reported U.S. dollar sales and earnings can be significantly affected by fluctuations in currency exchange rates. In general, our operating results are affected positively by a weakening of the U.S. dollar and negatively by a strengthening of the U.S. dollar. During the six months ended July 4, 2026, net sales outside of the United States represented 91.1% of Core Nutritional net sales. In our net sales discussions that follow, we approximate the impact of currency fluctuations on net sales by translating current year sales at the average exchange rates in effect during the comparable periods of the prior year. 22 Table of Contents Hiya: Hiya operates and sells products to customers in the United States, Canada, and the United Kingdom. Hiya's customers purchase Hiya products for personal use primarily through a subscription model, which is intended to provide a steady, predictable income stream for Hiya. The ongoing nature of subscriptions fosters stronger relationships with customers by making it easier for them to receive products regularly, which we believe leads to retention and loyalty. Hiya's subscription model also provides important data on customer preferences and behaviors, which enables personalized offerings, efficient marketing and data-driven innovation insights. We evaluate Hiya's customer counts and behavior through their monthly subscribers and only count as "active Monthly Subscribers" those Hiya customers who have purchased from Hiya at any time during the most recent month. Hiya expanded distribution into retail during the first quarter of 2026. Rise: Rise manufactures and sells high-quality protein bars, powdered drinks, and clear protein drinks that are formulated to help customers achieve their health goals through clean and simple ingredients. Rise's revenue is generated primarily from sales to large national retailers and club retailers. The following tables summarize operating results as a percentage of net sales for the current and prior-year periods, as indicated: Three months ended July 4, 2026 June 28, 2025 Core Nutritional Hiya Rise Consolidated Core Nutritional Hiya Rise Consolidated Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 18.9% 32.1% 89.2% 21.7% 18.2% 36.2% 61.8% 21.3% Gross profit 81.1% 67.9% 10.8% 78.3% 81.8% 63.8% 38.2% 78.7% Operating expenses: Brand Partner incentives 43.6% —% —% 37.4% 43.6% —% —% 36.9% Selling, general and administrative 30.8% 74.8% 61.3% 36.9% 31.5% 52.8% 51.1% 34.7% Goodwill impairment —% 103.1% —% 13.0% —% —% —% —% Total operating expenses 74.4% 177.9% 61.3% 87.3% 75.1% 52.8% 51.1% 71.6% (Loss) earnings from operations 6.7% (110.0%) (50.5%) (9.0%) 6.7% 11.0% (12.9%) 7.1% Amortization of acquired intangible assets —% 15.8% 6.2% 2.1% —% 13.1% 8.6% 2.0% Six months ended July 4, 2026 June 28, 2025 Core Nutritional Hiya Rise Consolidated Core Nutritional Hiya Rise Consolidated Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 18.4% 31.5% 92.2% 22.8% 18.0% 37.2% 63.1% 21.1% Gross profit 81.6% 68.5% 7.8% 77.2% 82.0% 62.8% 36.9% 78.9% Operating expenses: Brand Partner incentives 43.5% —% —% 36.4% 43.1% —% —% 36.5% Selling, general and administrative 30.3% 76.0% 28.2% 35.9% 31.5% 58.3% 62.4% 35.7% Goodwill impairment —% 48.2% —% 6.2% —% —% —% —% Total operating expenses 73.8% 124.2% 28.2% 78.5% 74.6% 58.3% 62.4% 72.2% (Loss) earnings from operations 7.8% (55.7%) (20.4%) (1.3%) 7.4% 4.5% (25.5%) 6.7% Amortization of acquired intangible assets —% 14.8% 2.5% 2.0% —% 12.5% 10.4% 2.0% 23 Table of Contents For more information relating to our reportable segments, see Note K to our condensed consolidated financial statements. Products The following table summarizes the approximate percentage of total product revenue for the Core Nutritional business that has been contributed by major product lines and our top-selling products for the current and prior-year periods, as indicated: Six months ended July 4, 2026 June 28, 2025 Product line USANA® Nutritionals Optimizers 71% 72% Essentials/CellSentials(1) 15% 16% USANA Foods(2) 8% 6% Personal care and Skincare 5% 5% All other 1% 1% Key product USANA® Essentials/CellSentials 8% 9% Proflavanol® 8% 9% Probiotic 6% 8% ______________________________ (1)Represents a product line consisting of multiple products, as opposed to the actual USANA® Essentials / CellSentials product. (2)Includes our Active Nutrition line. The following table summarizes the approximate percentage of total product revenue for our Hiya segment that has been contributed by major product lines for the current and prior-year periods, as indicated: Six months ended Product line July 4, 2026 June 28, 2025 Kids Daily Multivitamin 55% 53% Kids Daily Probiotic 13% 14% Kids Daily Greens and Superfoods 12% 14% Kids Bedtime Essentials 11% 11% Kids Daily Iron 5% 4% Kids Daily Hydration 2% 1% Kids Daily Immune 1% 3% Kids Daily Fiber+ 1% —% 24 Table of Contents The following table summarizes the approximate percentage of total product revenue for our Rise segment that has been contributed by major product lines for the current and prior-year periods, as indicated: Six months ended Product line July 4, 2026 June 28, 2025 Protein Pop (1) 70% —% Bars 29% 91% Powders 1% 9% ______________________________ (1)Protein Pop was launched in the third quarter of 2025. Customers Core Nutritional Because we primarily sell our products to a customer base of independent Brand Partners and Preferred Customers, we increase our sales by increasing the number of our active Customers, the amount they spend on average, or both. Our primary focus continues to be increasing the number of active Customers. We believe this focus is consistent with our vision of improving the overall health and nutrition of individuals and families around the world. Increases or decreases in product sales are typically the result of variations in the volume of product sold relating to fluctuations in the number of active Customers purchasing our products. The number of active Customers is, therefore, used by management as a key non-financial indicator to evaluate our operational performance. Sales to Brand Partners accounted for approximately 51% of Core Nutritional business sales during the six months ended July 4, 2026, with the remainder of our sales generated from Preferred Customers. As of July 4, 2026, Brand Partners and Preferred Customers represented approximately 43% and 57%, respectively, of the total active Customer base for the quarter in the Core Nutritional business. The table below summarizes the changes in our active Customer base for the Core Nutritional business by geographic region, rounded to the nearest thousand as of the dates indicated: Total active customers by region Change from prior year Percent change As of July 4, 2026 As of June 28, 2025 Asia Pacific: Greater China 216,000 56.2 % 231,000 55.3 % (15,000) (6.5 %) Southeast Asia Pacific 59,000 15.4 % 68,000 16.3 % (9,000) (13.2 %) North Asia 32,000 8.3 % 37,000 8.8 % (5,000) (13.5 %) Asia Pacific total 307,000 79.9 % 336,000 80.4 % (29,000) (8.6 %) Americas and Europe 77,000 20.1 % 82,000 19.6 % (5,000) (6.1 %) 384,000 100.0 % 418,000 100.0 % (34,000) (8.1 %) Hiya Hiya's active Monthly Subscribers are comprised of two types: first-time customers and recurring customers. First-time customers are viewed as an investment as the customer is provided a discount, and shipping costs are higher due to the inclusion of a refillable glass bottle. Additionally, as a direct-to-consumer company, customer acquisition is heavily influenced by the level of marketing spend. Recurring customers are not provided the same discount, and shipping costs are lower on refill orders. Both gross margins as well as operating margins improve with recurring customer orders, therefore, profitability margins are affected by sales mix between these two types of customers. As of July 4, 2026 and June 28, 2025, Hiya had approximately 166,000 and 200,400 active Monthly Subscribers, respectively. 25 Table of Contents Rise Rise sells its products primarily to large national retailers and club retailers throughout the United States. Rise does not operate under long-term supply agreements with any of its retail customers. Instead, sales are generally made pursuant to purchase orders. As a result, our revenue in any given period is dependent on ordering patterns and inventory management decisions made by our retail customers, which can be difficult to predict and may vary significantly from period to period. Rise offers trade promotions, discounts, spoilage, and other retailer deductions, which are recorded as reductions to gross revenue. Non-GAAP Financial Measures We believe that presentation of certain non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. Management believes these measures reflect an additional way of viewing aspects of our business that, when viewed with our U.S. GAAP results, provide a more complete understanding of factors and trends affecting our business. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. We provide such non-GAAP financial information for informational purposes only. Readers should consider the information in addition but not instead of or superior to, our condensed consolidated financial statements prepared in accordance with U.S. GAAP, accompanying this report. In analyzing business trends and performance, management uses “constant currency” net sales, “local currency” net sales, and other currency-related financial information terms to discuss our financial results in a way we believe is helpful in understanding the impact of fluctuations in foreign-currency exchange rates and facilitating period-to-period comparisons of results of operations and providing investors an additional perspective on trends and underlying business results. Changes in our reported revenue and profits in this report include the impacts of changes in foreign currency exchange rates. As additional information to the reader, we provide constant currency assessments in the tables and the narrative information in this MD&A to remove or quantify the impact of the fluctuation in foreign exchange rates and utilize constant currency results in our analysis of performance. Our constant currency financial results are calculated by translating the current period’s financial results at the same average exchange rates in effect during the applicable prior-year period and then comparing this amount to the prior-year period’s financial results. Results of Operations Summary of Financial Results Net sales for the second quarter of 2026 decreased 5.3% to $223.3 million, a decrease of $12.6 million, compared with the prior-year quarter. The decrease in sales is primarily the result of a decline in both the Core Nutritional and Hiya segments of $7.9 million and $5.7 million, respectively, partially offset by a $1.0 million increase in net sales for Rise. Additionally, favorable changes in currency exchange rates positively impacted Core Nutritional net sales by an estimated $5.6 million in the current-year quarter. Net loss attributable to USANA for the second quarter of 2026 was $21.4 million, a decrease compared with net earnings of $9.7 million during the prior-year quarter. The change is primarily attributable to lower net sales, operating margins, a higher effective tax rate, and a goodwill impairment for our Hiya segment in the current-year quarter. 26 Table of Contents Three months ended July 4, 2026 and June 28, 2025 Net Sales The following table summarizes the changes in net sales by segment for the fiscal quarters ended as of the dates indicated: Net sales by region (in thousands) Change from prior year Percent change Currency impact on sales Percent change excluding currency impact Three months ended July 04, 2026 June 28, 2025 Core Nutritional: Asia Pacific Greater China $ 114,614 51.3 % $ 113,171 48.0 % $ 1,443 1.3 % $ 5,230 (3.3 %) Southeast Asia Pacific 28,719 12.9 % 32,887 13.9 % (4,168) (12.7 %) 776 (15.0 %) North Asia 13,814 6.2 % 17,166 7.3 % (3,352) (19.5 %) (991) (13.8 %) Asia Pacific total 157,147 70.4 % 163,224 69.2 % (6,077) (3.7 %) 5,015 (6.8 %) Americas and Europe 34,458 15.4 % 36,264 15.4 % (1,806) (5.0 %) 632 (6.7 %) Core Nutritional total 191,605 85.8 % 199,488 84.6 % (7,883) (4.0 %) 5,647 (6.8 %) Hiya 28,261 12.7 % 33,931 14.4 % (5,670) (16.7 %) — (16.7 %) Rise 3,407 1.5 % 2,429 1.0 % 978 40.3 % — 40.3 % Consolidated total $ 223,273 100.0 % $ 235,848 100.0 % $ (12,575) (5.3 %) $ 5,647 (7.7 %) Core Nutritional Net Sales Net sales in the Core Nutritional business for the three-month period ended July 4, 2026 were $191.6 million, down 4.0% when compared to the corresponding period of 2025. On a constant currency basis, net sales in the Core Nutritional business declined 6.8%. The decrease in Core Nutritional net sales was mainly due to the decrease in active Customers. Asia Pacific: Net sales declined 3.7%, or 6.8% on a constant currency basis during the current-year quarter. Active Customers in this region declined 8.6% year-over-year. The net sales decline in this region reflects a continued challenging environment to attract new customers. The following table summarizes changes in local currency net sales, active Customer counts, and average spend per active Customer for the markets primarily contributing to the decline in net sales within the Asia Pacific region: Market Local currency net sales Active Customers Average spend per active Customer Malaysia (22.7%) (25.0%) 2.9% South Korea (13.7%) (13.9%) 0.2% China (3.1%) (5.6%) 0.8% 27 Table of Contents Americas and Europe: Net sales declined 5.0%, or 6.7% on a constant currency basis during the current-year quarter. Active Customers in this region declined 6.1% year-over-year, partially offset by a slight increase in average spend per active Customer. Year-over-year results in this region reflect a continued challenging environment to attract new customers. The following table summarizes changes in local currency net sales, active Customer counts, and average spend per active Customer for the markets primarily contributing to the decline in net sales within the Americas and Europe region: Market Local currency net sales Active Customers Average spend per active Customer Canada (13.8%) (3.7%) (10.5%) Hiya Net Sales Net sales in the Hiya segment for the three-month period ended July 4, 2026 were $28.3 million, down 16.7% when compared to the corresponding period of 2025. The decrease was driven by a challenging digital marketing environment, which created pressure in both net sales and subscriber growth. Rise Net Sales Net sales in the Rise segment for the three-month period ended July 4, 2026 were $3.4 million, up 40.3% when compared to the corresponding period of 2025. The increase was primarily the result of sales of Protein Pop through large national retailers and club retailers not present in the prior-year period. Gross Profit Consolidated gross profit decreased 40 basis points to 78.3% of net sales, down from 78.7% in the prior-year quarter. Gross profit margin in the Core Nutritional business declined 70 basis points from the prior year to 81.1% of segment net sales, reflecting lower production levels, partially offset by changes in currency and market sales mix. Hiya gross margins increased 410 basis points from the prior year to 67.9% of segment net sales, largely reflecting savings in shipping costs, favorable sales mix, and an acquisition related inventory basis step-up in the last year's second quarter. Rise gross margins of 10.8% primarily reflected a change in sales mix with the growth of Protein Pop. Brand Partner Incentives Brand Partner incentives increased 50 basis points to 37.4% of consolidated net sales, up from 36.9% in the prior year quarter. The increase in relative Brand Partner incentives can be attributed to the sales mix between our Core Nutritional business and Hiya and Rise, because Hiya and Rise do not pay Brand Partner incentives. For the Core Nutritional business, Brand Partner incentives were flat year-over-year at 43.6% of segment net sales. Selling, General and Administrative Expenses Selling, general and administrative expenses increased slightly by $0.4 million in absolute terms during the current-year quarter, or 220 basis points relative to net sales. Selling, general and administrative expense for the Core Nutritional business decreased 70 basis points from the prior year to 30.8% of segment net sales. The decrease is primarily attributable to lower employee compensation associated with the cost realignment initiatives that took place in the fourth quarter of 2025. Hiya, which operates with higher relative selling, general and administrative expense compared to the Core Nutritional business, experienced a notable increase in relative expense that can primarily be attributed to higher advertising and marketing costs. Although small in absolute terms, Rise invested higher relative costs to continue building its retail opportunity. 28 Table of Contents Goodwill Impairment Due to current lower-than-expected performance and changes in the near-term forecast in the Hiya reporting unit, the Company took additional steps to perform an interim goodwill impairment test. As a result of this analysis, the Company recorded a non-cash goodwill impairment charge of $29.1 million during second quarter of 2026. This non-cash charge primarily reflects the current performance and changes in near-term forecasts, as well as updated valuation assumptions under applicable accounting standards, including adjustments to market multiples and discount rates. The impairment does not reflect a change in management’s commitment to the business. The Company remains confident in the future of Hiya and recognizes the strategic importance as part of our consolidated long-term growth strategy as Hiya leverages their brand across additional channels and international markets. There was no comparable goodwill impairment charge in the three months ended June 28, 2025. Income Taxes Income tax expense totaled $9.1 million during the second quarter of 2026 on losses before income taxes of $18.9 million. The disproportionate income tax expense reported for the quarter was driven by changes in current performance and the near-term forecasts for our Hiya and Rise segments, the non-cash goodwill impairment charge, and the updating of the annualized effective income tax rate due to lower consolidated earnings projections and China's increased relative share of taxable income. As a result, the Company recorded income tax expense in a period of pretax loss compared to an effective tax rate of 44.5% for the prior-year quarter (see Note L to the condensed consolidated financial statements). Diluted (Loss) Earnings per Share Attributable to USANA Diluted (loss) earnings per share attributable to USANA decreased to $(1.16) during the second quarter of 2026 as compared to $0.52 reported in the prior-year quarter primarily as a result of lower earnings from operations, higher income taxes, and the non-cash charge for goodwill impairment. Six months ended July 4, 2026 and June 28, 2025 Net Sales The following table summarizes the changes in net sales by segment for the six months ended as of the dates indicated: Net Sales by Region (in thousands) Change from prior year Percent change Currency impact on sales Percent change excluding currency impact Six months ended July 4, 2026 June 28, 2025 Core Nutritional: Asia Pacific Greater China $ 237,948 50.3 % $ 231,917 47.8 % $ 6,031 2.6 % $ 10,216 (1.8 %) Southeast Asia Pacific 59,382 12.5 % 68,607 14.1 % (9,225) (13.4 %) 2,718 (17.4 %) North Asia 29,166 6.2 % 36,107 7.5 % (6,941) (19.2 %) (1,151) (16.0 %) Asia Pacific total 326,496 69.0 % 336,631 69.4 % (10,135) (3.0 %) 11,783 (6.5 %) Americas and Europe 69,508 14.6 % 73,681 15.2 % (4,173) (5.7 %) 1,955 (8.3 %) Core Nutritional total 396,004 83.6 % 410,312 84.6 % (14,308) (3.5 %) 13,738 (6.8 %) Hiya 60,411 12.8 % 71,020 14.6 % (10,609) (14.9 %) — (14.9 %) Rise 17,076 3.6 % 4,055 0.8 % 13,021 321.1 % — 321.1 % Consolidated total $ 473,491 100.0 % $ 485,387 100.0 % $ (11,896) (2.5 %) $ 13,738 (5.3 %) 29 Table of Contents Core Nutritional Net Sales Net sales in the Core Nutritional business for the six-month period ended July 4, 2026 were $396.0 million, down 3.5% when compared to the corresponding period of 2025. On a constant currency basis, net sales in the Core Nutritional business declined 6.8%. The decrease in Core Nutritional net sales was mainly due to a 10.1% decrease in active Customers, partially offset by an increase in average spend per active Customer of 2.9%. Asia Pacific: Net sales declined 3.0%, or 6.5% on a constant currency basis during the current-year period. Active Customers declined 10.8% year-over-year, partially offset by 3.5% higher average spend per customer. The net sales decline in this region reflects a continued challenging environment to attract new customers. The following table summarizes changes in local currency net sales, active Customer counts, and average spend per active Customer for the markets primarily contributing to the decline in net sales within the Asia Pacific region: Market Local currency net sales Active Customers Average spend per active Customer Malaysia (23.5%) (31.1%) 10.5% The Philippines (18.2%) (19.4%) 1.5% South Korea (16.3%) (22.5%) 7.7% China (1.7%) (6.7%) 4.2% Americas and Europe: Net sales declined 5.7%, or 8.3% on a constant currency basis during the current-year period, primarily due to a decline in active Customers of 7.2%. Year-over-year results in this region reflect a continued challenging environment to attract new customers. The following table summarizes changes in local currency net sales, active Customer counts, and average spend per active Customer for the markets primarily contributing to the decline in net sales within the Americas and Europe region: Market Local currency net sales Active Customers Average spend per active Customer Canada (11.7%) (5.4%) (6.8%) United States (2.9%) (1.4%) (1.5%) Hiya Net Sales Net sales in the Hiya segment for the six-month period ended July 4, 2026 were $60.4 million, down 14.9% when compared to the corresponding period of 2025. The decrease was driven by a continued challenging digital marketing environment, which created pressure in both net sales and subscriber growth. Rise Net Sales Net sales in the Rise segment for the six-month period ended July 4, 2026 were $17.1 million, up $13.0, or 321.1%, when compared to the corresponding period of 2025. The increase was primarily the result of Protein Pop sales through large national retailers and club retailers not present in the prior-year period. Gross Profit Gross profit decreased 170 basis points to 77.2% of net sales, down from 78.9% for the six months ended June 28, 2025. Gross profit margin in the Core Nutritional business declined 40 basis points from the prior year to 81.6% of segment net sales, reflecting lower production levels, partially offset by changes in currency and market sales mix. Hiya gross margins increased 570 basis points from the prior year to 68.5% of segment net sales, largely reflecting savings in shipping costs, favorable sales mix, and an acquisition related inventory basis step-up in the prior year. Rise gross margins of 7.8% primarily reflected a change in sales mix with the growth of Protein Pop. 30 Table of Contents Brand Partner Incentives Brand Partner incentives decreased 10 basis points to 36.4% of consolidated net sales, down from 36.5% in the prior-year period. The decrease in relative Brand Partner incentives can be attributed to the sale mix between our Core Nutritional business and Hiya and Rise, because Hiya and Rise do not pay Brand Partner incentives. Brand Partner incentives for the Core segment were up 40 basis points to 43.5% of segment net sales. This increase can be primarily attributed to an unfavorable change in market sales mix, and an increase in incentive promotions. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $2.8 million in absolute terms during the current-year period, but increased 20 basis points from a relative perspective. Selling, general and administrative expense for the Core Nutritional business decreased 120 basis points to 30.3% of segment net sales. The decrease is primarily attributable to lower employee compensation associated with the cost realignment initiatives that took place in the fourth quarter of 2025. Hiya, which operates with higher relative selling, general and administrative expense compared to the Core Nutritional business, experienced a notable increase in relative expense that can primarily be attributed to higher advertising and marketing costs. Although small in absolute terms, Rise invested higher relative costs to continue building its retail opportunity. Goodwill Impairment Due to current lower-than-expected performance and changes in the near-term forecast in the Hiya reporting unit, the Company took additional steps to perform an interim goodwill impairment test. As a result of this analysis, the Company recorded a non-cash goodwill impairment charge of $29.1 million during second quarter of 2026. This non-cash charge primarily reflects the current performance and changes in near-term forecasts, as well as updated valuation assumptions under applicable accounting standards, including adjustments to market multiples and discount rates. The impairment does not reflect a change in management’s commitment to the business. The Company remains confident in the future of Hiya and recognizes the strategic importance as part of our consolidated long-term growth strategy as Hiya leverages their brand across additional channels and international markets. There was no comparable goodwill impairment charge in the six months ended June 28, 2025. Income Taxes Income tax expense totaled $17.6 million during six-month period ended July 4, 2026 on losses before income taxes of $3.4 million. The disproportionate income tax expense reported for the quarter was driven by changes in current performance and the near-term forecasts for our Hiya and Rise segments, the non-cash goodwill impairment charge, and the updating of the annualized effective income tax rate due to lower consolidated earnings projections and China's increased relative share of taxable income. As a result, the Company recorded income tax expense in a period of pretax loss for the year-to-date period compared to an effective tax rate of 44.5% for the prior-year period (see Note L to the condensed consolidated financial statements). Diluted (Loss) Earnings per Share Attributable to USANA Diluted (loss) earnings per share attributable to USANA decreased to $(0.75) during the six months ended July 4, 2026 as compared to $1.01 reported in the prior year primarily as a result of lower earnings from operations, higher income taxes, and the non-cash charge for goodwill impairment. Liquidity and Capital Resources We have historically met our working capital and capital expenditure requirements by using net cash flow from operations and by drawing on our line of credit. Our principal source of liquidity is our operating cash flow. Although we are required to maintain cash deposits with banks in certain of our markets, there are currently no material restrictions on our ability to transfer and remit funds among our international markets. In China, however, our compliance with Chinese accounting and tax regulations promulgated by the State Administration of Foreign Exchange (“SAFE”) results in transfer and remittance of our profits and dividends from China to the United States on a delayed basis. If SAFE or other Chinese regulators introduce new regulations or change existing regulations which allow foreign investors to remit profits and dividends earned in China to other countries, our ability to remit profits or pay dividends from China to the United States may be limited in the future. 31 Table of Contents We believe our current liquidity, through cash flow from operations along with our line of credit, is adequate to meet our cash requirements and sustain our operations. Maintaining a capital structure that emphasizes sufficient liquidity and adaptability in the prevailing economic climate is our top priority. We actively assess potential acquisition opportunities and investments in complementary ventures. While we continuously aim to preserve ample liquidity and ensure business continuity amid uncertainties, we also explore initiatives such as stock repurchases. These strategic decisions have the potential to impact our liquidity and the ability to navigate these challenging times effectively. Cash and Cash Equivalents Cash and cash equivalents increased to $168.6 million as of July 4, 2026, from $158.4 million as of January 3, 2026. Cash flow provided by operating activities was $33.1 million, offset by cash used in financing activities of $17.7 million, and cash used in investing activities of $6.7 million. Additionally, favorable changes in currency exchange rates have impacted cash and cash equivalents, and restricted cash by $1.5 million. The table below presents concentrations of cash and cash equivalents by market for the periods indicated: Cash and cash equivalents (in millions) As of July 4, 2026 As of January 3, 2026 United States $ 76.6 $ 28.5 China 57.7 89.3 All other markets 34.3 40.6 Total cash and cash equivalents $ 168.6 $ 158.4 During the six months ended July 4, 2026, our China subsidiary remitted profits through an annual dividend of $62.3 million to the United States, net of a loss from a dividend hedge and applicable taxes. Cash Flows Provided by Operations As discussed above, our principal source of liquidity comes from our net cash flow from operations. Net cash flow provided by operating activities was $33.1 million for the first six months of 2026. Net earnings combined with adjustments of non-cash items and a decrease in inventory purchases contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay the 2025 annual employee bonus and accrued Brand Partner incentives. Net cash flow provided by operating activities was $27.7 million for the first six months of 2025. Net earnings combined with adjustments of non-cash items and an increase in accounts payable contributed positively to our net cash flow provided by operating activities, partially offset by cash used to pay the 2024 annual employee bonus, accrued Brand Partner incentives, and the purchase of inventories. Line of Credit Information with respect to our line of credit may be found in Note G to the condensed consolidated financial statements included in Item 1 of Part I of this report. Share Repurchases Information with respect to share repurchases may be found in Note J to the condensed consolidated financial statements included in Item 1 of Part I of this report. 32 Table of Contents Summary We believe our current cash balances, future cash provided by operations, and amounts available under our line of credit will be sufficient to cover our operating and capital needs in the ordinary course of business for the foreseeable future. If we experience an adverse operating environment or unanticipated and unusual capital expenditure requirements, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available to us at all or on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, mergers and acquisitions, or for other reasons. Such financing may include the use of debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. Critical Accounting Policies There were no changes during the quarter to our critical accounting policies as disclosed in our 2025 Form 10-K. Our significant accounting policies are disclosed in Note A to our Consolidated Financial Statements filed with our 2025 Form 10-K.