Q1 2024 Herbalife Ltd Earnings Call

Herbalife Premier League program and the access distributors have to Eric Worry's industry leading training and expertise.

Unknown Executive: Eric Worre's industry-leading training and expertise. Although the new distributor recruiting numbers might initially be influenced by the novelty of the launch of a new program, we believe the value and impact of the program long term will be key to building a sustainable and growing business. Recruiting is a leading indicator for future growth, and there's a natural lag until those numbers start to reflect in volume.

Although the new distributor recruiting numbers might initially be influenced by the novelty of the launch of a new program, we believe the value and impact of the program long term will be key to building a sustainable and growing business.

Recruiting is a leading indicator for future growth.

and there's a natural lag until those numbers start to reflect in volume growth. By the end of Q2, we will have a better indication of the impact on sales volumes and the momentum we're observing. In my 32 years of experience, building businesses as a distributor, two areas made the biggest difference.

Unknown Executive: By the end of Q2, we will have a better indication of the impact on sales volumes and the momentum we are observing. And, in my 32 Years of Experience Building Businesses as a Distributor, Two Areas Made the Biggest Difference. The first was developing leadership and continually upskilling the organization. Eric will play a key role over the next few years as he trains our global organization. This year, he will be present at almost every extravaganza, training over 100,000 distributors on how to become leaders and build successful businesses. Never in the company's history has there ever been this level of training accessible to such a large audience. We believe the impact will be significant.

The first was developing leadership and continually upskilling the organization.

Eric will play a key role over the next few years as he trains our global organization. This year, he will be present at almost every extravaganza, training over 100,000 distributors on how to become leaders and build successful businesses.

Never in the company's history has there ever been this level of training accessible to such a large audience. We believe the impact will be significant.

Unknown Executive: The second area that made a big difference was ensuring that the go-to-market strategies or DMOs that distributors were using were continuously evolving and relevant in current market conditions and never ceased to be optimized to attract and retain new customers and distributors. This is an area we are highly focused on as a company and are changing the way we traditionally train distributors in the business. We are moving away from generic business training to highly focused DMO-specific trainings, which are more efficient in helping distributors adopt and implement new models which are having the greatest success. The response from our distributors to this shift has been extremely positive. The changes we are making in these two important areas are just a small part of everything we are focused on.

The second area that made a big difference was ensuring that the go-to-market strategies or DMOs that distributors were using were continuously evolving and relevant in current market conditions and never ceased to be optimized to attract and retain new customers and distributors.

This is an area we are highly focused on as a company and are changing the way we traditionally train distributors in the business.

We are moving away from generic business trainings to highly focused DMO-specific trainings, which are more efficient in helping distributors adopt and implement new models, which are having the greatest success.

The response from our distributors to this shift has been extremely positive.

The changes we are making in these two important areas are just a small part of everything we are focused on. The work we have been undertaking during the reorganization has been aimed at designing the most efficient and optimized organization for top-line growth and financial performance efficiency.

Unknown Executive: The work we have been undertaking during the reorganization has been aimed at designing the most efficient and optimized organization for top-line growth and financial performance efficiency. One important aspect of the new operating model is having direct line-of-sight into the market, which gives me an opportunity to leverage my years of experience in the field and make the biggest impact possible on a market by market basis. Another important aspect is that, going forward, everything that touches top line growth will be organized within a commercial arm of the company.

One important aspect of the new operating model is having direct line of sight into the markets, which gives me an opportunity to leverage my years of experience in the field and make the biggest impact possible on a market-by-market basis.

Another important aspect is that going forward, everything that touches top line growth will be organized within a commercial arm of the company.

Unknown Executive: Led by Frank Lamberti, our newly appointed Chief Commercial Officer, Frank has more than 19 years of diverse experience throughout the organization, and he will be reassuring that everything we do daily is with our distributors in mind and focused on helping them attract and retain more customers and distributors and build bigger businesses. I could go on and talk about so many other things that are happening, but let's move on to John so we can update you on Q1. John, it's over to you. Thank you, Stephan.

led by Frank Lamberti, our newly appointed chief commercial officer, Frank has more than 19 years of diverse experience throughout the organization.

and he will be assuring that everything we do daily has our distributors in mind and focused on helping them attract and retain more customers, distributors, and build bigger businesses.

I could go on and talk about so many other things that are happening, but let's move on to John so we can update you on Q1. John , over to you. Thank you, Stefan. I'll start with our key financial highlights on slide 8 before getting into more details.

Unknown Executive: I'll start with our key financial highlights on slide 8 before getting into more details. Net sales for the first quarter were $1.3 billion, up 1% from the first quarter of 2023. This is our second consecutive quarter of year-over-year net sales growth. On a constant currency basis, net sales grew 2.4%, essentially the same year-over-year growth experienced a quarter ago.

John: Net sales for the first quarter were $1.3 billion, up 1% from the first quarter of 2023. This is our second consecutive quarter of year-over-year net sales growth.

John: On a constant currency basis, net sales grew 2.4%. Essentially, the same year-over-year growth experienced a quarter ago.

Unknown Executive: Our Q1 Adjusted EBITDA was $138 million and exceeded our guidance. Our adjusted EBITDA margin was 10.9%, a 60 basis point improvement from the same period a year ago. Additionally, last year's first quarter adjusted EBITDA benefited from approximately $9 million of China grant income that did not repeat in the current year. CapEx for the first quarter was $33 million, and at the low end of our guidance. The first quarter gross profit margin was 77.5%, up 130 basis points compared to the first quarter of last year.

John: A Q1 adjusted EBDA was $138 million and exceeded our guidance. Our adjusted EBITA margin was 10.9%, a 60 basis point improvement from the same period a year ago.

John: Additionally, last year's first quarter adjusted EBITDA benefited from approximately $9 million of China grant income that did not repeat in the current year.

John: Cap X for the first quarter was $33 million and at the low end of our guidance range.

John: First quarter gross profit margin was 77.5%.

John: up 130 basis points compared to the first quarter of last year.

Unknown Executive: Gross profit margin was favorably impacted by pricing actions we have taken over the past year, which provided approximately 150 basis points of benefit and which exceeded the impact of increased input costs of approximately 110 basis points. Lower inventory write-downs also contributed to the improvement in gross margin by approximately 60%.

John: Gross profit margin was favorably impacted by pricing actions we have taken over the past year.

John: which provided approximately 150 basis points of benefit, and which exceeded the impact of increased input costs of approximately 110 basis points.

John: Lower inventory write downs also contributed to the improvement in gross margin by approximately 60 basis points.

Unknown Executive: Q1 diluted EPS was $0.24, with adjusted diluted EPS of $0.49, which included a 3 cent FX headwind versus the first quarter of last year. It also included higher amortization expenses, as we started amortizing the implementation costs related to Herbalife 1 during the quarantine, and the non-repeat of the China grant income previously mentioned. For the year, we expect to recognize $30 to $35 million of amortization expense related to Herbalife 1. Our first quarter adjusted effective tax rate was 27.1%, up from 12.9% for the first quarter 2023, which drove an approximately 9 cent unfavorable impact on Adjusted Diluted EPS. The lower rate in 2023 is primarily due to the geographic mix of income and a greater tax benefit from discrete events last year.

John: Q1 diluted EPS was 24 cents, with adjusted diluted EPS of 49 cents, which included a 3-cent FX headwind versus the first quarter of last year.

John: It also included higher amortization expense,

John: as we started amortizing the implementation costs related to Herbalife 1 during the quarter.

John: and the non-repeat of the China grant income previously mentioned.

John: For the year, we expect to recognize $30 to $35 million of amortization expense related to Herbalife 1.

John: Our first quarter adjusted effective tax rate was 27.1%, up from 12.9% for the first quarter, 2023.

John: which drove an approximately nine-cent unfavorable impact,

John: to adjusted, deluded EPS.

John: The lower rate in 2023 was primarily due to the geographic mix of income and greater tax benefit from discrete events last year.

Unknown Executive: We anticipate our full-year 2024 adjusted effective tax rate to be approximately 30% based on our forecasted geographic mix of income and the impact of elevated interest expense following our recent debt refining. As Michael highlighted earlier, in March, we began implementing our new restructuring plan to get the management team closer to the market. Delay of the Organization, and Increased Management Span of Control

John: We anticipate our full year 2024 adjusted effective tax rate to be approximately 30% based on our forecasted geographic mix of income and the impact of elevated interest expense following our recent debt refinancing.

John: As Michael highlighted earlier, in March, we began implementing our new restructuring plan

John: to get the management team closer to the markets, delay the organization, and increase management span of control.

Unknown Executive: We expect the program to deliver annual savings of at least $80 million, which will be fully realized in 2025, with approximately $40 million of the savings expected to be realized this year. We expect to incur total program pre-tax expenses of at least $60 million this year, which are primarily related to severance costs and will be excluded from our adjusted results. We anticipate the majority of all actions related to this program to be completed by the end of June this year.

John: We expect the program to deliver annual savings of at least $80 million, which will be fully realized in 2025.

John: approximately $40 million of the savings expected to be realized this year.

John: We expect to incur total program pre-tax expenses of at least $60 million this year

John: which are primarily related to severance costs and will be excluded from our adjusted results.

John: We anticipate the majority of all actions related to this program

John: to be completed by the end of June this year.

Unknown Executive: During the first quarter, we recognized approximately 17 million in SG&A related to the program. Operating cash flows for the quarter were $14 million. We expect Q1 to be the lowest cash flow quarter of the year since it's when we pay out the MarQ bonuses to our most senior distributors, which was approximately $75 million. In comparison to Q1'23, last year's first quarter benefited from an approximately $35 million change in inventory, due mostly to last year's inventory optimization program. I am looking forward to the rest of 2024.

John: During the first quarter, we recognized approximately 17 million of SG&A related to the program.

John: Operating cash flows for the quarter were $14 million. We expect Q1 to be the lowest cash flow quarter of the year since it's when we pay out the Mark Hughes bonuses to our most senior distributors, which was approximately $75 million.

John: In comparison to Q-123, last year's first quarter benefited from an approximately $35 million change in inventory due mostly to last year's inventory optimization program.

John: Looking forward to the rest of 2024, we expect cash flows from operations for the remainder of the year to be approximately $250 million to $290 million.

Unknown Executive: We expect cash flows from operations for the remainder of the year to be approximately $250 million to $290 million. This includes the headwind of approximately $60 million to Implement Our Restructuring Program Just, as well as the higher interest expense associated with the new financing. We completed our $1.6 billion senior secured refinancing.

John: This includes the headwind of approximately $60 million to implement our restructuring program just mentioned.

John: as well as the higher interest expense associated with the new financing.

John: In April ,

John: We completed our $1.6 billion senior secured refinancing.

Unknown Executive: At the end of the first quarter, our total leverage ratio was 3.6 times, which is down from 3.9 times at year end. And we are committed to reducing our total leverage ratio to three times by the end of 2025. And I'll speak more on this a little later. Attorney to Slide 9.

John: At the end of the first quarter, our total leverage ratio was 3.6 times, which is down from the 3.9 times at year end, and we are committed to reducing our total leverage ratio to three times by the end of 2025. And I'll speak more on this a little later.

Unknown Executive: You can see the drivers of our year-over-year top-line growth. While overall volumes were down 3.6% year-over-year, which drove an approximately $45 million headwind, it was more than offset by approximately $82 million of pricing benefits. We continue to implement pricing increases to address region or market specific conditions, which are generally in line with local CPI increases. Unfavorable country mix was primarily due to higher sales in India and lower sales in the

John: Turning to slide 9. You can see the drivers of our year-over-year top-year growth.

John: while overall volumes were down 3.6% year over year, which drove in approximately $45 million headwind, it was more than offset by approximately $82 million of pricing benefits.

John: We continue to implement pricing increases to address region or market-specific conditions, which are generally in line with local CPI increases.

John: Unfavorable country mix was primarily due to higher sales in India and lower sales in the U.S.

Unknown Executive: Although partially offset by increased sales in China relative to our overall net sales portfolio, FX drove a 140 basis point headwind year over year, or about $18 million, primarily due to the continued devaluation of the Argentine Peso and the Turkish Lira. We continue to take regular price increases in both of these high inflationary markets.

John: partially offset by increased sales in China relative to our overall net sales portfolio.

John: FX drove 140 basis point headwind year over year, or about $18 million, primarily due to the continued devaluation of the Argentine peso and the Turkish lira.

John: We continue to take regular price increases in both of these high inflationary markets.

Unknown Executive: These FX headwinds were partially offset by year-over-year favorable currency movements from the Mexican peso. Moving on to regional net sales results for the first quarter, on slide 10, 4 of our 5 regions reported net sales growth in the first quarter on both a reported and local currency basis. China posted its second consecutive quarter of year-over-year double-digit growth on both a reported and local currency basis, up 11% and 17%, respectively.

John: These FX headwinds were partially offset by year-over-year favorable currency movements from the Mexican peso.

John: Moving on to regional net sales results for the first quarter on slide 10.

John: Four of our five regions reported net sales growth in the first quarter on both a reported and local currency basis. China posted its second consecutive quarter of year-over-year double-digit growth on both a reported and local currency basis, up 11% and 17% respectively.

Unknown Executive: We are continuing to see positive momentum in several of our metrics, including active sales representatives, which were up 16% year-over-year. Asia Pacific was up 4% year-over-year on a reported basis and up 7% on a local currency basis. India continues to outperform in the region, with net sales up 14% on a reported basis and 15% in local currency.

John: We are continuing to see positive momentum in several of our metrics, including active sales representatives,

John: which was up 16% year over year.

John: Asia Pacific was up 4% year over year on a reported basis and up 7% on a local currency basis.

John: India continues to outperform in the region, with net sales up 14% on a reported basis and 15% in local currency.

Unknown Executive: The market experienced double-digit year-over-year increases in both active preferred customers and active distributors. EMEA net sales were up 4%, with local currency net sales up 7%. However, year-over-year results were generally mixed across the markets in the region.

John: The market experience double-digit year-over-year increases in both active preferred customers and active distributors.

John: Emia net sales were up 4%, with local currency net sales up 7%.

John: The year-over-year results were generally mixed across the markets in the region.

Unknown Executive: In Latin America, net sales were up 4% on a reported basis and up 2% on a constant currency basis. This is the fifth consecutive quarter the region has reported a year-over-year increase in net sales. For the current quarter, the year-over-year favorable FX impact was primarily due to the Mexican paycheck. Mexico's net sales were up 10% year-over-year on a reported basis, while relatively flat on a local currency basis on slightly lower volumes. During the first quarter, we continued to experience importation delays in Mexico as a result of the government's delay in timely approval of importation permits, which stems from the importation hold placed on food supplements entering Mexico late last year, and this was not unique to Herbalife.

John: In Latin America, net sales were up 4% on a reported basis and up 2% on a constant currency basis.

John: This is the fifth consecutive quarter the region has reported a year-over-year increase in net sales.

John: For the current quarter, year-over-year favorable FX impact was primarily due to the Mexican peso.

John: Mexico's net sales were up 10% year-over-year on a reported basis.

John: while relatively flat on a local currency basis on slightly lower volumes.

John: During the first quarter, we continued to experience importation delays in Mexico as a result of the government's delay in timely approval importation permits.

John: which stems for the importation hold placed on food supplements entering Mexico late last year. And this was not unique to herbal life.

Unknown Executive: However, our distributors are resilient. They consistently find new ways to overcome challenges, which we believe contributed to the minimal decline in volumes year over year, given the significant headwinds they faced exiting 2023. The year-over-year volume decline in Mexico was more than offset by two price increases implemented in the market following the first quarter of 2020. In North America, the declines in reported net sales were primarily driven by the U.S. market's 11% year-over-year decline, as Stephan noted in his remarks.

John: However, our distributors are resilient. They consistently find new ways to overcome challenges, which we believe contributed to the minimal decline in volumes year over year, given the significant headwinds they faced exiting 2023.

John: The year-over-year volume decline in Mexico was more than offset by two price increases implemented in the market following the first quarter of 2023.

John: In North America, the declines in reported net sales were primarily driven by the U.S. market's 11% year-over-year decline. As Stefan noted in his remarks,

Unknown Executive: Several initiatives have been launched during the first quarter, which we believe are beginning to take root. We are encouraged to see the uptick in new distributors in the U.S. This is a positive leading indicator, which we are closely monitoring. Moving to the adjusted Ibida Bridge on slide 11.

John: Several initiatives have been launched during the first quarter, which we believe are beginning to take root.

John: We are encouraged to see the uptick in new distributors in the U.S. This is a positive leading indicator which we are closely monitoring.

John: Moving to the adjusted Ebedub Bridge on slide 11,

Unknown Executive: We see the drivers of our 7% year-over-year increase in adjusted EBITDA. Q1 Adjusted EBITDA was $138 million, with a margin of 10.9%. As I previously mentioned, price increases, which were based mostly on CPI, exceeded higher input costs.

John: we see the drivers of our 7% year-over-year increase in adjusted EBADA.

John: Q1 adjusted ebada was $138 million, with margin at 10.9%.

John: As I previously mentioned, price increases, which were based mostly on CPI, exceeded higher input costs.

Unknown Executive: The year-over-year increase in bonuses is primarily due to increased employee bonus accruals in the current period versus 2023, which were accrued at a significantly reduced achievement level. We expect this to continue for the remainder of 2024. Technology costs were up approximately $5 million year-over-year due to increased SaaS hosting fees as we strategically pivoted to more SAS-based arrangements in 2023. As I previously mentioned, the non-repeat of the China government grant income recognized in the first quarter of last year drove an approximate $9 million of unfavorable impact on adjusted EBITDA.

John: The year-over-year increase in bonuses primarily due to the increase employee bonus accruals in the current period versus 2023, which were accrued at a significantly reduced achievement level.

John: We expect this to continue for the remainder of 2024.

John: Technology costs were up approximately $5 million year over year, due to the increased SaaS hosting fees as we strategically pivoted to more SaaS-based arrangements in 2023.

John: As I previously mentioned, the non-repeat of the China government grant income recognized in the first quarter of last year

John: Joven approximate $9 million of unfavorable impact on adjusted EBDA.

Unknown Executive: The other changes include $7.5 million of favorable impact due to lower inventory write-downs in the first quarter of 2024 versus the same period last year due to significant efforts at the beginning of 2023 to right-size our inventory level. The remainder of OTHER primarily relates to additional net SG&A savings, mostly from the cost reduction initiatives put in place and led by a dedicated task force. Moving to slide 12, I'll provide an update on our capital structure.

John: The other changes include $7.5 million of favorable impact due to lower inventory write downs in the first quarter of 2024 versus the same period last year.

John: due to significant efforts at the beginning of 2023 to right-size our inventory levels.

John: The remainder of other primarily relates to additional net SG&A savings, mostly from the cost reduction initiatives put in place and led by a dedicated task force.

Speaker Change: Moving to slide 12, I'll provide an update on our capital structure.

Unknown Executive: During the quarter, we reduced our overall debt by approximately $155 million, and we reduced our total leverage ratio from 3.9 times at year-end to 3.6 times at the end of Q1. Cash at the end of March was just under $400 million, as we took additional steps during the quarter to further leverage our in-house bank and better optimize our cash. Following the quarter, we completed a $1.6 billion senior security refinancing, which included $800 million of senior secured notes due in April 2029, a $400 million 5-year term loan B facility, and a $400 million 4-year revolving credit facility.

Speaker Change: During the quarter, we lowered our overall debt by approximately $155 million, and we reduced our total leverage ratio from 3.9 times at year end to 3.6 times at the end of Q1.

Speaker Change: Cash at the end of March was just under $400 million as we took additional steps during the quarter to further leverage our in-house bank and better optimize our cash.

John: Following the quarter, we completed a $1.6 billion senior security financing.

John: which included $800 million of senior secured notes due in April 29, a $400 million, five-year term loan B facility, and a $400 million four-year revolving credit facility.

Unknown Executive: Proceeds from the 2029 Senior Notes and the new Term Loan B were used to repay all amounts outstanding under the 2018 credit facility, which included approximately $983 million. We also redeemed $300 million of the $600 million outstanding on the 2025 Senior Notes.

John: Proceeds from the 2029 senior notes and the new term loan B were used to repay all amounts outstanding under the 2018 credit facility.

John: which included approximately $983 million. We also redeemed $300 million of the $600 million outstanding on the 2025 Senior Notes.

Unknown Executive: In addition, last week, we separately repurchased an additional $38 million of the 2025 Senior Note. The net result of the transactions is that we have pushed a vast majority of our debt maturities out to 2029. The only sizable maturity we face prior to 2028 is the $262 million outstanding on the 2025 notes, which we expect to pay off with cash generated from operations. Regarding interest expense, based on the approximately 240 basis points increase in the weighted average interest rate of our new debt structure and assuming the debt balance as of April 26, as noted on the slide, we are expecting full year 2024 net interest expense to be approximately 50 to $60 million higher than 20 And we remain committed to reducing our leverage ratio to three times by the end of the year. Moving to slide 13.

John: In addition, last week, we separately repurchase an additional $38 million of the 2025 Senior Notes.

John: The net result of the transactions is that we have pushed a vast majority of our debt maturities out to 2029.

John: The only sizable maturity we face prior to 2028 is the $262 million outstanding on the 2025 notes, which we expect to pay off with cash generated from operations.

John: regarding interest expense, based on the approximately 240 basis points increase in the weighted average interest rate of our new debt structure, and assuming the debt balance as of April 26, as noted on the slide, we are expecting full year 2024 net interest expense to be approximately $50 to $60 million higher than 2023.

John: and we remain committed to reducing our leverage ratio to three times by the end of next year.

Unknown Executive: We will review our outlook for the remainder of the year. First and foremost, we expect to continue to issue guidance every quarter going forward. For the second quarter, we expect net sales to be in the range of flat to a 3% increase year-over-year. We expect Adjusted EBITDA to be in the range of $140 million to $160 million. A small decline from Q2 last year, which is primarily due to higher tech costs and higher employee costs as savings from the new restructuring program are mostly in the back half of the year as a majority of the actions are occurring during the second quarter.

John: Moving to slide 13, we will review our outlook for the remainder of the year. First and foremost, we expect to continue to issue guidance every quarter going forward.

John: For the second quarter, we expect net sales to be in the range of flat,

John: to a 3% increase year over year.

John: We expect adjusted EBAD to be in the range of $140 million to $160 million.

John: A small decline from Q2 last year, which is primarily due to higher tech costs and higher employee costs, as savings from the new restructuring program are mostly in the back half of the year, as the majority of the actions are occurring during the second quarter.

Unknown Executive: Looking at our planned capital expenditures for the second quarter, we expect them to be in the range of $30 to $40 million, in line with Q2 of last year and Q1 of this year, based on our results for the first quarter and outlook for the remainder of the year. We are reaffirming our full-year 2024 Net Sales Guidance, a flat to a 5% increase year-over-year. Additionally, we are raising our expectations for full-year adjusted EBITDA to a range of $550 to $590 million, and we are reducing our capital expenditure expectations to a range of $120 to $150 million.

John: Looking at our planned capital expenditures for the second quarter, we expected to be in the range of $30 to $40 million in line with Q2 of last year and Q1 of this year.

John: Based on our results for the first quarter, an outlook for the remainder of the year, we are reaffirming our full year 2024 net sales guidance of flat,

John: to a 5% increase year over year.

John: and we are raising our expectations for full-year-adjusted EBAA to a range of $550 to $590 million, and we are reducing our capital expenditure expectations to a range of $120 to $150 million.

Unknown Executive: The reduction and narrowing of our CapEx range is based on a thorough review of our technology and manufacturing plan. We have reprioritized the development and implementation of certain applications related to Herbalife 1, and eliminated or postponed certain capital projects related to our manufacturing. Capitalized SAS implementation costs are expected to be in the range of $20 to $25 million for the full year 2024, with approximately $5 million capitalized in the first quarter of 2024.

John: The reduction and narrowing of our CAPX range is based on a thorough review of a technology and manufacturing plan.

John: We have reprioritized the development and implementation of certain applications related to Herbalife 1,

John: and eliminated or postponed certain capital projects related to our manufacturing facilities.

John: Capitalized SaaS implementation costs are expected to be in the range of $20 to $25 million for the full year of 2024, with approximately $5 million capitalized in the first quarter of 2024.

Unknown Executive: A couple of last comments before we open up the call for questions. First, I'd like to provide an early but high-level outlook on our 2025 adjusted EBITDA margin. Inherent in our 2024 full-year guidance today is an adjusted EBITDA margin that is not dissimilar from 2023. However, with our cost savings plans and modest growth expect... We expect 2025's adjusted EBITDA margin to be a minimum of 100 basis points better than 2024. We get there with the full year impact of the reorganizational savings, as well as an additional $35 million in savings that we have already identified, including incremental reduced text. And, of course, we're not stopping there.

Speaker Change: A couple of last comments before we open up the call for questions.

Speaker Change: First, I'd like to provide an early but high-level outlook into our 2025 adjusted EBIDAR margin improvement.

Speaker Change: Inherent in our 2024 full-year guidance today is an adjusted EBITR margin that is not dissimilar from 2023.

Speaker Change: However, with our cost savings plans and modest growth expectations, we expect 2025 adjusted EBITDA margin to be a minimum of 100 basis points better than 2024.

Speaker Change: We get there with the full-year impact of the reorganizational savings, as well as an additional $35 million in savings that we have already identified, including incremental reduced tech spend.

Unknown Executive: We are continuing to focus on driving costs out of the business and enhancing our margins, and we will provide more updates in the future. Second, as I previously said, we expect to repay the $262 million in bonds due in 2025 from cash flow generated by the business, much of which we expect to be generated this year. Based on my earlier comments regarding our 2024 cash flow expectancy and our CAPX guidance provided today, you can calculate that we expect to generate nearly two-thirds of the free cash needed for this 2025 maturity in 2024.

Speaker Change: And of course, we're not stopping there. We are continuing to focus on driving costs out of the business and enhancing our margins, and we will provide more updates in the future.

Speaker Change: Second, as I previously said, we expect to repay the $262 million in bonds due in 2025 from cash flow generated by the business, much of which we expect to be generated this year.

Speaker Change: For my earlier comments regarding our 24 cash flow expectations,

Speaker Change: and our KAPX guidance provided today, you can calculate that we expect to generate nearly two-thirds of the free cash needed for this 2025 maturity in 2024.

Unknown Executive: With the bond payoff in 2025, the minimum 100 basis point improvement in adjusted EBITDA margins in 2025 previously met, plus the add-backs for the credit agreement EBITDA for things such as share-based compensation, we now have a line of sight to how we can achieve our three-times leverage ratio by the end of next year. This is an exciting time for Herbalife, and I could not be more proud of our team. I hope you walk away from today's call with the following.

Speaker Change: With the bond payoff in 2025, the minimum 100 basis point improvement in adjusted EBITDA margins in 2025 previously mentioned,

Speaker Change: plus the ad backs for the credit agreement EBIDA for things such as share-based compensation, we now have line as sight to how we can achieve our three-times leverage ratio by the end of next year.

Speaker Change: This is an exciting time for herbal life, and I could not be more proud of our team.

Speaker Change: I hope you walk away from today's call with the following.

Unknown Executive: As Stephan described, our initiatives are driving increased distributor engagement. We can see a sales growth trajectory. We have additional opportunities to take costs out of the business. The cash generated by the business will be used to pay down debt.

Speaker Change: As Stefan described, our initiatives are driving increased distributor engagement.

Speaker Change: we can see a sales growth trajectory.

Speaker Change: We have additional opportunities to take costs out of the business.

Speaker Change: The cash generated from the business will be used to pay down debt.

Unknown Executive: And one last key point, as Michael said earlier on the call: we are unique from every other direct selling company, and we will continue to capitalize on those assets as we move down our path to be the world's premier health and wellness company, community, and platform.

Speaker Change: And one last key point, as Michael said earlier on the call, we are unique from every other direct selling company.

Speaker Change: and we will continue to capitalize on those assets as we move down our path to be the world's premier health and wellness company, community, and platform.

Unknown Executive: Thank you. This concludes our opening remarks. Operator, please open the call for questions. Thank you.

Speaker Change: Thank you. This concludes our opening remarks. Operator, please open the call for questions.

Operator: Thank you. Ladies and gentlemen, to ask a question, please press star 11 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chasen Bender with Citi. Your line is open.

Speaker Change: Thank you. Ladies and gentlemen, to ask the question, please press 1-1 on your telephone, and then wait to hear your name announced.

Speaker Change: To withdraw your question, please press Star 1-1 again.

Speaker Change: Please stand by while we compiled the Q&A roster.

Speaker Change: Our first question comes from the line of Chasing Bender with City. Your line is open.

Chasen Louis Bender: Great, thanks. Afternoon, everyone.

Chasen Louis Bender: Great, thanks. Afternoon, everyone.

Chasen Louis Bender: I wanted to ask about North America. Specifically, you know, it seems like the March and April sales trends are improving.

Chasen Louis Bender: But, you know, relative to the rest of your geographies, North America continues to be sluggish on a year-over-year basis. So I was curious, you know, can you unpack why you think that market has been so challenged versus, you know, your other geographies and, you know, whether what we're seeing is just...

Chasen Louis Bender: a really prolonged COVID hangover, or is there something, you know, more structurally challenged about the U.S. and, you know, related.

Chasen Louis Bender: I know you don't guide by region, but, you know, based on your internal expectations and what you've seen, you know, in the last two months, what is a reasonable timeline to expect the U.S. to return to growth?

Speaker Change: Yeah, I'll take this one, Jason, thanks for the question.

Speaker Change: Last quarter we talked about the U.S. Nutrition Club more of a food service transactional model, right?

Jason: If we look at the last period of growth over, you know, the last four or five years, it was really a pivot to that model. By the way, fantastic model. You know, last quarter we talked about the 4.4 million customers.

Jason: the 55 million transactions,

Jason: the 910 million retail sales into clubs,

Jason: Very, very strong model, but on the back end, because it's so focused on food consumption, healthy shakes,

Jason: energetic teas,

Jason: What ends up happening is that we just aren't getting the conversion

Jason: overall, generally speaking, that we want to have. And that's people that are coming in, they may get the experience of being in a club, take home a healthy meal, healthy shake, but we want them to understand that herbal life really is a life-changing, you know, better health,

Jason: reach your goals

Jason: company and not just a grab a healthy shake on the way home. So, you know, the transition to that model, and especially if we look at it kind of through COVID,

Jason: What we're finding is that it's just a little bit slower for us to have these other transformational aspects of the model come back.

Jason: By the way, and I say come back, the focus hasn't been that long, to be perfectly honest with you, because

Jason: We got so much growth out of

Jason: the nutrition club

Jason: transactional business,

Jason: that really it was kind of not that evident that we were missing out on something until we really started to look at the numbers.

Jason: And that's where we went last time telling you about the conversion rates within different clubs. Some clubs are converting at 1% of club customers that become preferred customers. Some of them are converting over 10%.

Jason: So really the work is helping them to find within their communities, what are the services that they can give and how they can introduce people to moving from just a shake or a tea to actually taking products at home

Jason: focused on getting results. And so that's part of

Jason: you know, what's happening right now. By the way, we are having really good results in some areas with some people, and it's really that question of how do we take what's working with some groups, and we actually make sure that the information and the models are clear and they're shown.

Jason: So that's U.S. specific in the United Kingdom, and this is just to really go on the transformational part of it,

Jason: We've got someone there that started five years ago with a new club model, again, based in nutrition clubs, but they've got a very specific way of actually helping customers, you know, get on products.

Jason: and have a duplication in the model, which is quite incredible. And this is, you know, something that now in Europe is expanding, but also something that could be very valuable for the United States. So again, it's back to the DMOs and helping distributors

Jason: club owners in the United States understand how they can leverage this amazing business they have and build a much bigger back-end business and duplicating organization. Jason, let me add to that. So your question at the beginning talked about...

Unknown Executive: I wanted to ask about North America. Specifically, you know, it seems like the March and April sales trends are improving. But, you know, relative to the rest of your geographies, North America continues to be sluggish on a year over year basis. So I was curious, can you unpack why you think that market has been so challenged versus, you know, your other geographies? And, you know, whether what we're seeing is just a really prolonged COVID hangover, or is there something, you know, more structurally challenged about the US? And, you know, are they related?

Unknown Executive: North America lagging in new distributors from the rest of the world. If we look at specifically April , and you go to page 6 on the slide that was presented, North America is up 41% this April over last April .

Unknown Executive: I know you don't guide by region, but based on your internal expectations and what you've seen in the last few months, like, what is a reasonable timeline to expect the US to return to growth?

Unknown Executive: Yeah, I'll take this one. Chasen, thanks for the question. Last quarter, we talked about the U.S. Nutrition Club, more of a food service transactional model, right? So if we look at the last period of growth over, you know, the last four or five years, it was really a pivot to that model. By the way, a fantastic model.

Unknown Executive: You know, last quarter, we talked about the 4.4 million customers, the 55 million transactions, the 910 million retail sales into clubs. Very, very strong model, but on the back end, because it's so focused on food consumption, healthy shakes, energetic teas, what ends up happening is that we just aren't getting the conversion overall, generally speaking, that we want to have. And that's people that are coming in; they may get the experience of being in a club, taking home a healthy meal or a healthy shake, but we want them to understand that Herbalife really is a life changing, you know, better health, reach your goals company and not just a way to grab a healthy shake on the way home.

Unknown Executive: Jason, let me add to that. So your question at the beginning talked about North America lagging behind new distributors from the rest of the world. If we look at specifically April, and you go to page six on the slide that was presented, North America is up 41% this April over last year, which is the second highest of all the regions. So I think it has lagged. I think what we're seeing now is, hopefully, a re-energized Salesforce with a lot more new people coming in.

Unknown Executive: So, you know, the transition to that model, and especially if we look at it kind of through COVID, what we're finding is that it's just a little bit slower for us to have these other transformational aspects of the model come back.

Unknown Executive: By the way, and I say, come back. The focus hasn't been that long, to be perfectly honest with you, because we got so much growth out of the nutrition club transactional business. It really wasn't that evident that we were missing out on something until we really started to look at the numbers. And that's where we went last time, telling you about the conversion rates within different clubs. Some clubs are converting at 1% of club customers that become preferred customers.

Unknown Executive: Some of them are converting over 10%. So, really, the work is helping them to find partners within their communities. What are the services that they can give and how they can introduce people to moving from just a shake or a tea to actually taking products at home focused on getting results? And so that's part of, you know, what's happening right now. By the way, we are having really good results in some areas with some people.

Speaker Change: which is the second highest of all the regions. So I think it has lag. I think what we're seeing now is hopefully a re-energized sales force with a lot more new people coming in. The volume from those new people, it always lags. It'll lag a few months.

Unknown Executive: And it's really that question of how do we take what's working with some groups and actually make sure that the information and the models are clear, and they're shown. So, that's US-specific. In the United Kingdom, and this is just to really go into the transformational part of it, we've got someone there that started five years ago with a new club model, again, based on nutrition clubs, but they've got a very specific way of actually helping customers, you know, get on products and have a duplicate in the model, which is quite incredible.

Unknown Executive: And this is something that, now, in Europe, is expanding, but also is something that could be very valuable for the United States. So, again, it's back to the DMOs and helping distributors, club owners in the United States, understand how they can leverage this amazing business they have and build a much bigger backend business and duplicating organization.

Unknown Executive: You know, the volume from those new people always lags. It'll lag for a few months. But what we expect to see is meaningful improvement in North America in queues three and four, whether that translates to growth this year or early next year, we're not sure, but that's the trajectory based on the number of new people we see.

Speaker Change: But what we expect to see is meaningful improvement in North America in Q's 3 and 4. Whether that translates to growth, this year or early next year, we're not sure, but that's the trajectory based on the number of new people we see coming in.

Unknown Executive: Got it. I appreciate that color. And then, John, just to come back to some of the comments you made at the end related to reprioritizing some of the tech spending on Herbalife 1, just curious if you can flesh out those comments and then specifically how are you thinking about that $400 million in total spending on the program and is that still the right number? And then, just again, can you remind us how much of that you've spent already? Thanks.

Unknown Executive: Got it. Appreciate that color. And then, John , just to come back to some of the comments you made at the end related to reprioritization of some of the tech spending on herbal life one.

John: Just curious if you can flesh out those comments and then specifically, how are you thinking about that $400 million in total spending on the program? And is that still the right number? And then just, again, related, can you remind us how much of that you've spent already? Okay.

Unknown Executive: We've already spent about $250,000, so a lot of it is already spent. There's another $150,000, $160,000 to be spent. We'll spend less than that. How much less, I don't know yet.

John: Thanks. Yeah, so we spent about 250 already, so a lot of it's already spent. There's another 150 to be spent. We'll spend less than that. How much less I don't know yet we're going through some work, but it'll definitely be less than that. But a majority has been spent.

Unknown Executive: We're going through some work, but it will definitely be less than that. But the majority has already been spent. How we look at it going forward is what we've built, what the team has built, is an entirely new infrastructure that allows us as a company to layer on meaningful new tools for our distributors in various countries. That has started, but there's a lot of work left to do in that area. I think when the project started, we were going to customize everything, all the tools.

Unknown Executive: How we look at it going forward is what we've built, what the team has built, is an entire new infrastructure that allows us as a company to layer on meaningful new tools to our distributors in various countries.

Speaker Change: That started, but there's a lot of work left to do in that area. I think when the project started, we were going to customize everything, all the tools.

Unknown Executive: What's been built actually allows us now to go to third parties and leverage the tools that they've built and plug and play into our new foundation. That's something we're looking at closely. We're actually pretty close with two different vendors. It may or may not happen, so I'm not going to give you names, but I'll give you an update as we solidify agreements. But we're looking at two specific vendors that can bring a lot of functionality to our distributors and that we can plug into our current foundation, which we couldn't have done two years ago because the foundation was entirely homegrown, and APIs wouldn't have worked and really would have broken the system. So that's really what we've got now is a new foundation. You'll start to see an acceleration of that turning into tools that can both drive sales and, hopefully, get us off old tools and save money.

Speaker Change: What's been built actually allows us now to go to the third parties

Unknown Executive: and leverage the tools that they've built and plug and play into our

Speaker Change: New Foundation.

Speaker Change: That's something we're looking at closely. We're actually pretty close with two different vendors.

Speaker Change: It may or may not happen, so I'm not going to give you names and I'll give you an update as we solidify agreements, but we're looking with two specific vendors that can bring a lot of functionality to our distributors and that we can plug into our current foundation.

Unknown Executive: which we couldn't have done.

Unknown Executive: you know, two years ago because the foundation was entirely homegrown and APIs wouldn't have worked and really would have broken the system. So that's really what we've got now is a new foundation. You'll start to see an acceleration of that turning into tools that can both drive sales and hopefully get us off old tools and save money.

Unknown Executive: Got it. That's helpful. I appreciate that. I'll pause there and pass it on.

Speaker Change: Got it. That's helpful. I appreciate that. I'll pause there and pass it on.

John Joseph Baumgartner: Please stand by for our next question. Our next question comes from the line of John Baumgartner with Missouri Securities. Your line is open.

Speaker Change: Thank you.

John Joseph Baumgartner: Please stand by for our next question.

John Joseph Baumgartner: Our next question comes from the line of John Van Gartner with Missouri Securities. Your line is open.

Unknown Executive: Hey, good afternoon. Thanks for the question. First off, good afternoon.

Unknown Executive: First off, I wanted to ask in terms of the EBITDA guidance for 2024. It's a range of down $20 million to up $20 million year on year. And I guess, you know, that includes the $40 million of savings from this new restructuring. How do we think about the reinvestment of these gross savings in terms of getting to a net savings contribution number for this year? And how do we think about, you know, the magnitude of the drivers that sort of govern where you fall on that on that in that range for EBITDA?

Speaker Change: Hey, good afternoon. Thanks for the questions.

Unknown Executive: First of

Speaker Change: Hey, good afternoon. First of all, I wanted to ask in terms of the EBITI guidance for 2024. It's a range of down 20 million to up 20 million year on year. And I guess, you know, that includes the $40 million of savings from this new restructuring.

Unknown Executive: How do we think about the reinvestment of these growth savings in terms of getting to a net savings contribution number for this year? And how do we think about, you know, the magnitude of the drivers that sort of govern where you fall on that, on that range for EBAA?

Unknown Executive: Well, look, it's a range. So I'm not going to pick pick whether we're going to fall into the low or high end of the range, right? But that's the range.

Unknown Executive: Well, look, it's a range, so I'm not going to pick to whether we're going to fall into the low or high end of the range, right? But that's the range, and it's based on the best information we have at the moment. I can tell you that offsetting in the current year, anyway, offsetting some of the savings, the 40 million savings. Remember, the 40 million is half a year of savings.

Unknown Executive: And it's based on the best information we have at the moment. I can tell you that offsetting in the current year, anyway, offsetting some of the savings, the 40 million savings, remember, the 40 million is half a year of savings, is an incremental close to 60 million of bonus because this last year's bonus wasn't achieved for the most part. And so there's an incremental accrual. It's actually higher than what it would be on its run rate going beyond this year.

Unknown Executive: is an incremental, close to 60 million of bonus because this, you know, last year,

Unknown Executive: bonus wasn't achieved for the most part, and so there's an incremental accrual. It's actually higher than what it would be on its run rate going beyond this year. So they somewhat offset, and that creates the reason why, there's lots of ins and outs, but if I'm going to give you the big buckets, those are a couple of big buckets to consider.

Unknown Executive: So they somewhat offset each other. And that creates the reason why there's lots of ins and outs. But if I'm going to give you the big buckets, those are a couple of big buckets to consider. When we get into 2025, the bonus gets reduced by $20, and the savings jumps from $40 to $80.

Unknown Executive: When we get into 2025,

Unknown Executive: The bonus gets reduced by 20, and the savings jumps from 40 to 80.

Unknown Executive: Okay, and then the 2025 that incremental $35 million, I think it was reduced tech spending that's outside the scope of this new $80 million program, correct?

Speaker Change: Okay, and then of the 2025, that incremental $35 million, I think it was in reduced tech spending, that's outside the scope of this new $80 million program, correct?

Unknown Executive: Well, it's outside the scope, but it's not all tech. It was $35 million. So we have a cost savings task force that's identifying opportunities to reduce expenses in the company. I think we can all agree they're too high. The restructuring program is just one of them. On top of that, we've already identified $35 million of savings for next year. More than half of that is tech, so tech is the majority of it, but there's a bunch of other things in it. And yes, all of that $35 is incremental to the restructuring.

Unknown Executive: Well, it's outside the scope, but it's not all tech. It was 35 million. So we have a cost savings task force that we're identifying opportunities to reduce expenses in the company.

I think we can all agree they're too high what the restructuring program is just one of them on top of that we've already identified 30 million 35 million of savings for next year

Unknown Executive: More than half of that is tech. So tech is the majority of it, but there's a bunch of other things in it. And yes, all of that 35 is incremental to the restructuring.

Unknown Executive: Okay, and then to follow up last quarter, there was some, you know, initial discussion regarding investments in upselling, you know, some skill-specific distributor events, and maybe even some marketing spending as well. And I'm kind of curious, as you sort of did your sort of, you know, world tour and kind of got out there, what's your latest thinking on the opportunities, you know, for that reinvestment? You know, is there an order of operation there in terms of what comes first? Just your latest thinking, that'll be great. Thank you.

Unknown Executive: Okay, and then to follow up last quarter, there was some initial discussion regarding investments in upselling, you know, some skill-specific distributor events, and maybe even some marketing spending as well. And I'm kind of curious, as you sort of, you know, done your sort of world tour and kind of got out there, what sort of your latest thinking on the opportunities, you know, for that reinvestment? You know, is there an order of operation there in terms of what comes first? Just your latest thinking there will be great. Thank you. Okay.

Unknown Executive: John, yeah, just to clarify, was this around marketing expertise?

Unknown Executive: John , yeah, just to clarify, was this around marketing expertise?

Unknown Executive: It was a combination of just, you know, upskilling distributors, kind of plugging some white spaces and skill sets and, you know, I guess, supporting small business development.

Speaker Change: Oh, I'll make sure.

Speaker Change: It was a combination of just, you know, upskilling distributors, you know, kind of plugging some light spaces and skill sets and, you know, I guess, supporting small business development. Got it. Yeah, I think it was around, so we run a couple of pilots, actually. One of them was bringing in a social media marketing expert.

Unknown Executive: Yeah, I think it was around. We ran a couple of pilots, actually. One of them was bringing in a social media marketing expert who, you know, actually was going to and did pilots with a group of distributors, different clubs, how to actually go out and drive more traffic to the clubs. And so things like that are happening; we've got a few different pilots; we've got another pilot, which is actually about how to communicate and take the lists and line up the lists and be able to market to the lists that clubs have.

Unknown Executive: that, you know, actually was going to and did

Unknown Executive: pilots with a group of distributors, different clubs,

Unknown Executive: how to actually go out and drive more traffic to the clubs.

Unknown Executive: Things like that are happening. We've got a few different pilots. We've got another pilot, which is actually about how to communicate and take the lists and line the lists and be able to market to the list that clubs have. So there's different things that we're doing, but in general,

Unknown Executive: So there are different things that we're doing, but in general, it really is the training that we're trying to focus on to be able to upskill the distributors. And so that's why I mentioned that we're moving from what, typically, you know, if you looked at North America, we would have monthly trainings, we would call them STSs, and distributors would go to the trainings, many of them on a But that agenda was basically the same thing over and over; it was very, very basic.

Unknown Executive: It really is the training that we're trying to focus on to be able to upskill the distributors.

Unknown Executive: And so that's why I mentioned that we're moving from what typically, you know, if you looked at North America, we would have monthly trainings, we would call them STS's,

Unknown Executive: and distributors would go to the trainings, many of them on a monthly basis,

Unknown Executive: But that agenda was basically the same thing over and over. It was very, very basic.

Unknown Executive: The idea was really more to bring new people in to have them experience it, so there wasn't very specific training on different models on how to actually go out and, you know, duplicate a nutrition club and become as effective as possible. And so this is a big shift for us, you know, in terms of the spend. It's not that it's much more than we were spending before, but it's what we're doing with the money.

Unknown Executive: The idea was really more to bring new people to have them experience it, so there wasn't

Unknown Executive: very specific training on different models on how to actually go out and, you know, duplicate a nutrition club, become as effective as possible. And so this is a big shift for us, you know, in terms of the spend,

Unknown Executive: It's not that it's much more than we were spending before, but it's what we're doing with the money. So an example here in the United States, you know, the SPSs are moving more towards

Unknown Executive: So an example is here in the United States, you know, the STSs are moving more towards distributor model-specific training. We had leadership development weekends, which happened twice a year, that were also, you know, quite honestly, kind of a beefed-up version of what would happen monthly. We've changed those to be more specific to models and to bring in people that are training distributors on things that they've never had access to before. So in terms of the spend, not a big difference in what we're spending; I think it's more about how we're spending it.

Unknown Executive: distributor model specific trainings,

Unknown Executive: We had leadership development weekends, which happened twice a year, that were also, you know, quite honestly, kind of a beefed up version of what would happen monthly

Unknown Executive: We've changed those to be more specific to models and to bring in people that are training distributors on things that they've never had access to before. So in terms of the spend, not a big difference in what we're spending. I think it's more on how we're spending it.

Unknown Executive: Just always thinking about increasing the value to distributors. And then the last thing I'll say is, you know, we talked about the masterclasses on different models that were happening. And again, just to talk about this model in the United Kingdom right now, you know, we had our third masterclass last month. We had 2,700 people from 30-plus markets throughout Europe and, I think, even the world, and it was the third time that we'd run that.

Unknown Executive: Just always thinking about increasing

Unknown Executive: the value to distributors. And then the last thing I'll say is, you know, this, we talked about the master classes on different models that were happening. And again, I'll just to talk about this model in the United Kingdom right now,

Unknown Executive: You know, we've had our third master class last month. We had 2,700 people from

Unknown Executive: 30-plus markets throughout Europe and I think even the world and

Unknown Executive: Every time there's increased participation, people are interested. And what happens is that they get the level of training necessary to be able to go and implement the model and then support it over time. So, you know, we are starting to see results on this. I think the recruiting activity that you've seen that's picked up over the last couple of months is also because people are figuring out in their models how to really have a model that flows well and is able to duplicate. So, you know, by the end of Q2, I think we'll have some additional things to report on that. Okay, thank you.

Unknown Executive: It was a third time that we've run that.

Unknown Executive: every time there's increased participation, people are interested, and what happens is that they're getting the level of training necessary to be able to go and implement the model and then support it through time. So, you know, we are starting to see results on this. You know, I think

Unknown Executive: The recruiting activity that you've seen that's picked up over the last couple of months, it's also because people are figuring out in their models how to really have a model that flows well and to be able to duplicate. So, you know, by the end of Q2, I think we'll have some, you know, additional things to report on that.

Speaker Change: Okay, thank you.

Speaker Change: Thank you.

Speaker Change: Please stand by for our next question.

Anna Jeanne Lizzul: Please stand by for our next question. Our next question comes from the line of Anna Lizzul with Bank of America. Your line is open.

Anna Jeanne Lizzul: Our next question comes from the line of Anna Lizzo with Bank of America. Your line is open.

Anna Jeanne Lizzul: Hi, good afternoon and thank you so much for the question.

Anna Jeanne Lizzul: I was just wondering if you can comment on how the rollout of Verbalife 1 is progressing. You mentioned today that it's now rolled out in the UK and Spain. Just wondering if you're seeing any early benefits from that and how are distributors and members kind of interacting on the platform?

Anna Jeanne Lizzul: And then just in terms of the reduced KAPX spend, I was wondering if you could elaborate on just the decision behind that in terms of the applications that you decided to postpone or eliminate. Thank you.

Unknown Executive: I'll start and then I'll hand it off to Stephan. So first, based on the question, I think maybe we should provide some context about what Herbalife One is. Herbalife One is not just a website for which people can transact, which I think might be what you're asking about because we launched that in a couple of markets. Herbalife One is an entirely new technology platform. It includes websites and transactions that can be, you know, that can occur online.

Unknown Executive: I'll start and then I'll head off to Stefan. So first, based on the question, I think maybe we should provide some context about what herbal life one is. Herbalife one is not just a website for which people can transact, which I think it might be what you're asking about because we launched that in a couple of markets. Herbalife one is an entirely new technology platform.

Unknown Executive: It includes websites and transactions that can be, you know, that can occur online. It's also 10 other things that we're going to launch and we're going to partner with other people to launch. So the biggest part of verbal life one was actually this

Unknown Executive: There are also 10 other things that we're going to launch, and we're going to partner with other people to launch. So the biggest part of Herbalife One was actually this integration layer that allows tools to plug into all of our databases that didn't exist. So that's just in context about Herbalife One. I'll answer how we decided to reduce CapEx. And there are two things. It's Herbalife One and manufacturing

Unknown Executive: this integration layer that allows tools to plug into all of our databases that didn't exist. So that's just some context on Herbalife 1. I'll answer how we decided to reduce...

Unknown Executive: Capax and there's two things. It's herbal life one in manufacturing. So I'm manufacturing anything that doesn't have a two-year payback or quicker, we don't need to do in manufacturing right now. So we cut that off on the list and

Unknown Executive: So on manufacturing, anything that doesn't have a two-year payback or is quicker, we don't need to do in manufacturing right now. So we cut that off the list. The second is on tech; if it's not going to drive growth in the near term or save money in the near term, then we're also going to push that out. And so that's how we decide. I'll pass it to Stephan to talk about how the very recent launch of the online game, Transition.

Stephan: The second is on tech, if it's not going to drive growth in the near term, we'll save money in the near term, then we're also going to push that out. And so that's how we decided.

Stephan: to save when capitalics.

Stephan: I'll pass it to Stefan to talk about how the recent, it's very recent, but the very recent launch of the online transaction tool.

Unknown Executive: Yeah, thank you for the question. There are a couple of things.

Unknown Executive: One is that Herbalife, like John says, is much more than just a website or an e-commerce tool. What's really important to understand is that, actually, up until this project, distributors didn't even have an option to have a very simple way to be able to transact. So just to kind of give a bit of background, if someone wanted to have an e-commerce site in the past with us platform shopping site, they would actually have to go out; they'd have to find their payment processor.

Speaker Change: is doing. Yeah, thank you, Anna, for the question.

Unknown Executive: So a couple of things. One is that Herbalife One, like John says, it's much more than just a website or an e-commerce tool.

Unknown Executive: A lot of people, you know, just going through that process, it depends on your credit, it depends on really some different things. They couldn't even get access to be able to actually transact on an e-commerce website. And so part of the Herbalife One project also brought us to this point of becoming a merchant of record so that we could actually facilitate distributors being able to just simply say, hey, are you interested? You know, why don't you check it out? I'm going to send you a product bundle.

Unknown Executive: What's really important to understand is that actually up until this project,

Unknown Executive: Distributors didn't even have an option to have a very simple way to be able to transact. So just to kind of give a bit of background.

Unknown Executive: You can just pay. And that would allow them to have their customer easily, take the payment, and then the company could process that payment, and we could pay them. And so there's a lot that goes into this. The launch in the UK and Spain started with a group of about 212 distributors. And that was like the first week of March through mid-April, you know, something 40 days or something like that.

Unknown Executive: If someone wanted to have an e-commerce in the past with us platform,

Unknown Executive: shopping sites, they would actually have to go out, they'd have to find their payment processor, a lot of people, you know, just going through that process, it depends on your credit, it depends on releasing different things,

Unknown Executive: they couldn't even get access to be able to actually transact on an e-commerce website.

Unknown Executive: And so part of the Irvalife One project also brought us to this point of

Unknown Executive: becoming a merchant of record,

Unknown Executive: so that we could actually facilitate distributors being able to just simply say, hey, are you interested? You know, why don't you check out this? Or I'm going to send you a product bundle. You can just pay and

Unknown Executive: that would allow them to have their customer easy, take the payment, and then the company could process that payment, and we could pay them. And so there's a lot that goes into this. The launch in the UK and Spain, it started with a group of about 212 distributors

Unknown Executive: And that was like first week of March through mid-April, you know, something, 40 days or something like that.

Unknown Executive: Now there are 2.2 thousand sites that have actually been created. And again, this never would have happened in the past where people could just sign up for a site and actually be able to start having customers go and have a look at what they have and make a purchase and have it as simple as that. So it's the very beginning.

Unknown Executive: Now there's 2.2,000 sites that have been actually created. And again, this never would have happened in the past where people could just sign up for a site and actually be able to start having customers go and to have a look at what they have and make a purchase and have it as simple as that.

Unknown Executive: And I think the most important thing is not that they have just the access to have this easy way to transact with people, but like John was talking about, it's really about the tools that are going to allow them to go out and prospect and convert and have people come into the system. And then obviously, what we use with all of that data and then the bigger picture of the platform of being able to deliver service and value to customers because they're coming to a platform that delivers value, not just a place to buy something where there's value in the purchase.

Unknown Executive: So it's the very beginning, and I think the most important thing, it's

Unknown Executive: Not that they have just the access to have this easy way to transact with people, but like John was talking about, it's really about the tools that are going to allow them to go out and prospect and convert and have people come in to the system.

Unknown Executive: And then obviously what we use with all of that data, and then the bigger picture of the platform of being able to deliver service and value to customers

Unknown Executive: because they're coming to a platform that delivers value, not just a place to buy something where there's value in the purchase, but there's no value in basically, you know, having their, you know,

Unknown Executive: But there's no value in basically, you know, having their steps tracked, having their weight scale connected so that they can follow, seeing what their body fat and their muscle percentage, and muscle mass is like, and then being able to have the coach, who actually has all of that data that's coaching them, that can help them through and get the best results possible for them.

Unknown Executive: steps tracked, having their weight scale connected so that they can follow, seeing with their body fats,

Unknown Executive: and their muscle percentage, muscle mass is like, and then being able to have the coach, which actually has all of that data that's coaching them, that can help them through, you know, and get the best results possible for them. So, you know, this is, again, just the very beginning. This is also, I would say, a multi-year process. When I say multi-year, really where we want to go in terms of the platform that we want to become to serve and really give value to customers that makes it more attractive for people to come. to herbal life.

Unknown Executive: So, you know, this is, again, just the very beginning. This is also, I would say, a multi-year process. When I say multi-year, really where we want to go in terms of the platform that we want to become to serve and really give value to customers that makes it more attractive for people to come to Herbalife. And so just one little thing on this is that in China right now, we are about to enter into a pilot with wearable devices. China is a little bit, I would say, a little bit of a simpler platform because it's one market, very tech-savvy, and very well organized.

Unknown Executive: And so just one little thing on this is in China right now. We're about to enter into a pilot with wearable devices. China is a little bit

Unknown Executive: I would say a little bit of a simpler platform because it's one market, very tech savvy, very well organized. And so we are a little bit ahead on the platform there and actually kind of the connectivity of wearables. We've got a connected scale that we're taking.

Unknown Executive: And so we are a little bit ahead on the platform there and actually kind of the connectivity of wearables. We've got a connected scale that we're taking tens of thousands of daily numbers of people that are, or months, they all say, of people that are coming that are connected to a platform. Very soon, there will be wearable technology that customers are going to be wearing, and all of that is going to be landing on the platform connected to a distributor to be able to coach them and help them along their journey.

Unknown Executive: tens of thousands of daily, you know, numbers of people that are, or months they all say, of people that are coming that's connected to a platform.

Unknown Executive: Very soon there's going to be wearable technology that customers are going to be wearing, and all of that's going to be landing on the platform connected to a distributor to be able to coach them and to help them along their journey. So, so again,

Unknown Executive: So again... Websites are great. We've got 51 of them in markets, 80% of market coverage for us in terms of volume. We've got a couple of markets with e-commerce very early on. We've got merchants of record capacity now that will, you know, around the world will become very, very helpful. But, you know, this is going to be a process over time. And, you know, quarter by quarter, we'll give you some updates. But, that's kind of the general overall overview of what's happening.

Unknown Executive: Websites are great.

Unknown Executive: We've got 51 of them in markets, 80% of market coverage for us in terms of volume.

Unknown Executive: We've got a couple of markets with e-commerce very early on. We've got merchant of record capacity now that, you know, around the world will become very, very helpful. But, you know, this is going to be a process over time.

Unknown Executive: And, you know, quarter by quarter will give you some updates, but that's kind of the general overall overview of what's happening.

Speaker Change: Very helpful, thank you. Thank you. Thank you. Please stand by for our next question.

Hale Holden: Thank you. Please stand by for our next question. Our next question comes from the line of Hale Holden with Barclays. Your line is open.

Hale Holden: Our next question comes from the line of Hale Holden with Barclays. Your line is open.

Unknown Executive: Hi, good afternoon. I had two quick questions for you. The first one is, I apologize if I get this wrong, but the Premier Circle or Premier League new program launch. Can you sort of connect the dots on how that helped drive a lot of the distributor gains that you posted for April in the deck?

Unknown Executive: Hi, good afternoon. I had two quick questions for you. The first one is the, I apologize if I get this wrong, but the Premier Circle or Premier League new program launch,

Unknown Executive: Can you sort of connect the dots on how that helped drive a lot of the distributor gains that you posted for April in the deck?

Unknown Executive: Yeah, thanks. So the Premier League program, let me just kind of outline it for you. It's a program that's an annual program. And it really is a business builder program. So it's for people that want to be building an organization over time. To qualify for the program, a distributor needs to, within the calendar year, recruit 10 first-line distributors.

Unknown Executive: Yeah, yeah, thanks. So the Premier League program, let me just kind of outline it for you. It's a program that's an annual program, and it really is a business builder program. So it's for people that want to be building an organization over time,

Unknown Executive: To qualify for the program, a distributor needs to, within the calendar year, recruit 10 first-line distributors. So in and of itself, the program, if someone wants to be a part of it, and qualify and get the perks,

Unknown Executive: So in and of itself, the program, if someone wants to be a part of it and qualify and get the perks, they've got to be focused on building new people. That's one element; recruiting new people. The second element is the activation element, meaning that they need to not just sign up, but they actually need to go out and then start to get their customers and start building their business. And so there's an activation element that they need to do, each one of those 10 people, 250 volume points to be able to become active.

Unknown Executive: They've got to be focused on building new people. That's one element, recruiting new people. The second element is the activation element, meaning that they need to not just sign up,

Unknown Executive: that they actually need to go out and then start to get their customers and start building their business. And so there's an activation element that they need to do each one of those 10 people, 250 volume points,

Unknown Executive: to be able to come active. And then there's a sales leader aspect of building. So it's really around, you know, having distributors see value, receive value, but be focused on building an organization. And then there's a whole bunch of perks that come along with that. So just high level, that's the program.

Unknown Executive: And then there's a sales leader aspect of building. So it's really around having distributors see value, receive value, but be focused on building an organization. And there's a whole bunch of perks that come along with that. So just high level, that's the program.

Unknown Executive: Great, and then the second question I had was for whoever wanted to answer, but I guess because Michael was just there. The return of growth in China is really impressive. And that used to be a very large part of your business a couple years ago, pre-COVID. So I was wondering if you could kind of like frame out your ambitions there or where you saw it going. Because it could be a large needle moon.

Speaker Change: Great, and then the second question I had was, for whoever wants to answer, but I guess because Michael was just there, the return of growth in China is really

Unknown Executive: Impressive, and that used to be a very large part of your business a couple years ago pre-COVID. So I was wondering if you could kind of like frame out, you know, ambitions there or where you saw it going, because it could be a large needle mooner.

Unknown Executive: Yeah, well, ambitions are huge, but the market, the opportunities, are very big there. And We have been spending a lot of time in the last 12 months in China, working with the leadership there, working with the company. We put new leadership in place. And, you know, we have very big plans in China. We've been, and we will be adjusting things that need to get adjusted. We looked at the company, you know, the way that we actually have our sales leaders and our service providers there. And with the compensation plan, the model, the direct sales model that we operate there, we made some adjustments that needed to be made.

Unknown Executive: Yeah, well, ambitions are huge. The market, the opportunity is very big there. And

Unknown Executive: We have been spending a lot of time just in the last 12 months in China working with the leadership there, working with the company. We put new leadership in place and, you know, we have very big plans in China. We've been

Unknown Executive: We'll be adjusting things that need

Unknown Executive: to get adjusted. We looked at

Unknown Executive: the way that we actually have our sales leaders and our service providers there

Unknown Executive: And with the compensation plan, the model, the direct sales model that we operate there, you know, we made some adjustments that needed to be made.

Unknown Executive: And, you know, I will say that it's working very well. We've had an uptick in something that we call LSP, which is basically a learning sales provider that has grown 400% in a very short amount of time, which again is a leading indicator of what's happening there. So, they have big plans. They're about to launch a preferred customer loyalty program, which is actually quite advanced. We've never done something like this before, so we have a lot of big expectations and big plans. Yes, we're starting to see the results. And again, you know, it's... Quarter by quarter, we'll be giving you more about it, but our expectations and goals are very big there. Okay.

Unknown Executive: OK. Thank you very much.

Unknown Executive: I will say that it's working very well. We've had an uptick in something that we call LSP, which is basically a learning sales provider that has grown

Unknown Executive: 400% in a very short amount of time, which again is a leading indicator of what's happening there. So big plans and

Unknown Executive: They're about to launch a preferred customer loyalty program, which is actually quite advanced. We've never done something like this. So we have a lot of big expectations, big plans. Yes, we're starting to see the results. And again, you know, it's

Unknown Executive: Quarter by quarter, we'll be giving you more about it, but we're expectations and and goals are very big there.

Speaker Change: Okay, thank you very much.

Linda Ann Bolton: Please stand by for our next question. Our next question comes from the line of Linda Bolton Weiser with D.A. Davidson. The line is open.

Speaker Change: Thank you.

Speaker Change: Please stand by for our next question.

Speaker Change: Our next question comes from the line of Linda Bolton-Wiser with DA Davidson. Your line is open.

Unknown Executive: Yes, hello. So, at this meeting that you had with the top distributors in Lisbon, Portugal, other than the GLP-1 drug mega trend, were there any other issues that were discussed broadly that they had their minds on in terms of really long-term ways of thinking about the business or any mega trends that are affecting the business? Or is there just anything else you could mention that came up?

Speaker Change: Yes, hello.

Unknown Executive: So I was wondering at this meeting that you had of the top distributors in Lisbon, Portugal,

Unknown Executive: Other than the GLP1 drug mega trend, were there any other issues that were discussed broadly that they have their mind on in terms of really long-term ways of thinking about the business or any megatrends that are affecting the business? Is there just anything else you could mention that came up?

Unknown Executive: Yeah, Linda, I don't know. So there really wasn't a focus on or a mention of the GLP-1 trends. You know, I think in the US, it's probably a little bit more in the media. Worldwide, I don't think it's really something that the majority of distributors are fearing about or focused on. Really, I can't think of anything except that the group, based on its vision of the future, was absolutely excited. I know maybe many of you talk to distributors; I think you're going to find the same thing when you're reaching out to the distributors that you have.

Unknown Executive: Yeah, Linda, I don't know, so there really wasn't a focus or a mention of the GLP1 trends. You know, I think in the U.S.,

Unknown Executive: It's probably a little bit, you know, more in the media.

Unknown Executive: Worldwide, I don't think it's really something that the majority of distributors, you know, are hearing about or focused on

Unknown Executive: Really, I can't think of anything except that the group based on the vision of the future was absolutely excited. You know, I know maybe many of you talk to distributors. I think you're going to find the same thing when you're reaching out to the distributors that you have. And if you look at the growth,

Unknown Executive: And if you look at the growth that we've had in terms of recruiting since that event, I think it speaks for itself where distributors are at right now because we haven't seen this for almost four years.

Unknown Executive: that we've had in terms of recruiting since that event, you know, I think it speaks for itself where distributors are at right now because we haven't seen this for almost four years.

Unknown Executive: Okay, and then, um, you know, I didn't I have a study at the table where you show the new distributor growth in April, but I'm just wondering, is there something about April, like, in other words, why didn't this big jump or this notable growth occur on March 15th? I mean, was there some kind of incentive or something that drove the timing of this happening, such that, you know, you're pointing it out right at that point in time?

Unknown Executive: Okay, and then, you know, I didn't,

Unknown Executive: study at the table where you show the new distributor growth in April , but I'm just wondering, is there something about April ? Like, in other words, why didn't this big jump or this notable growth occur on March 15th? I mean, was there some kind of incentive or something that drove the timing of this happening?

Unknown Executive: such that, you know, you're pointing it out right at that point in time.

Unknown Executive: Linda, hey, it's John. Let me just jump in, and if Stephan wants to add something, he can.

Unknown Executive: Linda, hey, it's John , let me just jump in and if Stefan wants to add he can. So we actually did see it increase right after Lisbon.

Speaker Change: which was in the middle of March. The reason why we're showing April is because if we only showed Q1, you just see two weeks worth of results, and now you really get to see six weeks worth of results. And if you look at slide six in the presentation,

Unknown Executive: So we actually did see an increase right after Lisbon, which was in the middle of March. The reason why we're showing April is that if we only showed Q1, you'd just see two weeks worth of results. And now you really get to see six weeks worth of results. And if you look at slide six in the presentation, Stephan actually does also show March improvements over February. And that's just with two weeks.

Unknown Executive: Stefan actually does also show March improvements over February , and that's just with two weeks. So March is where everything launched in Lisbon. I'm not sure if you were there, but that's, there was a lot of, you know, initiatives put forward, and distributors, what they were focused on in Lisbon,

Unknown Executive: So March is when everything launched in Lisbon. I'm not sure if you were there, but there were a lot of initiatives put forward and distributors. What they were focused on in Lisbon was Herbalife, not anything else. There were no distractions. And they left Herbalife motivated and inspired, and they came back, and they went to work. And that's why we see enhanced engagement, and that's why we're sharing that data with you. We normally wouldn't share April, but since the activity started late in March, we wanted to share April. Yeah, and I'm thinking just

Unknown Executive: was herbal life, not anything else, no distractions, and they left herbal life motivated and inspired, and they came back and they went to work, and that's why we see enhanced engagement, and that's why we're sharing that data with you. We normally wouldn't share April , but since the activity started late March, we wanted to share April .

Unknown Executive: Yeah, if I can just add also, when we left Lisbon with the 4,300 leaders there, obviously, they were very excited, but we also continued on with the four-week training program that happened in April, where we had 140,000 distributors from basically all the markets around the world that participated in four weeks of training. And so really, to the question that was asked earlier, I think it was Hale, it's the leveling up. It's called upskilling.

Unknown Executive: Yeah, and if I can just add also, when we left Lisbon with the 4,300 leaders there, obviously they were very excited

Unknown Executive: But we also continued on with the four-week training program that happened in April , where we had 140,000 distributors from basically all the markets around the world that participated

Unknown Executive: over four weeks of training

Unknown Executive: And so really, to the question that was asked earlier,

Unknown Executive: I think it was Hale, it's the leveling up, it's the upskilling. When you have 140,000 distributors and you've got a Premier League program that they opted in for, they said, I want to be a part of this and I want the training, and 140,000 of them were on four weeks of training, that's where you get really this movement. And so, you know, it's just not talking to 4,300 and they're excited about the future.

Unknown Executive: When you have 140,000 distributors and you've got a Premier League program that they opted in for, they said, I want to be a part of this, and I want the training, and 140,000 of them went through four weeks of training, that's where you get this movement. And so it's not just talking to 4,300, and they're excited about the future; this is big plans. Now as we move into extravaganza season, and this talks to the way that we're changing things, the value that they saw with Eric, it's making us even change the way that we do our extravaganza that we've done for 44 years.

Unknown Executive: You know, this is big plans. Now, as we move into extravaganza season,

Unknown Executive: You know, and this talks to also the way that we're changing things. You know, the value that they saw with Eric

Unknown Executive: It's having us even change the way that we're doing our extravaganza that we've done for 44 years.

Unknown Executive: A typical extravaganza will have eight speakers over two days that'll each have a section of 40 minutes or 45 minutes. The decision has been made because of the value of the training for the distributors and upskilling them, that actually there's going to be four or five hours of content that Eric is going to be training for all of the participants in the extravaganza. So these are not things that are just a promotion; this is not just something to get excited about that's going to create some movement in numbers over a month; this is a long-term plan over the next three years to be upskilling and turning our distributors into professional distributors that have the skills necessary to go out and be impactful in their markets. And so this long-term program is not just a little blip on the radar.

Unknown Executive: A typical extravaganza will have eight speakers over two days that will each have a section of 40 minutes or 45 minutes.

Unknown Executive: The decision has been made because of the value of the training for the distributors and upskilling them that actually there's going to be four or five hours of content that Eric is going to be training.

Unknown Executive: for all of the participants in extravaganza. So these are not things that are just a promotion. This is not just something to get excited about that's going to create, you know, some movement in numbers over a month. This is a long-term plan over the next three years.

Unknown Executive: to be upskilling and turning our distributors into professional distributors that have the skills necessary to go out and be impactful in their markets. And so, you know, long-term program, this is not just a little blip on the radar.

Unknown Executive: Great. And then just to stick on that distributor point, like the new people that are being added, the new distributors, can you characterize the demographics? Are they different from historically or similar? Or like, is there any color you can give on that?

Speaker Change: Thank you.

Unknown Executive: Great.

Unknown Executive: Just to speak on that distributor point, like the new people that are being added, the new distributors,

Unknown Executive: Can you characterize the demographics? Are they different than historically or similar or, like, is there any color you can give on that?

Unknown Executive: Yeah, I don't have demographics in front of me, but I would say, just as a distributor that's been 32 years building, I don't think the demographics have changed. I think whoever distributors have been talking to over the last few years, they're talking to the same people. It's their clients that are coming in, maybe to a club. It's their friends that are looking for an opportunity. You know, I don't think that, specifically, that demographic would have changed. But it's a good question, and actually, I'm going to look at it because I think it's valuable. Maybe we can bring this on the next call. Thank you.

Unknown Executive: Yeah, I don't have in front of me the demographics. I would say just as a distributor that's been 32 years building,

Unknown Executive: I don't think the demographics have changed. I think whoever distributors have been talking to over the last few years, they're talking to the same people. It's their

Unknown Executive: clients that are coming in maybe to a club, it's their friends that are looking for an opportunity. You know, I don't think that specifically that demographic would have changed, but it's a good question, and actually, I'm going to look at it because I think it's valuable. Maybe we bring this on the next call.

Unknown Executive: Please stand by for our next question. Our next question comes from the line of Jeff Van Sinderen with B Raleigh. Your line is open. Okay.

Speaker Change: Thank you.

Speaker Change: Please stand by for our next question.

Speaker Change: Our next question comes from the line of Jeff Van Cinderin with V. Riley, your line is open.

Jeffrey Wallin Van Sinderen: How should we think about price increases versus volume increases as a driver of your revenue for the remainder of this year?

Speaker Change: Great, thanks. So how should we think about price increases versus volume increases as a driver of your revenue for the remainder of this year? Just wondering how you kind of bake that end of your guidance.

Unknown Executive: Yeah, hey, so I think you're familiar with our approach to price increases, which we take, we, you know, we take them at CPI, and we take them throughout the year, and it depends on the marketplace. So you can see the impact of pricing over volume in our row forward slide that we put on the screen.

Unknown Executive: Yeah, hey, so I think you're familiar with our approach to price increases, which is to take, you know, we take them at CPI, and we take them throughout the year, and it depends on the marketplace. So you can see the impact of pricing over volume in our roll forward slide that we put on in the

Unknown Executive: And that'll be similar to what you see the rest of the year. But I think what you'll, you know, our expectations are certainly for volumes to be improved in the back half of the year versus the first half of the year. And you'll see a little bit more net sales coming from that.

Unknown Executive: on the screen, and that'll be similar to what you see the rest of the year. But I think what you'll, you know, our expectations are certainly for, you know, volumes to be

Unknown Executive: improved in the back half of the year versus the first half of the year, and you'll see a little bit more net sales coming from that.

Unknown Executive: Okay, when you say improved, do you mean improved sequentially, or do you mean volumes increased?

Unknown Executive: Okay, when you say improved, do you mean improved sequentially or do you mean volumes up in the second half year? I mean the trend, we expect the trend to improve in the second half of the year, which means either up or at least less down.

Unknown Executive: I mean, the trend. I mean, the trend. We expect the trend to improve in the second half of the year, which means either up or at least less down.

Unknown Executive: Okay, got it. And then I realize you've done a lot around the new GLP product line. Maybe you can speak to your latest plans to further evolve the weight management business and the time frame, I guess, for the next milestones to look for there, kind of amidst the GL drug phenomenon.

Unknown Executive: Okay, got it.

Unknown Executive: And then I realize you've done a lot

Unknown Executive: around the new GOP product line, maybe you can speak to your latest plans to further evolve the weight management business and the time frame, I guess, for the next milestones to look for there, kind of amidst the GL drug phenomenon.

Unknown Executive: Yeah, I can speak to that. You know, we're really following Jeff, the lead of our distributors on this one. It's quite interesting, and I don't want to speak about any specific companies, but I think that there are a couple of companies out there that are trying to really, from the top down, dictate in which direction they go in terms of the market, the GOP ones. We are really listening to our distributors.

Unknown Executive: Yeah, I can speak to that.

Unknown Executive: You know, we're really following Jeff the lead of our distributors on this one. You know, it's quite interesting, and I don't want to speak any specific companies, but I think that there's a couple of companies out there that they're trying to really from the top down dictate in which direction they go in terms of the market, the GOP ones.

Unknown Executive: We want to support them and make sure that we've got the products, like the product bundle that you've just seen. Some of them are very excited and are seeing opportunities. Others of them, it's just not something that they, you know, personally see because of the way or the way that they are doing their business of how they're going to go out and attract those particular customers that would be on GLP-1.

Unknown Executive: We are really listening to our distributors. We want to support them and make sure that we've got the products like the product bundle that you've just seen.

Unknown Executive: Some of them are very excited and are seeing opportunities. Other of them, it's just not something that they, you know, personally see because of the way or the way that they are doing their business, of how they're going to go out and attract those particular customers that would be on DLQ1.

Unknown Executive: So we are supporting them, but we're also making sure we're paying attention where we need to pay attention so that when the time comes, if they want more support, or if we think that we need to pivot a little bit faster or stronger into something, we'll be able to do that. But, you know, for the time being, we're not seeing the huge demand that I think, you know, some companies. Our feeling is that they are seeing or are reading and that they're making these big moves.

Unknown Executive: We are supporting them. We are also making sure we're paying attention where we need to pay attention so that when the time comes, if they want more supports, or if we think that we need to pivot,

Unknown Executive: a little bit faster or stronger into something, we'll be able to do that.

Unknown Executive: But, you know, for the time being, we're not seeing the huge demand that I think, you know, some companies

Unknown Executive: We're going to make timely moves to support our distributors. And we feel that's really the best strategy and the best way forward for us. So not denying there's a market for it, and not totally watching where that market's going and being prepared, but respecting and working with our distributors to make sure that we are doing the right thing.

Unknown Executive: are feeling that they are seeing or are reading and that they're making these big moves. We're going to make timely moves, supporting our distributors,

Unknown Executive: And we feel that's really the best strategy and the best way forward for us. So not denying there is a market for it and totally watching where that market's going and being prepared, but respecting and working with our distributors to make sure that we are doing the right thing.

Unknown Executive: Okay, thanks for taking my questions. I'll take the rest offline.

Unknown Executive: Okay, thanks for taking my questions. I'll take the rest off line.

Unknown Executive: Please stand by for our next question. Our next question comes from the line of Karru Martinson with Jeffries. Your line is open. Oh, they put Jeffries behind us.

Karru Martinson: Thank you. Please stand by for our next question.

Karru Martinson: Our next question comes from the line of Karu Martisan with Jeffries. Your line is open. Oh, they put Jeffries behind us.

Unknown Executive: Oh, they put Jeffries behind us. Good afternoon.

Karru Martinson: Good afternoon. Just to clarify, you said that much of the $262 million in the stub piece will be paid off with cash flow.

Karru Martinson: Good afternoon.

Karru Martinson: Just to clarify here, you said that much of the 262 million of the stub piece will be paid off with cash flow, two-thirds of that with free cash flow in 2024. So that would imply kind of a 173 million or so would be paid off with cash flow.

Karru Martinson: that is generated in 2020.

Unknown Executive: Uh, yeah, but let me just make sure I'm clear. So I, your math is right. What we're saying is we're going to pay off the whole 262, from cash flows generated from the business between now and when it's due in the third quarter of 2025. Two-thirds of that is actually inherent in our guidance for this year, which is you did the math. And that means we'd have to generate one third of cash flows next year in the first, you know, three quarters to be able to pay it off without anything else happening. Now we have, there's also, you know, where we've got an administrative building, [inaudible]

Unknown Executive: 24, correct?

Unknown Executive: Yeah, but let me just make sure I'm clear. So your math is right. What we're saying is we're going to pay off the whole 262 from cash flows generated from the business between now and when it's due in the third quarter of 2025.

Unknown Executive: Two thirds of that's actually inherent in our guidance for this year, which is you did the math.

Unknown Executive: And that means we'd have to generate one-third from cash flows next year in the first, you know, three quarters to be able to pay it off without anything else happening. Now, we have, there's also, you know, where we've got an administrative building.

Unknown Executive: that's up for sale because we don't need the space with the reductions that we're taking.

Unknown Executive: So that's some cushion that's not in the number. You know, there's obviously tons of availability on the revolver. So there's a lot of cushion in order to pay it off, but I wanted to at least give visibility to investors on how we think we're going to pay it off with cash flows from operations.

Speaker Change: All right then, thank you very much, guys. Appreciate it.

Unknown Executive: Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Michael for closing remarks.

Michael: Thank you.

Unknown Executive: Ladies and gentlemen, I'm Sean, no further questions in the queue. I would now like to turn the call back over to Michael for closing remarks.

Michael O. Johnson: Thank you very much, and thank everybody for being on the call. I think you're seeing a new Herbalife emerge here today, and the really wonderful thing, I'm stealing two lines from Stephan's presentation, we've experienced year over year growth in distributor numbers in April across all regions. The last time this occurred was almost four years ago, in 2020. And that everything we do daily is with our distributors in mind and focused on helping them attract and retain more customers and distributors and build bigger businesses. Those are two key elements to where we are today and where we're going.

Speaker Change: Thank you very much, and thanks everybody for being on the call. I think you're seeing a new herbal life emerge here today, and the really wonderful thing.

Michael O. Johnson: I'm stealing two lines from Stefan's presentation. We've experienced year-over-year growth in the distributor numbers in April across all regions. The last time this occurred was almost four years ago in 2020.

Michael O. Johnson: and that everything we do daily has our distributors in mind and focused on helping them attract and retain more customers, distributors, and building bigger businesses.

Michael O. Johnson: Those are two key elements to where we are today and where we're going. We're bringing more people in to the company. We are making sure and bringing Step-on in and building this team with John and Evie in North America and Rob and the team that's been built around the world to now focus.

Michael O. Johnson: We're bringing more people into the company. We are making sure and bringing Stephan in and building this team with John and Evie in North America and Rob and the team that's been built around the world to now focus 100% of our effort and energy on doing things, whether it's digital, whether it's product, whether it is training, whether it is bringing in Eric Worre to join us on our mission here. It is distributor-focused to help them build their business, help them build a better customer base with products that respond to the marketplace and the needs of transformation of customers and consumers to help them along their healthy and wellness lifestyle activities and in their journey that they're on. And this is what makes us very unique, 67,000 nutrition clubs. It sets us apart.

Michael O. Johnson: 100% of our effort and energy on doing things, whether it's digital, whether it's product, whether it is training, whether it is bringing in Eric Worry to join us on our mission here. It is distributor focused to help them build their business, help them build a better customer base with products that respond to the marketplace and the needs.

Michael O. Johnson: to work on transformation of customers and consumers to help them along their healthy and wellness lifestyle activities and in their journey that they're there. And this is

Michael O. Johnson: what makes us very unique. 67,000 nutrition clubs. It sets us apart.

Michael O. Johnson: And Stephan mentioned a couple of companies that have jumped head over heels into the GLP world. We're looking at that very carefully. We negotiated with a lot of people, talked to a lot of folks about the potential of GLP1 in this company, and said the best way for us to do this was to do it organically. Let our distributors come back to us with a plan, with an opportunity in the marketplace. Make sure our products respond.

Michael O. Johnson: And, you know, Stefan mentioned a couple of companies that have jumped, you know, head over heels into the GLP world.

Michael O. Johnson: We're looking at that very carefully. We negotiated with a lot of people, talked to a lot of folks about the potential of GLP1 in this company, and so the best way for us to do this is do it organically. Let our distributors

Michael O. Johnson: come back to us with a plan, with an opportunity in the marketplace, make sure our products respond, make sure our business activity responds to it. But also the things that we're doing in these clubs that differentiate us

Michael O. Johnson: Make sure our business activity responds to it. But also, the things that we're doing in these clubs that differentiate us are not only transactional, as Stephan mentioned, in terms of people coming in, grabbing a shake and going out the door, but also people coming in to work on transformation in their lives. How do I lose weight? How do I get healthier? What activity can I take?

Michael O. Johnson: is not only transactional, as Stefan mentioned, in terms of people coming in grabbing a shake and going out the door, but also people coming in to work on transformation in their lives. How do I lose weight? How do I get healthier? What activity can I take? What community can I be a part of? This is what makes

Michael O. Johnson: What community can I be a part of? This is what makes our company so different, so unique, and sets us apart from other folks in our sector. We have a real understanding of some of the challenges in the direct sales industry with some of our competitors, but we know we're different. We have an incredible management team here. We have the incredible opportunity with Stephan aboard, with John back with me, to make sure that what we're doing inside this company is focused every single day on the top line, building the business stronger, more recruiting, more selling, more opportunities, bottom line efficiency, laser focused on cost, making sure that our digital platform is laid out in a fiduciary sense, and making sure that we are delivering tools and opportunities to people.

Michael O. Johnson: our company so different, so unique, sets us apart from other folks in our sector. We have a real understanding of some of the challenges in the direct sales industry with some of our competitors,

Michael O. Johnson: But we know we're different.

Michael O. Johnson: We have an incredible management team here. We have the incredible opportunity with step out of board, with John back with me, to make sure that what we're doing inside this company is focused every single day on top line, building the business, stronger, more recruiting, more selling, more opportunity, bottom line, efficiency, laser focused on costs, making sure that our digital platform is laid out in a fiduciary sense and making sure that we are delivering tools and opportunity to people.

Michael O. Johnson: This is a special, special company, very, very unique. I'm here because of my passion for Herbalife and my belief in what we do. Our concern for our opportunity has never been greater, not concern, but what should I say? The opportunity for our opportunities has never, ever been stronger than I've seen it. We're going to go up. We're going to build this business stronger and better. I'm more confident than I have been in a long time.

Michael O. Johnson: This is a special, special company.

Michael O. Johnson: Very, very unique. I'm here because of my passion for herbal life, my belief in what we do. Our concern for our opportunity has never been greater. Not concerned, but what should I say? The opportunity for our opportunities never, ever been stronger than I've seen it.

Michael O. Johnson: We're going to go up. We're going to build this business stronger and better. I'm more confident than I have been in a long time. I've been back a little over a year and a half, and the excitement just keeps

Michael O. Johnson: I've been back for a little over a year and a half, and the excitement just keeps building inside Herbalife. So thanks for being on the call. We're going to have more good news for you in three months, so stay tuned, and let's go Herbalife.

Michael O. Johnson: building inside Irvolife. So thanks for being on the call. We're going to have more good news for you in three months. So stay tuned and let's go Irvolife.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.