Good afternoon and thank you for joining the Second Quarter 2025 Earnings Conference Call for Herbalife Limited. [Operator Instructions] 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 morning, good afternoon or good evening to everyone joining us. Joining us today are Stephan Gratziani, our 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 nonrecurring 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 our CEO, Stephan Gratziani.

Thank you, Erin, and good afternoon, everyone. When I stepped into the role of CEO, I shared my belief that Herbalife's next chapter would honor our 45-year legacy while redefining what's possible for health and wellness worldwide. Over the past 3 months, the progress we've made has only reinforced my conviction that Herbalife is uniquely positioned to lead in this new era of health and wellness. Herbalife is in motion from our roots as a weight management company to becoming the #1 active and lifestyle nutrition brand in the world, we are now well on our journey to becoming the world's premier health and wellness company, community and platform. This next chapter blends trusted human connection with personalized, data-driven solutions to meet the evolving needs of consumers around the globe. Our transformation is underway and gaining momentum. We're taking bold steps, moving with speed and building on the strength of our brand, business model and science to shape the future of Herbalife. While these bold changes take time to fully reflect in sales, we are encouraged by clear signs of accelerating momentum. Since our last earnings call, we've made notable strides in transforming Herbalife into a next-generation data-driven wellness company. Product innovation remains a key focus. We entered into a new category with our first healthy lifespan product, and we launched MultiBurn, a nonpharmaceutical weight loss supplement. At the same time, we continue to strengthen our core business through market and DMO-specific product launches while also evolving our product launch strategy, integrating real-time education, targeted digital engagement and enhanced consumer accessibility. We are also laying the groundwork for long-term differentiation through the integration of Link Biosciences, enabling truly personalized nutritional supplements through advanced algorithmic and goal-specific recommendations. With Pro2col as the connective thread across these initiatives, we're building a unique…

Turning to our Q2 financial highlights on Slide 11. We delivered another solid quarter with adjusted EBITDA exceeding guidance, reflecting our continued focus on operational efficiencies. Operating cash flows for the quarter were also strong at $96 million. Net sales were $1.3 billion, down 1.7% versus Q2 of 2024 and just below the midpoint of our guidance range of down 3.5% to up 0.5% year-over-year. Net sales on a constant currency basis were flat compared to the second quarter of 2024 and near the lower end of our guidance range. And while FX headwinds were less severe than expected, they still had a 170-basis point negative impact year-over- year. Our Q2 adjusted EBITDA was $174 million, exceeding the high end of our guidance range. Adjusted EBITDA margin of 13.8% was down 30 basis points from last year, driven entirely by unfavorable currency impacts. CapEx for the second quarter was $23 million, slightly below the low end of our guidance range of $25 million to $35 million as we continue to optimize our capital spend, which you will see reflected in our revised full year guidance. Capitalized SaaS implementation costs were approximately $4 million in the quarter. Gross profit margin improved 10 basis points to 78%, driven by approximately 70 basis points of favorable pricing, approximately 20 basis points of lower inventory write-downs, partially offset by foreign currency headwinds of approximately 60 basis points and input cost inflation of approximately 10 basis points. Following our acquisition of a controlling interest in Link Biosciences, we are now separately reporting net income attributable to Herbalife. Second quarter net income attributable to Herbalife was $49 million with adjusted net income of $61 million. Q2 adjusted diluted EPS of $0.59 included an $0.11 FX headwind versus the second quarter of 2024. Our adjusted effective tax…

[Operator Instructions] Our first question comes from the line of Chasen Bender with Citi.

I wanted to ask about the commercial release of Pro2col planned for later this year. I know you called out that distributors were able to get access to Pro2col at the beta by purchasing that 60-day supply of the healthy lifespan supplement. I was wondering if you could share your latest thoughts on the monetization strategy for the app when it launches. And if you are planning on using the same bundled package with the healthy lifespan supplement, are the unit economics of that product meaningfully different than, call it, the existing portfolio?

I'll let John answer the last part of it. Let me just talk to the first part. So as you mentioned, we started with the beta, and I think this is a really important point. Number one, obviously, our business model goes through our distributors. And their input, feedback and how they are going to promote it, how they're going to use it, position it with their customers is really important, which is one of the reasons why doing this through a beta first and foremost is a really important step for the company. So number one, we have a lot of different distributors, different models, as you know, in North America through nutrition clubs to people doing social media, running challenges and different flows within even those particular models. So working alongside the distributors so that in Q4, when we do the launch, they exactly know how they are going to go to market, position things and start onboarding customers into Pro2col is very important. So number one, that's really the first point of the beta. So we actually have around just over 7,000 distributors that opted in, which, quite honestly, it was beyond the expectations that we had. It was literally 50% more of the distributors that were present at Extravaganza. And over the next 3 months, we will be working with them on a weekly basis, going through strategies of how they're going to implement this with their customers into their businesses. From a monetization standpoint, I think it's important to look at 2 pieces. One is that Pro2col is designed as a tool, right, to be able to help distributors do more, sell more of what they're currently selling. So it's going across the board. Although we launched this new healthy lifespan product, really, we look…

Yes. I'll talk about -- I mean, the economic model is not materially different, but it is slightly different. And it's different in 2 ways. So one, we have a concept called earn-based, which is what percent of retail our distributors earn on, and that will be a little different for this product. And that's one, again, not materially different, but a little different. The second concept is this is a subscription-based model and that first shipment, the cost of that first shipment is more expensive than the second, third and fourth, which are refill shipments. And so there are certain assumptions we made on the life of the subscription to get a blended rate that meets our hurdle. And if that ends up changing a little, then it could have an impact on the economics for us. Having said that, none of that will be material, certainly not in the near term because it's been launched in one country. But as we go globally, we'll have a lot more data for which to base that -- those assumptions on.

And just one point of clarification on that. What, if anything, have you assumed in guidance in terms of sales contribution in 4Q from the Pro2col commercial release?

Very little at this point. Mostly it's just mostly upside. That's our -- you'll get a little in Q3. That's included because we launched it in July. There will not likely be much incremental beyond July in Q3 because the commercial launch is not until Q4, but there'll be a slight benefit in Q3.

And then my second main question is just on pricing. You've continued to take prices here in several markets around the world. And I was hoping you could just offer some perspective on your price gaps versus competitors and how you're thinking about that and the competitive environment into the second half of the year, particularly in context of a pressured consumer who, frankly, we've heard from a number of CPG companies are exhibiting value-seeking behavior and in some cases, trading down.

Yes. So our strategy on pricing hasn't changed, which is to take pricing commensurate with what we're seeing in the marketplace. So when we talk about our products versus the competitors, that differential should not be meaningful. And we're not seeing a lot of pressure from that end. We are taking much lower price this year in many of the countries than we took last year. That's one of the reasons why the delta between volume and net sales was much greater in Q1 than Q2 because this year, the price increases have been lower. But we'll continue to take price, but we'll take it at a level that's limited risk, consistent with what's going on in the marketplace. And we have not seen a negative impact from that because, again, our volume trends have been heading in the right direction in most of our markets, and we've got a lot of momentum. especially in the U.S.

Chasen, just on this one, there is a value add to the products and someone can offer a digital application that is going to help them to be more compliant, use their products more seriously, more consistency, help them get better results. And so I think this is an important piece because the core offer gets elevated just with the simple fact of now having something that can be a digital support tool and can connect the distributor with the customer. So again, from a pricing standpoint, not directly, but definitely from a value proposition.

[Operator Instructions] Our next question comes from the line of Doug Lane with Water Tower Research.

Just on the Pro2col and at Extravaganza, the distributors did buy the 60-day supply of the supplement and got to beta test the app. So I guess my question is, when you commercialize this in the fourth quarter, are they going to continue to be connected? Will you buy the supplement and the app? And will you buy both on subscription? Or can you do one or the other?

So there'll be options. As I mentioned earlier, some distributors, they're already selling certain products and programs to customers. They will have an option just to offer the app as a support tool. Others will have an option to offer the product that we're going to launch the name and everything in October. And I almost want to tell you now, but first, we need to tell our distributors and actually, it's not going to take until October. So -- but that will be an option also. So it is fitting current models, and it's going to also create a new model. So the answer is both. And I think what's important is just to -- we are supporting the $5 billion business, and we're also entering into a new category, and as John mentioned, new models for monetization as well.

Fair enough. That makes sense. I guess I'd like to also follow up on the whole idea of subscription, which is a very attractive model in which the new product, the healthy lifespan product is suited for. How have you dealt with subscriptions in the past? And what do you think -- how do you think that will change going forward?

I think it's going to change a lot. I think it's going to take a bit of time. We have had a subscription model in the past, which was, I would say, not very consumer friendly. And a very small percentage of our business comes from subscription. When we look at other companies and especially not only just in our industry, but just in general, the subscription model business is huge. And I think you're right. I think this product, in particular, lends itself very well to a subscription model. I think we have other products as well. Multi- brand, for example, lends itself very well to a subscription model as well. So without giving you projections, we believe that adding this element is going to be an important element for the future for us. And it's new. So it's going to take time, and we're going to work with our distributors through the process. As I mentioned, they are the best ones to position this within the market. So -- but yes, you're absolutely right.

And you've been consistent talking about the Pro2col beta test in North America and then the commercialization in the fourth quarter, and then it just sort of drops off from there. So I don't want to talk about 2026 and guidance or anything. But what -- how do you envision Pro2col assuming everything continues to go well rolling out in the rest of the world? Is that something that could take a quarter or 2, a year or 2? Just what are you thinking from a high level?

Well, we have plans for expansion in 2026. So I can tell you that we are looking at different markets, regulatory environments and what it would take to launch. Our goal is to globalize this as quickly as possible, and you're going to see in 2026 that we're already entering other markets.

And then, John, on the balance sheet, where you're deleveraged at that 3.0 and you reiterated your 2028 target. What -- and you don't have maturities due much until a couple of years out, but you have some high-cost debt out there. What are your plans for the high- cost debt in the meantime?

So we closed the new debt deal last April, a good chunk of that. The bond had a 2-year no-call protection, which means you really can't redo that part of the debt deal until April of next year. But at that point, we'll actively consider refinancing if the conditions are right because we went to market at a time where there wasn't a lot of visibility into what was going on here, we come off a tough 2023 year. Our leverage ratio in the prior public quarter was 3.9. Now we're under 3. We're in a much different financial position than we were 1.5 years ago with much more visibility and trending entirely in the correct direction. So our margins -- our EBITDA margins were 11.3% in 2023 and 13.8% this quarter on an adjusted basis. So things are just in a much better spot. So we'll look at the economics and do it as soon as it makes sense. That's our objective.

[Operator Instructions] Our next question comes from the line of [indiscernible] Christina with Mizuho.

So on the particle, if I understand it correctly, so there are going to be some benefit and started in 3Q and then more in 4Q, but the constant currency guidance for fiscal '25, the midpoint of it is slightly reduced. Can you talk about like what's driving that?

Yes, that's a great question. So our trends are good, but we did come in below our constant currency midpoint for Q2. that's the majority of the reason why the year -- the midpoint for the year has come down. But again, we've got net sales growth projected in Q3. We actually have net sales growth. If you do the math. We're not directly projecting Q4 in guidance, but Q1 and Q2 are in the books, Q3, we're not giving you guidance. If you do the math, Q4 also has growth. So we narrowed the range a little bit. It got moved a little bit to the left because of what happened in Q2, but still expecting strong performance.

And on the EBITDA guidance, so you have a beat and then you're going to have a beneficial currency tailwind for the year. But I guess the raise was not as much as the currency tailwind and the beat in the quarter. So can you talk a little bit about that as well?

Well, it was as much as the beat in the quarter. It wasn't -- the tailwind doesn't hit the bottom line until about next year, hit the very end of the year. I think that needs a little explanation. So currency impacts top line right away because that's all translation. On the gross profit line, we have a lot of transactions that are denominated in dollars. And like we saw last year when the dollar strengthened, we get a onetime one inventory turn benefit at COGS. When the dollar weakens, we actually get hurt from currency on the gross profit line for one inventory turn. And so the actual impact from currency year-over-year for Q3 and 4 are still slightly negative. And maybe there needs to be just a little more description on that. So -- and I'm going to give you just a hypothetical example that I hope you can describe the situation. And I'm going to use -- let's use the Mexican peso, and I'm going to use inventory that was purchased at a rate of 20:1. So it was purchased at a rate of 20:1 a few months ago. Let's just say the rate dropped to 10:1. I know that's extreme, but that makes the math easy. If the inventory cost a dollar because it's priced in dollars, when it was purchased, it was paid for at MXN 20. Today, it would have been paid for at MXN 10, but it's on the books at MXN 20, and that's what hits the P&L. So what hits gross profit on any transaction is the translation rate when the inventory was purchased. So there is a lag to the effect of translation on the bottom line, which is why you don't see it as much in Q3 and Q4 as you might expect without building in that lag. The good news is, if it stays this way, we will see it in Qs 1 and 2 of next year in the whole year.

Ladies and gentlemen, at this time, I would now like to turn the call back over to Stephan for closing remarks.

First of all, I want to thank everyone for attending today. As I approach 100 days as CEO and just celebrated 2 years as part of the executive team and before that 32.5 years as a distributor, I've been reflecting a lot on the current situation and basically my life and the choices that I've made and what drives me to do what I do. I can share with you that for 32.5 years from starting as a distributor in 1991, I had the opportunity face-to-face every single day of my life for 32.5 years to be in front of people that I saw the impact that Herbalife made in their lives, whether that was a customer that was looking to lose weight or looking to improve some aspect of their well-being, whether it was a distributor that was in need of an opportunity, looking for something part-time to improve their personal situation, to improve something for their family, to believe in something that they could invest their life into to build a career, to have certain limits that's outside of our business and our industry were created for them that they found and especially with Herbalife an opportunity that they wanted to invest themselves into. And for 32.5 years, I built friendships family and community and was part of something and it was extraordinary for me. And for 32.5 years over time, one of the things that became clear was that Herbalife in my role in my life and my every single day, there was a reason why and a purpose behind what we were doing and who we were. It's a purpose that I believe that not everyone understands. And I'll just share this with you because when we talk about becoming the premier health and wellness company,…

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