Good afternoon, and thank you for joining the Fourth Quarter and Full Year 2024 Earnings Conference Call for Herbalife Limited. During the company's opening remarks, all participants will be in a listen-only mode. Following the opening remarks, we will conduct a question-and-answer session. As a reminder, today's conference call is being recorded. I would now like to turn the call over to Erin Banyas, Vice President and Head of Investor Relations to begin today's call.

Thank you, and good afternoon, good evening, everyone. Joining us today are Michael Johnson, our Chairman and Chief Executive Officer; Stephan Gratziani, our President; and John DeSimone, our Chief Financial Officer. Before we begin today's call, I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, which are both available under the investor relations section of our website. The presentation and earnings release include a discussion of some of the more important factors that could cause results to differ from those expressed in any forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non GAAP financial measures exclude certain unusual or non-recurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. And with that, I will now turn the call over to Chairman and CEO, Michael Johnson.

Thanks, Erin, and good afternoon, everyone, and thank you for joining us today. Today I have three pieces of good news to share with you. First, something I'm very excited about. The appointment of Stephan Gratziani, as the CEO of Herbalife effective May 1. Next, I'm equally excited to announce that Rob Levy will be stepping in the role of President of Worldwide Markets. And our third piece of good news is, our positive financial results and improving distributor trends. Let's start with the Q4 results, which were excellent. We delivered net sales growth on a constant currency basis for both the fourth quarter and the full year. On a reported basis, net sales for the fourth quarter were $1.2 billion, slightly below the fourth quarter of 2023. FX moved a lot during the fourth quarter, had FX rates in November and December remain consistent with the FX rates inherent in our fourth quarter guidance, net sales for the fourth quarter would have been up 1% year-over-year, and at the end of a very high end of guidance. In addition to our good sales results in the fourth quarter, we also delivered strong adjusted EBITDA results which significantly exceeded guidance and prior year. During 2024, we also paid down $250 million in debt and reduced our total leverage ratio to 3.2 times from 3.9 times at the end of last year. John will go into more detail about the results and 2025 guidance later on the call. When I returned to Herbalife in October of 2022 for the third time as CEO, I promised the Board and myself to focus deeply and thoroughly on how we best go about succession and appoint the next CEO of this great company. Herbalife operates in over 90 markets as a public company in…

Thank you, Michael. It's a privilege and an honor to be stepping into the role of CEO, and I'm excited to continue our partnership as you transition into the role of Executive Chairman. Working alongside you, Rob, and our incredible team of executives, our distributor leaders and employees has reinforced what I already knew as a distributor. The passion, dedication and strength of our Herbalife company and community is unmatched. As the world's largest publicly traded direct sales nutrition company, the impact we have made in the world over the last 45 years is truly incredible. Our scale and reach globally puts us at a unique position for the future and that future is to become one of the world's most important health and wellness platforms. But before we talk more about that, let's take a look at the fourth quarter and full year distributor trends. The initiatives we launched in 2024 to rebuild our distributor base and activity levels are showing positive results. As we look at Slide 6, our positive trajectory continued with the key takeaways being a continuation of those I highlighted last quarter. With the exception of China, new distributor growth continued across all markets. Starting with the chart on the left, you can see new distributor growth was up 22% year-over-year in Q4, our third consecutive quarter of growth and up 11% for the full year compared to 2023. Moving to the chart on the top right, you can see that all levels of our distributor leadership are active in bringing in new distributors, especially at the President team level as well as the Mill team and GET team levels. These individuals typically have the longest tenure, have built the largest organizations and know-how best to support new distributors. Again, we are very encouraged by…

Thank you, Stephan. I'll begin with our Q4 financial highlights on Slide 8. Please refer to our presentation appendix for our full year financial highlights. We are very pleased with our Q4 2024 results. Both net sales and adjusted EBITDA were strong and would have been even stronger if not for the movement in currencies over the last few months. Net sales were $1.2 billion, down 0.6% versus Q4 of last year. However, on a constant currency basis, net sales were up 2.7% versus Q4 of 2023 and further demonstrating the strength of our fourth quarter results. When we provided our guidance at the end of October, our FX assumptions were based on the average daily exchange rates for the first-two weeks of October 2024. Had (ph) FX rates in November and December remain consistent with the rates inherit in our Q4 guidance, net sales for the fourth quarter would have been approximately $1.23 billion or a 1% increase over Q4 of 2023, which would have been at the very high end of our guidance range of down 3% to up 1% year-over-year. Currency movements, especially the movement over the past few months is a theme that carries into our 2025 outlook, which I'll talk more about a little later. Full year 2024 net sales were $5 billion, down 1.4% year-over-year on a reported basis. On a constant currency basis, net sales were up 1.2% for the year. Our net sales are relatively stable and we've had growth in both the fourth quarter and full year on a constant currency basis and we remain focused on driving sustainable net sales growth. Moving to adjusted EBITDA. Our fourth quarter adjusted EBITDA was $150 million and above our guidance range of $105 million to $135 million. Adjusted EBITDA margin was 12.4%, up…

Thank you. [Operator Instructions] And our first question will come from the line of William Reuter with Bank of America. Your line is open.

Hi, guys. Good evening. Thank you for taking our question. This is Rob Rigby on for Bill. So, I guess the first one from us would be what you think needs to happen to turn around North American volume trends and how long do you expect this to take?

Hey, Rob. Thanks for the question. We've been talking for the last couple of quarters about the fact that we need to rebuild the distributor base and the supervisor base. And so after 14 quarters of decline quarter year-over-year -- quarters year-over-year, we finally saw last quarter the supervisor -- the active supervisor base rebuild. And that came after three quarters of new distributor growth. Again, it's a question of rebuilding. We've been saying it kind of time and time again, it's a quarter-by-quarter, but we're very positive about what's happening. And it's just this question of time. You've got certain markets that have come quicker than others and the US is on track to have its moment.

Yeah. If I can jump in. So, look, obviously all regions performed really well and had constant currency net sales growth with the exception of North America and China. But North America, all of our relevant distributor metrics improved, their trends improved. And it's improved multiple quarters in a row. Our net sales went from down 10% to 11%-ish in Q1 to down 7% in Q2 to down 6% in Q3 to down 3% in Q4. So it's still down, but it's down mid to low single digits now trending in the right direction with the foundation of distributors metrics building. So I think we're on the right track. It is a matter of time, but it's not far away.

Great. No, that's super helpful color. And then in terms of debt repayment, looking at your 2025 maturity, is that -- is the plan just to repay that once it comes due in September. And then I guess in terms of debt repayment over the rest of the year, based on your total leverage guidance for 2025, it seems like that may be the only debt repayment that you're targeting in 2025, I guess. Is that correct? And if you have…

It's mostly -- yeah, it's mostly correct. So, we have the 2025 just under $200 million due in September. We're going to pay that down. Our revolver is currently undrawn. We'll draw it a little bit to help pay down the debt, the 2025s. And we said that since a year ago when we said that we could pay the 2025 with cash flow from the business, at that point in time, our revolver was drawing at $170 million. So we anticipated that we would have some revolver drawn in September when we paid on the 2025. That gives us an opportunity to pay down the revolver post paying down the 2025, if that makes sense. So there is some opportunity beyond the 2025 to continue to pay down debt.

Understood. Thank you very much. I'll pass it on.

Thank you. One moment for our next question. And that will come from the line of Linda Bolton Weiser with D.A. Davidson. Your line is open.

Hello. Congratulations on the progress being made and congratulations, Stephan, on your CEO ship. So, I was wondering about the constant currency sales guidance range for 2025 up 1% to 7%. It's pretty wide. Can you talk about like what would dictate or what would have to happen for you to get to the high end? And then what would have to go wrong or something for you to kind of end up at only 1% or 2% growth for the year? Thanks.

So a couple things. So first, I don't think 600 basis points is that wide in this environment and not inconsistent with things we've done in the past, so let's start there. Second is on the high end, there's opportunities in China and the US to do beyond what we expected. We don't guide by region, but in those regions, there's more upside, I think, than there is downside risk and that could get us to the high end. And on the downside, it's probably the kind of the same -- same kind of markets, markets that aren't quite performing as well in 2024 as we hoped.

Okay. Also…

By the way, I mean, they're positive numbers, right. I mean, that's important, right. I want to put this in perspective, right. Because I don't want to leave with we could be on the low end of guidance. From where this company has been for multiple years now, we are projecting constant currency net sales growth in 2025. It's just a matter of how much, right. And either even at 1% below in the guidance, that's still a positive result that will give us a lot of opportunity and 7% will dramatically give us more opportunity, but it's still positive either way.

Yeah, of course. And then I guess, am I reading this right that with the currency impact, your EBITDA margin in 2025 is not projected to really increase? It looks flattered down, right, including the FX impact?

Yeah. We have about a $70 million headwind on EBITDA, right. So, our EBITDA was $635 million in 2024, our guidance is $600 million to $640 million. So the guidance has us slightly below, slightly ahead of where we performed in 2024. And so margins won't change that much. Having said that, if not for currency, they would have changed substantially. There is an 80 basis points impact to our 2025 EBITDA margins from currency headwinds over 2024 average currency rates. So there's a meaningful headwind. If not for the headwind, we would be meaningfully higher in EBITDA margins.

Yeah. Okay. And then I guess, China, not only was it down, but it was a little bit weaker than we had projected in constant currency terms. The revenue decline was a little worse. So, maybe you could just kind of remind us what's going on there? And how much of it is macro and how much are you controlling at this point? And just kind of give us a reminder about that market.

Sure, Linda. I'll take this one. Thank you. So China, as we mentioned, we made a major strategical shift in the way our business is actually focused. It was really to turn to a customer focused. And for the first time ever, we launched in June of last year, a customer loyalty program, which, by the way, yielded the kind of results that we wanted. We have a much stronger customer base and growing customer base. And so there was a shift in focus and we also shifted the focus for the Herbalife Premier League to be focused on customers instead of new sales reps, something we adjusted towards the end of the year and so it was weaker than we had thought. It's the -- the transition is a big transition. It's the first time we've ever done something like this in the market. And so, yes, we were a little bit surprised, just a little bit weaker, but at the same time, a lot of what we were trying to do has started and we're seeing the results there, but we're not satisfied. We know that market has potential and we've got an event that's going to be taking place at their extravaganza, we're launching the Diamond Development Mastermind there with the top leaders to really have them focus in and be able to put into place the initiatives into their business and their markets to be able to get the kind of growth that we want to get out of China.

Thank you. One moment for our next question. And that will come from the line of John Baumgartner with Mizuho Securities. Your line is open.

Good afternoon. Thanks for the question. Maybe first off, Stephan, I wanted to come back to North America acknowledging the return to growth in non-sales leaders and distributors, which -- it's a nice inflection, but looking specifically at preferred customers, those were down 10% in Q4. And I know it's not among your main KPIs, but I am curious how you think about the continued declines there? Is there a read across from that in terms of the pulse of the business, your turnaround efforts thus far? And what it might tell you about any additional refinements necessary for the model or the Herbalife brand?

Yes. Thank you, John for the questions. We've spoken in the past about the fact that over a number of years the business really shifted. It went to more of a food service transactional business, which has been fantastic. I mean, we talked last year about these 4.4 million customers that had come in, I think in 2023. And it's a very strong business, it's a great foundation. But the transition of those food service customers to using the products from a product result standpoint has been an area of weakness for us. And so a lot of the work has been focused on working with the clubs and the club leaders to have them build into their models, this incredible model of serving customers on a day-to-day basis, offering a value in terms of product results. And so our business in the U.S. is a good percentage nutrition clubs. We have obviously different demographics, different areas, people that focus on different things. But I would say the big transformation for us and the focus is to really balance out the transactional with the transformational. And so I think this is where we kind of see that we've got just kind of a mixed group of people in different places in their models of really having the balance that they would want to have and we want them to have. So we're just fully supporting that. One of the things that really has started to happen, we mentioned it as well last year, was starting to have trainings instead of very basic vanilla, here's how the marketing plan works, here's information about the products is moving to more DMO centric trainings and that's been something that's we've had a great success with here and there's more demand for it. So, that's very positive, the response has been positive and there's just a lag in terms of distributors putting everything that needs to be put into their models to get the results that we want.

So then is it fair to think that what you're attempting to affect in the business? Is it fair to look at those preferred customers as sort of a barometer or a proxy for the progress you're making in terms of moving from transactional to transformational?

It is, but it's also about what value they're being offered. So, some -- I'll just -- we talked about this in the past, but some clubs, the transition from a customer who buys a shake at the bar to a preferred customer, it's 1% or 2%. So, you've got 100 individuals walking into a club, only one or two are becoming preferred customers. So, depending on the model that they have, the actual conversion of customers to preferred customers is low. Our job is to have everybody raise, those numbers. We believe that there's value in not just walking in and having a convenient, healthy shake or tea, there is value in getting on the Herbalife products and getting a product result that is visible, that feels and that's a fundamental part of our business. So it is a little bit of an indicating leader, an indicating number. But we have work to do because in general, overall, the model hasn't really adopted the aspects they need to adopt to make that happen and change those numbers, but we're working on it.

Okay. And then, John, coming back to FX, it's a big drag on EBITDA this year per the guidance. And I'm curious, the business has some, I guess, good sized exposure to regions where you can argue currency depreciation is sort of a structural factor. And I mean translation impact is one thing, but how do you think about the underlying economic? I mean, at what point does it maybe make sense to rethink the supply chain where you shift more to local production and match with local consumption? Given that we could be in, maybe a four year period of on and off tariffs and disruption, who knows what happens after that?

Yeah. That's a great question and we do constantly look at those things and have relooked at it in the light of some of the tariff discussions that have been published. First, let's take it into pieces. Most of the impact of currency is translation, okay. It's -- maybe $10 million to $15 million of the $70 million is transaction. So a lot of it is translation. So that limits a little bit of the opportunity. The biggest currency that's impacting us is the Mexican peso, the second biggest is the Euro. Most of our product in Europe is already denominated in euro and made in Europe. Mexico, we don't have the opportunity to produce locally for a number of reasons. We -- if there's a tariff imposed, we could make the product somewhere other than the U.S. potentially, but we're not going to make it locally. So there is not a lot of ability to create the natural hedges for manufacturing. We have done it in a handful of countries, but even in those countries, it has somewhat limited impact because a lot of the ingredients are priced in dollars, even at local conversion costs are priced in local currency. So -- and we see that in Brazil where we make a number of products in Brazil, but the ingredients are priced in dollars. So it's just not a huge opportunity. The bigger opportunity is on the price side as the currency movements kind of work their way down into the local inflationary changes. And then we can take price increases as its seen in the local inflationary conditions in the marketplace.

Okay. Thank you.

Thank you. One moment for our next question. And that will come from the line of Hale Holden with Barclays. Your line is open.

Thanks. And congrats, fellas, on the new roles. John, I had two quick ones for you. The first one is on the leverage target, it would seem like maybe you could do better than three times this year. I just wanted to make sure I wasn't missing anything in your free cash flow bridge just because…

Our stated goal is to be at or below three times and that hasn't changed. It doesn't mean if we do better, we do better, that would be below. But we have not changed that target.

Right. And the second question I had was maybe I need a tax book for dummies, but could you just tell us which IP you moved to Europe and then maybe walk through very simplistically why it's not changing the 30% tax rate that you guys pay?

Well, okay, so actually it is more complicated maybe than you might think and that's why you're asking the question. So we transferred some IP, doesn't matter what IP, right, but it's intellectual property that we moved. What the purpose of the move really is twofold. One is to facilitate better economic transfer of cash in the future, which we need as we look to pay down debt that wasn't contemplated when the original structure was put in place. But this structure also gives us greater flexibility to move other things around like if we did want to move manufacturing around or we did want to consolidate facilities, this structure gives us a better opportunity to do that. Now this -- now that's question A, that's why we did it. The impact on the future cash rate -- I mean, future tax rate is excluded from guidance. This was a non-cash benefit this year. Going forward, there will be somewhere around 500 basis point of non-cash detriment that offsets this over a long period of time. We'll just keep carving it out. We carved out this and we'll carve out the offsetting non cash debit that you'll see in the P&L. So it doesn't change our cash tax at all. It was non cash benefit this year. It'll be a non-cash detriment in future years, but we've excluded it for guidance, which I think is important given its non-cash, given that we're looking -- the major purpose of this reorg was to generate more cash to pay down debt. We're going to -- like I said, we carved out the benefit, we're going to carve out the detriment.

Great. I follow that. Thank you very much.

Thank you. One moment for our next question. And that will come from the line of Karru Martinson with Jefferies. Your line is open.

Good afternoon. Just regarding the different demographics of your distributor base here in the United States. We've gotten the question a couple times now, is there an impact from the immigration policies of the new administration?

Hey, Karru. Thank you for the question. Look, I think everybody sees the headlines and it's hard to know the reality on the ground. For us, it's just too early to tell if there's going to be any impact whatsoever. But again, it's -- headlines are headlines, how real it is and to what extent it's impacting, we just don't have enough to know right now.

Okay. And then when we look at the Latin American distributor growth, very strong numbers, how much do you feel that has been driven by the changes that you've done in the market? And is that something that you would think of replicating in other markets?

Yeah. I think it has a lot to do with what we've changed. I mean, John, can talk about kind of the optimization that we've done there, but there's been a lot of support for distributors in terms of just making sure the opportunity that they have financially speaking is really designed for their markets. And so, John, maybe you can talk a little bit more about that.

Yeah. Look, I think the one size fits all, which is kind of the foundation of our marketing plan. We call it marketing plan, it's our distributed compensation plan. The incentive program was pretty similar across the globe. And one of the big movements we have along with distributor leaderships is to find the optimal incentive program for various countries based on what's going on in those countries. And our Latin American tax, it's not in all Latin American markets, but it's in most, has been very successful and we do think that opens the door to additional possibilities. So, it's all about creating the optimal incentive program for each market. And it's one of the reasons why volume points aren't as a valuable metric as it used to be because now we're changing volume points. So, when you look at the year-over-year comparison, it doesn't tell you much. So what we're going to do is not use that metric anymore publicly and just deal with net sales still providing investors with visibility into the change in net sales that came from volume, but we don't use volume points anymore.

Thank you very much. Appreciate it.

Thank you. One moment for our next question. And that will come from the line of Doug Lane with Water Tower Research. Your line is open.

Yes. Hi. Good evening, everybody. Congrats, Stephan. And Rob is in the room, congrats as well. Stephan, the number that really stuck out to me was that new distributor number. The 22% is an acceleration, but it's a pretty sharp acceleration from 14% last quarter and 12% the quarter before after several years of negative. So I really want to drill down on what is going on? What are you doing to drive that acceleration of new distributors and now as we see non sales leader members and how are we going to see that manifest ultimately in sales leaders?

Hey, Doug. Thank you for the question. Look, we've been saying the same thing for the last few quarters, right. We needed to -- need to rebuild our distributor base. And so since the beginning of last year, all of the initiatives that were put into place, whether it was to actually come up with the program, the Herbalife Premier League which for the first time in, I don't know how long as a distributor, I don't remember there ever being a time like this where there was an actual program that focused on distributors going out and having a target of the amount of new distributors they were going to bring into the business. And along with that target would be also a focus on activating them. And along with that target, a focus on getting 20% of those distributors to convert and qualify supervisor and become sales leaders. And so, number one, having a program that never existed before has made a difference. It's been one initiative. That program actually really went far beyond our expectations. If we would have had the same program in 2023, there would have been seven times less people qualifying for it. So we have a situation where we've got a focus now as a company. We've brought in new training and given support to leaders that we've never done before in the past. We've upped the type of training that people are getting in terms of having that than things don't happen. And I think that's where you see this acceleration and the momentum and rebuild. And so our job is to support them in that process with the programs, the initiatives, the tools and the technology to go out and build and scale their businesses. And so we are just very steady. We are on this focus. We will continue to deliver more service and value to the distributors and tools and allow them to go out and do what they do best, which is build businesses.

Well, certainly the numbers bear that out. And looking at the average sales leader number, it stabilized in the quarter for the first time also in many years. And so I would read through that this new distributor growth is starting to manifest itself in sales leaders. So, I guess the question is the timing and the magnitude of where we ultimately end up since my models are based driven by the sales leader number?

Yeah. I mean, again, we've been saying quarter-by-quarter. We have different regions at different places in terms of where they are in implementing and how many quarters of growth they have of new distributors coming in and how high that growth is. And so it's really going to be the consistency of the rebuild over time. I wish I could pick out a quarter. I think we're confident that moving into the second half of this next year of this year, we are going to hit our stride. Again quarter by quarter, we'll be back next quarter and sharing more. But we all love to have that looking glass into the future and, yeah, we just -- quarter-by-quarter for us.

Got it. Fair enough. Thanks, Stephan.

Thank you.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call over to Mr. Michael Johnson for any closing remarks.

Well, I've got a few. This is my swan song. I'm a little emotional about it, I have to be honest. But before we end the call, I just want to acknowledge the events in Los Angeles over the last month, the recent wildfires, they've impacted so many people, distributors, employees, our communities. And a helpful hand from so many employees and we appreciate all those who've stepped up to offer support, especially the first responders that are out there. In our true fashion, we've had employees and distributors come together to provide nutrition, financial assistance through our family foundation and then personally a lot of people were picking up clothes and delivering them goodwill and Red Cross donations were made and personal donations were made. It just shows the strength of our community and how well we respond to things like this. For those of you who are not in LA, it's devastating. This is our home. This is where the company was founded by Mark Hughes. And Mark had a dream in 1980. And when I walked in the door here in 2003, I'm not sure I fully grasped it or understood it. I thought I was walking from my entertainment background with a content and distribution company. I didn't realize the blood, sweat and tears that went into the individual efforts that make this company so interesting and so great. We've been portrayed and mis-portrayed over time. We fought some battles. We dealt with some incredible instances. Mark did it in the 80s and 90s. I had to do it in the 10s, the 20s and 15s, and deal with lies and misinformation and images that got smacked for our company that just weren't true. I wish I could drag each of you through our supply chain…

This concludes today's program. Thank you all for participating. You may now disconnect.