Good afternoon, and thank you for joining the First Quarter 2025 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. You may begin.

Thank you, and good afternoon, good evening, everyone. Joining us today are Stephan Gratziani, our President and incoming Chief Executive Officer; 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 President and incoming CEO, Stephan Gratziani.

Thank you, Erin, and good afternoon, everyone. Thank you for joining us. It’s an incredible honor to be with you today as I transition into the role of CEO. I take on this responsibility with a profound respect for Herbalife’s 45 year history and with clear purpose to honor our past while redefining what’s possible for the future. I want to begin by expressing my deep appreciation for Michael Johnson, whose leadership and vision have been instrumental in shaping the strong foundation we stand on today. His contributions to Herbalife’s global impact are enduring, and I’m committed to building on that legacy. I’m pleased that Michael will continue to support the company in his role as Executive Chairman. Herbalife’s mission has always been to change people’s lives through better nutrition, stronger community, and an entrepreneurial business opportunity. That mission remains unchanged, but the way we deliver it is evolving because the world is changing. The gig economy, digital and social platforms, and shifting consumer expectations are real forces. We consider them not only an invitation for us to evolve, but an opportunity for us to lead. Before we get into the Q1 results, I want to share with you three things. First, my conviction. I believe Herbalife is uniquely positioned, perhaps more than ever, to lead in the new health and wellness economy. With 2.1 million distributors and a brand trusted around the world, we have the human foundation, our network effect to reach customers in ways few companies can match. Second, our transformation. We are building on the strengths of our brand, our business model and our high quality science-backed products. We will maximize the power of direct selling and expand our reach through technology, personalization and tools that empower our distributors to connect more effectively with customers in…

Thank you, Stephan. Turning to our Q1 financial highlights on Slide 9, we are very pleased with our strong first quarter results. Net sales were $1.2 billion down 3.4% versus Q1 of 2024 and just above the midpoint of our guidance range of down 1.5% to down 5.5% year-over-year. On a constant currency basis, net sales were up 1.4% versus Q1 of last year, a little below the midpoint of our guidance range of flat to up 4% year-over-year. FX rates had a negative 480 basis point impact on year-over-year sales which is slightly better than expected as there has been a small improvement in FX rates versus the rates used in our Q1 guidance. Moving to adjusted EBITDA, our first quarter adjusted EBITDA was $165 million and above our guidance range of $140 million to $150 million. Adjusted EBITDA margins with 13.5% up 260 basis points versus Q1 of last year, marking another quarter of strong operating performance primarily driven by cost savings initiatives implemented in 2024. CapEx for the quarter was $18 million, significantly below the low end of our guidance range of $30 million to $40 million, primarily due to the delay and reprioritization of certain projects with some being shifted to later in 2025. Capitalized SaaS implementation costs were approximately $5 million in the quarter. First quarter gross profit margin improved to 78.3%, up 80 basis points compared to Q1 of 2024. The increase in gross profit margin was primarily due to pricing actions we took over the past year which provided approximately 80 basis points of benefit along with approximately 50 basis points of favorability from reduced input costs mainly related to lower raw material cost. These benefits were partially offset by 50 basis points of headwinds from higher inventory write downs year-over-year. First quarter…

Thank you. [Operator Instructions] Our first question comes from the line of Chasen Bender with Citi. Your line is open.

Great. Afternoon, everyone. Thanks for taking the question. Stephan, to start, I was hoping you could expand a little bit on the monetization strategy of Pro2col. I realize it’s still pretty early, but given the expectations for adoption that you were highlighting earlier, how do you anticipate that the ROIs will evolve through 2025 and 2026? And related to that, it’s been almost a year since I think you first discussed the conversion opportunity at U.S. Nutrition Clubs. Could you just give us a sense how the conversion rates have evolved over the last year, and how the Pro2col integration or launch could potentially influence those conversion rates going forward?

Yes. So Chasen, thanks for the questions. So first of all, I appreciate the fact that you said it’s a bit early to start talking about the ROI. Obviously, this is a new era for us as a company. Launching a digital platform that supports our business, supports more product consumption, longer product consumption, sales of new products, and supports distributors in helping their customers achieve the best results possible and create a stickiness to the company that we’ve never experienced before in this way. So I’ll let John talk a little bit about kind of how we’ve modeled things out. But again, it’s very new. We will be launching the beta in July and in October starting commercialization. So again, I’ll let JD talk a little bit about that. On the Nutrition Club conversion, it’s a huge opportunity for us. And you’re right, it has been probably just over a year that we’ve been talking about it. If we look at the 2024 data of unique consumers purchasing from U.S. Nutrition Clubs, it’s almost 4 million people. I mean, if you think about that in the United States, it’s a huge amount of people. And as you mentioned, we’ve been talking about conversion 1% to 2% conversion as preferred customers. And part of it is that the people that are distributors and the people that are working in the clubs that are selling to consumers because it is really a consumption based more of a food service model. They’re not taking the time specifically to sit down with someone and ask them what their goals are and to explain the products to them or to go through and evaluate how they’re eating. And so to have a technology that is as simple as saying, hey, download this QR, scan the QR code, download, do a digital diagnostic, they may promote it and say, you’ll get $5 off your next visit here at the club. You take the 4 million people and we will be looking at different AB testing, different conversion models. It’s clear that we are going to go beyond the 1%, 2% conversion. And so again, early days, but we see that there’s a huge opportunity for us and that’s just the United States. I mean, we can then talk about the 65,000 clubs around the world. But your points are very important. These are huge upsides for us. And yes, it’s early, but I think logic would tell you that this is going to have a very positive impact on conversion. And this is again, new territory. Let me pass it over to John to talk a little bit more about the modeling in terms of the memberships and the users.

Yes. So Chasen, thank you. This I think is an important question. When it comes to ROI and creating value, there’s three main components and there’s some subcomponents of a couple of them. So first, the app itself could generate revenue. I say could because there’s likely to be a fee for that unless you buy product. And so it itself can have some revenue generating attributes. That’s one. Two, the app will help us sell more product. And I kind of put that into three buckets. So there’s the ultra personalized bucket that’s tied to Link BioScience, which is very much a product unique to you, with your name on it, based on your biomarkers and how you’ve answered questions and whatnot. So that’s one subset of it. Two is there will be products specific to the Pro2col app that, that are not in our portfolio today that will get launched over time. We’ll get into more details next quarter as to what that looks like, and that should be incremental revenue. And then three, the app should help us sell more of our Herbalife product. And then – so those are three subsets of the product value and then there’s new distributors and new customers and that comes – I’ll put that in two buckets. So really, there is the Herbalife bucket. We think there’ll be – this will be really a new DMO for our distributors that can bring in new distributors and generate new customers. But also, Pro2col was originally being developed for Pruvit and for their distributors. And now their distributors have an opportunity to sign up for Pro2col and become Herbalife distributors and that will help us. So hopefully that, that, that kind of buckets it. Lastly, I’ll tell you, in terms of the 2025 projections that we use for guidance, we included the cost of Pro2col. We have not included revenue yet because when we launch the app in beta, it will be July. Maybe there will be some revenue for some product at that point, but it will be small. The commercial launch is October. We’ll know a lot more by then, and we’ll start including more into our guidance as the year progresses.

Got it. Thanks for that color. And then secondarily for North America, the trend on a lot of the distributor number, KPIs and volumes too has taken a sequential step backwards. So I was hoping you could provide some additional perspective on what’s driving that and your expectations for the market in context of 2025 guidance.

Yes, I’ll take it from a high level. So when we think about net sales and just overall volume in the U.S., the U.S. finished the quarter very strong. It actually started the quarter strong. It had a weak February, which I think we will come. And there could be a few reasons why, including there was a lot of noise in the world back then that kind of slowed things down and the consumer was pretty weak in February in general. And also we were launching a lot of new technology the first week in March, including our new e-commerce platform in the U.S., our digital IBP, which is the kit you have for signing up, which was much less expensive because it was digital leads. There’s a whole host of different actions we took at the beginning of March that may have slowed things down in February. Why distributors waited for the new stuff to come in March, so. But I will tell you, we finished the quarter strong and we expect the North American region to improve Q2 versus Q1 sequential trends and continue to improve during the year.

Got you. And then if I can just sneak one last one in, the guide for the constant currency sales guidance for 2025 came down by about 1% at the midpoint, which is more than just the flow through of 1Q. And this is happening when broadly new distributor growth ex-North America, ex-China still looks pretty healthy. You’re getting pricing in a number of markets and the overall trend in active sales leaders and non-sales leaders distributors is headed in the right direction. So they’re kind of pointing in opposite direction. So curious if you can elaborate on why the reduction to the midpoint of guidance.

Yes. I mean, so what you’re saying, it is slightly in the different direction, right. It’s not materially in the different direction, right. I mean, you take the Q1 trend if you annualize it. Yes, we took the year down by slightly more than what the annual number would be for the first quarter, but not much. So it really was basically rolling in what we saw in the first quarter. We had a little bit of weakness in Asia Pac and we rolled that in to the back half of the year. And we’re not expecting a lot out of China, although we are expecting improvement. And I think we’ve launched, we’re very cautious on China. We’ve been through a roller coaster ride over the last five years in China. And we have a lot of initiatives. We’re very hopeful, but we’re going to wait and see on China before we roll any meaningful upside into our projections.

Okay, I’ll take the rest offline. Thanks so much, guys.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open.

Good afternoon. Thanks for the question. Maybe first off, building on the last line of questioning, I wanted to come back to the Link BioSciences and Stephan, could you elaborate a little bit on your sort of intentions for that business? The offering seems maybe a bit more advanced and maybe a bit more expensive relative to the needs of the average person looking to drop a few pounds or maintain a healthy weight. So is this something that you’re looking to tap into athletes, a more specialized audience with the NSF certified for sport and have it slide into the energy sports fitness category. How are you thinking about the audience for Link?

Well, I think there’s a few audiences, definitely athletes, and without going into details, we actually the last couple of weeks have spent a good amount of time with some of our partners that work with very high level athletes and this is something that is of high interest to them. So we’re looking at opportunities and programs there. I think if we look overall and to Jason’s question a little bit in terms of kind of the U.S., the U.S. market is becoming more and more sophisticated. It has more and more access to information. I think there’s more and more competition in terms of what’s being offered by companies. And so Link BioSciences offers something that is really unique and differentiates us from almost every other company out there. To be able to formulate on a one-to-one basis for someone and not just on a one to many basis, it’s just something that is not – it’s not common at all. I mean, look at what’s in your cupboards, how many of those products were formulated one-to-one for you. And so we believe that there’s going to be a category of customers that are the more sophisticated that, number one, are looking for something and having something unique for them that’s more customized. It’s going to bring customers in that don’t have anywhere else to go, because we have it number one, first of all. So the second is the technology. And so having this technology and being able to build upon it, we believe over time, what’s going to happen is yes, now it’s hyper customized, but we actually think the world is going to go in that direction also. So if we go down the road five or ten years from now, I think that the population overall that’s going to be looking for hyper customization, it will be bigger. And so being ahead of this and especially having acquired this technology and being able to build on it and expand it internationally, it’s going to position us in market ahead of, I don’t want to say any competitors, but I would say almost any competitor. So it’s going to bring different levels of customers now. And yes, you’re right, it’s more of a premium customer and athletes definitely fall into that category. But we believe over time, this will become more generalized and we will be at the right place at the right time because of the moves that we’re making today.

Okay, thanks for that. And then, John, if we could dig a bit more into Asia Pacific, that region seen some pretty good growth in the active non-sales leader distributors for a couple of years now. And yet, the volume isn’t really converting. Can you elaborate a bit in terms of what you’re seeing on the ground? And maybe it’s India versus non-India, but is it macro? Is there an upskilling need that you haven’t really implemented yet? Any thoughts on Asia Pacific would be appreciated.

Yes, sure. So Asia is still performing well, by the way, right. And India is a big part of that and it’s still growing. But the numbers have gotten big and the growth rates have decreased as expected and that has an overweighting impact on the consolidated APAC numbers that you’re probably looking at. So there’s still a lot of strength in APAC, but there was a few markets that had some weaknesses in the quarter. Korea was a little weak. Some of that is timing of price increases. We expected to launch a price increase in March, which we thought would pull a little bit of volume into Q1. That didn’t happen until April. So we’ll make up the – I think we’ll make up the Korea volume in April. Taiwan had a number of promotions last year and it’s got some tough comps. It’s not doing great. Indonesia has got a little bit of weakness and some of that was Ramadan and timing was March of this year and it was April of last year. But it’s not – there’s nothing major negative going on APAC. There’s a lot of good stuff going on in APAC. It’s just slightly under our expectations in the quarter and we rolled some of that forward into the year.

Well, I was just going to add that, we’ve talked about the three-year decline in recruiting, right. So there’s a tail to that. And as we’ve now had our fourth consecutive quarter of new distributor growth, what ends up happening is that we’ve got to find the end of the tail and it’s got to have that moment of capitulation. So it’s a mixed basket, right. You’ve got certain markets dealing with certain conditions and individual situations. So it’s a timing and this is why we’ve been very clear it’s quarter-by-quarter. I think overall, the company and I spoke a little bit about it in the opening comments, the distributor leadership with these acquisitions and the vision and the tools of the protocol platform and this new manufacturing capability and technology, it’s created a new vision for everyone around the world in the future and where we’re going as a company. So I just, again, it’s – we’re in this period of time where we want to be able to come on these calls and say growth, growth, growth. And we’ve done a great job over the last year. Recruiting is up, the tale of the three years prior, we’re quarter-by-quarter closer to the point of capitulation and it’s just quarter-by-quarter.

And again, just to put it in perspective, right, APAC on a constant currency basis was up, right. We expect it to continue throughout the year. So we’re not looking at declines in Asia Pacific, right. But the numbers are just lower relative to what they were the prior year, because India was growing at such a hyper rate that it had an overweighting impact on the consolidated APAC numbers.

Great. Thanks, Stephan. Thanks, John.

Thank you.

[Operator Instructions] Our next question comes from the line of William Reuter with Bank of America. Your line is open.

Hey guys, good evening. Thank you for taking our question. This is Rob Rigby on for Bill. So first one from us, regarding the current economic environment, do you think that it’s – that it could be a tailwind given that consumers may be seeking a job?

So this is John. I won’t answer it directly, but I think indirectly. History has shown direct sellers do pretty well in this kind of cyclical environment when people are looking to make extra money. That’s going on. That’s a century worth of data that supports that. So you can make your own determination whether you think it’ll help us or not this cycle. I mean, there’s just a lot of noise in the world right now. So I don’t know if it’ll happen or not. But historically, that’s been a benefit to our company and other direct sellers.

Understood, thank you. And then second one from us, appreciate all of the color regarding tariffs and understand that it’s not very material portion or won’t materially impact 2025 results, I guess. Do you have any sourcing from China into the U.S.? And then do you think or do you have an idea of if others within the industry may source from China into the U.S.?

I can speak for us. I don’t know where the other companies source their ingredients. We have some botanicals that we source from our own manufacturing facility in China. It’s at the ingredient level and there is an impact from that. Now half the imports end up getting re-exported out. They come from China. The ingredients they get manufactured here and they get shipped out. So there is a duty drawback that’s about 50% of the duties we have to pay. And that’s why in total, with all the – on an annualized basis in 2026, if nothing changes except for the duties that have been announced, it’s a $10 million to $15 million impact. It’s not material after the duty drawback. Most of that is coming from China. But again, that’s our impact and that takes. China is the majority of that impact, but it’s just not overall material, because a big picture where a U.S. manufacturer and most of the ingredients we use in our manufacturing facility come from the U.S. not all of them, but most of them. So at least for the tariff, the U.S. tariffs that have been enacted, it’s just not much of an impact to us.

Great, thanks. And then just one last one from us. Are there any additional or is there any additional CapEx that’s associated with the recently acquired assets? And then regarding the CapEx guidance, I was just wondering what the rationale was for lowering guidance there. Thank you.

So the rationale for lowering guidance is we spent less in Q1 as we reprioritize our spend, right. So all the reduction taken down – all the reduction that’s inherent in the full year guidance is a result of what happened in Q1. Actually, the next nine months goes up slightly, because we underspent the midpoint of guidance in CapEx in Q1 by around $17 million and we took the full year down by $10 million. But I will tell you that the next nine months includes all the CapEx necessary for Pro2col for the acquisitions too. So there’s nothing we’re expecting from an operating cost standpoint or from a CapEx standpoint that’s not included in the guidance we provided.

Great. Super helpful. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Carolyn Popelka with Barclays. Your line is open.

Thanks. It’s Hale from Barclays. John, it was great to see the EBITDA increase for the year, despite what sounds like some additional SG&A costs associated with protocol and launch costs. So I was wondering if I was thinking about that correctly, because it wouldn’t have been in the number that you gave at the beginning of the year.

That’s correct.

Is that a material spend for you to get that off the ground in the U.S. or not?

I guess I don’t know the definition of material. I would say it’s not material from a company our size, but it’s meaningful money to get that up and launched. There’s a lot of effort to get it both the beta launch in July and the commercial launch in October.

Got it. And then the second question I have for you is you did a pretty good job of outlining the increased cash costs in the first quarter with the John you stated, and then the bonus payments for the fourth quarter that carried over. But your cash conversion was pretty good, so I was wondering what worked in your favor in the first quarter that kind of offset those?

Well, we took our cash balance down. I’ll go back a year, maybe five quarters ago, we ended 2023 with a cash balance north of not $500 million. When we redid the debt deal last year, we communicated that we think we get it to $350 million and maybe better with some initiatives that we had planned. And I think what you’re seeing now, what we’re seeing is the benefit of those initiatives that we’re able to get our minimum cash needs to a point where we could draw our cash down to below $350 million. I don’t know if there’s much more room to go in some quarters based on whatever circumstances going on and the ability to move money around, some quarters may go up or may go down, but that was one of the reasons why we were able to pay down our debt and have all these cash needs from an operating standpoint, but still lower our leverage ratio.

Got it, thank you. And congrats on the acquisitions. I look forward to ordering my bespoke vitamins and pills.

Thank you.

Thanks, Hale.

Thank you. Please stand-by for our next question. Our next question comes from the line of Doug Lane with Water Tower Research. Your line is open.

Yes, hi. Good afternoon, everybody. John, staying on protocol here, and I’m more interested, I think in the out years in capital investment there. I mean, it seems to me you’re basically building a company inside a company here and taking what is now a very early stage operation and taking it to maturity. So we see sort of a permanent elevation in capital spending over the next three or five years as you do that?

Well, I think, so when you say elevated, I mean, there is some CapEx associated with protocol, but we’re not going to elevate our capital expenditures above and beyond what we ordinarily would have done. We’re actually just reprioritizing our internal spend away from things that we were going to have to do that we now don’t have to do because of protocol. So I’m going to step back and just take a big picture approach. We spent a lot of money in tech over the last 2.5 years. We said that there was a flex to do that and that spending would come down. And that’s what we’re seeing. We flexed up, spent a lot of money, built this integration layer, which protocol is leveraging. And maybe that’s the piece that’s missing is the development of the app, that’s the money we have to spend. The integration of it into our operating systems and our different databases, that’s really leveraging the work we’ve already done and the money we’ve already spent. So it’s only a subset of what you might think, the CapEx and protocol is only a subset of what you might think if we were actually genuinely starting a new company, because we already have Oracle, we already have the integration layer, we already have our MCS, which is our member’s compensation plan. All we’re now doing is taking the applications, creating websites, and integrating them into that platform, and that middleware that helps the integration is now built.

Okay, that’s good color. Thank you. And can we talk a little bit about the Flex45 Challenge, which was launched with great fanfare at your honors back in March? We should be starting that program now, if I’m not mistaken. So can you give us an early read on the distributor response to Flex45?

Yes, Doug, I’ll cover this. First of all lots of excitement at different levels. Number one, distributor engagement because the seven elements that they’re actually engaged in every single day for the 45 days are things that are positive for themselves personally, their product use, the activities that they’re going to be doing, personal development, exercising. And so we had 200 over 200,000 distributors that actually preregistered for this, and we have tens of thousands of them that are participating. And I would say the level of excitement around the program, just as an initial feeling for what’s going on, it’s quite incredible. I mean, they’ve taken this on as an idea. And now they’re implementing it in their organization. So again, this is a very simple program. There was no cost to this. This was something that distributors could engage, engage their customers, and engage their organizations. And so we are following it very closely. But overall, I think it was just, I would say, a little bit of genius in a simple program. But it can have a really long lasting impact over time. It’s something that we think that they’re actually going to, once the 45 days are up, actually keep it in terms of kind of not a DMO, but something that helps new people, new customers and new distributors come in and just be a part of getting right on board and getting focused and it’ll impact the results. So we’re pretty excited about it.

And this is happening all in this quarter, right? So we’ll have more to talk about when you report the second quarter and meet into the challenge, right?

Yes. But just so you’re clear, this is something that distributors are doing amongst themselves and for themselves, right. So we had a, kind of a pre-registration for them to be able to register and commit to it. It was really more for them to commit to the program. How it actually gets expressed in their own organizations, with their customers, with their downlines, that’s not something that we are tracking. We’re going to track the productivity, obviously. But we’re not tracking per se all of the participants and what they’re doing on a daily basis.

I see. Okay. Thanks, Stefan.

You’re welcome.

Thank you. Ladies and gentlemen, I’m showing no further questions in the queue. I would now like to turn the call back over to Stephan Gratziani for closing remarks.

Thank you. So before closing, I’d like to share just a little bit from a personal standpoint. As many of you know, I signed up as a distributor in 1991. And as a 22-year old living in France who had really no idea of what my future was going to be and being introduced to this community and this opportunity and the products and the vision of Herbalife at that time, it was life changing for me. I remember certain elements, whether it was hearing a story of someone that had started the business and it changed their life, or whether it was Babette [ph], who in France, in Paris, I saw at an event and who had lost 54 kilos and was standing up in front of the room and crying, and touched me to the core. It’s hard not to get emotional about this because it has been my life for the last 34 years. Mark Hughes started the company and his whole mission was to help people lose weight naturally because he had lost his mother to medication trying to lose weight. Funny enough, 45 years later people are still taking medication. They’re just injecting it now and not swallowing it and maybe not swallowing it. The problem still exists. And so when Mark started in 1980, that was his mission. That was his vision. 20 years later, Herbalife became the world’s weight loss program, probably the premier in the world. Then we had Michael Johnson who joined and his heart and spirit and his professionalism, number one, an athlete, And he birthed an entire community of healthy active lifestyle focused individuals. Not only did he make sure that the company was vertically integrated, that the products were science-backed, that people started to pay attention to their…

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