Q4 2019 Earnings Call
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Good afternoon, and thank you for joining the fourth quarter two dozen Nike Inc. earnings Conference call Herbalife Nutrition limited.
On the call today as Michael Johnson, the company's chairman and CEO Dr., John <unk>, The company's co President and Chief Health and Nutrition Officer, John Desimone, The company's co President and Chief Strategic Officer.
I'm mosquito the Companys senior Vice President Finance strategy, and Investor Relations and American Road, the company's director Investor Relations I would now like turn call over to urban rose to read the Companys Safe Harbor language.
Sure we began as a reminder, during this conference call. We may make forward looking statements within the meaning of the federal Securities laws.
These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those disgust or anticipated.
For a complete discussion of risks associated with these forward looking statements in our business. We encourage you to refer to today's earnings release, and our FCC filings, including our most recent annual report on form 10-K.
Our forward looking statements are based upon information currently available to us.
We do not undertake any obligation to update or release any revisions to any forward looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events. In addition, during this call certain financial performance measures, maybe discuss the differ from comparable measures contained in our financial statements.
Prepared in accordance with U.S. generally accepted accounting principles referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe that these non-GAAP financial measures assist management and investors in evaluating our performance and preparing period to period results of operations in a more meaningful and consistent manner.
As discussed in greater detail in the supplemental schedules to our earnings release.
A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the S easy.
These reconciliations together with additional supplemental information are also available at the Investor Relations section of our website Herbalife Dot com. Additionally, when management makes reference to volumes. During this conference call, they're referring to volume point.
I will now turn the call over to our chairman and CEO, Michael Johnson. Good afternoon, everyone and thank you for joining us for fourth quarter 2019 conference call before start today I really want to express our heartfelt comparison to the citizens of China for the difficult hardware going through.
John are gonna be John Desimone, Alex and Mosquito, we'll talk about the business impact, but the impact on our employees distributors and their families.
Utmost concern and we wish them all the best.
Onto the or 29 team was a record year for Herbalife nutrition incredible momentum. We've built resulted in an all time high in terms of body imports and for the fourth quarter nine of our top 10 countries delivered year over year net sales growth in a moment, John John and Alex will take you through the results for the full year end fourth quarter.
As well as provide an update on our China business.
As I wrap up my tenure as CEO at our honors about in March and retires Chairman and board member at our annual General meeting in April I, just want to state what an honor. It has been to work alongside our distributor leaders are talented corporate management team and our wonderful employees to serve our distributors in their custom.
First driving growth of Herbalife nutrition over the last 17 years. It is truly remarkable how far we have come since we began this journey together in 2003.
Our growth continues to confirm the demand for our products and the value of our distributor since 2003, our body imports have increased from 1.5 billion to over 6 billion in 29 team.
And that demand is growing around the world as we are no operating more 90 countries up from 58 in 2003.
We have the das business opportunity anywhere in our distributors are succeeding like never before the number of distributors and our prestigious presidents team has almost quadrupled from approximately 652 over 2500 and the number of distributors our lead founder circle in chairman scope is more than tripled from 21 and 2003 to six.
67 today the value of our distributor leaders it just cannot be overstated, our distributors today have a better understanding of their business than ever before new tools data and technology co designed with them to help them succeed.
In order to support our distributors and they're growing businesses. Our global employee family has increased from approximately 1000 2003 to almost 9500 today.
And the product arena, we provided our distributors more product to meet their customers' needs importantly through our seed to feed program. We are now manufacturing approximately 65% of bar products in our own state of the art facilities.
2003 to 2019, we launched 9100 product skews with more than 200 would those be new products, including night works developed with Nobel Prize, winning Dr. Lu ignoring our sports nutrition line Herbalife 24 that helped us attracting new younger and active distributor base into herbalife skin like these products are more access.
Well to our distributors mirror customers than ever before as we've increased our distribution access points from 117 to almost 2000.
And all of this has resulted in our status as a number one branded meal replacement number one branded weight management as measured by Euro monitor.
Onto our brand, where we built a stronger brand through the years with incredible athlete to endorse and use our products and in some cases worked with our nutrition and fitness experts who are cheap peak performance. This is something we built from scratch since 2003, and we know sponsor over 200 athletes and teams around the world across a multitude of sports, including our own.
Galaxy and Cristiano Ronaldo.
We're also sponsored community now probably could bounce in the world, including Triathlons like the Herbalife 24, triathlon, Los Angeles, which we brought back to our home city last year well be doing it again in May this year and I can't wait to join distributors and employees for this really spectacular but.
I was far image, we've grown or Herbalife nutrition Foundation, continuing our mission of providing good nutrition and nutrition education to disadvantaged children around the world. Since 2005, we granted more than $33 million to nonprofits globally and have grown or Casa Herbalife program from six partners to more than 170 today.
To say, we're proud of our distributors employees and support the foundation is an understatement.
Our leadership team a stronger more confident in more ready than ever and as I highlighted on the last call. Our board of directors and I have complete competent future leaders of this company will continue herbalife positive trajectory.
You heard me say a thousand times before there's never been a better time to be part of Herbalife nutrition. My good friend, John are gonna be leading herbalife to CEO I've never been more competent in the future of our company not only as a shareholder of course, but also as a continuing mentor to our company leaders and distributors.
As this great company celebrates its fortyth year in enters its fifth decade, I couldn't be more excited about the future now let me turn the call over to my good friend and incoming CEO Dr., John Auckland Ob. Thank you Michael.
I've had the owner of working closely with you since I joined Herbalife nutrition at the beginning of 2016.
And one thing that it's always been abundantly clear is your passion for this company.
That passion has resulted in incredible growth over the past 17 years as you highlighted in your remarks.
The success of our distributors, who are at the heart and soul of this company has been furthered by your vision and your leadership.
You have led with integrity and you've brought us to this point in our 40 year history setting the stage for what I know our exciting years to come.
Because of you we are improving more lives around the world than ever before.
To better nutrition, and an incredible business opportunity.
No I speak for our distributors, our executive team our employees and our shareholders. When I say, thank you for all you have done.
Job now to use your words is to continue to build it bigger better and stronger than ever before.
But before we look forward, let's look back at 29 team starting with our financial results.
As you saw from our press release today, we delivered full year volume points of 6.1 billion.
Redcard for the company at a 3% increase compared to 2018.
Our performance demonstrates the strength of our geographic diversity.
As we achieved this record despite challenges in China.
Excluding China volume points for the year grew nearly 7%.
Three of our six regions and six of our top 10 countries set volume point records for the year.
Today, We also announced sales leader retention results for the last 12 month Requalification period, ending in January of Twentytwenty.
The absolute number of sales leaders retained for the year is just under 300000, the highest in our history.
This result is reflective of the ongoing sustainability of our business and the opportunities that we offer to our distributors.
Yes, 2019 was a record breaking year and we take that momentum with US now as we go into Twentytwenty.
We have the right strategy and our distributors and our employees are focused on the right priorities.
During the year, we made significant progress on our established growth strategies of product expansion and technology innovation.
On the product front, we launched 20, new products and introduced over 480, new SK use across our markets worldwide. These new products will enable us to better satisfy the taste preferences and the nutrition needs of our customers worldwide.
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From a technology perspective, we developed at ushered in multiple new tools and technologies to increase our distributor to customer connectivity to enhance our distributor scalability and to improve the distributor and customer experience.
But no amount of technology can ever take the place of our distributors.
The personalized advice service and support that they provide to their customers is a key point of differentiation.
It's what makes us unique.
We look forward to providing a more detailed update on our growth strategies on Thursday. This week during our presentation Cagney in Florida.
Like many other companies the outbreak of Corona virus has impacted our business on mainland China and elsewhere in the region.
Our first priority is ensuring the safety of our employees and distributors and we've taken prudent steps to do so including limiting travel postponing meetings where appropriate.
I will ask nutrition together with Nevertheless, nutrition Foundation is supporting relief efforts with a significant donation to med share international specifically, focusing on bringing urgently needed medical supplies into that region.
Wherever we have increased our charitable giving two additional local emergency relief efforts as part of our foundations work.
I'm proud to say that our distributors in China have done the same thing and that their philanthropic giving continues the situation in China and around the globe is emerging.
And we're gathering data points and monitoring the market very very closely.
The scope and duration of business disruption and the related financial impact from the corner virus can't be reasonably estimated at this time.
But it could materially impact our consolidated results for the first quarter and for the full year Twentytwenty as such we will update our guidance for the full year Twentytwenty. When we can reasonably estimate the impact on our near term business results.
We remain optimistic and we're committed to the long term opportunity in China.
As I prepare to step into my new role as CEO I'm incredibly excited about the opportunities ahead for Herbalife nutrition.
Since the CEO announcement, I've had the opportunity to travel to many of our key markets to meet with our distributors for example in China in Korea in Peru and across the U.S.
Our distributors are the engine of Herbalife nutrition.
Seeing their enthusiasm and commitment to improving their communities into changing people's lives through better nutrition and personalized support is one of the things that gives me confidence in our future.
There are millions around the world, who still need to here, what we have to offer and I'm eager for us to continue to unlock the tremendous opportunities that lie ahead.
Working closely with my friend and colleague John D., Simone along with our extraordinary team, we will continue to grow our business and help even more people around the globe pursue healthy active lifestyles and a unique entrepreneurialism opportunity I.
I would now like to turn the call over to John to provide an update on key market performance.
Thank you John I want to once again, thank Michael first countless contributions to the company.
And the significant role he has played in leading involving herbalife nutrition into the Permian Nutrition company that it is today in mentoring me for more than a decade, we've a very talented and long tenured management team and together I believe we are well positioned to drive growth for years to come under John I've always leadership.
Turning now to the regional performance with 2019 was highlighted by three regions setting annual volume point Records.
As we've highlighted before the geographic diversity of our company is an asset that resulted in a record 2019, despite challenges in China, one of our largest markets.
Excluding China volume points grew 6.7% year.
Net sales grew 6.2% in constant currency net sales grew nearly 10% for the fourth quarter year over year growth rate accelerated to 4% from 2% in Q3.
And we saw continued improvement in a year over year trend in China in the U.S. the strength of the business continues in the fourth quarter with volume increasing by 7% compared to the fourth quarter of 2018.
We ended 2019 with year over year growth in every quarter for the second year in a row.
Net sales for the full year of over $1 billion represents a record high an increase of over 8% versus 2018 for the USA.
Moving to the Asia Pacific region. It continued its record breaking year with volume points, increasing 17% year over year and setting. Another all time high result, this is the eighth quarter in a row a record high volume results in APAC and once again the growth is very broad based.
The two year stack volume point results for the fourth quarter was 53%.
The growth rate in the region was led by India, Indonesia, Vietnam, Malaysia, and South Korea, all of which grew by double digits.
India volume increased by 24% during the quarter.
Where we continue to focus on improving the access for distributors in tier two and tier three cities by increasing the number of access points.
In the fourth quarter, the number of access points, including third party drop off points increased to over 6000, which is more than doubled the number we had Q4 2018.
Vietnam volume points increased 30% for the fourth quarter closing out a very successful 2019 with growth of 37% compared to 2018.
Indonesia volume was up 27%.
Laser was up 29% in Korea was up 12%.
For the full year net sales in the region increased 18%.
Full year net sales of $1.25 billion represented the largest year for any single region in company history.
Turning to Mexico volume points were down 4% in the quarter, but net sales actually increased 2%.
For the full year net sales increased 1% as currency neutralized in region and our ability to take price increases offset a decrease in volume a 4%.
Looking at South and Central America volume points declined, 6%, which was in line with a decline from a quarter ago.
So a sequential improvement in trends in Brazil.
Along with over 34000, new preferred members joining during the fourth quarter.
Since the launch of segmentation in Brazil, we have seen approximately 75% of sign ups join as preferred members.
The improving trends in Brazil were offset with softness in Argentina, Ecuador, and Bolivia, all of which are experiencing economic challenges at a macro level.
Turning to AMEA region continued its pattern of consisting growth, which now totals 39 consecutive quarters, increasing 3% during the quarter.
Mere ended the year with full year volume point growth of 6% in local currency net sales growth of 8.5%.
Net sales in volume points were record highs for the region in 2019.
For the year the increases were very broad based led by Russian speaking markets South Africa in Spain.
Turning to China volume points decreased 13% and improvement in the trend from Q3, which had declined 19%.
As we mentioned on last quarter's call in response to last year's hundred day campaign. When sales meetings were curtailed we launched a personal each store on we chat at the beginning of Q4. This new technology was designed to give service providers and sales reps. Another platform to sell products are they would be less dependent on meetings and nutrition.
Clubs.
Comes with some features such as instant pay which allows our sales representatives with the ability to receive their rebates in a matter of days instead or at the end of a month since its launch approximately 30% of total volume in China has come from the personal E store.
Looking into 2020 as John I. When are we said in his opening remarks, the safety and well being of our customers service providers sales reps employees and their families are the top priority and as such we have taken a number of prudent steps to do so including limiting travel and postponing meetings where appropriate.
And while the duration of the business disruption from the Corona virus cannot reasonably be estimate at this time many of the new initiatives implemented last year like the personally store combined with an incredible pipeline of new products plant in China, and our continued investment in the market through our China growth and impact investment program. She helped benefit our service providers.
Sales reps and their customers throughout 2020.
I'll now turn the call over to Alex to provide an update on the financials. Thank you John fourth quarter net sales of 1.2 billion represents an increase of 3% on a reported basis compared to the fourth quarter in 2018, which included growth in nine of our top 10 countries full year 2019 reported net sales of 4.9 billion.
Were approximately flat on a reported basis, but adjusting for foreign exchange impact net sales for the year increased 3% and excluding China local currency net sales grew almost 10% for the year for the fourth quarter. We reported net income of approximately 56.7 million or 40 cents per diluted share.
Adjusted earnings per share of 74 cents included expenses related to the China growth program of approximately 9 million or five cents per share. This was above the high end of our guidance range of 68 cents.
The impact of currency fluctuations represented a year over year headwind of approximately four cents.
Reported gross margin for the fourth quarter of 81.2% increased by approximately 20 basis points compared to the prior year period.
Note that the incremental but now discontinue tariff in Mexico that negatively impacted our gross margin earlier in the year is no longer a headwind fourth quarter 2019 reported and adjusted SGN, a as a percentage of net sales were 43.3% and 39.9% respectively. Excluding China.
On a member payments adjusted SGN as a percentage of net sales was 30.5% approximately 50 basis points unfavorable to the fourth quarter 2018, which was largely due to the timing of certain year end accruals, our fourth quarter reported effective tax rate was approximately 29.2% and our adjusted.
Effective tax rate was 16.5%, which was materially lower than our expectations. This was primarily driven by discrete tax benefits of approximately 11.4 million or eight cents per share.
Turning to the full year 2019 reported net income was 311 million or $2.20 per diluted share compared to reported net income of 296.6 million or $1.98 per diluted share for the full year 2018, 2019, adjusted diluted EPS was $2.82.
Per adjusted diluted share, which includes expenses of approximately 19 million or 10 cents per share related to the China growth program as well as approximately 34 cents per share headwind from foreign currency.
On a constant currency basis adjusted earnings per share grew approximately 10% compared to 2018, our full year adjusted tax rate of 25.3% benefited by 5.8 million or four cents per share due to excess tax benefits from the exercise of equity grants.
As you just heard from John we cannot reasonably estimate the impact to the Corona virus on our 2020 consolidated financials at this time.
How did not been for Corona virus, we would have largely reaffirmed our prior guidance for the full year 2020, however, given the material impact that the Corona virus could have on our consolidated financials, we will update our 2020 guidance. Once we have a better understanding and could reasonably estimate the impact related to the balance sheet during the fourth quarter, we announce.
An amendment to our existing 743 million term loan B credit facility that reduces the interest rate by 50 basis points, excluding the cost of the transaction and future principal payments the lower interest rate will feed the company approximately 20 million in interest costs through maturity continuing to improve our capital structure remain.
As a key focus as part of our overall strategy to deliver value to our shareholders. We currently have 839 million of cash on hand, and 1.5 billion in our share repurchase authorization.
This concludes our prepared remarks, operator, please open up the line for questions.
At this time, if you like that's not to your question. They do so by pressing star followed by the number one on your telephone keypad against that Star One. Our first question. This line of Doug Lane from Lane Research Doug.
Yes, good afternoon everybody.
Talking about.
The FCP I know you didn't mention that I noticed in your commentary in the 10-K that you put a dollar figure in there are $40 million, how should we read that does not show movement on the SCPA front and what about timing of ultimate settlement.
Hey, Thanks for the question. So the accrual that you see in the EPA disclosure doesn't indicate a timeline it doesn't indicate where we might ultimately land it is simply.
An artifact of the discussions that have continued to progress.
Figures accounting principles in which we have to record that accrued liability and so we'll continue to have our discussions with the FCC, India Jay all the outcomes. Please look at the P.A. disclosure.
As we outlined.
Outlined it to see what the path welcomes, maybe but it the accrual doesn't necessarily imply any specific outcome at this point.
Okay. Thank you and.
Shifting to the financial statements here one.
I just wonder the I noticed the DNA as a percentage sales was up 140 basis points from a third quarter and I know you know it can be lumpy from quarter to quarter, but I just wondered why there was the big increase in the fourth quarter as a percentage sales on a sales number that was pretty good probably be upper end of expectations.
Versus the third quarter.
So.
Again, you're talking about the Q4 specific.
Yes.
So yes, if you look at yeah. If you look at Q4 19 versus Q4.
18, there was some year end accruals one went in one direction last year. The other went and the other direction. This year. So created about $19 million difference in year end accruals. It doesn't really impact the full year SDN as a percentage net sales, but it does that impact the quarter when you're looking at it year over year. So there's nothing fundamental.
Or system.
Demick going on in that number it's really more just a timing issue and so if you look at how that kind of evens out for the year, you're going to see SDN as a percentage of sales effectively flat 19 overeating.
Okay. That's helpful. Just one last thing with the big move in the tax rate.
Yeah, and you, saying that you largely would have reaffirmed your outlook for 2020 does that include the tax rate outlook for 2020, so that that fourth quarter was really a one off and it really didn't change your structural tax situation looking into 2020.
That's correct. It is it doesn't really affect our structural tax.
Structural tax rate what you saw in Q4 was a number of onetime items. They just some of them happened to be very large and hit in Q4.
But as you know.
We typically every year have a basket of onetime items. It just happened to be particularly large this year and it has to be particularly large in Q4 that that's what really impacted the rate or going forward and again as you as you noted had we.
We reaffirmed guidance our tax rate for 2020 wouldn't largely remain unchanged. Okay. Thank you.
And our next question, it's one of Steph Wissink from Jefferies Seth.
Hi, good afternoon, everyone.
Well follow up question on Doug's question regarding the FCTA can you just remind us what the accounting processes or their rules related the accrual is it some sort of reasonable likelihood or ability to estimate what trip or trigger is the ability to include that level of disclosure in your filing.
Thanks for the question. Unfortunately, when you go through the accounting.
Steps to arrive at the accrual, it's really based on the facts and circumstances of the discussion of the of the case, so I can't.
You know I can't really disclose what those.
I can't really disclose what conversations are actually taking place that caused those accounting rules the trip so.
Unfortunately really what we haven't disclosure is all we can really say and we're just following us GAAP principles here.
Okay Fair enough and then just bigger picture question on technology, and new product initiatives. I know this is something that's been kind of underlying some of the headlines, but if you could just give us an update on some of the technology platform rollout across your major regions, and then I'm going to new product initiatives, we should expect from year over the next 12 months there.
So I, particularly as we look at some of your growth markets of the world.
Yes, so I mean, one of the biggest technology initiatives, we put in place coming out of the 100 day campaign was some of the distributor to customer technology in China, specifically and so that was a significant unmet investment we made in 2019 or began to make in 2019 is still ongoing that project is very much in the mid.
All of its rollout of different features and capabilities.
But what we're seeing is.
And particularly in light of the Corona virus situation, we're seeing our distributors adopt that technology and really figuring out another way to go to market, which has been helpful. It's all very much still in its infancy, but I think the progress of that technology implementation is really encouraging.
And we're going to.
Look to continue to update on that progress I think generally.
For the rest of the world.
In the U.S. in 2019, we put in a productivity tool for distributors nutrition clubs and there are more broadly just rolling out our tool kit.
I would call as our core technology cool tool kit, which is building a lot of our larger markets, but really rolling that into our tier two tier three markets. So that every distributor in every country has had the core set of tools and that continues to.
Continued to rollout and it'll continue to roll out in 2020. So just overall I think you will you know that will contribute to just productivity and making sure distributors have a good way to go about doing their business.
What was and then you mentioned something on the product standpoint.
Yeah, just expectation there messaging you wanted to hear back regarding product innovation and product initiative.
Above and beyond your core assortment.
Right. So the product initiatives again, we're really focused on choice, we're focused on products, whether that be in sports nutrition targeted nutrition or even weight management in the weight management category, where its choice around clean label or choice around.
Different distributors and how they react with their customers and their local market in the way that they want to speak it's about choice and given that option. So some of these products might be door openers to get into our core products or some of it might be.
Given offerings that are that our distributors have a way to talk to a customer that they haven't been able to so.
Yeah, and maybe John yes image that into actually both those yet obviously to the course.
Two questions about two of our core strategy right. So technology of course, it's about creating scale for our distributors to do more without losing that connection that with customers and Alex talked about a lot of those.
He initiatives.
On the product side.
Let's give you a lot of examples of things we're doing I think another one to keep in mind, it's really going to drive an acceleration of launches.
Is the localization of product and the pushing out of the resources into the region.
The products that they have particular market needs whether its.
Lever is unique to a particular region or health and wellness products, you need to particular regions. So.
It's less of a global approach than it's been a path to mobile approach.
Great. Thank you.
And our next question is one of William Reuter from Bank of America William.
Good afternoon, and the first it's just a follow up on that last question about localization of products, where are you in that process now in terms of trying to get product that is unique for region verse.
Products that are generally available across all your regions.
So it's a process.
You know in some regions were further along than others I can tell you that.
In China for example, it gets done right China has its own R&D Center now.
Very localized.
In other regions, there developing the resources and certainly working with our local distributors we are.
I think far along in that journey, I think a little bit more on the resource I'd be done, but I think culturally within the product development group and the team worked out with distributors, we announced deal. So just a matter of getting hurt resources.
Okay. That's a that's very helpful. And then I understand that it would be impossible to try and gauge the impact of chronic virus on this year, but I guess are there certain regions, where you do have club does that continue to operate you have any even thoughts on when you may have some clubs that are beginning to open again.
Well look at its.
It's tough to know where a lot of the club's aren't operating right now just like most of the restaurants aren't people aren't physically going into locations like that.
And so those distributors have moved over to the online platform.
And you know we seen actually you know, we're comping a pretty easy scenario with 100 day campaign last year and we are seeing.
Activity levels actually higher than a year ago.
And actually.
You know you sales leaders hi than a year ago, but don't really know where this will end up because the situation is not over and so we don't all the dominoes before and exactly what this how this plays out over the medium term.
But with respect clubs.
Somewhere maybe 80% of our clubs probably it somewhere around there right now.
Ben.
So there are some clubs that are performing okay, but most of them right now.
On the customers are coming in in Arlington.
That makes sense and then lastly in your prepared remarks, you use the word improve around your capital structure I guess, what do you think about improving it what does that mean I think your leverage target had been three times. So I would assume that might mean something to increase your leverage but theres, obviously, a lot of uncertainty so I don't know off the chronic.
There's changes that thought.
Yes, no the current affairs doesn't impact.
Our capital structure thoughts our target gross leverage is around three times, though we do have capacity and we continue to monitor the capital markets and in concert with.
Just overall being.
Having an efficient capital structure so.
You could envision them sometime during 2020, we may we may be out in the market looking to fill that gap to get our target leverage backup work it on leverage up to that target level. So that that's certainly.
One of the.
Reasonable expectations, but obviously.
That's an execution question and we just have to make sure that we're doing that right time.
Okay great.
I saw there thank you.
Yes.
Once again, ladies and gentlemen, if you'd like to ask an audio question you may do so by pressing star followed by the number one on your telephone keypad again that star one.
And our next question is fine of Hale Holden from Barclays.
All right. Thanks for taking my question I had a couple quick ones.
Are you still manufacturing in your facility in China.
And or would we expect.
Any any potential shortages from that facility broader Asian region.
Yes. So we are now manufacturing them, we were down for a couple of weeks during the extended.
China New years, I think as of the 14th as of late last week.
Factory opened not every employee in but certainly not keep production going.
So we're in a pretty good spot there and that includes the to local manufacturing facilities in China last extraction facility in.
Right.
Great and then you had also mentioned in her prepared remarks the potential for.
Geographic weakness I guess beyond just China is that something you're seeing hours, that's just a little more caution.
Well I mean, we're certainly postponing some meetings and in some areas of Asia.
You know, sometimes you get to make those calls early in sautter wanted to caution and there are meeting has been canceled.
Cancels wrong word that being postponed they're just being pushed out till later in the year.
That could have an impact, but it might not have an impact.
So given that we're not sure yet how this plays out we're being cautious in our.
Guidance.
Okay and then my last question was.
I was wondering if a in the quarter.
Mexico turned out to your plan and any thoughts on how that market's doing.
So it turned out pretty close to our expectations. They had a slight improvement in trend versus Q3.
Net sales on a local currency basis were down 1.5%.
On a reported basis is actually up 1.7%. So it's tracking with expectation as we said last quarter.
The the objective now in Mexico to get the market back on track is more recruiting.
That's where the weakness has been for about a year now and that's going to focus needs to be to recover.
Great, Thank and nothing nothing nothing materially different than we had thought.
A quarter ago.
Great.
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And at this time I'm showing that we have no other questions. So I'd like to turn the call back over to Michael Johnson for any closing remarks.
Thank you very much.
I began my Herbalife journey in 2003.
I had a wonderful mentor, who reminded me that fuel get a platform like we have it herbalife.
Hi, Ben.
And today see your blood through four buckets or product our business opportunity our brand in our image in March we celebrate 40 years of enhancing and in large in each of those buckets. This February we celebrated celebrate our founder Mark Hughes Merck in a very simple yet incredible vision change into it.
Additionally, habits of the world and give people an opportunity to earn what they're worth.
That vision has grown into a multibillion international company that has fueled by the passions with distributors employees, we're proud to be team herbalife.
Let me close.
Alright, expressing my gratitude following Mark Hughes in leading this company for the last 17 years has been ride over the lifetime.
In the success, we've achieved together, it's been really nothing short of exhilarating want to think our distributor leaders our distributors nerve employees, all of whom I adore for the support and encouragement you provided me along the way into our board of directors long term shareholders. Thank you for your fee you can trust for hanging in there and the good times and the targets.
During the past 17 years, we've generated substantial cash flow returned approximately $5.1 billion capital to our shareholders. We continue to keep your mind everyday as we continue to grow our business together.
I'll now take my place alongside shareholders like you on this call is an enthusiastic long term investors knowing that the best of Herbalife is ahead. When we were just getting started so thanks for.
For all your support through all the years.
Ladies and gentlemen, thank you for joining us for Herbalife fourth quarter 2019 earnings Conference call you may now disconnect.
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