Herbalife Nutrition Ltd. Aktie

Good morning, everyone, and thank you for joining us today, whether in person or via webcast. I'm Samantha Holway, Head of Investor Relations at Herbalife, and I'm joined by John DeSimone, our Chief Financial Officer and incoming Interim CEO; Scott Schaefer, our Senior Vice President of Finance and Transformation and Incoming CFO.

Before we begin, I would like to direct you to the cautionary statement regarding forward-looking statements that is available under the Investor Relations section of Herbalife's website. This fireside chat will 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 presentation will be governed by this language. In addition, during today's presentation, we may discuss 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 Investor Relations website for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure.

And with that, I'll hand it back over to Hale.

Thanks, Sam. So John, the company comes in the conference with 4 quarters of top line growth, stated path to bring leverage into the 1x range by '28, the buyback that you announced yesterday and the early stages of a push into personalized data-enabled nutrition. But you've also had some recent management changes. So maybe walk us through what the CEO transition announcement and what interim means in your title.

Yes, sure. So for those who are unfamiliar with what's happened in the last few years, about 3 years ago, we had one of our top distributors, our second most successful distributor in the 46-year history of the company join as an employee. We were going through some post-pandemic challenges as was our industry, and he was bringing a distributor perspective in. He came in as Chief Strategy Officer and President and CEO. And he brought that unique angle that helped us create a vision and a strategy for the longer term. And we've announced that he's going back to running his distributorship at the end of October.

Incredibly grateful for the insight he brought in for the new vision and strategy. The company is in a much better place today than it was coming out of the pandemic. 9 of our last 11 quarters, we've had local currency net sales growth. The last 4 quarters, we have reported net sales growth. We've had volume growth in the last 4 quarters. Our balance sheet has been strengthened. 3 years ago, our leverage ratio was 3.9x gross leverage ratio. Now it's 2.7 or 2.8 in that range. We've got a new debt deal, saving a lot of money of interest. We're in a much better spot right now for Stephan now to return. Stephan is the person we're talking about, who's our current CEO, to return back to his distributorship. At the same time, just prior to this, we announced a CFO transition. When I came back to the CFO -- so from my background, I was CFO from 2010 to the middle of 2018, had a couple of other roles with the company.

After that, semi retired, came back in early 2024. And one of my objectives when I came back in addition to strengthening the balance sheet was to hire a successor. And about a year ago, Scott came in, and we're very comfortable that he is the right person. So we announced my retirement at the end of the year, and Scott was going to jump in on January 1. Those 2 transitions were actually disconnected, but I think it was fortuitous because with Stephan going back to his distributorship, I've already had a replacement for me, I am stepping in as an interim CEO. I've been at the company for 18 years. I know the company very well. I'm no longer retiring on December 31. So I will be interim for as long as it takes to find the right candidate. And I think that's an important takeaway for the audience. I understand the business. We've got an incredibly strong executive team.

I will be here for as long as it takes, and I will be here for whatever transition a new CEO, whatever help they need. But we're doing this in a position of financial strength, right? This is not a traditional CEO transition. In fact, we're not even losing Stephan, who is our current CEO. He is our #2 distributor. In his organization, he has about $0.5 billion in revenue. He has not been able to run that distributorship as CEO. It has to go in a trust. Now he gets to go back and run that distributorship, and that's one of the reasons for such a quick transition. So that's just some context around the situation and both Stephan's situation, my situation, and Scott's situation.

So Stephan's transition, does that change the personalized nutrition push that the company is.

No. Again, for some context, our core business is doing very well. Like I said, last 4 quarters, we've had volume growth, strong net sales growth. But there is a vision and kind of the foundation of that vision is we've got 6 million members. Members are somebody who's a distributor or a preferred customer that can buy directly from us. In addition, we have millions of additional customers. When we talk about Nutrition Clubs, which we'll talk about at some point today, these are consumers coming into a fixed location to buy basically a single serve of our product.

In the U.S. alone, we have 4 million customers that are not distributors in just the U.S. alone. So we have reach into millions -- tens of millions of customers if you extrapolate out for the U.S. customer base. We believe the next wave in health and wellness nutrition is personalization. Personalization's -- Herbalife has been grounded in personalization since it started. Our distributors ultimately create a personalized program for their customers to be successful, but it's more of a curated program. The vision going forward is more of a formulated personalized product. So taking the -- like what the data consumers have available to them today is exponentially greater than the data they've had available just a decade or 2 decades ago. It used to be just a scale or you measure how many bench presses you could do. There was measurements, but it was minimal.

The amount of data our consumer has today with their ability to get blood work when blood work is a commodity, anybody can go get their own biomarkers -- that -- what do you do with that data? We want to own the space where we can take that data, whether it's biomarker data or just survey data where you answer a series of questions, and we can create a product specifically for your needs. That is an important part of our strategy, and that's not going to change. It's a spectrum. We're personalized today on a curated standpoint. We want to go to personally formulated. We think we have the foundation for it because we've got the millions of customers, right? We can -- we'll have the ability to get the data. There's going to be a journey to get there on that spectrum, but that's an important part of our future.

My son's playing football and he sent me his WHOOP score last night and then told me I need to get off my butt and...

WHOOP. I mean the amount of data is a bit like what do you do with the data? That's the confusing part for consumers. We want to be the experts to say, take that data, here's what you do to improve it and reach your goals.

Apparently make fun of your father who's not playing high school. So any changes to the capital allocation policy that you guys have outlined or the way you think about?

Well, a little bit. For those who are unfamiliar, again, I feel like I want to give background for those who are unfamiliar with Herbalife. We generate a lot of cash. And from a perspective, we -- over the last 4 quarters, our free cash flow yield is 23%. We've always generated cash. The reason we have debt is because we've done a lot of buybacks over the years. We bought back $6.5 billion of stock since I joined the company. A lot of that was strategic. Some of it was we had a Board member who was a big investor and ultimately bought that position out. That was not strategic, but the rest of it was strategic.

Coming out of the pandemic, when business changed, our balance sheet didn't look so strong anymore. And so we focused that cash on paying down debt, which we've done a lot of in the last 3 years, over $800 million, I believe, in the last 3 years. Our goal is to pay another $600 million down by the end of 2028. But where our stock is right now, our multiple is incredibly low, incredibly undervalued for a company that's growing that generates cash. We announced yesterday a $250 million 3-year buyback program. So we're going to work in the buyback along with paying down debt. That does mean maybe the 2028 goal of paying down another $600 million might get pushed out a little to 2029, which is fine because the maturity of the debt deals we just did doesn't happen until the early 2030s. So we'll still hit that goal.

So yes, I think our priorities have changed. And so you'll start seeing a buyback program that gets implemented. We announced it in advance of this conference, so we could talk about it with our -- in our meetings with our investors. It's not likely to be implemented until next quarter because our blackout period by policy starts tomorrow. And so there really isn't enough time to execute something in Q3, but at least we can talk about it and investors know it's coming, and we can start executing it beginning with our earnings announcement that will be early November.

So at the risk of making this a little weird for Scott, one of the things that got a lot better when you came back to the company, John, was the ability to hit guidance, project, like have some financial rigor and hold yourself accountable for the goals that you had out there. And so maybe talk about your confidence in how that's institutionalized in the way you do things now so that when you depart at some point in the future, Scott can carry that forward.

Yes. Look, there was a time like when I was not in the company where we -- again, it was challenging times coming out of the pandemic, and we pulled guidance. So a couple of things. We will always guide. That's my commitment. I think Scott agrees with that. We guide with the best information we have possible, but there's a lot of rigor and a lot of different models we use to guide, hundreds of models ultimately that we use to find what we think is the best model to use for guidance. And over the last 2 years, I think in the last 3 years, since I came back, we've missed net sales once, but haven't missed EBITDA. We've exceeded guidance. And so I do think this -- it's been institutionalized knock on wood.

I mean every time you got -- at some point, you're going to miss, we all have to deal with that. But I think we have a lot of rigor in the process. Scott, who's the next CFO, his background, he was with Zappos for 18 years, I believe, when...

16.

16 years. From when it was its stand-alone company to when it was a division of Amazon, he rose up to not just the CFO position, but the CEO position for 3 years. Working for Amazon, I think financial discipline, operating rigor and accountability is core to that environment. So I think it's in Scott's DNA, too.

I was going to -- Scott, like I was hoping for better shoes from you, to be honest, but, I do wonder how you got from Zappos to Herbalife because presumably, you spent a lot of time at Zappos and Herbalife may not have been like on your operating radar. So maybe talk about what attracted you to the company or how you ended up there?

Yes. So after exiting Zappos, decided you want to take a year off and continue halfway through that window started to search for what's next. And I was actually about to join another firm with a contract opportunity back in the shoe game as a CFO, COO. And right before I signed the contract, one of the recruiters I was working with reached out and services this opportunity with Herbalife. And I've always been into the health and wellness kind of journey over time. And I'm familiar with the company, but wasn't deeply familiar. And so I was like, yes, this seems like a really interesting opportunity. Does the profile look great? And met with John first and then I met with the CEO, Stephan. And what was striking that made me really pause and really become extremely interested was how it presented both purpose and opportunity.

Zappos was a company that was purpose first, values first. And then when you're creating value for people, profit follows and cash follows. And we lived our values every single day and the culture and the company and really the purpose of helping small business owners create something unique for themselves. It just -- it struck me. And so I thought it was something that they wanted to pursue a little bit further. And then on the opportunity side, the company had come through a kind of corrective period coming out of COVID and was on stable footing -- learned a lot from John in terms of like the margin expansion and the goal that we have set forward on debt pay down. And it seems like it was a really great time for me to jump and the rest is history. I've been with the company now about 10 months and extremely grateful to be part of it. It feels very much like home.

So what are the 2 or 3 metrics that you're going to focus on as CFO that you want to hold the company accountable for or your team accountable for?

Yes. So when you think about the -- first, the financial and then kind of the operational, I think on the financial side, clearly, free cash flow. This is a great cash generating business. And as we focus on margin expansion being number two, our ability to drive top line growth, margin expansion is only going to yield stronger free cash flow. This is not a capital-intensive business. So there's a lot of operating cash and free cash that we generate. Those are a couple where we're going to set long-term targets for ourselves. And I think we can do really well. The operational one, because we are -- the way we go to market is through our distributors and they're kind of our first line of customers, then, of course, they have their customers that they work with.

Experience metrics matter. They are effectively operational metrics. And so the couple that I really want to hold ourselves accountable is how can we create a great experience for our distributors. This is everything from inventory efficiency, making sure that we have product in stock so they can meet consumer demands to things like click to deliver rates, right, making sure that we can get a product to our customers in an appropriate time -- sorry, to our distributors and our customers in appropriate time to help them service their small business needs. So just a couple of those operational metrics because those have a significant impact on the experience that they can create for their customers.

John, you've got a clock on your tenure here, maybe we're an extended time. But what do you want to finish before you leave?

I'll speak to it as a CFO position, not as the interim CEO because there's things I want to do on both. Our historical margin rate was -- EBITDA margin was north of 15%, right around 15%, between 15% and 16% for a long time. We went down really low to 11.3% coming out of COVID in 2023. We worked our way up to just over 13% last year. We want to see if we can get back to 15%. I think there's a little bit of aspirational goals there because of some -- the more familiar you get with us, the more you'll understand this next comment, there's an India GST tax issue that's great for sales, but hurts margins a little.

So it's creating a mix issue, still hugely beneficial to us as a company, but it puts pressure on the margin number, but adds a lot of profit dollars. We're working on a path, a road map to get our margins back up, whether we get to 15% or maybe we get to 15% less the impact of GST, we want to have that clear road map out over the multiple years we need to get there. And Scott is a big part of that, and I'd like to have that done before I leave.

And we talked about this a little bit yesterday, but you have these new products that are coming that are different than the core. You have a distributor base that is a unique attribute of the company in the sense that they're not direct employees. And most of your cash is coming from the core nutrition products at the moment. So how do you make sure that the distributors don't get distracted with shiny new toys or that things get levered in the right way and that growth has moved up and to the right the way you want it to?

Yes. Well, first of all, I think I'm going to reframe it because I think I'm not worried about distributors getting distracted from the next bright shiny object, because they're going to do whatever makes them the most money. They're all independent entrepreneurs. They know what works. They have their business flows. They don't change easily. The real question is, how do we, as a company, not get distracted with the bright shiny object. So we're not working on things that don't add value. Our job is to help add value to the distributor. If we launch something, they're not going to be distracted. If it doesn't work for them, they just won't use it. And so our job is to add value.

And so that's what we believe we're doing with our initiatives, and we do that multiple ways, but one of the ways is a lot of interaction with our distributors. For example, with our new technology platform, Pro2col, it's an application. We're having we call them labs. Our distributors have different business flows. We -- those business flows have names. Nutrition Clubs is one of the names, but there's a lot of them. We bring in the top distributors to have those business flows in these labs to help us launch a product that they believe will help them. So I'm not worried about distraction. It's more the other way around is making sure we put the energy and effort into things that actually add value. Otherwise, they won't use it.

Right. I guess the flip side of that is how do you move the needle on the distributor economic model so that they do adopt these and it becomes profitable for them.

Yes. It's -- there's 2 things that have to marry up. It has to be value for the consumer and it has to help a distributor make money. Those are the 2 things that our initiatives need to effect for it to be successful. So again, I'm not at all worried about that. I think what we're launching will -- with their interaction will help drive value.

And Scott, you came in after Herbalife One was kind of cleaned up by John, which is probably a nice thing for your stress level. But maybe if you guys could both talk about where you are in the digital transformation, what you have left to do? Is that an ongoing sort of cost drag as you go forward?

So -- and we use the phrase, Herbalife One was a large internal technology investment to kind of clean up a lot of middleware and connect a lot of our systems together to be more efficient, both internally and for kind of distributor facing, significant investment over a number of years, and that project concluded about a year or so ago. So -- our digital transformation, it's not going to stop. What we're doing for the most part is not heavily capital intensive. Our typical CapEx rate runs between 1% to 2% of sales.

So there are couple of things that we have going right now, which I think no matter what we're going to continue to invest in, in a good digital experience that is obviously internal for efficiency and external for helping drive growth for our distributors and for ourselves. The -- where we are in the journey right now is if you look at the consumer-facing side of it, right, our Pro2col investment. So how can we better connect in customers and their data with distributors to help them create accretive value and then also create better business opportunity for themselves. That's a journey that we're going to continue to be on and that development cycle will continue. I'd say we're still early in that development cycle. That's not the only consumer-facing or distributor-facing technology that we have.

I think there's still a lot more that we can continue to do to improve those experiences and possibly combine some of the applications and reduce some of the overall tech overhead. So I think that's going to be part of that journey. The other side of it is we have some other internal projects that we're doing. Our Oracle cloud -- sorry, Oracle ERP is an on-prem system right now. We have a large project that's through '28 and goes into '29 and some of the later boundary systems to move to a cloud infrastructure. That project again is -- this is the biggest year for the capital-intensive portion of it. We're going to get a lot of gains out of it for internal efficiencies because we can't take advantage of a lot of things like the AI native aspects of what cloud has to offer because we're on-prem server.

So with that, we are expecting actually some labor efficiencies down the road where we can apply AI automation for things like translation services for our contact center that can help us do some consolidation efforts. So we are -- again, we're always going to be on a journey of creating a great infrastructure that can help with efficiency internally and externally. It's never going to be done the same way. I shouldn't say never, but we don't anticipate it being done in the same way as with Herbalife One and the level of investment, but sticking within that 1% to 2% range and trying to create incremental efficiencies for ourselves and growth opportunities for our distributors will always be our journey.

Do you think the distributors have the right AI tools now to help sell your products because you have a pretty wide swath, but it would seem like that there would be either an internal or external AI interface that could accelerate it.

I completely agree. So I'd say we're still early in our journey. We have this internal group called key account managers. It's actually one of the programs that Stephan helped create -- and it's a group of folks that will go out and work with key distributor leaders and help them understand deeper about their business, surface with them insights and hold them accountable to specific goals because they're independent -- they're not employees, right? They're independent business owners. But if coaching and how a distributor holds their consumer accountable, we kind of take that same philosophy and see, okay, great, how can we create metrics and hold our -- these key accounts accountable too, if they want to be held in the same way.

So we actually have created some AI tools internally that we are using to surface insights in a way where we haven't been able to before, connecting into our Snowflake data lake. And then from there, servicing these key insights that have been a strong driver for us. So I think we're -- again, we're at the infancy. Pro2col also as part of its journey, is going to have some AI capabilities to surface next best action type activities for distributors. So we're early, but it's an investment that we're continuing to make.

And Sam, before you had your current role, you were working in the North America distributor base. And the North America base is pretty unique with this Nutrition Club model. So maybe you could spend 30 seconds explaining why it's unique and different than the rest of the world. But also how you move the Nutrition Clubs from selling sort of a single-serve effectively a shake to some of these new initiatives that are more subscription-based.

I'm sorry, can I just want to add a little bit more about Samantha's background? Look, because I think it adds more credibility to the -- She's got a financial background, a Big 4 accounting firm, but -- and she came into Herbalife through finance. But for the last couple of years, she moved to the front end of the business. She wasn't just working with distributors. She ran sales for North America. So she's speaking from a position of authority here.

Thanks, John. Yes. Look, so I'll really quickly describe the Nutrition Club. John sort of touched on it. We have Nutrition Clubs all over the world. But in North America, they really primarily are a single-serve. So think going into any coffee shop and getting a tea, while in an Herbalife Nutrition Club, you're going in and you're getting a tea or a protein shake at an accessible price point. But they're not just that, and this is why they're poised really well to adopt the new initiatives. They have multiple methods, multiple different business flows happening within these brick-and-mortar walls.

People come in for a daily workout or they come in for a body transformation challenge. And every day, customers are looking for support on whatever health journey they might be on. And that doesn't just get solved by what you drink over the counter that the distributor may be serving you. It also needs to be solved by what you're taking at home, what you go home, whether it's your vitamins and minerals like a Bioniq or it's helping you along your journey when you're not inside the club like a Pro2col application could support. And I think to building off some of the digital transformation, the new capabilities that we brought into market, we have new commerce platforms with subscription capabilities, and these only help upsell from the Nutrition Club standpoint.

It helps distributors who are really busy servicing customers over the counter, and they can just point to a QR code and, hey, if you want this at home or you want this -- you want to take a wellness assessment to get your personal 1 of 40 formulations in Bioniq, then they have those digital capabilities that they need to scale beyond just what happens within the 4 walls of the club.

I probably just started with this question, but the whiteboard vision, right? So you guys have Pro2col, Bioniq, Link BioSciences, Life I/O -- those are the 4 new ones. You've got the existing coaching business, which is kind of the core of the company. You have the nutrition products, and you also have the sports products. So like what's the ideal customer journey here? Like I get onboarded through a distributor, she or he gets me really excited. How do I get sold like in the perfect world?

So it's our ability to personalize that journey is key. So we're in 95 countries. We have 2 million distributors. The customer journey could be very different in Bogota than it can be in Barcelona than it can be in Boston.

A lot of B's there.

A lot of B's. I do that on purpose once I got it going, right? So it's just -- again, if you just want to picture a global footprint with millions of customers and how do you service those customers, each customer has a unique journey. A distributor's job is to create the journey that's unique to you. So if you have your own journey Hale, which might be different than mine, your experience can be different than mine. We have to have that spectrum, that ability to personalize. So in the past, that personalization came through curation.

So as a distributor, if you were my customer, I would create a program for you based on the SKUs that we had available and the activities that I wanted to add to those SKUs to help you achieve your goal. We don't want to lose that. That's our core. That's not going away. It's how do we bolt on to that to improve that experience. So the product lines that you just spoke about, they don't cannibalize that model. They add to that model. That's important because we're delivering great results right now. We have volume growth. We have net sales growth. How do we build on top of that? How do we increase that customer journey to make it more personalized. We can do that through, first Pro2col, you mentioned Pro2col, Pro2col is an experience layer. It's an app for the distributor and the customer -- I mean, excuse me, the distributor and the company to get more consumer data.

The more consumer data you have, the greater the ability to personalize. And if that data is in our technology ecosystem, we can create scalability for a distributor then personalize. So they don't have to do all the work. AI, the computer system, the technology can help with that personalization. So that's the data side. The other products you mentioned are more personalized formulation. So with Link BioSciences, right now, we have -- we were able to create 40 different unique formulas for it's vitamin mineral supplementation. Like most of our products right now are food. So when you think of Bioniq, think of an incremental product line that we don't sell a lot of today in supplements, it gets us in the supplement business. Within those 40 formulas, we can take your needs and say this formula is best for you. That's an increased level of personalization. When you get to Link BioSciences, which we haven't launched yet, we bought that, that actually can do greater level of personalization.

It doesn't have to be 40 SKUs. It can be 1 SKU just for you because it has those capabilities. So every one of these products you just mentioned fit in the journey for the consumer in a different way as we move from personally curated all the way up to personally formulated.

Okay. The Pro2col has been in beta for a little bit now. So maybe you could talk about the user experience and the ability to do the blood testing on it because that adds some complexity in terms of the whole model. What you've learned from the guys that are in beta and what makes you excited about it?

Yes. I mean -- so again, Pro2col is the user experience. We purchased that. It was a concept that was in development that we purchased that is in beta so that we can learn. And I'm going to separate that from blood test because blood tests are not critical to Pro2col working. Blood tests can work within Pro2col. Blood tests can give us biomarkers that help us personalize, but it's not necessary, although we did launch beta of blood test because that's ultimately where the market is going to go. We don't necessarily need to be in the blood testing business. It's a commodity now. We just need the ability for consumers that want to use that data to be able to use it within Pro2col so that, that information can be used ultimately to create personalized nutrition.

So I'm going to put that one aside. What we've learned in Pro2col is, again, I'm going to repeat what I said earlier, for the application to be successful, 2 things have to happen. They have to add value to the consumer and just help distributors sell more product to make money, right? And our distributors go to market in many different ways, and it has to fit those methods. So what we've learned is what are the needs that the consumer has, and we have to work those needs into the app and how does the distributor ultimately generate revenue from it. And I don't mean app application revenue. I mean sell more product. That's the process we're in now with these labs.

We call them labs -- there's a concept we call DMO Daily Method of Operations, business flows of each distributors. Those labs are happening now to know what the actual needs are for the distributor to have successful Pro2col.

Yes. If I could just add to that, too, I think that part of the learning has been not having to own the first mile, so things like the blood test and doing our own and creating our own. Obviously, we want to take the input side of it, but we don't need to own the actual input aspect of it. It's more important for us to own the last mile and what does that actually create? How do we leverage that to use to get like product recommendations out of it for distributors to help them help their business. So owning the last mile, I think, has been a good part of the journey.

So when we think about personalization and what that does for metrics or my world and the Excel spreadsheet, -- is it customer acquisition? Is it retention? Is it basket size? Is it gross margin? Or should I just be thinking about it as just it helps distributors sell more, which helps get distributors excited to retain distributors or grow your base, which then sells more?

If I break it into 2 buckets, and then we can break it further, right? So there's direct impact and indirect impact. Direct impact is the ability to sell more personalization. The indirect impact is the energy and excitement distributors feel around that personalization will also help them sell more core product because it helps activation. So activation is, a, more customers can come in. Second, we want to increase the economic value of those customers. A distributor's single most constraining asset is their time. They're very small businesses. Technology through Pro2col through personalization can create a technical -- technology connection to the consumer that will help the distributors scale their business better.

We got 2 minutes left, and I got 2 questions. Have to be tight. The first one is on India. Can you guys give us sort of a state of the state, what happens next month, what people should be paying attention to?

Yes. So India, it's becoming our largest market. September of last year, right at the end of it, India lowered the goods side of the GST, which is a sales tax from 18% to 5%. Leading into that change, India for us is 18 years of consecutive growth. And that -- basically, that change that made the price lower for the consumer at the time of purchase accelerated that business. And so we -- the 13% decrease actually yielded over 40% increase in volume growth for -- so pretty significant movement in a market that was already having great growth.

What's happened since that window and so we're getting towards the anniversary of it at the end of this month is not just increase in purchase activity, but actually a lot of people that have come into the business opportunity side of it because they have a great flow. They bring people in as preferred customers. They have a membership model that's as well as Nutrition Clubs that they go through. And basically, the way that their flow works is they brought in significantly new preferred customers, the actual people that have come in for the business opportunity side. And then from their sales leaders.

So if you think of our business, it's a funnel, right? New people coming into the system, new distributors, right? They're actually not producing a significant amount of volume because they're learning the business. And then at the bottom of the funnel is our sales leaders. These are our storefronts. These people that have been in the business, they're starting to qualify for production bonus levels. And that has now started to grow in double digits. So the actual inputs of the business as we lap this have become pretty strong. So we believe that this momentum is going to continue past when we pass the anniversary in September.

My last one, John, is like, as you guys know, I'm a credit analyst, so I don't make stock picks at all. Maybe you guys want to make a pitch on why Herbalife is good stock right now?

Well, tremendously. I mean our multiple -- our EBITDA multiple has been hovering between 4 and 5. We're a company that's growing volume, growing net sales, has 23% free cash flow yield, has historically generated free cash every year since I've been here in 18 years. We now have a buyback program. So we generate -- first of all, the business is generating a lot of cash, undervalued. Second is we're using that cash. We've been using it to pay down debt, which transfers value from equity -- from debt holders to equity holders.

And now we're looking for an incremental way to create value for equity holders through buybacks. So you've got a business performing well, generating a lot of cash, using that cash to pay down debt and buy back stock. I mean it's -- I personally think it's a big opportunity. Even if you just look at our cash flow yield, and we just keep buying back stock or paying down debt, and that just increases the equity value. That alone has a big opportunity for us.

All right. Thank you, guys.

Thank you.

Welcome, and thank you for joining the Second Quarter 2026 Earnings Conference Call for Herbalife Ltd. [Operator Instructions] As a reminder, today's conference call is being recorded.

I would now like to turn the call over to Samantha Holway, Vice President and Head of Investor Relations, to begin today's call. You may begin.

Thank you, and welcome to everyone joining us. With 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, Sam, and thank you all for joining us today. Before we begin, I'd like to welcome Samantha Holway, our new Vice President of Investor Relations. Sam brings more than a decade of experience across finance, strategy and most recently as the Head of Sales of North America at Herbalife, and we're excited to have her in this role.

Over the past year, we've made strategic investments to build capabilities that will drive Herbalife's next phase of growth. This quarter marks an important milestone as those investments began translating into tangible execution, bringing new innovations to market, expanding our addressable audience and creating new opportunities for our distributors. Today, I'd like to share how those investments are beginning to take shape across our business. But first, let's review some financial highlights.

We delivered net sales of $1.3 billion, up 5.4% year-over-year and at the top end of our guidance range. On a constant currency basis, net sales were up 5.8%, which exceeded guidance. This was our fourth consecutive quarter of year-over-year net sales growth on both a reported and constant currency basis, demonstrating the resilience of our business. Net sales in North America were up 0.2%. And while nominal, this marks the second quarter of growth in the last 4 quarters. Adjusted EBITDA was $167 million and near the top end of our guidance range.

We entered 2026 with momentum and a clear set of priorities. Throughout the second quarter, we focused on translating our growing capabilities into execution across the business, expanding how we take personalized nutrition to market. Personalized nutrition has evolved into one of the fastest-growing segments in health and wellness. According to Grand View Research, the category extends well beyond supplements to include personalized recommendations, digital technology, health data, individualized formulations and ongoing engagement. Today, it represents a $34 billion growing global market. But while the category is being defined and given a name, personalization isn't new to Herbalife.

And while many companies are focused on individual segments, we believe our unique opportunity comes from combining technology, science and human connection. For more than 45 years, Herbalife has been at the forefront of personalized nutrition, supported by decades of experience, global scale and the strength of our distributor community. Every day, our distributors personalize the customer experience, helping them understand what to measure, what to take, what to do and who to do it with. These 4 Ws have always been at the heart of our business. What's evolving is how technology is helping to amplify that experience for both customers and distributors.

We are working to bring together AI-assisted technology, biomarker insights and individualized formulations while strengthening the human connection that has always set Herbalife apart. It's the reason we believe Herbalife is uniquely positioned to lead the next generation of personalized nutrition, beginning with our most recent launch. Bioniq Go is the first product we brought to market following our acquisition of Bioniq in April. It is a personalized daily supplement that provides a simple, consumer-friendly entry point into personalized nutrition. Customers complete a digital wellness assessment and are matched to 1 of 40 personalized supplement formulas based on their individual profile and wellness goals.

Supplements are the largest segment of the personalized nutrition market, accounting for nearly half of the category, and Bioniq Go represents the next generation of personalized nutrition for Herbalife. We launched Bioniq Go at our Europe and Africa Extravaganza in June across 11 markets, followed by the U.S. launch at our North America Extravaganza in July. Additional market launches are planned for the second half of the year.

In conjunction with the Bioniq Go launch in the European markets, we introduced new digital commerce and subscription capabilities like those recently made available in the U.S. These capabilities make it even easier for distributors to do business and for customers to incorporate products into their daily routines and maintain consistency.

While we're excited about the opportunities Bioniq Go creates today, we're also looking ahead. Our acquisition agreement includes a call option for Bioniq Lab, a peptide distribution business, giving us the flexibility to evaluate that category over time. As always, we'll take a disciplined approach, continuing to assess the science, regulatory landscape and long-term opportunity before determining the right path for Herbalife.

Bioniq Go advances the what to take element of our personalized nutrition strategy. At the center of that strategy is Pro2col, our personalized health operating system. Through AI-assisted recommendations and connected digital tools, it brings every element of our personalized nutrition approach together in one experience for distributors and customers.

AI is one of the most powerful forces transforming personalized nutrition and consumer engagement. According to Grand View Research, the AI-powered personalization nutrition market includes AI-enabled nutrition apps and test-based solutions that deliver individualized recommendations. With nutrition apps representing the largest segment, the market is projected to grow from approximately $1.9 billion in 2026 to more than $10 billion by 2033, a 27% annual growth rate.

Developed in partnership with our distributors, Pro2col is how we'll bring these capabilities together in a single personalized health platform, combining AI-assisted support across what to measure, what to take, what to do and who to do it with. We believe our distribution model gives us a distinct advantage to extend these capabilities through already established trusted relationships.

Pro2col is currently in expanded beta as we're building it out as a platform rather than a single product launch. Our focus during this phase is on developing capabilities that will make the platform an integral part of our distributors' daily methods of operations. We expect it to be adopted in stages as new modules and capabilities are introduced through next year, creating value incrementally and driving broader adoption over time.

At our North America Extravaganza, we introduced a significant update based on distributor feedback. The update included an overhauled user experience and enhanced features. In the second half of the year, we plan to introduce features like smart device integrations and evolved biomarker support while also building out distributor-specific business model capabilities.

We also introduced a beta program for blood testing and platform integration. At this stage, we're focused on validating the end-to-end experience from ordering and self-administering the blood test to external lab processing and delivery of results through Pro2col.

Beyond Pro2col, we're also expanding our personalized health and wellness portfolio in North America through Life I/O, our healthy lifespan brand, giving our distributors the opportunity to serve a broader and growing consumer audience. According to McKinsey, longevity is one of the fastest-growing wellness categories with more than 60% of consumers globally prioritizing products and services that support long-term health and vitality. Life I/O is focused on this growing digitally engaged customer segment that takes a proactive approach to wellness and invests in long-term health.

The Life I/O brand portfolio includes Baseline, which was launched last year and features Niagen to increase NAD+ levels and support cellular health; Helio, a daily all-in-one supershake, combining foundational nutrition with many of the functional ingredients consumers commonly purchase separately. Each serving delivers 30 grams of protein and beneficial fats for sustained energy, 6 grams of diverse fibers to support the microbiome, 20-plus vitamins and minerals and a range of premium wellness ingredients like adaptogens and polyphenol blends. These unique ingredients all come together in a single product designed to simplify consumers' daily routine without compromising on taste.

Helio launched in July at our North America Extravaganza alongside Activate Energy. Activate Energy is our channel exclusive entry into the exogenous ketone category following our acquisition of Pruvit last year. It features D-BHB ketone technology as well as caffeine, B vitamins and electrolytes to support sustained energy, mental focus, hydration and metabolic health. Together, Life I/O offerings broaden our product portfolio, strengthen our position in the healthy lifespan market and extend our reach to a broader consumer audience.

While technology and science are essential for personalized nutrition, it's our distributors who have always made it meaningful. AI-assisted technology can provide data, insights and recommendations to help customers understand what to measure, what to take and what to do, but it's our distributors who turn those recommendations into action through encouragement, accountability and trusted relationships that foster human connection, build community and help customers stay motivated to achieve long-lasting results.

That same philosophy guides how we train, educate and support our distributors through Extravaganza events around the world. So far this year, more than 110,000 distributors have come together at Extravaganza events in India, Uzbekistan, China, Panama, Singapore, Poland and the United States to learn, connect and share best practices. That level of engagement is a powerful reminder that our distributors are deeply invested in Herbalife, committing their time and resources to develop their skills and build relationships that help them strengthen their businesses and better serve their customers. Our greatest competitive advantage is our distributor network and investing in the Herbalife brand they bring to life is an investment in their success.

Through global campaigns and strategic partnerships, we increase brand awareness, reinforce our nutrition expertise and strengthen Herbalife's relevance with consumers around the world. One example is our Fuel Like Ronaldo campaign, which builds on our long-standing relationship with our global nutrition partner, Cristiano Ronaldo. Centered around the daily personalized nutrition habits that fuel his performance, the campaign took place around one of the year's biggest global sporting events. It brought our personalized nutrition story to life across 45 markets through social, digital, traditional media and immersive fan experiences, helping deepen engagement with existing audiences while introducing Herbalife to new consumers around the world.

Personalized nutrition is transforming our industry, and it's creating an opportunity that plays directly to our strengths. What makes us different is that we're bringing every element of personalized nutrition together in one ecosystem, science-backed products, digital technology, AI-assisted insights, health data and personal recommendations. We're building on our vast network of entrepreneurs and customers to deliver the next generation of personalization, and we're just getting started.

Everything I've talked about today is possible because we built a strong company, one with a clear strategy, a solid financial foundation and a long-term vision of where we're headed. That foundation has been strengthened by John DeSimone's leadership over nearly 2 decades at Herbalife. As we announced today, John will begin his well-earned retirement at the end of the year. Through his roles as President, Chief Strategic Officer and Chief Financial Officer, John has helped navigate a number of transformational periods for the company, all while maintaining a disciplined focus on our financial strength. His leadership has had lasting impact on Herbalife and helped position the company for its next chapter. I look forward to continuing to work alongside him through the remainder of this year.

Scott Schaefer, our Senior Vice President of Finance and Transformation, will succeed John as Chief Financial Officer at the start of 2027. Scott joined Herbalife in 2025 after 16 years at Zappos, where he most recently served as President and CEO. Among other accomplishments over his tenure, he spearheaded a digital-first growth agenda that enhanced customer engagement, optimized and scaled operations and delivered significant bottom line improvements. Since joining Herbalife last year, he has become an important member of our leadership team, and I'm confident he'll provide the financial leadership and strategic perspective to help guide our next chapter. Over the next 5 months, John and Scott will continue to work closely together to ensure a seamless transition.

And now I'd like to turn it over to John.

Thank you, Stephan. Turning to our second quarter financial highlights on Slide 11. We delivered another strong quarter. Second quarter net sales were $1.3 billion, up 5.4% versus the second quarter of 2025 and at the high end of our guidance range of up 1.5% to 5.5%. This is our fourth consecutive quarter of year-over-year growth.

On a constant currency basis, net sales increased 5.8% year-over-year. We've now delivered year-over-year constant currency growth in 9 of the last 11 quarters. This quarter's constant currency growth of 5.8% was approximately 80 basis points above the high end of our guidance.

FX rates moved unfavorably during the quarter versus the assumptions included in guidance. Our Q2 guidance had included a 50 basis point tailwind, but we experienced a 40 basis point year-over-year headwind in the quarter.

Our second quarter net sales outperformance was led by India, but even without the outperformance of India, our Q2 net sales would have been above the midpoint of guidance. I'll provide more details on our regional performance later in the call.

Adjusted EBITDA was $167 million, also at the high end of our guidance range of $150 million to $170 million. CapEx was $11 million for the quarter, below our guidance range of $15 million to $25 million, primarily due to timing. Capitalized SaaS implementation costs were $8 million.

Gross profit margin was 77.7% for the quarter, down 30 basis points year-over-year. This reflected approximately 50 basis points of country mix, 20 basis points of higher other costs and 20 basis points from higher inventory reserves and 10 basis points from changes related to self-manufacturing and sourcing. These were partially offset by 60 basis points of pricing benefits.

Second quarter net loss attributable to Herbalife was $26 million. This GAAP net loss was expected and was primarily driven by a nearly $95 million pretax loss on the extinguishment of debt related to our successful April debt refinancing. On an adjusted basis, net income was approximately $53 million.

Second quarter diluted loss per share was $0.25. As I just stated, the loss was due to the debt extinguishment from April's refinancing. Adjusted diluted EPS was $0.51, which included a $0.04 FX headwind versus the second quarter of 2025. Our adjusted effective tax rate was 43.2%, up from 27.7% for Q2 of last year, which drove an approximately $0.14 unfavorable impact to adjusted diluted EPS. The higher adjusted tax rate was driven primarily by country mix and certain discrete items in the quarter. For full year 2026, we expect our adjusted effective tax rate to be approximately 35%, primarily due to these items.

Our operating cash flow this quarter is best viewed on a year-to-date basis due to the timing of employee bonus payments, which were moved to Q2 this year versus Q1 in 2025. Operating cash for the first half of 2026 was $147 million, up 52% year-over-year, demonstrating the continued strength of our cash generation.

Credit agreement EBITDA for the second quarter was $191 million, and our total leverage ratio remained 2.7 at June 30, while our net leverage ratio was 2.2x. For additional details regarding the adjustments between adjusted EBITDA and credit agreement EBITDA as well as the calculation of net debt, total leverage ratio and net leverage ratio, please refer to the presentation appendix in the earnings press release.

Turning to Slide 12. Reported net sales increased nearly $70 million in the quarter or 5.4%, while constant currency net sales increased 5.8%. Volume increased 5.8% worldwide, marking our fourth consecutive quarter of year-over-year volume growth. Pricing provided an approximately $37 million benefit in the quarter, while country mix was an approximately $38 million headwind to net sales. FX was an approximately $5 million or 40 basis point headwind.

Turning to Slide 13. We have the regional net sales results for the second quarter. Three of our 5 regions delivered year-over-year net sales growth this quarter on both a reported and constant currency basis. On a sequential basis, these same regions showed improvements on a year-over-year constant currency basis.

As Stephan mentioned, North America returned to slight growth this quarter. Results reflected higher year-over-year pricing, partially offset by a 2% decline in volume.

Latin America delivered its fourth consecutive quarter of double-digit year-over-year growth. Reported net sales increased 17% with constant currency results up 8%. Results reflected favorable year-over-year pricing and sales mix, approximately 2% volume growth and an 840 basis point FX tailwind. Within the Latin American region, Mexico posted reported net sales up 17% year-over-year and local currency net sales increase of 5%. The reported net sales increase was driven primarily by favorable year-over-year pricing and significant FX tailwinds.

In Asia Pacific, reported net sales increased 15% year-over-year, while constant currency net sales increased 23%, driven by approximately 26% volume growth and favorable year-over-year pricing, partially offset by unfavorable country mix and FX movements. Within APAC, India delivered another strong quarter with reported net sales up 33% year-over-year and constant currency net sales up 47%. Growth was driven by a 45% increase in volume and favorable sales mix. Pricing was neutral and FX was a meaningful headwind.

In EMEA, reported and constant currency net sales declined 3.5% and 5.6%, respectively. This reflects a 12% volume decline that offset the higher pricing, favorable sales mix and FX tailwinds. In China, our smallest region and less than 5% of our worldwide net sales, reported net sales decline of 25% year-over-year, while constant currency net sales declined 29%, reflecting a partial benefit from foreign exchange. The decline was driven primarily by a 29% decrease in volume.

Turning to Slide 14. We see the drivers of the second quarter year-over-year change in our adjusted EBITDA. Adjusted EBITDA was $166.6 million. On a constant currency basis, adjusted EBITDA increased to $174.4 million, up slightly year-over-year. Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our fourth consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix.

Other changes included the expected timing of the Chinese government grant income and the timing of certain distributor events. The China grant received in Q1 this year compared with Q2 last year, while there were certain other distributor events that occurred in Q2 this year that were in Q3 last year. Additionally, there is an unfavorable net impact from India GST.

Foreign exchange was approximately $8 million headwind to adjusted EBITDA and a 53 basis point headwind to adjusted EBITDA margin.

Moving to Slide 15. I'll provide an update on our capital structure. We ended the quarter with $370 million of cash. At quarter end, $135 million was outstanding under the revolving credit facility. Our total leverage ratio was 2.7x and net leverage ratio was 2.2x at the end of the quarter. We are still targeting a net leverage ratio below 2x by the end of the year. This is the first quarter reflecting our April refinancing, and we are already seeing the positive impact on our net interest expense, which was $37 million, down from $54 million in the second quarter of 2025.

Turning to Slide 16. I'll review our outlook for the third quarter and full year. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis, with reported guidance based on average daily exchange rates from the first 2 weeks of July.

For the third quarter, we expect foreign exchange to be a modest headwind to net sales and adjusted EBITDA. On a reported basis, we expect net sales to increase 0.5% to 4.5% year-over-year, including a 100 basis point currency headwind. On a constant currency basis, we expect net sales to increase 1.5% to 5.5% year-over-year. We expect third quarter adjusted EBITDA to be in the range of $160 million to $180 million on a reported basis and in the range of $165 million to $185 million on a constant currency basis. Third quarter capital expenditures are expected to be in the range of $15 million to $25 million.

For the full year, we have narrowed our net sales guidance ranges and raised the midpoint on both a reported and constant currency basis. We expect reported and constant currency net sales to increase 2.5% to 5.5% year-over-year. For full year adjusted EBITDA, we have narrowed the ranges on both a reported and constant currency basis. We have raised the midpoint of adjusted EBITDA on a constant currency basis. However, changes in foreign exchange rates have resulted in us slightly lowering the midpoint of guidance on a reported basis.

We expect full year adjusted EBITDA to be in the range of $670 million to $690 million on a reported basis and in the range of $690 million to $710 million on a constant currency basis. We expect 2026 capital expenditures to be $50 million to $70 million, narrowed from previous guidance. Additionally, we continue to expect capitalized SaaS implementation costs of $35 million to $55 million, which are incremental to CapEx.

Before we move to Q&A, I'd like to close with 2 brief comments. First, on our capital allocation priorities. Herbalife is a resilient business that generates significant free cash flow. And relative to our current market capitalization, this cash generation is especially meaningful. On a trailing 12-month basis, our free cash flow yield is just over 23%, which we calculate as free cash flow or cash flow from operations less capital expenditures, divided by our market capitalization at the close of the quarter. We believe a yield at this level speaks to the underlying value of the business, and we continue to believe the best use of that cash is to keep reducing debt. Our commitment to repay more than $600 million by the end of 2028 remains a core priority. And all else equal, we believe delivering on it will create meaningful long-term value for our shareholders.

My second comment is to acknowledge the leadership transition we announced this afternoon. I returned to the CFO role more than 2 years ago to help strengthen our financial foundation and position the company for its next chapter, and I believe we have accomplished those objectives. Together, we've returned the business to growth and improved EBITDA margins. We have meaningfully reduced both our total debt and our leverage ratios. We have strengthened our balance sheet through our refinancing and significantly reduced our borrowing cost, and we reintroduced quarterly guidance in the financial discipline that supports greater predictability. We accomplished all of this while continuing to invest in the initiatives that we believe will drive the company's long-term growth.

Last year, we hired Scott. And since he joined, I've had the benefit of working side-by-side with him. He has earned my confidence as a financial leader, a trusted business partner for Stephan and the right person to lead our financial organization in the years ahead. For these reasons, I believe this is the right time to begin an orderly transition. Over the next 5 months, Scott and I will continue to work side by side to ensure a seamless transition.

And with that, this concludes our opening remarks. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of William Reuter with Bank of America.

Our next question comes from the line of Nicholas Sherwood with Maxim Group.

So there's been substantial distributor growth in Asia Pacific, I'm sure in part driven by the growth in India. How do you ensure to have stronger distributor retention during and after this rapid growth phase in that region?

Yes, Nick, thanks. I'll take this one. First of all, I think what you're seeing in terms of the growth is really driven by strong business models, strong customer support and systems that the distributor have actually -- distributors have put in place, the leadership. And so this is really a tremendous amount of growth, which is partially driven by what would be a correction in price, not correction, but just an adjustment in price, making the products more accessible to a greater number of customers and then the knock-on effect of the distributors and their systems and being able to take the influx of customers and duplicate.

And so systems are in place. We've never experienced this type of growth over a period of time like this. But everything that we're seeing in terms of the way the distributors are actually through their systems, their clubs, both virtual and physical, they were able to actually increase the amount of customer flow in ways that we've not quite seen in the past. So we're confident that that leads to the growth, and that will also support the growth as well.

Yes. And if I could add maybe just a little bit of history to, kind of, give some confidence in India's ability to manage growth. I mean, I know this is a very unique situation with the GST and the type of growth. But India has had 18 straight years of growth. And so they were able to accomplish that because they've been able to build in the discipline underneath that growth. So that also gives us confidence.

Okay. Yes. And then looking at North America, I know it's not direct one-to-one, but net sales per distributor is up year-over-year. And then also you have active sales leaders growing from the first quarter to the second quarter, where looking historically, usually, that number goes down from the first quarter to the second quarter. Are we looking at just sort of individual distributors are kind of doing better in North America? And is there any reason behind that?

I can speak to the productivity. So we are seeing increased productivity with distributors in North America and even a greater change in productivity of new people than more of a traditional run rate within North America. So I think your takeaway is accurate. I don't quite look at it the same way you look at it, but I look at it from a productivity standpoint, and we look at productivity by class when an individual came in. And I will tell you -- and maybe this is an important takeaway. Nutrition Club productivity is up.

Okay. Yes, that's really helpful. I know it's only been 1 month, but -- what have you seen from your distributors since the launch of the new Life I/O products and how they've been able to reach what is be considered a more sophisticated consumer with those products?

Look, so we launched it in July, right, which is a Q3 event. We barely just closed July. I think it's really better to hold this question until next quarter and not ask about the Q2 results. It really is -- look, I think you were at the event, lots of excitement. But before we start giving figures out, I think we should get through Q3 and do it on the next call.

Our next question comes from the line of Hale Holden with Barclays.

I have 2 quick questions. The first is the narrowing of the CapEx range for the year, or it looks like actually a modest reduction. Is there something that's slipping into '27 or something that you're not doing? I just was wondering what the driver was.

We've had -- so we have a very disciplined approach to reviewing capital expenditure projects. And so we have a forecast. But then before every individual project is approved, we do the ROI analysis. And we've had a history over the last couple of years of maybe delaying a few or reprioritizing and saving a little bit of money. I think it's important to note, we're investing in those things that we think can add value. So this is not a financial constraint. This is more of just good practices that we put in place. And so we've been underspending a little bit from what we've expected. So I think it's more of an underspend than it is a pushing out until next year.

Got it. I actually viewed it as a positive, John. Not a negative, but that's fine.

Yes. The important thing I want to make sure people take away is when we underspend in capital expenditures is because we are prioritizing projects in a way that can add value, not because of cash constraints, right? We generate plenty of cash.

Great. And then, Stephan, I had, like, a sort of more of a thought question for you. It does feel like we're, if not hitting, at least on the road to maximum protein with Pop-Tarts launching a protein Pop-Tart covered in sugar. And that's always been Herbalife's kind of wheelhouse and go-to in their consumer, and it was nice to see the North America growth up in the quarter. But I was wondering, does this help your distributors? Does it hurt them? How does having protein in every single piece of food that's out there in the grocery aisle affect you?

Yes. Well, I think, number one, it's a good thing. What we've been doing for 45 years, over 45 years and how we've been approaching it and meal replacement and finding our place as a leader, it definitely leads the market. You mentioned just kind of thoughts around it. One of the things is are we taking advantage of it to the extent that we can. And so I don't want to talk a lot about it, but we are looking very close at everything that we're doing in the area of protein and just being able to look at it through the lens of how can we go and grab more market share and extend that lead.

So you're right. It's showing everywhere. I think we've led in the fact that it's been vital to health and well-being and reaching goals. And now the market also is catching on, and it's just expanding the market. So we're going to be taking advantages of that. But it's a lot of good things coming. More consumer awareness is always a positive thing.

Our next question comes from the line of Carla Casella with JPMorgan.

Two things. One, can you talk about what you expect the cost or inflation to be for next year? I may have missed it in the prepared remarks. And if you have any issues with -- given the whey shortages or costs that we're hearing about?

Yes. So you're talking input costs. We're seeing some pressure. It's manageable for us. Whey is one of the bigger increases that we're seeing, but we have lots of different kinds of protein. Whey is not the dominant type of protein that we sell. But there is an impact. And then packaging and on freight because of the oil prices, we're seeing some pressure there, too. I think it's a lot less on us than maybe some other companies. But what we're seeing is, like I said, I think it's manageable. I think we probably will be able to recover those costs with our normal price increase structure next year. We'll know more as we start projecting next year, but that's the feel we have right now.

Okay. Great. And then just with new CFO coming in, any potential changes to your leverage target or thoughts of capital allocation?

No, not at this time. I mean, so Scott has been here for about a year. He joined last year. He and I share similar thinking on that. And I reiterated what our policy -- not policy, but what our priorities are with capital allocation on the earnings call. And I did that so that investors would know as of right now, it hasn't changed. I can't tell you that as a company, that priority won't change over time, but that's not where we are now. And I don't believe that Scott is going to be a driver of the change unless the circumstances change and the Board will do it. Because when we think of capital allocation, it's a Board-level decision. So I want to make that clear. So it's not going to be just -- we have a new CFO and things are going to change.

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

Also in the competitive environment, there was some M&A news this week with P&G buying a premium supplement company, Thorne. Does that change any of your thinking on how to go to market? Or what does that really say about the competitive environment in premium nutritional supplements?

Doug, it's...

Tells me it's undervalued.

Right. $3.8 billion, right?

There was [indiscernible] times this year's projected revenue. And so...

Yes. So again, back to the awareness, right? So this is talking to this $34 billion global personalized nutrition market. And it's just validation that the strategy of the company and the capabilities that we're bringing to market is sound. And it's a natural progression for us as a company. So definitely see that as a validation. And when you think about the Life I/O brand, it's exactly to start targeting that audience. So this is the direction, and it's great to see. Obviously, I'm with JD on that in terms of valuation, though.

That's understandable. At the Extravaganza last month, there was a lot made of the beta test of the blood biomarker diagnostics. So I'm just curious how the reaction has been among the distributors to the beta test? And what have you seen over the last 3 or 4 weeks with that?

Yes, it's interesting. I mean, if you're speaking of news, I think Function Health's current -- recent, I think $450 million that they raised in blood diagnostics. And so here we go again into the market of the personalized nutrition market, which the blood-based testing and biomarkers is a part of that. So again, launching in beta in North America, an at-home test that allows an affordable, simple, easy way to have biomarkers and then do it at home, send it in, have all of the results put into Pro2col and make it accessible for people to educate and to support people on their health journey. It's an opportunity.

So we are -- this is, again, beta, this is new capabilities. So we are every step of the way from the ordering to the administration at home to the sending in of it to how it shows up and the API into Pro2col. So it's the beginning of a process for us. And again, uniquely positioned for ourselves. And that's part of the what to measure, right? This is -- we've been doing it 45 years. It's just the evolution.

No, that makes sense. And then on the personalized nutrition, there is big news with Bioniq rolling out in Europe in June and North America in July. So what's next in the personalized nutrition space?

The continuing evolution. So additional markets in the end of the year and Bioniq Go being the first in the line in the category, and there will be more to come. So we're not really ready to talk about it right now.

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, and thank you, everyone, for joining today. I want to leave you with 3 thoughts. One is Herbalife is 45 years of a proven strength in our business model. We just reported our fourth consecutive quarter of reported net sales. As John mentioned, we've delivered constant currency net sales growth in 9 of the 11 last quarters. And we've just talked about how the consumer health and the personalized nutrition market is evolving and the opportunity that it's creating. The important thing to understand is that Herbalife has been here for over 46 years, and we have been a personalization company. Our distributors, that's been the key of personalization, taking an individual based on what they're looking for, who they are and personalizing their nutrition through our products and supporting them on their journey. So we're uniquely positioned to lead in this.

The personalization in the nutrition industry, it's a lot of segments. We just talked about a couple of them. Herbalife brings them all together. We're in the process of building out so that we can actually partake in the growth of these segments, all while driving our primary segment, which is the nutrition piece. And our distributors are the superpower. A lot of the companies that you see in this space, they don't have a superpower of millions of distributors across 95 markets that are the voice in the spirits and the heart of helping people on their journey to better health and wellness. This creates a unique opportunity for us. And so we're building on that foundation.

And then lastly, this opportunity and what we're building is built on a position of strength because of the company that we are and the foundation that we have. We generate strong cash flow that allows us to invest in the future and at the same time, reducing debt, strengthening the balance sheet and creating long-term value for our shareholders.

So this is the 3 things or these are the 3 things I want to leave you with. And then the last is just thanks. Thank you to all of our employees, our distributors and shareholders. Your continued commitment and support is very important for us. And we thank you for participating today, and we look forward to updating you next quarter.

That concludes today's conference call. You may now disconnect.

Welcome, and thank you for joining the First Quarter 2026 Earnings Conference Call for Herbalife Limited. [Operator Instructions] As a reminder, today's conference 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. Please go ahead.

Thank you, and welcome to everyone joining us. With 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 statements 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 thank you all for joining us today. We delivered a strong start to 2026 with first quarter net sales and adjusted EBITDA exceeding guidance as we continue to build momentum. Importantly, these results reflect the underlying stability of our business and reinforce our confidence in the strategy we are executing.

We are building a more connected, personalized approach to health and wellness by bringing together innovation, science and the strength of our distributor network to better serve customers around the world. On April 14, as part of our debt refinancing, we released preliminary net sales growth expectations that exceeded the high end of our guidance on both a reported and constant currency basis. We also indicated that reported adjusted EBITDA was expected to be at or above the high end of our previously issued guidance. Our final reported results are in line with that release. Let's review a few of the financial highlights from the quarter.

We delivered net sales of $1.3 billion, up 7.8% year-over-year and up 5.4% on a constant currency basis, exceeding guidance on both measures. This was our third consecutive quarter of year-over-year net sales growth on both a reported and constant currency basis. India achieved record quarterly net sales for the second consecutive quarter. Adjusted EBITDA was $176 million and above guidance, and we generated $114 million of cash from operations in the quarter.

In addition to our first quarter results, we successfully refinanced and strengthened our capital structure in April, which we expect will result in approximately $45 million in annual cash interest savings. We executed this transaction in a highly volatile market and geopolitical environment. We achieved our pricing objectives, extended our maturity profile and meaningfully reduced our borrowing costs while also enhancing our financial flexibility. This outcome reflects the financial and operational results we've delivered over the past two years.

As we build on this momentum, we remain focused on executing against our vision with personalization at the center of our strategy. Personalization has always been a foundational strength of Herbalife with our distributors delivering tailored recommendations through direct relationships and a deep understanding of individual goals. What's evolving is the level of precision we can now bring, which is enabled by enhanced data, insights and technology. This evolution is especially important as consumer expectations continue to rise, driven by greater access to AI, wearables and at-home diagnostics which are increasing demand for guidance that is not only personalized, but also more actionable and continuous.

We are evolving from personally curated recommendations to an approach that combines both personally curated and formulated solutions, extending our ability to deliver individualized outcomes at scale through better tools, better data and expanded manufacturing capabilities, all delivered through our distributors.

This builds on four core actions that have long guided our business: what to measure, including key health metrics like weight and muscle mass, what to take, which is products from our expanding portfolio, what to do includes daily habits like hydration and exercise and who to do it with is our distributors who provide guidance and support through a variety of DMOs, which is how they go to market. These actions have successfully built our business over the past 45 years. Our global network includes over 2 million distributors, more than 60,000 nutrition clubs and millions of customers across 95 markets. This reach is our differentiator and super power.

Building on that foundation, our recent acquisitions are enabling a more connected, personalized and data-driven approach that is enhancing these four core actions, making them more precise, scalable and actionable. On March 26, we announced an agreement to acquire substantially all of the assets of Bioniq's core personalized nutrition business, which we completed at the end of April.

Bioniq is an established U.K.-based business with an existing supply chain. Its patented product personalization engine uses an individual's health background and a proprietary database of biomarker data to develop personalized nutritional supplement formulas. This acquisition further accelerates our pathway into personally formulated products. In late June, our distributors will begin offering Bioniq's personalized nutritional supplements to customers across 11 European countries. The U.S. will follow in July with additional markets later in 2026.

I'd like to take a moment to explain how our recent acquisitions fit together to support the four core actions I mentioned earlier with Pro2col as a central operating system. Each acquisition plays a distinct role. And combined, they create greater value than any one capability alone. Let me walk you through how each contributes.

Link BioSciences is a formulation and manufacturing engine. It translates insight into products by enabling us to manufacture personalized nutritional supplements in a powder format at scale, directly connecting data and recommendations to the finished product. Bioniq accelerates our speed to market with a personally formulated vitamin and mineral complex in a granular format while broadening availability through a more accessible price point.

Pruvit provides the opportunity to expand our portfolio into the ketone category with a channel exclusive offering aligned with growing consumer interest in performance, energy and metabolic health. It's an exciting addition to the portfolio, and we'll have more to share this summer.

And Pro2col brings it all together by providing the experience and intelligence layer. It digitizes and scales the four core actions I mentioned earlier, what to measure, what to take, what to do and who to do it with, bringing greater precision to how distributors support and engage their customers through a more connected data-informed experience. It translates consumer inputs and health data into actionable guidance that supports a more consistent behavior change over time.

At the end of March, we expanded the Pro2col beta program to include select distributor leaders across 10 EMEA markets. That broader deployment is providing valuable feedback that is helping refine the road map, platform capabilities and the digital experience. To enable integration of Bioniq into Pro2col and incorporate feedback from the broader beta group, we are extending the beta program with the next release planned for the North America Extravaganza in July. That release will include a new user experience, enhanced features and additional capabilities that support our broader strategy.

Part of that broader strategy is a multiyear rollout of new packaging across our global product portfolio. The rollout began in March, and we expect it to be substantially completed by the end of 2027. For context, Slide 8 highlights our packaging currently in market. And Slide 9 highlights our new modern packaging design.

Grounded in consumer insights and analytics, the new packaging reinforces scientific credibility and trust at every touch point. At a portfolio level, a consistent science-led visual system simplifies navigation and helps distributors and customers confidently build personalized product combinations. The new labels also reinforce product purpose and efficacy, strengthening confidence and differentiation, which are foundational in a competitive global marketplace.

In April, we kicked off our first Extravaganza events of the year, which started in India, where we hosted three consecutive events across Delhi and Bengaluru with approximately 46,000 attendees. We saw firsthand the strong energy and engagement across the market. These events are a critical part of how we operate. It's where we communicate our vision, build skills, share best practices and reinforce strategic priorities in ways that directly shape distributor execution. They also drive momentum at the local level, leading to stronger engagement, more consistent business activity and improved retention. We look forward to that momentum continuing as we kick off our summer Extravaganza events in China, Eurasia, South America, Asia Pacific, Europe and North America.

Before I turn it over to John to walk through the quarter in more detail, I want to take a step back and reflect on what we've accomplished over the past two years. Herbalife today is a fundamentally stronger company than it was two years ago. We have stabilized net sales and returned to growth, expanded adjusted EBITDA margins, strengthened our balance sheet by repaying nearly $540 million of debt since the beginning of 2024, reduced our total leverage ratio from 3.9x at the end of 2023 to 2.7x at the end of the first quarter, completed our debt refinancing, unlocking approximately $45 million in annual cash interest savings and completed four strategic acquisitions.

Importantly, we have done all of this with a disciplined approach, improving operational efficiency while executing against our plan. We are about to reach a major milestone this summer with the launch of our next-generation personalized nutritional supplements. This further strengthens our confidence in the path ahead. Our continued progress reflects strong momentum and clear direction as we advance towards our vision to become the world's premier health and wellness company, community and platform.

With that, I'll hand it over to John to walk through the financials in more detail.

Over to you, John. Thank you, Stephan. Turning to our first quarter financial highlights on Slide 11.

We delivered another strong quarter with net sales and adjusted EBITDA both above our guidance ranges, led by continued strength in India. First quarter net sales were $1.3 billion, up 7.8% versus the first quarter of 2025 and above the high end of our guidance range of 3% to 7%. This was our third consecutive quarter of year-over-year growth and our strongest year-over-year growth since the second quarter of 2021, building on the momentum we saw in the fourth quarter of 2025.

On a constant currency basis, net sales increased 5.4% year-over-year, also exceeding guidance. We have now delivered year-over-year constant currency growth in eight of the last 10 quarters. Our first quarter net sales outperformance was driven primarily by India, where net sales reached a record $275 million, up approximately 32% year-over-year, marking the second consecutive quarter of record sales. We believe demand in the market remains strong following the reduction in the GST rate on the majority of our products in late September 2025. I'll provide more details on our regional performance later in the call.

Adjusted EBITDA was $176 million, above the high end of our guidance range of $155 million to $175 million. Adjusted EBITDA margin was 13.3%, down 20 basis points year-over-year, but up 240 basis points on a two year stack rate, including approximately 70 basis points of FX headwinds versus last year. CapEx was $11 million for the quarter at the low end of our $10 million to $20 million guidance range, primarily due to timing with some spending shifting into the second quarter.

Capitalized SaaS implementation costs were $10 million. Gross profit margin was 77.9% in the quarter, down 40 basis points year-over-year. This reflected approximately 50 basis points of input cost inflation, primarily from lower absorption rates, 30 basis points of unfavorable sales mix, 20 basis points from other unfavorable cost changes and 50 basis points of FX headwinds. These factors were partially offset by 70 basis points of pricing benefits and 40 basis points from lower inventory write-downs.

First quarter net income attributable to Herbalife was $62 million with adjusted net income of $69 million. First quarter adjusted diluted EPS was $0.64, including a $0.03 FX headwind versus the first quarter of 2025. Our adjusted effective tax rate was 27.3% compared to 21.8% in the first quarter of 2025, which resulted in an approximately $0.04 unfavorable impact to adjusted diluted EPS. The higher rate in 2026 was primarily driven by a decrease in tax benefit from discrete events compared to the first quarter of 2025. For full year 2026, we continue to expect our adjusted effective tax rate to be approximately 30%, in line with 2025.

We delivered strong cash generation in the first quarter, which is typically our lowest cash flow quarter in the past years due to timing of our annual Mark Hughes distributor bonus payments and employee performance bonus payments. Operating cash flow was $114 million compared to relatively neutral cash flow in the first quarter of 2025. Consistent with last year, we paid approximately $75 million of annual Mark Hughes distributor bonuses in the quarter. However, employee performance bonuses were paid in April this year rather than in the first quarter.

Credit agreement EBITDA for the first quarter was $194 million, and our total leverage ratio was 2.7x as of March 31. Beginning this quarter, we are introducing net leverage ratio as an additional metric to provide greater transparency into our leverage profile and delevering progress. We define net leverage ratio as net debt divided by trailing 12-month credit agreement EBITDA. At the end of the first quarter, our net leverage ratio was 2.1x, and we are establishing a target to reduce net leverage to below 2x by the end of this year. We believe this metric provides a more complete view of financial flexibility because it reflects debt relative to earnings while also incorporating cash on hand.

For additional details regarding the adjustments between adjusted EBITDA and credit agreement EBITDA as well as the calculation of net debt, total leverage ratio and net leverage ratio, please refer to the presentation appendix and the earnings press release. Lastly, as Stephan noted earlier, in April, we completed our $1.45 billion senior secured refinancing, and I'll provide more details on that in a moment.

Turning to Slide 12. Reported net sales increased nearly $100 million in the quarter or 7.8% year-over-year, while constant currency net sales increased 5.4%. Volume increased 4.1% worldwide, marking our third consecutive quarter of year-over-year volume growth. Pricing provided an approximately $40 million benefit in the quarter, while country mix was an approximately $26 million headwind to net sales. FX provided an approximately $29 million benefit or a 240 basis point tailwind.

Turning to Slide 13. We have the regional net sales results for the quarter. As we noted in our April 14 pre-release, results were mixed across the business in the quarter. Strong growth in Asia Pacific and Latin America more than offset softer performance in EMEA and North America, while China continued to be a headwind.

In Asia Pacific, reported net sales increased 17% year-over-year, while local currency net sales increased 21%, driven by approximately 22% volume growth and favorable year-over-year pricing, partially offset by unfavorable sales mix and FX movements. As I mentioned earlier, India delivered record quarterly net sales for the second consecutive quarter with reported net sales up 32% year-over-year and local currency net sales up 39%. Growth was driven by a 37% increase in volume and favorable sales mix. Pricing was neutral as we have not taken a price increase since November 2024, and FX was a meaningful headwind.

We continue to believe market demand remains strong following the GST rate reduction on a majority of our products. Importantly, India has long been one of our strongest growth markets. While year-over-year reported net sales growth began to moderate in late 2024 to mid-2025, momentum began to build again, supported by distributor leadership training in the back half of 2025. We expect the GST tailwind to continue through September with momentum extending beyond September, although at a more moderate level.

Latin America delivered its third consecutive quarter of double-digit reported net sales growth, with net sales up 17% year-over-year and local currency net sales up 7%. Results were driven primarily by favorable year-over-year pricing and sales mix, along with a significant FX tailwind, mainly from the strengthening of the Mexican peso, partially offset by a 2% decline in volume. Within the region, Mexico delivered another quarter of growth with reported net sales up 22% year-over-year and local currency net sales up 5%, driven primarily by favorable year-over-year pricing.

In EMEA, reported net sales increased 1% year-over-year, benefiting from FX tailwinds, while constant currency net sales decreased 6%, reflecting an 11% decline in volume that more than offset favorable year-over-year pricing. In North America, net sales declined 3% year-over-year, reflecting a 5% decline in volume, partially offset by favorable year-over-year pricing.

As noted in our April 14 press release, U.S. net sales were negatively impacted by unusually severe weather in January and February, which led to temporary closures of distributor-owned nutrition clubs, disrupted distributors' daily consumption sales and in turn, reduced distributor product purchases from the company. Net sales were also impacted by higher levels of shipments in transit at quarter end compared to the prior year with the related revenue deferred to the second quarter under our revenue recognition policies. Excluding these factors, North America net sales would have been slightly up year-over-year on both a reported and constant currency basis. We continue to expect full year net sales growth in North America in 2026.

In China, reported net sales declined 12% year-over-year, while local currency net sales declined 16%, reflecting a partial benefit from foreign exchange. The decline was primarily driven by an 18% decrease in volume, partially offset by favorable sales mix.

Turning to Slide 14. We see the key drivers of the $11 million or 6.5% year-over-year increase in first quarter adjusted EBITDA. Adjusted EBITDA was $176 million for the quarter, with a margin of 13.3%. On a constant currency basis, adjusted EBITDA was $180 million.

Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our third consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix and input cost inflation, primarily due to lower absorption rates.

Salaries were an approximately $2 million headwind, largely reflecting merit increases implemented in late Q1 of 2025. First quarter adjusted EBITDA included $5.5 million of China government grant income. Because this grant is typically received once annually, the year-over-year variance is timing related as the prior year grant of $4.8 million was recognized in the second quarter of 2025. Lastly, foreign exchange was an approximately $5 million headwind to adjusted EBITDA and a 70 basis point headwind to adjusted EBITDA margin.

Moving to Slide 15, I'll provide an update on our capital structure. We ended the quarter with $451 million of cash, up nearly $100 million from the end of 2025. During the quarter, we made the scheduled $5 million amortization payment on the Term Loan B and the revolver was undrawn as of March 31. At quarter end, our total leverage ratio was 2.7x and net leverage was 2.1x. In April, we completed our $1.45 billion senior secured debt refinancing. We were pleased to execute this transaction in a dynamic market environment while achieving our pricing objectives, meaningfully reducing our borrowing costs, extending our maturity profile to more than seven years and enhancing our financial flexibility. We also have no material maturities until 2028.

The refinancing included $800 million of 7.75% senior secured notes due May 2033, a $225 million Term Loan A and a $425 million revolving credit facility with both the Term Loan A and revolver maturing in April 2031.

At closing, as of April 29, $200 million was outstanding under the 2026 revolving credit facility with approximately $180 million available to borrow. As I noted, the refinancing meaningfully reduced our borrowing cost. The coupon on the senior secured notes were reduced by 450 basis points and the spreads on the revolver and term loan were reduced by 300 basis points and 375 basis points, respectively, to 3%. Based on the total senior secured debt outstanding immediately before and after the refinancing and current applicable interest rates, we expect the refinancing to result in approximately $45 million in annualized cash interest savings.

Because the refinancing was completed during 2026, those cash interest savings will only be partially reflected this year. The $45 million represents the annualized benefit based on current conditions. That estimate may change as we pay down debt or as variable interest rates move, but it is reflective of our current expectations for the annual savings from the refinancing. Overall, these actions further strengthen our balance sheet and support our continued focus on deleveraging and financial flexibility. Looking ahead, we are targeting net leverage to be below 2x by the end of '26 and remain on track to reduce outstanding debt to approximately $1.4 billion by the end of 2028.

Separately, let me briefly touch on Bioniq. As Stephan noted in his opening remarks, on April 30, we completed the acquisition of substantially all of the assets of Bioniq's core personalized nutrition business as contemplated by the agreement we announced on March 26. Base consideration was $55 million, payable over five years, including $10 million payable subsequent to closing. The agreement also provides for up to $95 million in contingent payments tied to certain future Bioniq product sales performance. We also obtained a call option to acquire Bioniq Lab, a separate platform focused on small molecules and peptides. Importantly, this acquisition is consistent with our disciplined approach to selectively pursuing targeted cash-light capabilities that complement our business and can be scaled through our global reach.

Turning to Slide 16. I'll review our outlook for the second quarter and full year 2026. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis, with reported guidance based on average daily exchange rates from the first two weeks of April 2026. Broadly speaking, since we provided our full year guidance in February, overall FX impact has moved unfavorably, reducing the tailwind benefit to net sales.

For the second quarter, we expect foreign exchange to be a modest tailwind to net sales and neutral to adjusted EBITDA due to timing. On a reported basis, we expect net sales to increase 1.5% to 5.5% year-over-year, including an approximately 50 basis point currency tailwind. On a constant currency basis, we expect net sales to increase 1% to 5% year-over-year.

We expect second quarter adjusted EBITDA to be in the range of $150 million to $170 million on both a reported and constant currency basis. This outlook includes an approximately $10 million year-over-year headwind to adjusted EBITDA or approximately 80 basis points of adjusted EBITDA margin from two items. Approximately $5 million reflects the timing of the China government grant. We have historically received that grant once annually. And in 2026, it was recognized in the first quarter compared to the second quarter of 2025.

The other $5 million relates to the September 2025 India GST rate change. As previously discussed, while the GST rate on most of our products we sell was reduced to 5%, the GST rate we pay on services remained at 18%, which created a mismatch between the GST we collect and the GST we pay, resulting in incremental G&A expense. We have partially offset that impact through a reduction in the sales commission percentage paid to our distributors reflected in selling expenses. The net impact of those two items is an estimated $5 million headwind to the second quarter adjusted EBITDA.

Second quarter capital expenditures are expected to be in the range of $15 million to $25 million, above the first quarter of 2026, primarily due to timing as some spending shifted from the first quarter into the second quarter. For the full year, we are increasing the midpoint of our constant currency net sales guidance range, while also narrowing the reported and constant currency net sales guidance ranges. The FX tailwind to full year net sales guidance has been reduced to a 50 basis point benefit from 100 basis points assumed in our previous guidance.

For adjusted EBITDA, we have narrowed the ranges on both a reported and constant currency basis, while increasing the constant currency midpoint. We are reaffirming our capital expenditure guidance. For the full year, we expect reported net sales to increase 1.5% to 5.5% year-over-year. On a constant currency basis, we expect net sales to increase 1% to 5% year-over-year.

We expect full year adjusted EBITDA to be in the range of $675 million to $705 million on both a reported and constant currency basis. Based on India's first quarter sales performance and our outlook for the balance of the year, we now expect India GST-related net incremental cost to be an approximately $20 million to $25 million headwind to full year adjusted EBITDA and an approximately 40 to 50 basis point headwind to adjusted EBITDA margin. Our guidance also includes a preliminary estimate of the impact of higher oil prices.

We continue to expect 2026 capital expenditures of $50 million to $80 million. In addition, we expect capitalized SaaS implementation costs of $35 million to $55 million, which are incremental to CapEx. Lastly, we continue to expect our full year 2026 adjusted effective tax rate to be approximately 30%.

Before moving to Q&A, I want to close my opening remarks with one final comment. As Stephan said earlier, Herbalife is a fundamentally stronger company today than it was two years ago, and we remain focused on driving shareholder value. We returned to net sales growth and expect year-over-year growth to continue the remainder of the year. We strengthened our distributor network through enhanced training and other targeted initiatives, including the Herbalife Premier League, which was launched in March of 2024. At that time, we had experienced 12 consecutive quarters of year-over-year declines in new distributors.

Since that launch, however, the trend has improved meaningfully with new distributor growth up 13% on a two year stack basis in Q1. And as we have now moved beyond the two year anniversary of the Premier League launch, this metric becomes less relevant going forward. We have also expanded our Q1 adjusted EBITDA margins by 240 basis points since Q1 of 2024. And we have reduced our total leverage ratio from 3.9x at the end of 2023 to 2.7x at the end of the first quarter, driven by $540 million of debt reduction, primarily through cash generated by the business.

And lastly, as I said, we've completed our debt refinancing in April, unlocking approximately $45 million in annual cash interest savings. This concludes our opening remarks. Operator, please open the call for questions.

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

Stephan, I wanted to first ask about Pro2col. Now that the distributors and the customers of distributors have had more time with Pro2col in the U.S. beta group, do you think you could discuss a little bit more the behaviors you're seeing from that group and how they're shaping up relative to your expectations? For example, are you seeing distributors able to sell more Herbalife product to their customers? And on the customer side, what are you seeing from the activity and the duration with which customers are interacting with the app and inputting their health data?

Yes. Thanks for the question, Jason. So as you know, we launched beta last year. And the objective of beta is really to get the distributor feedback and make sure that it's really fitting with their business flows and how they go out and talk to customers and engage with them. So in terms of the distributors and their response, the amount of feedback that we get in terms of the different models and leaders that operate in different regions, especially now that we've expanded it to the 10 European markets. It's helping us to actually formulate features, how people are coming into it and how distributors will work with their customers. And at the same time, there has to be enough there for the distributors to actually bring in the customers.

And we're really in this beta phase, and we did it on purpose. We've kind of -- it's not beta 1, beta 2. The phasing is really because the more information that we have, the more amount of people to give the feedback, the more that we're adjusting it to make sure it goes across different DMOs with different leaders in the way that they operate. And so I would say that we continue this phase. For us, this was not a company that's going direct to consumer that's going and has this relationship directly. Our entire business is based on distributors and their engagement with customers.

So we're in the phase still and enlargening the beta phase as we've gotten more countries in to make sure that we bring the functions that are necessary to allow the impact and bring the value that we need to. So in the beta phase currently.

John, do you want to chime in?

Yes, let me just chime in for a second. So as Stephan said, it's beta. We're seeing performance, getting feedback, enhancing it, and we've got an enhanced version coming up with Extravaganza. What we want investors to know, this is an important part of our strategy, but we have not rolled into our forecast any revenue -- direct revenue from this. So it's still -- even though we're going to launch Bioniq and we're going to launch Pro2col, it's still going to be in the beta form. Any results ends up being more opportunity to this year than it is risk to this year because we have not rolled that into the numbers yet.

Yes. Let me just add, Pro2col overall, it's not just a digital application to engage with customers. It really is designed as an end-to-end solution, right? So we believe that the future is in the what to measure, meaning that people are going to want to measure more things like bring their wearables in to inform, blood biomarkers which are going to get launched at Extravaganza that are going to come in. Then personally formulated or the next generation of personalized nutrition through Bioniq, for example. And what ends up happening is it's the overall value proposition, which gives it value. That's why we talk about all of the pieces individually being valuable, but it's all the pieces together that make it incredibly valuable.

I think the most important thing, and it's the core fundamental of our business is distributors need to be able to go out into the market and have conversations and that the people that they're talking to with what they're going to be offering them, they say, wow, you can do all of this? Oh, I'm interested. And it's a pretty basic thing. If you were to ask 10 people on the street, would you rather have supplements that are really more personalized for you? Or would you rather buy supplements that are actually formulated for many? And I believe that most people would respond, well, I'd be interested in the more personalized ones. And so that's the opening of the conversation, but you've got to also be able to deliver the products for it.

So we're really excited to get to Extravaganza and to be launching these 11 markets in EMEA in June and in North America to be able to bring this to market. So the pieces are coming together. Testing is coming. Now we're still in beta because there's still functionalities and features that we need to build in, but we're also launching this next generation of personalized supplements and so the pieces are there.

And we'll continue this journey for us is really about making sure that our distributors have what they need in hand to go have conversations, bring more people into the company, keep them longer, increase LTV, increase the amount of people that are getting referred and ultimately increase the amount of people who want to join the business and duplicate a business.

Got it. Really appreciate all that color. My second question is on India. Obviously, very strong growth following the GST change. I'm curious, given what you've seen, how has your thinking evolved on potential price reduction programs in other markets? And just as a housekeeping related to that, what are you assuming in guidance for India constant currency in the rest of the year? I know you mentioned you're expecting continued momentum. But should we expect that -- or does your guidance contemplate kind of the similar 30-plus percent growth in the rest of the year?

Yes Chasen. It's John. I'll take this. Let me break it into pieces. So there is a lesson in India. We had that price decrease or effectively a price decrease through the GST reduction and that created a lot of momentum. India had started building momentum just prior to that. And I think maybe there's a couple of things I want investors to know. So one is that momentum has been incredibly strong. And we're going to annualize the GST in September, but we don't think that means we're not going to grow after September. I think the momentum carries forward.

Granted, we'll be comping quarters that has the GST impact. So the growth rate will moderate, but that momentum we expect to continue. So that's one. And that gives you a little flavor of our thinking of India. India did beat our expectations in Q1. Going forward, if I may break this into buckets, for Q2 through Q4, so the rest of the year, we basically haven't changed our sales expectations from where we were in February. India has come up a little, but we had some softness, as you noticed in the quarter in EMEA. And we're going to run some tests. And based on what we've learned in India and hopefully, that can work.

And actually, we had another issue with -- I don't know if issue is the wrong word, but we had a price increase in Mexico, plus there was an incremental tax in Mexico that actually had a little bit of a volume impact in Mexico on a negative side. So that also supports the thesis we're working with our distributors on that price matters. And so I think there's a lot of opportunity for us to affect volume in the future by modifying price and modifying the commission structure. So we're running tests. We have been running tests. We're now running more tests based on the results we've seen.

Our next question will come from the line of Karru Martinson with Jefferies.

You referenced higher oil costs. I was wondering how is that flowing through to the consumer, especially here in the North American market?

We're not flowing it through. We're just absorbing it right now. At this point, for the rest of this year, that's what's assumed. What we did say is it's not material to the year. So we're going to cover it ourselves. So we have not raised prices because of it. That doesn't mean that it didn't have an indirect impact or it doesn't have an indirect impact on the consumer in general, but it doesn't have a direct impact on our price.

Okay. And so did you see a shift in the ordering pattern when the Iran conflict started and gas prices started going up? Or is that too soon to tell?

It's too soon to tell, but we did have -- like I said, the U.S., we can explain what happened. There was some timing differences, and there was some nutrition club closures during some really bad weather that we can quantify, and we made that available to investors. So I think the U.S. is on track. EMEA, there was -- I mean, Europe had some weakness, and it's too early to tell if that was tied to the economics resulting from the geopolitical situation or not. So -- but there was definitely some weakness in Europe.

Okay. And just lastly, when we look at China, it's been a work in progress for a while now. How should we think about that? And could you remind us where it stands today as a percentage of your sales?

It's -- I mean it's... I'll give you the percent number. It's really small. It's like 4% of sales. It's under 5% of sales. So it's relatively small. It's not very -- doesn't really contribute to profit in any meaningful way. What I've told investors over the last few quarters is we have a lot of strategies we're going to implement in China. I would wait and see. At this point, we're not rolling in the benefits of those strategies. We're going to wait until we see the benefits of those strategies.

So I expect China to be -- I think China long term is a huge opportunity for us. We're super underpenetrated. The model does well in China for some of our competitors. The products do well in China. We haven't found our footing yet. We're working on it. I'm confident over the long term, we will, but you won't see it rolled into our forecast until we see it coming through in results.

Yes. And Karru, just on -- distributor leadership, we've spoken about it in the past. Historically, it's been really just by itself isolated. And we started at the beginning of this year to allow distributors and leaders from Greater China to come into the market. And it's the first time they've ever had to lead that opportunity. And we see a continuing trend of more of them being interested. And at this Extravaganza that's coming up this month, there's a few hundred that are actually in that are looking -- 500 actually approximately that are looking at the potential of building business in China. So we're seeing it as really positive from that standpoint. But you said it, work in progress. So we'll update you over time.

Our next question is going to come from the line of Nicholas Sherwood with Maxim Group.

Kind of going back to the Pro2col launch, have you seen any use of the platform in nutrition clubs and any feedback of how it works in that space?

Yes, Nick, super early. Thanks for the question. In nutrition clubs, especially here in the U.S., it's really a consumption-based business. And so it's one of the flows and the integrations that we're working on because it's obviously a very large and important part of our business. And there are millions of people walking in annually into a nutrition club to buy a shake or a tea, and we want to have an easy entrance into Pro2col and getting exposure to being able to track and have physical results and move from a transactional to more of a transformational business. So yes, it's one of the areas of focus for us, and it's a major DMO integration. So early days.

Yes. I appreciate the detail. And then looking at the packaging redesign, what early metrics did you see coming out of testing the new design? And what have you seen from the early stages of the rollout of that new packaging?

Well, the first product was just rolled out actually in India, and it's very, very early. So overall, number one, as we went through the process, obviously, distributor feedback and we did research, very, very positive from that standpoint to see in the real world, how it impacts, it's going to take time. But yes, the initial feedback and research, very positive, but very, very early.

Okay. And then my last question is, can you provide any color on the transition of preferred members to the new e-commerce platform? And how do you expect preferred members to interact with Pro2col or get added to that platform in the future?

So I think you're referring to the DS Commerce. Yes. And that started to happen with a pilot group, a small group, I think, at the beginning of the year, and then it was just opened up. So it's very, very recent. So very early to talk about it.

Yes. If I could step back for a second because we had a lot of questions just to make sure we're aligned on where we are with a lot of these initiatives. We've launched them. They're in beta form. We're getting the feedback. And so you get all the functionality in, you don't get the -- including the commerce out where people can buy on the app or at least have the appearance of buying on the app if it takes them somewhere else. There's some functionality that we're launching where you'll start seeing the benefits for clubs and things like that. So just to put it in perspective, we're in beta, right?

Yes. So I think -- yes, correct, John. And the one thing I think it's early to highlight, but we think it's quite a big deal is that as a company, we haven't really had a subscription business. The product purchases have been, I don't want to say one-offs because some of them are continually purchasing. But we've really implemented recently subscription. One of the early indications on the preferred customer on the new commerce platform is that the uptake on subscriptions is very positive. So it's still early, but that, I would say, is a very positive outcome from what we're seeing. And again, early, but exciting.

It's also one of the things in terms of the launch of Bioniq in Europe is that we're going to be having a subscription product for the first time really in the history of the company. So we're very excited about that.

Our next question comes from the line of John Baumgartner with Mizuho Securities.

First off, I guess going back to personalized nutrition. There's a lot of great detail here into the data expansion and products. So I'm curious, has there been any evolution in your thinking regarding segmentation? The levels of offerings? How you may tier those out, different levels of personalization? Have you heard any feedback from your distributors in terms of how they think about the product market fit as you're going forward with this?

Yes, John, thanks for the question. Actually, one of the reasons why we made the Bioniq acquisition is for that reason. As you know, when we acquired Link, there's a manufacturing process to it, right? You have the equipment and you've got the software that can actually take the inputs, create the formula and then you manufacture the formula in powdered form. The price point for that is really more in a premium area price point. It also, quite honestly, is more functionality, like because of the formatting of it, you can have some other need states.

Bioniq gives us the opportunity, not only was it a company that's existed, that had been in market that had an existing customer base, but had also been in the business of formulating really not only a premium, but also formulating what we would just consider a personalized vitamin mineral complex. And so -- which was at a lower price point, so a larger addressable market.

And so that has been also one of the reasons and part of the strategy is that we want to hit different price points. We know our business, obviously, around the world. If you think about it, we -- from India to Switzerland, different demographics. So I would say the other aspect of this, besides making it more accessible to people because this is a newer concept is really what are the offshoots? Where can we go now that we have the capability of personalizing and all of the data and the customers who we've been personalizing for, where does it lead us in the future to specific product categories that actually personalization could make a lot of sense?

As an example, Bioniq, which is more personalized than when you're buying off the shelf for -- that's been formulated for everybody or just for men over 50, for example. So it is giving us more range, more demographics. And I think where this leads in the future is that everything will become and everyone will want a more personalized version of whatever they're using today. So it's absolutely part of the strategy.

And then coming back to EMEA, just to drill down there a bit more. I'm curious the extent to which there may be, I don't know, maybe more structural change or softness in the direct selling market given the consistent declines you're seeing in sales leaders? Or is it more of a productivity issue you think where maybe some price adjustments can maybe kickstart growth in that region?

So this is where from a distributor lens of someone that worked in EMEA in specific was one of the areas that I spent really a lot of time in. I think what's happened is, obviously, the overall way people look at their health and their wellness and they make -- basically, they make their decisions on what they're going to buy and where they're going to spend money, things are evolving over time.

If you think of just historically, we started in 1980. The idea of a protein shake in 1980, and I'll just speak to myself, in 1991, when it came to France where I started, you had to go and convince someone the idea of taking a shake instead of having breakfast was actually a thing. I mean they would be like, but you're telling me I'm going to mix this up and I'm going to drink this instead of have my coffee, croissant and that's breakfast? Today, we don't live in a world where a protein shake is novel and innovative, right? It's more of a commodity. It's an accepted form.

So I think part of what's happening is as the markets are evolving as technology is evolving, the offer also needs to evolve. And that's why I am very strong on as a company, the super power that we have of these 2 million distributors that are having conversations with tens of millions of people on a daily, weekly, monthly basis and interacting and helping them with their health goals with the conversation around personalized nutrition and this next generation that -- is absolutely where the market is going, and we want to lead in that market.

And so we can say, yes, how can you optimize your current product portfolio? How can you optimize with your DMOs? How can you go and bring more people and keep them longer and have them buy more and refer more people and want to do the business? Fundamentally, if you've got something you can go to market with that's novel, it's innovative and that people are saying, this is where things are going in the future. I want to be a part of it. I want to buy it. I want to use it. I want to tell people about it and I want to sell it. That's what we're building for.

So from that standpoint, and we do all the work on every area. Let's train them, let's do everything that we need to do, but let's work on the core offer. So -- and that's what we're doing.

And just maybe a bit of a random question. Looking at the U.S. market, I'm curious the extent to which you're seeing any benefits or traction from participation in the diabetes prevention program. I know it's not spoken about a lot, but just curious if there's participation, any learnings there thus far?

Yes. We had started that as a pilot. And to be honest with you, I don't have the answer because I haven't followed it that closely. But my guess would be is that it hasn't had a material impact.

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

On the Bioniq nutritional supplements being offered in Europe beginning in late June and then the U.S. in July, are they the same product offerings in both markets? And what actually are the product offerings that you're rolling out?

Yes, Doug they'll be essentially the same. There's going to be obviously different markets. There's a bit of different regulatory aspects to it. Essentially, but think of this as your personalized vitamin and mineral complex stack, right? So you -- and I don't want to get into details, but a man versus a woman, height, weight, age, objectives, personal conditions, then you put in biometrics, potentially blood biomarkers. And it would be really clear that you probably wouldn't need the same amount of vitamins and minerals and your individual complex would be different than basically everyone else.

So number one, that is the core offer of Bioniq. The other thing is, and this is also something I think that's important is everyone is using supplements. And if you ask how you actually buy supplements and even a vitamin and mineral supplement, most people, it's going down the aisle way at the grocery store or in the pharmacy or their doctor said something or someone recommended something to them and they buy it. And they use it. And they might use it and have been using it for a year, two years, three years, five years.

We believe that personalization, what it really means is not only should you have your -- as close to your individual needs, not only today, but also next month, when you've lost 5 pounds, when you've changed some things in your daily habits and in your diet, right? When and over time as you age and your circumstances change, right? So the capability to flex that on a monthly basis for someone and to personalize that -- that is something that's innovative. And that is something that makes sense in the world that we live in today. And that's something, quite honestly, that no one is doing at scale around the world. And so this is our opportunity.

We also know that if you can get people into the conversation and they look at Herbalife and they're like, this is unique, what you're doing. We've got an incredible portfolio that we're doing $5 billion in revenue currently that is not Bioniq. It's an opportunity to have people go beyond just this vitamin -- this personalized vitamin mineral complex. So for us, this is not just a door opener. It's something that people are going to want because I think it's logic that they would want it and that we are going to be able to deliver it and especially through 2 million distributors eventually that are having conversations with people every single day.

And so more attraction to Herbalife a value proposition, we think that's unique, an opportunity in subscription and an opportunity for the introduction to the entire portfolio so that we become that solution for people for their health and wellness.

Bioniq has been around for a little while and it's been producing product. Can I get Bioniq anywhere else at this point?

You cannot. As of the transaction, this is going to be sold through Herbalife distributors.

So will it be rebranded under some sort of Herbalife sub-brand like Bioniq by Herbalife? And what will that look like?

Yes. Well, we'll do the reveal in Extravaganza. So I don't want to give it away, but the brand is definitely staying.

Okay. Fair enough. When do we see Link BioScience product out in the marketplace?

Yes. So Link BioScience will be Q1 of next year.

Okay. Got it. And are you going to operate these four acquisitions as independently as is? Or what's the plan on just structurally how you're going to run these four acquisitions on personalization?

I'll jump in. First of all, they all work together, right? I think you heard Stephan talk about Bioniq and Link, and they are different versions of personalized nutrition and they can work together. Pro2col supports that and actually, it supports Pro2col. And then when we talk to the fourth acquisition, which is Pruvit, there's a product line. Maybe because there's a separate product associated with that, that's maybe a little distinct. But overall, those four are all connected.

Okay. Fair enough. And lastly, John, now that you've completed the debt refinancing, is there any change to your capital allocation priorities?

There is not. Our number one priority is to still get our gross debt down to $1 billion -- $1.4 billion, excuse me, by the end of 2028, which would get our net debt below $1 billion.

Thank you. And I would now like to hand the conference back over to Stephan Gratziani for closing remarks.

Thank you, and thanks, everyone, for joining us today. We had a great quarter. We completed our debt refinancing. As Doug just mentioned, we've made four acquisitions, and we're executing on our vision. 45 years of incredible history behind us, but the future is even more exciting. As a company, we're evolving. We're advancing how we deliver what we do best, greater precision, greater scale, greater impact, and we're focused on the vision. And we're well positioned to deliver what we believe is the next generation of personalized nutrition. Thank you for joining today, and we look forward to sharing the continued progress next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

Welcome, and thank you for joining the Fourth Quarter and Full Year 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 welcome to everyone joining us. With 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 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 statements 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 thank you all for joining us today. As we look back on 2025, I want to take a moment to reflect on what we have accomplished and, more importantly, discuss where Herbalife is headed and how we are positioning the company for long-term growth.

Our vision is clear: to be the world's premier health and wellness company, community and platform. And in 2025, we took deliberate steps to ensure our vision is supported by a strong and resilient financial foundation. We executed with discipline, reducing our total leverage ratio to 2.8x. This meaningful step down from 3.9x at the end of 2023 underscores the strength of our business, our strong sustainable cash generation.

We also sharpened how we operate, how we engage and how we create value for our community, the company and our shareholders, and we are advancing innovation, modernizing our digital ecosystem and deepening engagement across our distributor network. With the momentum generated in 2025, we enter 2026 in a position of strength, advancing our strategy to build a more innovative and digitally enabled Herbalife.

Let's turn briefly to our fourth quarter and full year financial performance. Q4 marked our second consecutive quarter of year-over-year net sales growth with net sales of $1.3 billion, up 6.3%. India delivered its highest quarterly net sales in Q4. And even without year outperformance, our Q4 net sales would have still come in above the midpoint of our guidance range.

Adjusted EBITDA for the quarter was $156 million, for the full year, net sales were up nearly 1% to just over $5 billion. And excluding FX, net sales were up 2.5% compared to 2024. Full year adjusted EBITDA was $658 million, with margin at 13.1%, marking our second consecutive year of adjusted EBITDA and margin expansion, and we exceeded guidance for both the fourth quarter and full year on each of these metrics.

For the year, we generated $333 million in operating cash flows, and we continued strengthening the balance sheet, repaying $283 million of debt in 2025. It was a strong close to the year. And behind these positive financial outcomes is a growing engaged distributor network. Equipping them for success is one of our top priorities. This commitment is reflected in the continued strengthening of our distributor network.

In Q4, North America delivered its second consecutive quarter of double-digit year-over-year growth in new distributors, up 19%. Latin America continued its positive trend achieving its seventh consecutive quarter of year-over-year growth. And while new distributors joining worldwide was down 5% versus a very strong prior year, the 2-year stack provides a more meaningful view. On a 2-year basis, new distributors are up 16%, with 4 of our 5 regions reporting increases, reflecting sustained multiyear momentum.

These results underscore the foundational work we have done to support our distributors with enhanced training, improved digital tools and comprehensive resources, all tailored to the needs of each region and designed to position them for success. We will continue to provide them with innovative products and effective tools and training to help them generate interest, drive stronger engagement, increase repeat purchases and maximize long-term customer value.

Innovative products are a key part to that equation, providing our distributors with products that excite existing customers, attract new customers and support increased sales remains central to our strategy. Driven by this commitment, 2025 was a strong year for product innovation as we continue to broaden and strengthen our portfolio across key categories.

In July, we advanced our weight management offering with the successful launch of multi burn. In September, we broadened our skin care portfolio with HL/Skin in EMEA which is based on cutting-edge K-Beauty formulations and supported by an AI-powered facial analysis tool. And in December, we expanded into the high-growth healthy lifespan category with Life I/O baseline.

Beyond these innovative launches, we continue to optimize our global product portfolio to align with the evolving consumer trends and preferences, while tailoring our offerings to resonate with local markets. In 2026, we are building on this momentum with exciting new product launches that further modernize and expand our portfolio, supported by new digital capabilities that enhance human connection.

The human connection has always been at the heart of Herbalife. As a distributor-led nutrition company, our strength lies in the one-to-one relationships our distributors build with their customers. Our distributors take the time to understand a person's individual needs and support them throughout their health and wellness journey. These fundamentals remain unchanged.

What is changing is how we deliver them because we see a future of health and wellness that is even more personalized data-driven, proactive and accessible. We are modernizing the experience to make it more connected and more effective. We will continue to provide curated product recommendations while laying the groundwork to deliver personally formulated nutritional supplements.

Over time, this personalization will leverage data and insights from multiple inputs such as blood biomarkers and connected devices. Central to this strategy is Pro2col, our health and wellness operating system. It's acquiring the Pro2col technology in April of 2025. Our focus has been on building a digital experience that supports the strength of our business. leveraging digital tools to enhance, not replace the human connection at the core of our go-to-market strategy. We've implemented a strategic phased beta rollout designed to integrate in-market insights from distributors and customers enabling us to enhance capabilities and introduce new features in a way that drives the greatest impact.

In December, we advanced to the second phase of our beta program with the release of Pro2col beta 2.0. And which included enhancements to the recently launched distributor marketing pages and Coach dashboard. We believe our phase strategy is working. The beta group is engaged providing feedback that is helping us refine the digital experience to ensure -- integration into distributors' daily methods of operation and meet real-world needs.

We have expanded the availability of beta access to distributors and customers in the U.S. Canada and Puerto Rico and will begin extending it to select EMEA markets this year. Pro2col is more than a digital tool. It's a key strategic component of our platform vision. It adds a connective digital layer that enhances distributor engagement supports customers in building sustainable nutrition and healthy lifestyle habits and generates data that helps our distributors support customers more effectively.

Over time, we believe this approach will broaden our reach, making Herbalife more attractive to a wider audience of future customers and distributors. By combining Pro2col's data and technology with our recently acquired proprietary manufacturing capabilities, we are set to deliver precision made nutritional supplements tailored to an individual's needs and goals at scale. U.S. distributors in the initial Pro2col beta group will have first access to these personalized nutritional supplements by the end of the first half of 2026.

Before I close, I want to highlight the exciting announcement we made earlier today. Global Sports icon, Cristiano Ronaldo has acquired a 10% equity stake in HBL Pro2col Software which is the Herbalife subsidiary that holds the Pro2col technology. Cristiano invested $7.5 million, along with the commitment to provide services and sponsorship rights to Pro2col. It reflects Cristiano's deep personal commitment to nutrition and performance and our shared vision to scale personalized nutrition and wellness around the world, bringing together science, data, AI, innovation and community to improve the lives of millions.

We believe Cristiano's involvement will elevate the visibility of Herbalife and Pro2col, expanding awareness and supporting broader engagement and adoption. After 12 years as Cristiano's Global Nutrition partner, we are thrilled to welcome him as a strategic investor and business partner.

Over the past 45 years, we have built an incredible company with a strong foundation. As the largest publicly traded direct selling company with a global network of more than 2 million independent distributors across 95 markets and over 60,000 nutrition clubs worldwide, we are uniquely positioned to extend our leadership in global health and wellness in ways we believe no other company in the world can replicate.

We will continue to build on this solid foundation while also forming strategic partnerships like the one we announced today with Cristiano Ronaldo. We will also continue to identify opportunities that bring differentiated products, services and capabilities that are aligned with our platform vision and add value to our customers, distributors, company and shareholders.

As we move into 2026 we are carrying forward the momentum of 2025 with confidence in our strategy, our leadership team, our distributor community and our ability to execute with discipline. Now I'll turn it over to John DeSimone for a detailed review of our results.

Thank you, Stephan. Turning to our fourth quarter financial highlights on Slide 8. Our remarks today focus on the quarter with a summary of full year results in the appendix. As Stephan just described, we delivered a strong finish to 2025. Net sales for the fourth quarter were $1.3 billion, with 6.3% growth versus Q4 of 2024, and exceeding the high end of our guidance of 1.5% to 5.5% year-over-year growth.

Q4 marked our second consecutive quarter of growth and our strongest year-over-year increase since the second quarter of 2021. On a constant currency basis, net sales increased 5.5% year-over-year, also exceeding guidance. We have now delivered year-over-year constant currency growth in 7 of the last 9 quarters. While FX rates moved slightly against us versus our Q4 guidance assumptions, we still realized an 80 basis point tailwind.

Our Q4 net sales outperformance was driven by a record quarter in India with net sales of $250 million, up nearly 15% year-over-year and exceeding our expectations. We believe this was fueled by stronger demand following the reduction of the goods and services tax rate on the majority of our product in late September 2025.

Importantly, while India outperformed our expectations, even without this upside, Q4 net sales growth would have been above midpoint of our guidance range. Adjusted EBITDA was $156 million. exceeding the high end of our guidance range of $144 million to $154 million. Adjusted EBITDA margin was 12.2%, down 20 basis points year-over-year driven primarily by FX headwinds of 100 basis points and an approximately 90 basis point headwind from employee bonus accruals, which we previously communicated as a meaningful and expected headwind given the 2024 annual employee bonus was fully accrued by the end of Q3 of 2024, and therefore, we had no bonus expense in last year's fourth quarter. These pressures were partially offset by pricing benefits.

Adjusted EBITDA excludes an approximately $11 million transition charge related to the September 2025 India GST amendments as the company no longer expects to fully utilize certain input GST credits generated before the law changed.

CapEx for the fourth quarter was $19 million at the low end of our guidance range of $18 million to $28 million. Capitalized SaaS implementation costs were approximately $9 million in the quarter. Gross profit margin was 77.5% for the quarter, down 30 basis points year-over-year. Gross margin was pressured by approximately 100 basis points of FX headwinds, 30 basis points of unfavorable sales mix and 30 basis points of input cost inflation. These were partially offset by 80 basis points of pricing benefits, 10 basis points from lower outbound freight costs and 30 basis points from other favorable cost changes.

Fourth quarter net income attributable to Herbalife of $85 million includes $54 million of noncash deferred tax benefits related to the release of valuation allowances in certain of our European subsidiaries, which were established in the fourth quarter of 2024, following changes to our corporate entity structure. Adjusted net income for the quarter was $48 million. Adjusted diluted EPS of $0.45 includes $0.07 FX headwinds versus the fourth quarter of 2024. Our adjusted effective tax rate was 34.7% down from 40.6% for the Q4 of 2024, which drove an approximately $0.04 favorable impact to adjusted diluted EPS. The lower effective tax rate in 2025 was driven primarily by the geographic mix of income, partially offset by noncash updates to our assessment of uncertain tax positions.

For the full year 2025, our adjusted effective tax rate was 29.1% and slightly above our expectations of 27% to 28% due to discrete items in the quarter, but still below last year's tax rate of 30.2%. For full year 2026, we expect our adjusted effective tax rate to be approximately 30%, in line with 2025. Operating cash flow was another highlight this quarter at $98 million, up 41% year-over-year. For the full year, operating cash flow totaled $333 million, up 17% versus 2024, and underscoring the durability of our cash generation.

Credit Agreement EBITDA for the fourth quarter was $173 million. We also repaid $30 million of debt in the quarter, maintaining a total leverage ratio of 2.8x, while also increasing our cash balance by approximately $50 million. For additional details regarding the adjustments between adjusted EBITDA and Credit Agreement EBITDA as well as the calculation of our total leverage ratio, please refer to the presentation appendix and the earnings press release.

Turning to Slide 9. Reported net sales for the quarter increased 6.3% year-over-year, while constant currency net sales were up 5.5%. We achieved year-over-year volume growth on a worldwide basis for the second consecutive quarter up 3.1%. Pricing benefits were approximately $40 million in the quarter and country mix represent approximately $10 million headwind to net sales. FX had a favorable impact of approximately $9 million in the fourth quarter, representing a year-over-year tailwind of 80 basis points I mentioned earlier.

Moving to Slide 10. We have the regional net sales results for the fourth quarter. The [ 3 of 5 ] regions delivered year-over-year net sales growth in the fourth quarter on both a reported and local currency basis. On a sequential basis, the same regions showed sequential improvement on both the reported and local currency basis.

Latin America delivered its second consecutive quarter of double-digit year-over-year growth. Reported net sales increased 18% with local currency results up 11%. And results reflected favorable year-over-year pricing and sales mix, approximately 3% volume growth and a 660 basis point FX tailwind.

Within the Latin America region, Mexico posted another solid quarter with reported net sales up 19% year-over-year and local currency net sales up 9%, driven primarily by favorable year-over-year pricing, approximately 3% volume growth and significant FX tailwinds.

EMEA reported net sales growth for the third consecutive quarter with reported net sales up 9% and local currency net sales up 5%. And higher year-over-year pricing, favorable sales mix and FX tailwinds were partially offset by less than a 2% decline in volume.

In Asia Pacific, Reported net sales increased 5% year-over-year, while local currency net sales were up 9%, driven by approximately 9% volume growth and favorable pricing partially offset by unfavorable sales mix and FX movements.

As I mentioned earlier, India delivered its highest quarterly net sales in the fourth quarter with reported net sales up 15% year-over-year and 21% up in local currency. Top line growth was driven primarily by an approximately 18% increase in volume, along with a favorable year-over-year pricing and sales mix, partially offset by FX headwinds.

In North America, sales declined by less than 1% year-over-year on volumes that were down less than 2%. This is consistent with the expectations we've previously communicated. Execution remains strong and momentum continues to build as we enter 2026. We expect the North American region to deliver full year net sales growth in 2026. And China net sales were down 4% year-over-year on a reported basis and 6% on a local currency basis, driven primarily by an 11% year-over-year decline in volume. This was partially offset by favorable impacts from changes in the benefits and timing of the China customer loyalty program as well as favorable FX.

Turning to Slide 11. We see the key drivers of the year-over-year improvement in fourth quarter adjusted EBITDA despite an approximately 100 basis point FX headwind and an approximately $11 million employee bonus accrual headwind, given the 2024 bonus was fully accrued by the end of Q3 2024, as I previously mentioned.

Adjusted EBITDA for the quarter was $156 million, with margins of 12.2% on a constant currency basis, adjusted EBITDA was $168 million, underscoring the continued underlying strength of our business. Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our second consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix and input cost inflation driven by lower absorption rates.

Salaries represented approximately $8 million headwind, largely reflecting merit increases implemented in the first quarter of 2025. Promotional-related expenses declined by approximately $6 million year-over-year. and lastly, unfavorable year-over-year FX movements resulted in an approximately $12 million reduction in adjusted EBITDA.

Before moving on, I want to highlight a presentation change we made to the financial statements to simplify how we report distributor-related compensation and to better align with how we model these costs internally and have historically presented them in the segment disclosure in our 10-K and 10-Q.

In summary, we have separated selling expenses from SG&A. We've taken the service fees of our China independent service providers and combine them with distributed compensation previously reported as royalty overrides. These expenses are now presented together with in selling expenses on the P&L. Similar updates were made to the balance sheet and cash flow presentation.

Importantly, this had no impact on prior period results or key financial metrics. This was simply a presentation change that combined distributor and service provider related payments within our financial statements. For those looking for continued visibility into China independent service provider fees, that information remains available in our segment reporting disclosures in both the 10-K and 10-Q. For additional details, please refer to the presentation appendix earnings press release and Form 10-K.

Moving to Slide 12, I'll provide an update on the capital structure. We ended the quarter with $353 million of cash up nearly $50 million from the end of the third quarter of this year. During the quarter, we made the scheduled $5 million amortization payment on the Term Loan B repaid the $25 million outstanding under the revolving credit facility as of September 30.

As of December 31, the revolver was undrawn. Over the last 2 years, we have paid down over $530 million of debt and reduced our leverage ratio from 3.9 to 2.8x. Our financial profile today is much stronger than it was 2 years ago. And depending on market conditions, we may consider refinancing portions of our existing debt. While there can be no assurances regarding time or outcomes, a successful transaction could meaningfully lower our borrowing costs. Regardless of whether or not we pursue any capital structure initiatives, we remain committed to reducing our gross debt to $1.4 billion by the end of 2028.

Turning to Slide 13. I will walk through our outlook for the first quarter and full year 2026. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis. For guidance on a reported basis, we used the average daily exchange rates for the first 3 weeks of January 2026.

For the first quarter, we expect foreign exchange to have an approximately $31 million positive impact on net sales. While currency is expected to be a meaningful benefit to the top line in the quarter, it's expected to be neutral to EBITDA for the quarter due to timing.

On a reported basis, we expect first quarter net sales growth of 3% to 7% year-over-year, including an approximately 250 basis point tailwind from currency. On a constant currency basis, we expect net sales growth of 0.5% to 4.5% year-over-year. Adjusted EBITDA for the first quarter is expected to be in the range of $155 million to $175 million on both a reported and constant currency basis. Planned capital expenditures for the first quarter are expected to be $10 million to $20 million.

Moving to our full year guidance. For the full year, we expect reported net sales growth of 1% to 6% year-over-year, including an approximately 100 basis point tailwind from currency. On a constant currency basis, net sales are expected to be flat to up 5% year-over-year. Adjusted EBITDA are expected to be in the range of $670 million to $710 million or $665 million to $705 million on a constant currency basis. With respect to tariffs, our 2026 guidance includes a preliminary estimate of the impact of tariffs enacted through yesterday, which we are currently expecting to be immaterial.

For 2026, we expect capital expenditures to be in the range of $50 million to $80 million. Separately, we anticipate capitalized SaaS implementation costs of $40 million to $60 million, which are incremental to CapEx. Lastly, for the full year 2026, we expect an adjusted effective tax rate to be approximately 30%.

Before moving to Q&A, I want to close my opening remarks with one final comment. The financial performance of this business has transformed significantly over the past 2 years. our sales trajectory looks much different now than it did 2 years ago as we carry a lot of momentum into 2026.

Our adjusted EBITDA margin continues to expand and has improved by 180 basis points over the 2-year period and we've generated substantial cash over the prior 2 years, despite meaningfully higher interest costs, and we have used that cash to pay down over $530 million of debt while lowering our leverage ratio from 3.9x and to 2.8x. And while our performance over the last 2 years has improved substantially, more importantly, we believe we have a strong foundation, both strategically and financially, to further generate shareholder value over the long term.

This concludes our opening remarks. Operator, please open the call for questions.

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

So I know you guys don't traditionally give guidance by region. But I was hoping you could do a little bit of around the world and give some more color on how you're thinking about sales for the different geographic segments in 2026, I know you called out you're expecting growth in the U.S. But if you could kind of flesh out the comments with your other geographies, especially given the really strong India results and how the GST impact should kind of flow through until we lap those changes, that would be great.

Yes. So we don't guide by region. I do want to give maybe a little bit of commentary. It will be a very high level. I will say that we're expecting net sales growth in every region with the exception of China. China is expected more of a 2027 even. And that's about, I think all really feel comfortable giving out.

Okay. Got it. And then as it relates to Pro2col, obviously, there's a lot of excitement building around the organization on that. I was hoping you could kind of frame your expectations in terms of the sales contribution you're expecting from that program and kind of what you've assumed in 2026 guidance? And then I guess to kind of stay in the realm of guidance, just on the EBITDA side, too. You've exceeded your quarterly guidance in each of the last 8 quarters. And if my math is right, you're only guiding to 20 to 30 bps of margin expansion. It seems like you've built in a lot of flexibility there. So I'm just curious to understand kind of what your assumptions are and what's driving that degree of expansion?

So Chasen, that's a lot of questions. So let me see if I can hit them all.

I'm sorry.

No, that's okay. It's great. On the Pro2col side, there's very little from a top line building. At this point, there's a lot more upside from vertical than risk we're in beta phase right now. We launched commercially in the U.S. in July, and there will be a build from there, of course. So we haven't built a time in. We have a view of the beta test we'll launch this year in some other markets. But again, beta doesn't drive the kind of volume. It's more of an acclimation process and a build. So again, more oxide than downside there.

On SG&A, there's 1 complexity, which is -- it's GST in India. So one of the drivers of sales in India is the government lowered it's GST rate, which is a goods and services tax. So I think of it as a sales tax from 18% to 5% of a lot of our products. That's a big price decrease for the consumers, and it's been very beneficial.

However, on services, which is what our distributors provide to us and what we pay to them and are in the company services that rate did not get lower. It's still 18%. We used to be able to offset those, the input in the out -- credit and now we don't. So one of the things that's happening next year with GST is there's a net about $16 million incremental cost between G&A and member comp, net-net $16 million on negative impact on the bottom line. So our margins ex GST would be about 30 basis points higher than what you're seeing in guidance.

So I know guidance -- by the way, we're getting margin enhancement and improvement next year anyway, and I think that's an important point. But there's also a slight drag on the percentage from the GST in India. However, the GST is great for our business because it's driving a lot more volume.

Got it. That's helpful color. My multipart question, and I try to sneak it into 2 total questions.

[Operator Instructions]. Our next question comes from the line of Nicolas Sherwood from Maxim Group.

Kind of looking at the product categories, Energy, Sports & Fitness was the fastest grower in 2025. Can you kind of talk about where that momentum came from? And how do you expect to continue that in 2026?

Well, if you look historically over the last few years -- not that I don't know how many years, but it goes back quarter ways. We've been seeing that category outpace our overall performance as a company. So you see a slight decrease in the percent of our sales coming from weight management and a slight increase coming from to nutrition and from sports. And it comes from a various number of regions. But I also think we launched Sports in India had some growth this year in the sports products. I don't have a breakdown by market for each one of those categories. So that's just the general picture of what's happening in the business.

There was also a little bit of an uplift with Nutrition Clubs with Liftoff, which is a very popular product that specifically was designed in the H24 product brand. So that's helped a little bit of the growth here as well.

Okay. And kind of talking about Nutrition Clubs, I noticed in the -- there is wording about doing training in Europe, Middle East and Africa of Nutrition Clubs for the distributors there. Can you kind of go into any more detail on sort of expanding that Nutrition Club infrastructure in that market or other markets?

Yes. Nick, I think you're referring to the Breakfast Budget clubs, which is a particular model that started in the U.K., which there's a lot of interest and we do kind of biannual master classes where we'll have thousands of people actually that will come either virtually or physically to learn about this particular model that started in the United Kingdom, which now is starting to take root in other markets as well.

It's a really powerful, small club grassroots where people are literally coming to the club every single day. They're interacting with distributors. They're weighing themselves. They're talking about working the food their eating, they're taking products, and it's really a community-driven one.

We actually have a little bit of an uptake as well here in the United States with some of the distributors that have gone to the U.K. and understanding them all. So that's part of the strategy that we have in terms of master classes and making sure that our distributors understand what's happening in different markets, so they can see how it relates to their own and to be able to kind of import it into models in areas and geographies that make sense for them.

And then my last question is positive sales leader continue rates, especially in North America and Latin America in 2025. How much is that attributed to some of these training programs that have been going on for almost 2 years now, such as the Mastermind program? And kind of what -- where are you seeing is why some getting more sales leaders were retained in 2025 compared to 2024?

Yes, I think you see an incremental improvement. We have a very strong sales leader base. And so all of these programs that are designed to support them better education, better support, the key account management program, which has key account managers that are working with certain levels of leadership and going through their business metrics, I think everything helps. I just revert back to my experience as a distributor leader of an organization. And the more educated people are, the more understanding, the better strategy they have towards their business, it all makes a difference.

So I think it's hard to point to one thing. I think it's really the totality of the things that we've been doing over the last couple of years, but it definitely all the pieces make a difference.

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

So my first question is around products and how much they may have contributed to expanded sales in fiscal year '25 versus previous years. Was there an increase in that percentage of what you offer that was part of the contribution.

Well, just to talk to kind of North America. We had a very successful launch of multi-burn that was launched at Extravaganza just previous prior Extravaganza, which really helped us to have the performance that we had in Q3. Overall, I think we're doing a good job. In EMEA, we had the launch of the skin which really HL/Skin, which was again a successful launch. I think we have been launching successfully products, probably the most that's ever happened in the history of the company. It's 2 very successful launches. So we continue right there. I think there's learnings that are taking place. And as we roll out more products, we're just getting more effective at how we're rolling out product lines and products.

Got it. And then just secondarily for me, you have been increasing your number of distributor events over the last 2 years really, what is your expectation for fiscal year '26 in terms of are you going to be doing more events? Are you going to be doing fewer larger events? And what the total spending on those may be on a year-over-year basis?

Yes, I'll let J.D. hit the total spend. Overall, we really go by the markets and regions. India had increased to more Extravaganzas, which are the big one based on the needs Asia Pacific last went to 2 Extravaganzas instead of one. So it really depends. I think overall, we try to stay in line with what the spending is based on the region.

But I would say, in general, we try to do more events, more attendance. We've been tracking increases on an annual basis. Obviously, coming out of COVID, where we didn't have events, there's been a ramp up. But I'll let J.D. -- refer to J.D. on the costs overall.

Yes. There's multiple lines we look at when we think of supporting our distributors and events is just one of those lines and event costs are expected to go up next year. A little more than sales is going to go up. But we're funding it both from sales and from some other lines in the advertising promotion area. So it's not a material change overall.

[Operator Instructions]. Our next question comes from the line of John Baumgartner from Mizuho Securities.

I'd like to ask Stephan, I'd like to ask, as you're making these investments in the personalized technology and more specialized new products, the multi-burn the life I/O, it really feels like a new Herbalife that's much more geared to where the health and wellness market is going.

And as you move down this path with an evolving product portfolio, how do you think about product customer fit, is there a need to maybe also augment your legacy customer base with maybe higher income households or consumers who are more intense users of supplements. Just how do you think about complementing an evolving product offering also evolve and expanding your consumer base to maximize the revenue opportunity.

Yes, it's a great question, John. I think the strength of our business, when you look across the geographic regions is you have different levels of people using the products through different models for different reasons.

Number one, we believe there is a more sophisticated customer that has higher expectations in certain markets. The United States, for example, Europe is another example. There's other markets that lag a little bit just in terms of what they're seeing and what the competition is doing.

Overall, as a company, we believe that the world will come to a place where everyone wants a more personalized solution. And for some, that means a bespoke personalized formulation in a product in certain markets. In others, it means just the best data that leads for the certain individual, the best product for them. And so we're expanding the breadth of what we're offering to attract more people, and I appreciate, by the way, the comment just on kind of a new Herbalife, that's the goal that we can go out and attract customers like you've seen with multi-burn with baseline we believe, ultimately, with a personally formulated product, which actually there is -- I don't want to say 0 competition, but very small competition for. We want to own that category. And so we believe that it's going to attract customers that we never would have had. At the same time, we want to double down and be more strategic on the current business that we have because it's an existing $5 billion business across 95 markets.

And so we -- our strategy is across everything actually. We want to expand. We want to attract more, but we actually want to engage more of our current customer and go deeper in the product lines that we have.

One of the things -- I mean no one's mentioned to yet, so I'll just make mention of it right now. The other announcement that we made today around Cristiano Ronaldo, so number one, you have an athlete that is probably number one has the most following in the world in terms of any athlete. Number two, he's now 40 years old, but is still competing at the highest level in terms of performance, and it's someone that has his entire career has been built around measuring and having inputs into his own health and wellness and performance and then personally, customizing by formulation and by curation what to take in terms of supplementation. That's how we got together 12 years ago in terms of a partnership. And so then his lifestyle, right, in terms of how much sleep does you get, the recovery, all of the things that he does to recover to be at the top of this performance.

This is the philosophy around Pro2col. This is where the company we are going, and this is why we have this alignment and this partnership because we believe the future of health and wellness. And this is what Pro2col and Herbalife is really about is data in and the more data and the precise data that you have that leads to your health and wellness and where you are on your goals with the output of what your precise nutrition should be, which is where personally formulated comes in and curation comes in, then the lifestyle aspect of it, which is making sure that everything else you're doing besides your data and what you're taking, you're doing the best that you can for your lifestyle because that's where real long-term change comes and results come.

And then we believe with our community, which is our super power, the 2 million distributors that they are in the best place to do what they've been doing for 45 years, which has helped people get the best results possible.

So again, I know it was a question around the products, it was probably a little bit more than you asked for, but we will go broader. We're going to go and get more different types of customers, and we're going to support the existing and go deeper in the current markets and portfolios that we have. So we're super excited about where we're going in the future.

That was great. And then my follow-up on India. Volume growth there has decelerated going back to, I think, around mid-2024, but you saw a really nice bounce back in Q4 '25. And John, you mentioned the GST benefit. And I'm curious to the extent to which you saw any sort of related one-off benefits supporting volume this quarter relative to the extent to which this reduced GST, you can ride it as a tailwind until it's lapped late in 2026.

Yes. So it is -- we expect it to be a tailwind until we lap it in late September of 2026. It may be a declining tailwind. I mean the GST is not going to change -- rate, at least that's not our expectations, right? But maybe the excitement around it will get reduced a little bit, but it will definitely -- our expectation is, it will definitely be a tailwind for the next 9 months.

[Operator Instructions]. Our next question comes from the line of Carolyn Popelka from Barclays.

This is Carolyn Popelka on for Hale Holden. My question relates to the distributor to member model. we've seen pretty outsized distributor growth, especially on a 2-year stack. So I was wondering if you could expand on the relationship between distributor growth and members growth. I think intuitively, with the current market, you might think more people want to be distributors looking for extra income. But on the other side, people might have less discretionary income for health and wellness. So is there a mismatch there?

Carol, thanks for the question. I think I just want to make sure, but you're talking about preferred members, I think, which is more of the customer type that you're talking about?

Yes.

Okay. Good. Yes. Well, Look, it's both, right? The opportunity that people are looking for to have a financial opportunity. I think we're all clear that remains and will continue to remain something that there's a large attraction and interest and need for. At the same time, you said it health and wellness and people taking care of themselves and reaching their goals and what's important to them is also a major factor.

But the one thing that you might see just in terms of the distributor recruiting numbers versus the preferred member numbers is that we did launch 2 years ago, something that we call Herbalife Premier League, which put a bit of a focus on distributor recruiting. And when we did that, there was a little bit of a focus on distributors more than preferred customers.

For the first year that we ran the program, it ended up having more of a focus on the distributors. We made an adjustment in 2025 to actually account for preferred customers because a lot of markets in their models and flows they really kind of led with preferred customers. So I think as you see those numbers, there might be some level of fluctuation. All in all, it really depends on the distributor models we could have more preferred cuts. So for example, preferred customers in India, it drives a lot of growth for us. It's not direct distributor recruiting it drives because it's really attuned to their model and the way that they actually build the business there. So I would say both remain highly interested and attractive, and our distributors are focused on both.

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

I just want to follow up on the Pro2col here. You made the small IP acquisitions last year, and I don't remember Herbalife making a lot of acquisitions in the past. And now you have Ronaldo with an equity partnership in one of your parts of your business, I don't remember you're doing a lot of equity partnerships in the past. So is this just one-off opportunistic? Or is this part of a new strategy going forward?

Doug, this is John. I think most of that question is going to go to Stephan, but let me see if I can set it up financially anyway for this audience. So our superpower, our strength is our distribution reach, right? We're in 95 countries, tens of thousands of communities, great reach into the consumer base around the world. we are interested from an acquisition standpoint in companies that are relatively small that have great content that don't have that distribution. And so we can buy the content and leverage that strength of ours. And for investors, what I think is important to understand is it augments the core business, it's not in set up.

Second is it's not a huge use of cash. we're still looking to do small acquisitions, but still get our total debt down to $1.4 billion by the end of 2028. And that content can be technology content, it can be product content. In addition, of course, if we can partner with somebody that can help expand our business in a way that makes economic sense, we're looking to do that too. So it all has to fit our vision. And so I'm going to pass it to own. You can maybe talk more a little bit about the vision and how things fit.

Yes, Doug, thanks for the question. I think it comes down to, when you think about the 4 things that we've done historically for 45 years, it's been the what to measure right, the inputs for health and all, by the way, I'll just kind of my experience when I came in at 1991, we were primarily weight loss. If I had a customer, the question would be, how much do you want to lose? And the measurements would be how much did you weigh this morning? And then let me take a tape measure and let's measure your hips, your waste, your thighs, your arms. And let's start with those measurements. And then let's track. So we've always been measuring.

It's just today, in the world of health and wellness, what people measure has grown exponentially. And so we believe that there's a lot of value in what people are looking at that are insights into their health and their wellness.

In terms of acquisitions and partnerships and things building on what John mentioned, in the what to measure space, there could be some interesting opportunities. That's all I'll say in that area. On the what to take space because for 45 years, we've been telling people what to take, which is our Herbalife products, right? We believe also that in that space, if there are opportunities of products that we believe are beneficial or technologies like personally formulation of product technologies, these could be things that could be interesting because, like John said, it aligns with our platform.

What to do space, it's the same thing, right? So telling someone, and I used to sit down with the customer and write on a piece of paper, this is how you're going to -- going to take 2 shakes a day, 3 times your tablets, have 1 normal meal, here's some protein intakes that you should have. We don't do things on paper anymore. It all happens through a digital layer.

So when you think of Pro2col and you think of actually helping people know what to do. And by the way, where their measurements are going to come into and then telling them what to take or personally formulating something for them, you need a digital application layer. And so not just to be able to tell them what to do, but to help them do it. Like a reminder, are you drinking enough water? Are you taking in enough protein? Are you eating within the eating window?

So those 4 buckets, what to measure, the what to take, the what to do and support in doing it and then who to do it with, which is the distributor that we want to connect closer to their customers. and so that they can support their customers better to create more value for the customers and gain more value, a longer customer, someone that refers more, someone that buys more and longer. And so ultimately, someone that says, I love what you do, I love what you're about, and I want to be a part of this, and I want to help other people. So acquisitions, as we look at this, it's really about what really fits in our platform vision and in terms of partnerships.

This is what Cristiano Ronaldo, this is why we are partners. This is why he's invested because he leaves in this vision. The one thing that I will say that this is not a diversification of business for us. we don't make these acquisitions because we think that our direct sales model, we need to diversify and move into other channels. This is an acquisition strategy to support our super power which are the 2 million distributors in 95 markets that the business that we have today is because of them. And our whole goal is to give them more interested products opportunities to talk to people, bring more people into their business, their ecosystem, our ecosystem and deliver more value.

And so I think John said it small, products and services, capabilities that can deliver more value to our vision and to our platform and to our distributors and to our customers. That's really how we're looking at this.

Thank you. At this time, I would now like to turn the conference back over to Stephan Gratziani for closing remarks.

Well, thank you, everyone. I'm going to keep this brief. But I think we can say that we've returned to growth. We delivered growth in Q3, Q4 and for the full year of 2025. We're guiding growth in Q1 and for the full year of 2026. I think the performance is reflected in the team that's really disciplined. We're being fiscally responsible. We strengthened the foundation, expanded margins, generating strong cash flows, fortified the balance sheet, reduced total leverage down to [ 2.8x from 3.9x ] positioning the company for sustainable and profitable growth.

And we're looking at things differently. Number one, we understand that our superpower is our distributors and this base and this foundation that was built over 45 years. So now we announced today a partnership with Cristiano Ronaldo, which is going to give Herbalife Pro2col and what we can deliver to the world more visibility than ever before. We recently made some acquisitions that we believe are giving us an expansion and will give us the possibility of leading in terms of where we believe nutrition is going for the future. And we're focused we have not -- and by the way, this is not a departure for who we are. The results that we have today is really about what we've been doing for the last 2 years. It's the culmination of so many things that we've implemented.

Market optimization efforts, the Diamond Development mastermind, key account management programs, the Premier League, bringing in -- to support our distributor leadership. Product launches, master classes and DMO and so many different things. So doubling down on our existing business, doubling down on the fact that we believe that the direct sales channel and our distributors and Herbalife in the 45 years and the 60,000 nutrition clubs around the world, puts us in a position to do something that no other company can do.

And so we thank you for being with us, and it's kind of a little bit of an inside joke because I think I'm ending every quarter by saying stay tuned next quarter, and you've been doing that. So I thank you for that. And I'll just end with saying stay tuned until next quarter. Thank you, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.

So all right. Great. Well, I'm going to allow Erin Banyas from Herbalife to read some cautionary statements before we start.

Good morning, everyone, and thank you for joining us, whether you are here in person or joining via the webcast. I'm Erin Banyas, Head of Investor Relations at Herbalife, and it is a pleasure to welcome you to today's fireside chat. We are joined today by Stephan Gratziani, Herbalife's Chief Executive Officer; John DeSimone, our Chief Financial Officer; and Bill Reuter, Managing Director of High Yield Credit Research at BofA Securities. Thank you all for being here.

We are looking forward to an engaging and insightful conversation, and we appreciate your interest in Herbalife. Before we begin today's fireside chat, I would like to direct you to Herbalife's cautionary statements regarding forward-looking statements included in our most recent Form 10-Q filing and earnings release which are both available under the Investor Relations section of Herbalife's website. The Form 10-Q 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 fireside chat will be governed by this language. In addition, during today's fireside chat, we may discuss 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 historical earnings releases and presentation materials available under the Investor Relations section of Herbalife's website 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 it over to Bill Reuter of BofA to begin today's discussion.

Thanks, Erin. You made it excited didn't have to try and pronounce any names. But I take high yield [indiscernible] here in Bank of America, and I feel really lucky that the Herbalife team has joined us here today. I guess I'll start with my first one to you, Stephan. You've been CEO now for 7 months. But your background prior to that is pretty unique for your role now given all of your time as a distributor. How has that shaped your early decisions? And how does it shape how you are going to lead the organization going forward?

Thanks for the opportunity, Bill. So I was a distributor for over 30 years, and my job was to take what the company was giving us in terms of the products and the tools and whatever support and actually figure out the go-to-market strategy. And so I did that. I don't want to date myself, I already said over 30 years as a distributor. But I started before cell phones were a thing. So try to imagine explaining to someone the products, you had to be in front of them to explain it. At the time when I started in Paris, if I had a customer that was a nice, it would cost $1 a minute to talk to them. So try to sell a product at $1 a minute or try to follow up someone at a $1 a minute.

So I bring that because technology for the last 3 decades, 3.5 decades, it's always been evolving and changing. My job as a distributor was to make sure that the go-to-market strategies leverage the technology changes and the market conditions. And so you can imagine over 3 decades before cell phones, before there was a chance to talk to someone once Skype came, it was like amazing, it was free. You could talk to someone for the cost of an Internet connection. Then Zoom came and you could talk to not just one, but you could talk to hundreds and even thousands of people. Social media came also. And so imagine if you were my customer 20 years ago, the people that would see you lose weight, and become more healthy and get results would be the people that you know, the people you saw during holidays and the people that worked with you, all of a sudden, social media came and 5,000 of your friends could see you change and transform and ask what are you doing?

So I share this because as technologies come and as the markets have evolved, as a distributor, my responsibility was to make sure that the strategies we're always evolving with. And so how it really shaped coming in, and it's been 2.5 years as an executive, and 7 months as a CEO was coming in already knowing through the work that I was doing, how the landscape was evolving and where we needed to go as a company.

So that, I think, was a unique advantage and having been responsible for the strategy overall of my individual business and built it across 70 markets. Coming in and now being able to do it at scale and bring the strategy at scale for the entire company, I think it is unique and it's someone who was a distributor I think it gives us a lot of opportunity for the future.

I add a point. So Stephan was not just a distributor. He was the second most successful distributor Herbalife has ever had in the 45 years. I say that because this business is across 70 markets and he's very strategic in the way he's navigated the changing landscape of business over the last 3 decades. So he's very strategic. So he's not just a distributor. He's a very successful distributor.

Who's number one?

Successful distributor...

Really expensive business. So he's working at the #1 Health and Wellness company in the world or the industry. I guess that gives you a unique perspective on the landscape, how it's evolving and where you think it's going in the future. Can you talk a little bit about kind of the most recent transitions and what's been happening, then where you think we're going?

Yes. So it's really interesting. And again, over the experience of a distributor and it is evolving. Herbalife, the largest direct sales public nutrition company. Our foundation is very strong, $5 billion in revenue across over 90 markets, and one-on-one interaction, 2 million-plus distributors interacting on a daily basis with customers and Health and Wellness is a personal journey. There's no -- everyone has their own conditions, their own wherever they live the lifestyle that they need, the goals that they have.

So the one-on-one relationship of a distributor to personalize someone and support them throughout a journey. It's always been the foundation of our business. But Health and Wellness is evolving. If you think about -- I don't know how many of you wear or ordering, or just look at your phone, all of a sudden now we're tracking how we sleep. And sleep is now one of the things that determines longevity. There's all of these inputs into health. Same thing if you look at where people are going, I mean, 5 years ago, the only reason why someone would go get a blood draw would be because their doctor said, "Oh, you need to go check this go. "

Today, people are doing things proactively. So the landscape is changing. The inputs to know how someone is doing in terms of their Health and Wellness, it's evolving. There's more inputs than ever, microbiome, DNA, RNA, wear your glucose monitor blood, you have all of these inputs besides the simple ones at home, your scale that now is connected to your phone, your phone that's tracking your steps. So as the world evolves and as more inputs come into someone's health, we're able to now take the inputs. And this is really the evolution of not just personalized the nutrition program for someone based on an information of you say, "Hey, I want to lose weight. Great, let's put you on this. " No, I want to lose weight and here's my overall basically biometric behavioral, nutrition, everything together, it allows us as a company and especially our distributors to be in a better position to personalize a journey for someone and accompany them along the way.

So I'll just try to do this quick. But if you think about there was a time where Blockbusters existed, right? So Blockbusters, it was great. You could go rent a movie, just coming out of the theaters. But the experience was you go, and this is dating myself, but there used to be one down the street here that I would go to. You would go the feature film you wanted wouldn't be available. So you take the second best choice you'd bring it home, then you'd forget to return it and you get a late fee, and then you wouldn't rewind it. There was a time where people had cassettes and you get another fee. And Netflix came and they said, "You know what, we're going to disrupt. We're going to just send you. So that way, when the feature comes out, you have it. You don't have to worry about going and not getting what you want and you just send it back and there's going to be no late fees and we'll send you the next thing automatically. So you always have some content.

Well, what ended up happening, Netflix disrupted Blockbuster, but then things went to streaming. And so Netflix, they had to not only make the shift to streaming because what their model is doing would be disrupted. But now if you look at Netflix, it's not just streaming content. They have a whole flywheel and ecosystem. They own the content. They produce the content. They have the data of the 300 million people watching the content, which helps them to lead strategy. So I equate this to Herbalife being 45 years in the nutrition business. So distribution of nutrition supplements to this massive organization Health and Wellness is evolving.

Now there's an ecosystem of health and wellness, biometric data, blood data, DNA, microbiome, all of these things that are actually creating the image of what someone's personal health journey should be and help them along. And so as we build out our flywheel and you'll be on just selling nutritional supplements to actually encompassing the entire health picture of someone and wellness picture and supporting them through their journey, we will build our flywheel.

And there's no other company that has over 90 markets, 2 million distributors, every single day interacting with tens of millions of customers and over 60,000 physical brick-and-mortar locations. So we have the network effect that no one has, and we believe that this is our competitive advantage and that we will, and I don't say this lightly, we will become the Netflix of Health and Wellness. We'll become the world's largest Health and Wellness platform.

As part of that a lot, I think, 4 times where you mentioned personalization in that last answer. You've got a new app coming out protocol. I think it's in beta mode. Can you talk a little bit about the app, what the functionality of it is, how it works, when it's going to be available?

Yes. So if you think about protocol as a personal health operating system. So whatever anyone does today, whether it's banking, ordering food, reserving a hotel, ordering a car, you have to have a digital layer. And so for us, as a company, all of the health aspects that we just talked about, there's going to be a level of connectivity. It's all got to come somewhere. So think of protocol is your personal health operating system. It's on your phone. It connects your behavior, what your nutrition, your supplements that you're taking, whatever data that we bring in from whatever connected device, and it is connected to your distributor. Who's there is your coach and your support, and it helps you to personalize your journey because everyone is individual.

And so this is one of the acquisitions that we made early last year, and it really was to help us to kind of leapfrog and get into the space of having a digital application and having this connected digital experience layer. At the same time, most of the time when someone develops an application, they develop it and then they have a small beta group, and then they'll evolve it over time, and kind of bring it primetime. For a company that has 2 million distributors, bringing this layer, we've had to bring it in -- we're following really a 1-year beta process. So the first is because they've never -- distributors have never had this layer before. The first was to take a group of people around 7,000 approximately, and to start having them experience it personally so that they could give their feedback as distributors because they manage the go-to-market.

The second step is opening it up to customers and getting their feedback. And so we will actually, in December, be opening it up broader to have kind of any customer in the United States or Puerto Rico able to access the app still in beta, so that we can take the customer feedback. And in July of next year at Extravaganza, we will go into a commercial full-blown availability in North America of a non-beta version.

Got it. The -- I guess, has there been feedback that you've received thus far, so we know a little bit about how it's...

Yes. So the feedback has been great. The amount of I would say, distributors of entrepreneurs, and they're on the market. So just the amount of insights in terms of what their expectations and how they would go to market with, that was the first thing. The second now is the customers coming in and the relationship with the customers. Because it's not just a digital application that customers will use on their phone and distributors will use on their phone. But there's also a coaching dashboard that information is transmitted if the customer opts in to have the coach have their information so they can support them.

So if I'm your distributor and you're living your day in and out, I'm able to see how things are evolving for you. So based on your goals, I can say, "Hey, Bill, you look great. I see that you were in the Bahamas for a week. Your numbers were showing it, let's get back. Welcome back from vacation. Let's get back on it because you said you wanted to lose x amount of pounds before Christmas. So to allow distributors to support their customers even better. So there's different layers to this. It's moving fast, but at the same time, we want to move steady and we want to make sure that all of the steps, we're not skipping steps and the distributors are so important for the success of anything that we do as a company. Their involvement is really critical.

Sounds like this app actually follows me around and is watching me at all times.

Just like your phone and all the apps are right now.

You just made a 51% controlling interest acquisition of Link Bioscience. Can you talk a little bit about how this complements protocol and when consumers are going to see this product in the market?

Yes. So we're super excited about this. If you think about again, 45 years, $5 billion in revenue across the world, 90-plus markets, 2 million distributors that are out there day-to-day talking to customers. We've always been in the personalization business. So our portfolio of products, if you and I were to sit together, I would be asking you, what are your goals? Do you have any things health-wise that you're trying to do? What does your diet look like currently? And I would be curating your program for you based on your needs. We believe the next level is beyond curation of personalized products to actually formulation of personalized products. So if you think about this personal health operating system, where it is following you around in a certain sense and it's knowing.

It's knowing maturity, it's knowing your weight, how it's tracking, it's knowing your energy. It's knowing all of these different aspects, plus some different biometric inputs. And it basically with Link Bio, it's going to allow us to personally formulate your individual formula, and that is different than curating. It's different than saying you should be using this product, that product, that product, it's actually creating your individual formulation of a product. So we believe this is the next generation and the evolution of nutrition. And this acquisition is allowing us to do really what no one is doing and especially at scale today. So we're super excited about this. By summer of next year, it will be available to a select group of distributors that are in beta. And I would say full commercialization, or we'll talk about in the United States really sometime around summer next year.

Got it. I think this question is probably directed towards John, but either of you can answer. In terms of, you just are in the midst of these recent acquisitions, how are you expecting CapEx to trend over the next couple of years? Are these going to both require investments that are elevated for some period of time, fixed income investors? We love our free cash flow.

Great question. I'm actually going to take another direction first, then I'll come back to that question. So just with the acquisitions, they're pretty low-cost acquisitions, right? Our biggest, most valuable asset is our distribution network. And so if we can find a technology company or a product company that has a great product, great content, but very limited distribution, and we can purchase them very inexpensively. That's our strategy. So we're not spending a lot of money on acquisitions. So I want to make that clear.

Second, on the capital expenditure side, our capital light business. I mean our capital expenditures historically ranged in the -- including capitalized SaaS cost in the 2% to 3% of net sales range. And we can reprioritize our tech spend. Most of that is tech spend, actually, and we're reprioritizing the tech spend toward these projects. So we're not -- it's not incremental capital expenditures. It's going to fit within our core business model of 2% to 3% of net sales.

Great. So I guess this could be a question for either of you. Third quarter was strong. Momentum seems to be building globally really across all of your regions. What does this mean for the fourth quarter? And how do you feel about the momentum going into next year?

I'll start. So for the last 8 quarters, the business has been pretty stable. We've had constant currency net sales growth in 6 of the last 8 quarters and the other 2 quarters, it was essentially flat. So we've had this run of stability. That inflected up in Q3, and we had growth globally. And we also had growth in the U.S. And that's a function of a lot of initiatives that we haven't talked about today, that were built on top of our core business.

What we said for the fourth quarter is we continue -- we guide, we guide with a lot of information and we're expecting growth in the fourth quarter. We have not guided for next year, but we have said publicly that we expect growth next year, both globally and for the U.S. And in the third quarter, like I said, we grew globally and we grew in the U.S. In the fourth quarter, we said we may not grow in the U.S. right? Because we had some product launches in the third quarter that gave it a little spike. But if you look at the trend over the last 8 quarters in the U.S., it's gotten better each quarter. The trend has gotten better. So it's on the right path, and we expect to grow next year.

I have additional questions, but I also want to make sure that any members of the audience get to ask theirs. Are there any questions from the audience at this time?

Yes, I put everybody on the spot and they can feel awkward and look at each other. I guess, John, another question. You've set out this goal to reduce debt to $1.4 billion by the end of '28. You've made great progress thus far. You also have a leverage target of 3x, which you're at, more or less. So I guess how does that inform decisions about potential share repurchases, kind of in association with that debt reduction target?

Sure. So for those of you don't know, I was CFO of the company for a long time. I came back as CFO at the beginning of '24, March 2024. And my initial goal for debt was to get our leverage ratio below 3x. We were at 3.9x at that moment. And that's because I don't believe the company should ever be over 3x. So that was really a short-term goal. I'd set that goal to be able to be achieved by the end of 2025. We actually achieved it at the beginning of 2025, and now we're at 2.8x. That doesn't mean that's the end of the journey. That was the first goal.

Subsequently to setting the first goal, we had a second goal, which is to reduce our gross debt by $1 billion starting Q2 of last year. That's when we set that goal. And we said that between Q2 of last year and 2028, we will reduce our gross debt by $1 billion, that would get our gross debt to $1.4 billion by 2028. So that's our longer-term goal. We're a little over $2 billion now. That's our priority. We generate a lot of cash. Our business is a cash generator even with the current debt deal, we generate a lot of cash, more than we need for our core investments in our business. The #1 priority beyond our investments in our core business is to continue to pay down debt. If we hit the 2028 goal, which we're on track to do, our leverage ratio will actually be below 2x. So that's how you kind of connect the 2 goals. The one was the short-term goal. The other one is a longer-term goal.

As far as share repurchase, it's not a priority. Like I said, we generate a lot of cash, more cash than we need to invest, probably more cash than we need to hit our goal of $1.4 billion gross debt by 2028. Any incremental cash could be used for a lot of things. It could be used for an acquisition or repurchase or -- but it's not a priority. And it's not going to come at the expense of paying down our debt and hitting that back at the 2028 goal.

Got it. We've got a question.

Just to follow up on that point on shareholder returns. I mean the equity has underperformed over the past few years because of the high leverage and some of the hiccups that you had. But to get the equity story working as well, don't you have to promise some sort of return to them, maybe change the shareholder base. So how do you balance that? I understand debt reduction is the near-term goal. But eventually, it seems like you have to start turning some of that back on at some point.

Well, that's a great question. Thank you for the question. So I'll kind of tell you how we view it. So we have a certain enterprise value today, right? It's 4x our EBITDA. It's incredibly low, okay. One way to create equity value is to take some of that enterprise value and transfer from debt holders to equity holders. So just by paying off the debt, $1 billion in debt, we add $1 billion to our equity holders, right? So that -- from where we were, where the stock was a month ago, that doubles the stock, right? So this value to the equity holders by paying down the debt. So that's one way to do it.

Second is we just have to perform, right? I think if we perform, our multiple will grow, right? I mean if you look historically, where enterprise value multiple is, we're at an all-time low recently, right? Yet our business is stable. It's starting to grow. Our margins are improving, right? Our EBITDA margins -- adjusted EBITDA margins in 2023 was 11.3%, 12.7% last year, north of 13% this year. We're on a great trajectory on margins. I think it's just pay down debt, continue to perform. The equity holders will get a return.

So I'll ask another one, probably towards John. But how are you thinking about pricing for next year? What are you seeing in terms of commodity inflation? Your gross margins are so high that commodity inflation isn't too big of a challenge for the company, and that's certainly one of the strengths that I've always seen. But how do you think about those dynamics?

Well, first, let me add that pretty much unimpacted by the duty environment. We're a big U.S. manufacturer. Most of our ingredients come from the U.S., not all. So there is some small impact by duty. So we're not really in a position where we're forced to take a price increase beyond what's happening in inflation which I think is a good spot may be different than a lot of other companies. Our approach to pricing is to take a price increase, commensurate with what's going on in the local markets for products like ours. I think that's going to be a much lower price increase next year than what we've seen in the past, but we'll be able to get some price. Like I said, in commodities, there's a little bit of pricing pressure on commodities or cost pressure on commodities, but nothing material can handle. So no big shifts on either side.

Got it. In terms of innovation, it seems like innovation has been at the most rapid pace over the last year or 2 that since I've been covering the company, can you talk a little bit about what's driving that growth and how that will impact the next couple of years?

Yes. So first, it's intentional. I think if you look at the acquisitions that we made, as John was saying, they're strategic. They're strategic to our core business, which is this $5 billion in revenue, 2 million distributors across 90 markets plus. And so for us, bringing what's needed to support them to go to market and to attract more customers keep customers longer, increase the LTV, and build and grow that top line, everything that we need to do, we're in the process of doing. So at the same time, the world is moving fast.

We can't -- there's not a day that goes by that everyone isn't talking about AI and how it's going to absolutely change the landscape. And especially, I believe, in the Health and Wellness industry. So it's something that's needed. I don't think that it's -- I don't know if in the history, John, you know more about like the overall history. But I would say that the rate which we're evolving is where we need to be. I don't know if it's the most in the history of Herbalife, but over the last couple of years probably.

I think Herbalife has been incredibly resilient over its entire life. Everybody knows some of the back story. And the reason why it's resilient is because we've got 2 million distributors who are all ideating and finding ways to make things work in the local marketplace, and we provide great products and the consumers get a benefit. But as far as like speed of change, we're pretty much used to it, we're good at it as a company.

I think we're kind of at the end here. If there could be 3 key messages or 3 takeaways that you would want the audience to take with them today? What would those be?

Well, I'll start. First of all, we're really geographically diverse. If you look at the world overall, North America is approximately 20% of our revenue. India is another 20%. Asia Pacific with China is another 20%. LATAM is another 20%. You have Europe as well. So number one, we're diverse. We're not concentrated in one or just a couple of markets. And number two, there's a lot of upside as we continue to evolve as a company. So I think as you look across the spread, just understanding the markets are in different places and cycles. But overall, where we're headed directionally, there's just a tremendous amount of upside, we believe.

Yes. I'll add a couple of financial takeaways besides the fact that our performance is seems our momentum is accelerating. We're cash-generating. We're a capital-light business. We've generated cash even in our most challenging years. We never had a year we haven't generated cash. Even with the current debt deal, which is an expensive debt deal, we generate positive cash. And then we're using that cash to strengthen our balance sheet, and that's our continued plan.

Well, Stephan, John, Erin, thank you all for joining us today. Thank all of you for attending and listening to the story and have a great conference. Thank you.

Well, thank you. Thanks for the invitation.

Good afternoon, and thank you for joining the Third 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. You may begin.

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 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 we met last quarter, I reiterated our vision to be the world's premier health and wellness company, community and platform. I talked about how Herbalife was in motion, honoring our 45-year legacy while transforming for the future. This quarter, we made great progress against our strategy and we're turning the corner.

Disciplined execution, strong operating fundamentals and aligned leadership are accelerating momentum and strengthening confidence in our path forward. We have a clear vision and we're executing against it.

Let me walk you through the progress we made in Q3. The headline is clear. Herbalife returned to net sales growth in North America and on a worldwide basis. This is a significant milestone.

For North America, it marks the first quarterly increase since the second quarter of 2021 and is a reflection of nearly 2 years of disciplined execution and foundational work across every level of the business.

On a worldwide basis, it is our first quarter of net sales growth since Q1 of 2024. Q3 net sales were $1.3 billion, up 2.7% year-over-year and above the midpoint of our guidance range. On a constant currency basis, net sales were up 3.2% and towards the upper end of guidance.

Adjusted EBITDA of $163 million exceeded guidance. We fully repaid the 2025 notes in September, leaving no significant debt maturities until 2028. We ended Q3 with a total leverage ratio of 2.8x, reducing our leverage beyond our 3x commitment. And while these results are encouraging on their own, they are just one part of the story.

Herbalife's more than 2 million distributors across 95 markets are driving execution globally, capitalizing on health and wellness trends and delivering personalized nutrition at scale. With this foundation in place, we are moving faster, operating more efficiently and embracing technology to deepen engagement and drive growth.

Importantly, this momentum comes even before the commercial release of Pro2col and other personalized nutrition initiatives slated for introduction in the coming quarters. Pro2col, our next-generation digital personalized health operating system, which elevates our heritage in personalized connection and coaching is designed to deliver tailored accessible wellness solutions through innovation and the strength of our global distributor network.

Since forming our beta group in July, which has grown to 7,900 distributors, we have seen strong engagement and enthusiasm. To date, thousands of app users have completed their Pro2scores, our proprietary personalized wellness scoring system.

In addition, a large majority have set intended consumption schedules for Herbalife products, which are supported by automated reminders designed to drive consistency of product use.

Simply put, the app can turn engagement into action and action into sales. Engagement metrics are encouraging. In the short period since the beta release, users have logged approximately 32 million steps, scheduled over 200,000 instances of Herbalife product usage, logged 36,000 meals and scheduled 42,000 lifestyle hacks.

In the past 30 days, AI-driven features have proven popular, including the AI health guide and an AI food scanner, which evaluates macronutrients of meals.

Last week, we hosted a virtual protocol event and expanded beta access to retail customers of distributors in the beta group. Alongside this expansion, we introduced key enhancements to the app, including the full Herbalife product catalog, nutrition-linked product tracking and improved Pro2score functionality.

We also launched a new coach dashboard, providing distributors with real-time customer insights to support more customers and more effectively. Plus, we rolled out customizable sales funnels for a variety of DMO flows.

Insights from this phase are informing refinements ahead of the commercial release of Pro2col Beta 2.0 in the U.S. and Puerto Rico by year-end and additional markets beginning in 2026.

Building on the growing consumer demand for accessible health insights, we will be introducing at-home tests that deliver baseline blood biomarkers as an additional health and wellness service. U.S. distributors in the beta group will gain early access to the tests in the first quarter of 2026.

Technology drives personalization, but accountability drives results. That's why our high-tech, high-touch model is so critical. Studies consistently show that coaching improves adherence and outcomes and our global distributor network provides a proven, scalable way to convert digital engagement into lasting behavior change, a capability digital-only platforms can't replicate.

Herbalife has always been about personalized nutrition, one-to-one guidance, curated product support and human accountability that drives behavioral change. It's a core capability and a clear competitive edge. Now we're taking that foundation to the next level with HBL Link BioScience.

With Link BioScience and data from Pro2col, we will move from curated to formulated, delivering precision-made supplements tailored to an individual's needs and goals. Link BioScience brings proven proprietary manufacturing technology and positions us to bring one-to-one formulation to scale.

This represents a step change in our value proposition. No one else in our space combines trusted human support, deep community reach and now the ability to deliver personalized supplement formulation at scale. It accelerates our innovation cycle and firmly positions Herbalife at the forefront of personalized wellness.

U.S. distributors in the beta group will have the first opportunity to access these personalized nutritional supplements in the first half of 2026. Herbalife's distributors remain at the center of everything we do.

In the third quarter, 3 of our 5 regions reported year-over-year new distributor growth led by North America, up 17%.

On a worldwide basis, new distributor growth declined 2% versus Q3 of last year, which had the most new distributors of any quarter since exiting COVID in 2021. That said, momentum remains strong on a 2-year stacked basis with growth of new distributors up 11% and programs like the Flex45 Challenge, Herbalife Premier League and the Diamond Development Mastermind continuing to strengthen leadership pipelines and elevate performance.

Our Mastermind program celebrated its first anniversary in August, expanding to India this quarter. Approximately 10,700 distributors and service providers worldwide are committed to the program and participants report greater confidence in their core business and leadership skills. We plan to evolve and expand the program to additional markets in 2026.

Strong engagement and confidence were also evident at the 5 Extravaganzas we held in September, where approximately 57,000 attendees gathered in Tashkent, Mexico City, Delhi, Bengaluru and Budapest. Across all 2025 Extravaganza events, we welcomed nearly 142,000 participants, a 5% increase compared to 2024, demonstrating the continued strength, enthusiasm and engagement of our global community.

Notably, EMEA saw nearly a 25% increase in attendance year-over-year. But the engagement, excitement and commitment of our distributors extend well beyond our extravaganzas. Everywhere our team has traveled this year, we've seen firsthand our passionate distributors embracing our vision for the future and our shared purpose of helping more people live healthier, more active lives.

And that purpose begins with our products, the cornerstone of our brand. Herbalife is a leader in global health and wellness because consumers trust our products and the results they deliver.

This leadership is grounded in our dedication to innovation, science and quality. We recently strengthened our product innovation engine with the opening of our new state-of-the-art center of excellence, quality control and research and development labs in Torrance, California, a facility designed by scientists for scientists.

This 8,600 square foot center, which is 1 of 7 global state-of-the-art facilities, brings R&D, quality and sensory labs together, enabling us to move from idea to prototype to commercialization even faster.

With more than 40 scientists and experts, this facility supports over 300,000 tests annually across more than 90 markets and houses one of the world's largest botanical DNA reference databases to authenticate ingredients and ensure purity.

Along with nearly 1,000 raw materials tested globally, we bring a level of scientific capability that we believe is unmatched in our category and that reinforces our commitment to product quality, integrity and effectiveness. This facility, along with every one of our labs worldwide, is where ideas become science, science becomes products and products change lives.

In Q3, that continuous innovation and commitment to quality was evident as we further expanded and elevated our portfolio and launched offerings that reflect the most relevant global health trends from functional nutrition and personalized wellness solutions to cutting-edge K-beauty innovations and science-backed self-care.

These products not only reinforce our commitment to innovation, but also deepen our connection with consumers seeking tailored high-impact health solutions.

In EMEA, we launched HL/Skin, a new skin care line built on advanced South Korean science with K-beauty formulated ingredients. The HL/Skin range builds on Herbalife's science-backed approach to product development with the efficacy of each product supported by clinical studies.

What makes this launch particularly noteworthy is that we brought it to market in just 11 months, demonstrating both operational agility, product velocity and our unwavering commitment to innovation. HL/Skin is supported by an AI-powered skin assessment tool that delivers a personalized skin care analysis in less than 60 seconds.

At the same time, it sends product recommendations directly to distributor dashboards. This helps consumers understand their skin needs and track visible improvements over time while giving distributors actionable insights for faster, more informed customer interactions.

By leveraging tech-enabled solutions, we are advancing personalized wellness and equipping our distributors with insights and guidance that strengthen trust and expand their value proposition. This enhances the customer experience and drives greater engagement and loyalty, helping to increase customer lifetime value while meeting the rising demand for products such as Korean skin care.

The HL/Skin launch generated strong enthusiasm and immediate distributor engagement. We launched it alongside recommended DMO strategies, allowing distributors to integrate the line quickly into their businesses.

Early activity is promising with skin care-focused events and product-led gatherings and we're evaluating opportunities to expand HL/Skin into additional markets.

Also this quarter, we launched a new product in Mexico that supports restful high-quality sleep. The product is formulated with chelated magnesium Bisglycinate, glycine and Affron, which is a clinically studied plant-based saffron extract shown to improve sleep quality.

As we previewed in Q2, we initiated an early release in July of our new healthy lifespan supplement formulated with Niagen, a patented ingredient that's clinically shown to increase NAD levels, which is important for maintaining cellular energy. This product is now officially called Baseline, which will be launched commercially in the U.S. and Puerto Rico by the end of the year.

These product launches showcase our ability to innovate and respond to emerging global health trends by blending science, personalization and innovation, we're expanding our portfolio, energizing distributors and building long-term value.

Before turning it over to John, I want to underscore the tangible impact of our disciplined execution. Strong cash flow, reduced leverage and targeted investments in innovation and technology are strengthening our financial position and laying the foundation for scalable growth and long-term shareholder value. We are moving fast and executing with precision.

Let me give you some examples. Our new labs accelerate idea to market execution and strengthen our product pipeline. After nearly 2 years of focused execution in North America, including renewed recruiting and business building efforts, a new key account management program, new products and technology, we have strengthened our business, which positions us for long-term growth.

Just months after acquiring the Pro2col assets, we are already beta testing with thousands of distributors, a reflection of our focus on technology and innovation.

The Link BioScience asset acquisition will bring next-generation personalized supplements to market with manufacturing capabilities to deliver tailored formulations and we're moving quickly to bring these solutions to distributors and consumers.

And products like Multiburn, Baseline and HL/Skin showcase our ability to quickly translate science and consumer trends into highly relevant and efficacious offerings.

Simply said, our differentiated strength lies in pairing scientific rigor and technology with the scale and trust of our global distributor network. Very few companies can combine personalized digital tools, advanced analytics and human connection.

This allows us to bring targeted science-backed products to market faster, sharpen distributor execution with data-driven insights and deliver personalized consumer experiences, furthering our vision to be the world's premier health and wellness company, community and platform.

Quarter-by-quarter, Herbalife is getting stronger. We're turning the corner. And today, we are operating from a position of growing strength and increasing confidence in the path ahead.

Now I'll turn it over to John for a deeper dive into our financial results.

Thank you, Stephan. Turning to our Q3 financial highlights on Slide 10. As Stephan mentioned earlier, the headline for the quarter is that we returned to net sales growth on a worldwide basis and North America delivered its first quarter of growth since the second quarter of 2021.

This is a strong validation that our strategy is working. The actions we've taken to reinforce our distributor base, drive engagement and strengthen our fundamentals are translating into measurable results.

We've now achieved year-over-year constant currency net sales growth in 6 of the last 8 quarters. This quarter, we built on that momentum, achieving constant currency net sales growth of 3.2% year-over-year, our strongest performance since the second quarter of 2021.

Our third quarter performance reflects disciplined financial, operational and capital execution, strategic clarity and a focused commitment to deliver shareholder value.

Moving to the financial highlights for the third quarter. Net sales were $1.3 billion, up 2.7% versus Q3 of 2024 and above the midpoint of our guidance range. On a constant currency basis, net sales increased 3.2% and came in toward the upper end of our guidance range. FX rates moved unfavorably during the quarter versus our assumptions, creating a 50 basis point year-over-year headwind.

Adjusted EBITDA was $163 million, exceeding the high end of our guidance range of $150 million to $160 million. Adjusted EBITDA margin of 12.8% declined 60 basis points year-over-year, primarily due to approximately $5 million in China government grant income recognized in the third quarter of last year that did not repeat this quarter, along with some FX-related headwinds.

CapEx for the third quarter was $21 million, at the low end of our guidance range of $20 million to $30 million. Capitalized SaaS implementation costs were approximately $7 million in the quarter.

Gross profit margin was 77.7% for the quarter, down 60 basis points year-over-year. Pricing benefits contributed approximately 80 basis points, offset primarily by foreign currency headwinds of approximately 90 basis points and approximately 30 basis points of input costs.

Q3 net income attributable to Herbalife was $43 million with adjusted net income of $52 million and third quarter adjusted diluted EPS of $0.50 included an $0.08 FX headwind versus the third quarter of 2024. Our adjusted effective tax rate was 32.7%, up from 22.3% for Q3 of 2024, which drove an approximately $0.08 unfavorable impact to adjusted diluted EPS.

The higher effective tax rate in 2025 was primarily due to changes in timing of the geographic mix of income. For full year 2025, we continue to expect our adjusted effective tax rate to be in the range of 27% to 28%, which is slightly below last year's rate of 30.2%.

Operating cash flows for the quarter were strong at $139 million, up 40% from Q3 of 2024. In addition, we fully repaid the 2025 notes in September, leaving no significant debt maturities until 2028.

Credit agreement EBITDA for the third quarter was $184 million and our total leverage ratio was further reduced to 2.8x, outperforming our 3x commitment as we continue to focus on reducing our debt.

For additional details regarding adjustments between adjusted EBITDA and credit agreement EBITDA as well as the calculation of our total leverage ratio, please refer to the presentation appendix in the earnings press release.

Turning to Slide 11. Reported net sales for the quarter increased 2.7% year-over-year, while constant currency net sales were up 3.2%. We also achieved year-over-year volume growth on a worldwide basis for the first time since the second quarter of 2021.

The volume increase reflects the early impact of our initiatives. Pricing benefits were approximately $43 million in the quarter. FX had a negative impact of approximately $6 million in the third quarter, representing a year-over-year headwind of 50 basis points.

Turning to Slide 12. We have the regional net sales results for the third quarter. 4 of our 5 regions delivered year-over-year net sales growth in the third quarter on both a reported and local currency basis. These same 4 regions also showed sequential improvement on both a reported and local currency basis.

Latin America delivered another solid quarter. Reported and local currency net sales were both up 11% year-over-year, primarily driven by favorable year-over-year pricing impacts, improved sales mix and approximately 2% increase in volume. FX had a minimal impact on results.

For Mexico, reported net sales were up 12%, while local currency net sales were up 10%, primarily driven by favorable year-over-year pricing and an approximately 3% increase in volume.

EMEA net sales increased 4% on a reported basis and 2% on a local currency basis. Higher year-over-year pricing and FX tailwinds were partially offset by approximately 2% decline in volume and unfavorable sales mix.

In Asia-Pacific, reported net sales were relatively flat, while on a local currency basis, net sales were up 3%. Pricing benefits and approximately 2% increase in volume were partially offset by unfavorable sales mix and FX movements.

In India, net sales increased 4% on a reported basis and 8% on a local currency basis, primarily due to favorable year-over-year pricing and an approximately 5% increase in volume, partially offset by FX headwinds.

North America, which outperformed our expectations in the quarter, returned to growth with net sales up 1% year-over-year in both reported and local currency. This was primarily driven by favorable pricing year-over-year on flat volumes.

On a sequential basis, North America's year-over-year net sales trend improved by approximately 480 basis points with volume trends improving by approximately 570 basis points.

China net sales were down 5% year-over-year on both a reported and local currency basis, primarily due to a 12% decline in volumes year-over-year, partially offset by favorable sales mix.

Moving to Slide 13. We see the drivers of the third quarter year-over-year changes in adjusted EBITDA. Adjusted EBITDA for the quarter was $163 million, slightly below the prior year, driven entirely by unfavorable foreign currency impacts.

As mentioned earlier, the non-repeat of the China government grant income recognized in the third quarter of last year drove an approximately $5 million headwind to adjusted EBITDA. On a constant currency basis, adjusted EBITDA was $175 million for the third quarter, demonstrating the continued underlying strength of our business.

Looking at the bridge, the drivers of gross profit margin changes were primarily a pricing benefit, partially offset by input cost inflation, mainly due to higher raw material costs. The $6 million headwind in salaries reflects employee merit increases implemented in the first quarter of 2025, which was more than offset by the $7 million tailwind from lower employee bonus accruals.

It is important to note that the full 2024 bonus was entirely accrued by the end of Q3 2024 and there was no additional bonus expense recognized in the fourth quarter of last year. In 2025, the bonus accruals have been recognized much more ratably each quarter, which we expect will result in a significant year-over-year headwind in Q4.

In addition, we expect 2025 bonus achievement levels to be normalized compared to the elevated levels seen in 2024. Promotional-related spend increased approximately $4 million year-over-year, primarily related to 2 additional extravaganza events in the current quarter versus the prior year.

And lastly, unfavorable year-over-year FX movements resulted in an approximately $12 million reduction in adjusted EBITDA.

Moving to Slide 14. I'll provide an update on the capital structure. As I stated earlier, we have fully repaid the remaining $147 million principal balance on the 2025 notes and the scheduled $5 million amortization payment on the Term Loan B.

We ended the quarter with $25 million outstanding on our revolving credit facility and a leverage ratio of 2.8x. We remain committed to reducing our gross debt to $1.4 billion by the end of 2028, a $1 billion reduction from the end of the second quarter of last year when we first made the commitment.

Since announcing that goal 5 quarters ago, we have repaid $343 million in debt. And since the beginning of last year, we have paid down over $500 million in debt.

Turning to Slide 15. We will review our outlook for the fourth quarter and full year 2025. Given currency volatility, we are continuing to provide our net sales and adjusted EBITDA guidance on both a reported and constant currency basis. For the guidance on a reported basis, we use the average daily exchange rates for the first 2 weeks of October 2025.

For the fourth quarter, FX will impact our top and bottom lines differently when compared to the prior year. We expect approximately $12 million positive effect on net sales, but an approximately $10 million negative effect on adjusted EBITDA.

We expect net sales growth in the fourth quarter on a reported basis of 1.5% to 5.5% year-over-year, which includes an approximately 100 basis point tailwind from currency. On a constant currency basis, we expect net sales to be up 0.5% to 4.5% year-over-year.

We expect adjusted EBITDA for the fourth quarter to be in the range of $144 million to $154 million, while in the range of $154 million to $164 million on a constant currency basis. The change from the implied Q4 guidance last quarter is primarily a result of FX movements since last quarter. Our planned capital expenditures for the fourth quarter are in the range of $18 million to $28 million.

Let's move on to our full year guidance. We have revised our outlook based on year-to-date performance, updated Q4 expectations and recent currency rates. With 3 quarters now behind us, we've narrowed our full year ranges. We've raised the low end across all metrics and raised the midpoint for constant currency adjusted EBITDA.

We now expect full year net sales to range from a slight decline of 0.3% to growth of 0.7% year-over-year. On a constant currency basis, we anticipate net sales to increase between 1.2% and 2.2% year-over-year.

Adjusted EBITDA is now expected to be in the range of $645 million to $655 million or $700 million to $710 million on a constant currency basis.

Regarding tariffs, our 2025 guidance includes a preliminary estimate of the impact from tariffs enacted through yesterday, which are immaterial. Looking ahead, on an annualized basis, we continue to believe that the enacted tariffs will not materially impact our overall performance.

With respect to capital expenditures, we now expect full year spend to be in the range of $80 million to $90 million. We continue to expect capitalized SaaS implementation costs to be in the range of $25 million to $30 million, which is incremental to our planned CapEx.

Our expectations for depreciation and amortization, including the amortization of SaaS implementation costs, remain unchanged at $140 million to $150 million. And for the full year 2025, we continue to expect our adjusted effective tax rate to be between 27% and 28%.

Before moving to Q&A, I want to close my opening remarks with one final comment. Q3 was another step forward in the company's transformation. The combination of growth, cash generation and continued debt reduction reflects both the resilience of our distributors and the strength of our operating model.

We are confident in the direction we're heading, grounded in execution, focused on shareholder value and energized by the momentum we are seeing in our business.

This concludes our opening remarks. Operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of William Reuter with Bank of America.

My first question is a little bit of a housekeeping one or maybe not so much housekeeping. But capital allocation, you're now below your targets. You still continue to reduce debt by the end of '27 by, I don't know, another $600 million, $600-something million. How are you thinking about other uses of cash and allocation of that?

Yes. To be clear, there were 2 debt goals. There was a short-term debt goal and a longer-term debt goal. The short-term debt goal that we announced last year -- early last year was that we wanted our leverage ratio to be below 3x by the end of this year.

That's a short-term goal. And the reason is we -- I don't think we should ever be higher than 3x and we got there for a number of reasons. And so we wanted to get that as a baseline.

Then we further said, that's not our end point. That's our short-term goal. The longer-term goal is to pay down debt by $1 billion from the time we set it a year ago until the end of 2028 because we generate a lot of cash and we continue to expect to generate a lot of cash. And that's our #1 use after our internal investments is to buy down cash.

So are we tracking ahead of -- obviously, we track ahead of the leverage goal. We achieved 2.8x already. On the long-term goal, we paid a lot back and we're probably tracking ahead of that goal, too, which means we have some additional cash that we're likely to generate beyond the needs to pay down the $1 billion.

What we do with that will, first and foremost, be how can we drive value in the business and other opportunities to invest in certain things in the business. And then beyond that, we'll make decisions circumstantially.

Got it. And then secondly, with these new product introductions, they certainly sound extremely exciting. You're spending a lot of time on them. I'm wondering if there are going to be costs associated with getting your distributors up to speed on the usage of them that will result in elevated SG&A next year that will have returns in subsequent years?

Or if you think that kind of your natural distributor event cadence or extravaganza cadence will be sufficient to educate them?

There's nothing outside of the normal scope of distributors learning about the products and through the education format that we have that they're able to go to market with. So yes, I don't see any type of an increase.

Our next question comes from the line of Christina with Mizuho.

Just want to ask about, can you share some of the early responses from the Pro2col beta group? Any interesting takeaways from the testers so far?

It's been really a great process with the beta group. Obviously, these are distributors who are engaging. So they're kind of like our super users and when you hear about the number of miles or steps logged and the amount of meals and they're engaging at a very high level with the app.

The process for us is really to get their feedback. That was -- that's been step one because they're helping us to formulate the features so that when we go to market, it's things that they can leverage and things that they're already doing with coaching and understanding how to actually engage with the customer to be able to get the biggest opportunity, as many sales as possible, a stickier customer, upgrading customers on to other products.

So the takeaway for us has really been the process has been amazing. The feedback that they're giving, the suggestions. When you aggregate close to 8,000 distributors and their ideas and how they're interacting with it, it's just there's a certain level of richness in the information and the data.

Next step for us is obviously to move towards customers. And that's why we opened up the beta now for customers of those distributors in the beta because customers are different than distributors.

They experience different things. The distributors will be interacting with them. So we'll be having insights from customer data, but also the distributors who have their customers who are participating in the protocol app as well. So it's been a great process for us.

Yes. And then maybe another one on the new distributor growth, which is pretty strong in the quarter for North America. So did you kind of see some kind of early signs of progress on the productivity side?

Yes. I don't -- from a productivity standpoint, I think it's in line with traditionally what's happening. I think the growth in the new distributor, it's coming from the excitement that they have, number one, about what's coming in the future and the way things are looking.

It's also a lot of work that's been taking place, all of the things that we mentioned, the Diamond Development Mastermind, the key account management program where we're working with the leaders. They are figuring out in their DMOs. There's been this reengagement with the Herbalife Premier League of getting people back focused on business building as well.

So it's really an excitement, obviously, about the product launches that we've had. Multiburn was, I would just say, very, very well accepted and it's creating kind of a new focus really and I would say around weight loss, where quite honestly, we've been probably more of a healthy active lifestyle. And having this product really brought a focus on weight loss, which has seen -- we see it as an added benefit.

Okay. Maybe last one for me. So on the new skin care product, can you share like how the AI was developed? Was it like built in-house? Or is it kind of through a partnership? And do you see that kind of like AI interaction expanding across the rest of the product line?

Yes. So it was in partnership. We customized based on our products and our needs as well. And it's really interesting to watch the engagement.

We -- I don't have the exact figures, but I know in the first few weeks, we were over 100,000 scans actually, which was quite impressive. And it's something that when people see the data and especially when they are going to use a product and come back and scan to see the difference, it just gives a way of interacting, which is very effective.

And obviously, technology today is very important and leveraging it is one of the key pillars that we're building on.

Our next question comes from the line of Karru Martinson with Jefferies.

When we look at the volume growth, which is encouraging to see you guys return, are there product categories that are driving it? And how should we think about that against kind of like the traditional mix of products that you used to be selling?

Yes. I'll take that one. I mean, there's a little bit of skewing mix toward healthy active lifestyle products, fit products and a little bit toward -- and this is a global comment and a little bit toward targeted nutrition and a little less on weight loss.

That's been a trend now for a few years. And that's still the trend globally. But in the U.S., with the launch of Multiburn, it brought some of that focus on weight loss back and it took a little share in the U.S. versus our kind of historical rate. But it's not a revolutionary shift.

Okay. And then when we think about the sales mix that you called out, just a modest decline there. I mean, are some of these categories more profitable than others? Or how do you look at the mix going forward?

Some product lines are more profitable than others. Some countries are more profitable than others. I mean, when you run a global business with net-net thousands of SKUs, there's always a profit differential. So I wouldn't say -- it can be significant, but there's nothing specific to call out.

Okay. And then there was talk a couple of quarters ago, we had been looking at GLP-1, certainly incorporating it into the thought process. Is there anything that we should be highlighting there? Or how has that thinking kind of evolved?

Karru, I would say it's still the same thinking, right? So if people want -- they don't want to go down the GLP-1 route, we want to give them a natural alternative, right? So that's Multiburn as an example.

If people want to go down the GLP-1 route, we want to be able to help them and make sure they're getting the protein, they're supporting their muscle mass, their bone density. So we want to be there to accompany them down that road.

If they've been on GLP-1s and now they want to transition off and they don't want to just fall back into the same situation and gain the weight back, we want to be there on the off-ramp, supporting them to get on a better nutrition, better lifestyle so they can have a sustainable result.

That remains the way that we are approaching the GLP-1 in the marketplace. And I would say that that has been something that's been a great strategy so far. It continues to be a great strategy.

And obviously, with Multiburn now we're seeing an uptick in the focus of people that are interested in losing weight and our distributors are gaining some market share there.

Our next question comes from the line of Hale Holden with Barclays.

I just had 3 quick ones. The Mastermind rollout to India, that's been a pretty successful program for you. In other parts of the world, can you just give us a sense of what you're looking or what you think success would look like there?

Well, I was personally there in India when we launched. It's kind of interesting. I think this is the first time that we've ever had a program like this. And India, as you know, has grown substantially over the last decade.

Huge influx of leaders and never having this level of training, especially in this format before, I think it was very impactful. The feedback from the leaders there was that this was something that was really needed to be able to continue the growth that they've experienced in the past and to see the continuing sustainable growth there.

So I can just tell you, personally, there was a lot of feedback and energetically, it was really an amazing event. They're already very motivated, excited. They value the opportunity. They're very hard working. So it was something that was hugely beneficial.

We are going to evolve the program. Obviously, we've been doing this now since August of 2024. So the content, the structure, the support, the tools that we're using, it's evolving and we'll continue to expand the program. So we have some additional markets coming online this year. And it's, I'd say, something that's fundamentally and foundationally that's supporting the growth that we're having.

Okay. The beauty slide that you guys flagged, it's certainly exciting. And I think it's just been a while since I've seen you highlight things in that category. Is the intention there to bring it to more countries? Or you're just highlighting it because it's working in South Korea?

Yes. It's interesting. We actually launched it in EMEA. And there was a demand. Actually, to your point, it's not a product line or category specifically that we've focused on a lot.

But when you have over 2 million distributors who are all using, for the most part, skin care and interested, you start to have certain markets where they just are like, listen, as a company, we need to do something. And the way we do things here is we do it and we go out and find the best technology, the most clinically proven.

And that's what led us to South Korea. And the launch in EMEA, again, this is also part of the dynamics of our business, it didn't take very long for that ripple effect to kind of spread around the world. So we have got another market that's coming online very quickly and we have other markets that are already -- they're asking for it.

Just the one thing that I would say is that there's also within the distributor network in certain markets, pockets of distributors who like to focus on this specifically as a DMO. Notably in Turkey, as an example, they've been doing -- we do nutrition clubs around the world. They actually implemented skin clubs.

So it's also one of the things that led us down this pathway. But I could say that the launch was very successful and the demand is there. So this will be something that we will be expanding. And we're going to evaluate, obviously, timing and everything. But yes, it is our goal to expand this around the world.

So I guess the reason I was asking is because it's a very different product line than the Pro2col launch. I was wondering if it -- if you have the ability, I guess, to walk and chew gum at the same time or if it would distract distributors or if it's just different markets?

Yes. No, it's -- so here's what I would say. Consumption is one thing. Again, when you have 2 million distributors that are consumers, much rather have them consuming our products than in the category than buying them anywhere else, number one.

Number two, our model is predicated on people getting results, liking something and wanting to share it. So we know that there will be a benefit to having especially an advanced product like this in skin care line, just in terms of the usage and the sales that will happen like accessory sales.

Then you have distributors certain that are going to do it as a DMO. And so we don't see this as a distraction. We think certain distributors and markets are going to naturally gravitate towards this and figure out in their models.

By the way, we've had this in the past. Brazil was a very -- out of all of our markets are very focused on skin care. And there's just countries and certain leadership that it's part of their market. But we don't see it as a distraction at all or something that's going to be too difficult in terms of what we're trying to accomplish overall with Pro2col.

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

The one number that did stand out for me was that North American number. I mean, you mentioned the 480 basis points acceleration sequentially, but just going back beyond that, it was down 4% in the first quarter, 3%, 6%. So it's just kind of was steady state in that mid-single digit decline and all of a sudden it jumped up to 1%. So I'm wondering, a), did you expect that? And b), what was driving that?

This is John. Let me start and if Stephan wants to add, he can. But as you said, U.S. has been getting stronger now quarterly for 2 years, but the numbers were pretty weak. And we had a really big jump in the third quarter, both from a net sales standpoint, also a volume standpoint.

That actually exceeded our expectations, right? Some of that is -- it was elevated because of the event in July. We launched a lot of products in July.

And if you remember on the last call, we said July actually had volume growth in the U.S. For the quarter, the U.S. ended up flat with volume, which means we had a great July. We had a tremendous August and September, not quite flat, though. So that's kind of the new baseline.

I think we did make a jump. I'm not sure Q4 will exceed Q3 or maybe even be at the levels of Q3, but meaningfully higher than the run rates we had prior to our July extravaganza. So I think we've hit a new baseline in the U.S. and so that's exciting.

Okay. And then looking at the cash generation here, you've got cash from operations going up, you've got CapEx going down. You're ahead of your debt reduction targets. Is there any room to accelerate stock buyback, maybe not be at the pace it was in the past, but maybe more than it's been recently?

It's not a priority right now, Doug. Our priorities are pretty well laid out. One is support the new strategy of the business. Two is continue to pay down debt. We want to get our net debt down to under $1 billion, which is really getting our gross debt down to $1.4 billion by the end of 2028. That's our goal.

We are tracking ahead of that. What we do with the excess cash that we're generating beyond what's needed to pay that goal is something that we will determine over time, but buybacks are not a priority right now.

Okay. You've been fairly consistent with that message. And just one last thing. You talked a lot about the products, which are very exciting, but also the opportunity for subscription revenue. How is the move towards building up a subscription revenue base going?

Yes, Doug, I'll take that one. We believe that there is a big place in the future for subscription revenue. So for that, obviously, we've introduced Multiburn in the U.S. now. We have certain products that are available for subscription within the Pro2col app.

Obviously, when we move to personalized formulated, it would be based on subscription also. We just look at companies in the industry and subscription is just a huge part of businesses today.

So for us, where we are -- this is part of our vision. This is part of where we're going. We're building all of the things that are needed for that in terms of the commerce capabilities and the products and having it all tied to the service.

So I'll just say it's en route. It's a big part of what we believe is going to bring a lot of value in the future and we are just going to keep building quarter-on-quarter to where we want to go.

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

Thank you. Number one, I just want to say that if you don't know it and I imagine that you do if you're listening, is that Herbalife is a very special company. I can say this because it's been 34 years of my life that I've been a part of this company.

I've been on the side of building a business and interfacing and interacting with customers on a daily basis and distributors and across many, many markets and seeing the passion and the mission and the drive that they have to be agents of change to actually, because of their own individual experience, want to share and impact other people's lives.

And so number one, special company, 45 years, over 2 million distributors, 60,000-plus nutrition clubs, physical brick-and-mortar locations around the world. We are different than, I would say, every other company in the direct sales channel. We are not only bigger, we're diversified and we have probably the largest network effect and more reach than any other company in the world.

Now having said that, we are a direct sales company. And that is a super power when it comes to selling products to people that are going to be ingesting something, changing some behavior that's going to help them to become healthier and having the support of a coach, a distributor, someone that cares about them, this is something that's very special to Herbalife.

What we're doing as a company is we are technically and technologically enabling our distributors, aggregating personal data information supported by AI and analytics, personalizing and empowering support through technology in a way with the things that we're launching, the new coach dashboards to be able to give distributors even more capability of following up their customers and helping them reach their goals than they've ever had in the past, delivering tools for all of those 2 million-plus distributors to go out and build bigger businesses like the sales funnels and the functionalities that we're delivering now that we've just launched for our distributors in beta.

Then you think about personalized curated products and solutions. Herbalife, this huge network, the quality, the science, the innovative products and we have been doing that for 45 years. We offer a personal solution through a personal coach and distributor supporting someone and we're about to take that to the next level and move from curated to actually formulate it.

And so again, looking to the future, these are things that will set Herbalife aside from every other not only direct sales company in the world, but we believe actually other health and wellness companies in the world.

We're expanding the products and services beyond just selling products. And so when we look to the future, we know that this foundation and the strength of our business through our distributors, it has gotten us to where we are today. And we know where we're going in the future.

And so we believe that with time, quarter-by-quarter, the potential of what Herbalife can and will become in the future will become evident. We believe last quarter was us turning the corner.

And we believe that we will do things that, quite honestly and I'll just say from a personal level, from someone who was a distributor for many years are things that we would like to show the world that we are just not great as a company that works in direct sales, but we will be one of the companies that impacts the health and wellbeing of humanity in a way that very few companies could ever do.

So we thank you for your support and joining us on this journey and we look forward to speaking with you next quarter.

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

Good afternoon, everyone, and thank you for joining us. Whether you are here in the room or participating via webcast, I'm Erin Banyas, Head of Investor Relations at Herbalife, and it is a pleasure to welcome you. We are joined today by Stephan Gratziani, Herbalife's Chief Executive Officer; John DeSimone, our Chief Financial Officer; and Hale Holden, Barclays Managing Director and Head of U.S. High Yield Credit Research. Thank you all for being here for what I believe will be an engaging and insightful conversation.

Before we begin today's fireside chat, I would like to direct you to Herbalife's cautionary statements regarding forward-looking statements included in our most recent Form 10-Q filing and earnings release which are both available under the Investor Relations section of Herbalife's website. The Form 10-Q 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 fireside chat will be governed by this language.

In addition, during today's fireside chat, we may discuss certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or nonrecurring items that management believes impact comparability of the periods referenced. Please refer to our historical earnings releases and presentation materials available under the Investor Relations section of Herbalife's website 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 it over to Hale Holden of Barclays to begin today's discussion.

Stephan, what's harder talking to investors or talking to distributors?

Investors. Distributors, I spent 32.5 years doing it. investors, it's been a couple of years now.

All right. So you've only recently become CEO. You've been on the executive suite of Herbalife for the last 2 years. But before that, you were a distributor, building your own over Herbalife business from the ground up. So you are now the first distributor turned CEO since the founder. So maybe talk to us about how that works for you and what your leadership approach is?

So in terms of leadership approach, I think, the 1 thing is when you've spent over 3 decades focused on building a business that primarily is looking at going into the market and attracting people to your products and your services and at the same time, being a network marketing, multi-level marketing company, you're building an organization. I was hyper-focused to do those 2 things. And so I would say from a 3-decade period of time where that is your sole focus stepping into a position as an executive and now CEO, it's hard to take that focus away. And it's something that even if I tried, I couldn't, because I still think every single day about how we can, as a company now go out and attract more customers, bring more customers into our ecosystem, attract more distributors, bring them into the ecosystem and build a sustainable growing business to the size and the likes that I never experienced as a distributor because I wasn't in a position to actually impact the company.

Do you think that gives you better credibility with the distributors that you talk to them?

I think it gives them confidence. No.

Who's been -- who is pre Stephan and post Stephan, it absolutely gives more credibility.

I would hope so. I would hope so.

Okay. So let's talk a little bit about vision. Can you help us understand Herbalife's vision of being the world's health and wellness company, community and platform. That's a big statement. So how should we, as investors, think about that ambition and how that drives John's P&L?

So let me just backtrack a little bit. I would say the last probably 15 years of my work being a distributor was really looking at what was taking place in the markets that I was in, which was pretty much across the world and realizing that there were always or often shifts that would occur. So I don't want to date myself, but I started in 1991 as a distributor, there really wasn't the Internet the way it exists today.

There was no Internet in '91.

Well, there was probably within colleges and there was probably something, but I remember getting my first Mac 165, being very upset the next month when the 165C came out, and it was actually a color screen and then having e-mail.

Prodigy, [ 2,400 Bob ].

My goodness, so we're aging ourselves here. But there was a time before you could actually send someone to a website. There was a time before someone could transact online. There was a time before someone could actually like imagine when I started to do follow up when I was living in Paris, if I wanted to talk to a customer in Nice, it used to cost $1 a minute or the equivalent of $1 minute. Try to sell someone products or even follow them up at $1 a minute or train them on how to do the business.

And so through the 3 decades, there was a lot of technological advance, changes that happened and learning to navigate those changes. By the way, some of them they created a huge opportunity. I mean, you could send someone to a website instead of try to explain to them or that you could actually call someone on Skype and it didn't cost you more than the Internet connection. Or social media came and instead of 1 of your clients and having their family maybe see the results or the colleagues at work that automatically 5,000 friends on Facebook could see the results. It created a big opportunity. And so we've had a lot of changes through the times and knowing how to adjust and adapt.

To the question on the future and the platform for us, it's a natural place for us to pivot into. We have a huge network of over 2 million distributors. We are the only direct sales company in the world that's ever built a hybrid model, meaning that we have over 60,000 brick-and-mortar locations where our products are sold out of and customers are interacting every single day with our distributors. We already have a huge network.

So we already are in terms of health and wellness, very much spread across the world with this very large network. What we haven't been as of yet and where we're moving to and I think, we'll talk about some of that today is really developing a modern-day platform the likes of other platforms today, for example, whether it be Airbnb or Uber or DoorDash or eBay Amazon. These are all platforms that on one end, they interact with customers and on the other end, they interact with the service providers.

That's our model. We've been for 45 years, the company, the platform, interacting with distributors and not so much with customers because our distributors were the ones that interacted with the customers. So to become a modern day platform to become that health and wellness company community and platform, it really is bringing the company to become a digital-first company and connect the tens of millions of customers that we currently have plus the tens of millions of future with the company. So that we can provide more service and value to them. And at the same time, with over 2 million distributors do the same thing in terms of being business owners. And so that means for us as a company, really becoming a digital-first company, although we're a nutrition company.

I think if you look at health and wellness and where the world is going to, we were talking about it earlier, everyone is connected today or not everyone. A lot of people are connected. It used to be that I would wake up in the morning and I'd say I slept well. Now I wake up in the morning and I look at my phone and I look at my WHOOP data. And I see if I had how many hours of REM, how many hours of deep, it's just part of where things are going. And so we believe that we're at the right place because we have the existing network to be able to really become the platform that aggregates. And I think for us, this is very clear next step and what would be a very logical next step for ourselves.

So before we talk about some of the acquisitions you've done, how difficult is it going to be to bring your distributors along with this journey on you because some of them when you start adding in more tools or I don't want to say it's DTC because it's not in your model. But more interactivity perhaps they can get a little upside down.

Yes. So some -- well, let's -- our distributors went there first. So many of the distributors, they were already wearing the wearables. They were already doing research. They're already doing Biohacking because they are health and wellness enthusiasts and so they follow the market. So a percentage of them, if you think about it, it's on a spectrum, they're already very high on that end of the spectrum. A lot of them are not. And 1 of the advantages that we have as a company is we are in 95 markets.

So the United States, it's a very sophisticated market, in Europe, very sophisticated, a lot of competition, a lot of knowledge, a lot of information. If you go to India, where it's our largest market currently, the company is looked at as a premium brand. There's not a huge amount of competition that's there. Although they are very tech savvy, there's a lag between the U.S., for example, in terms of technology and adoption in India.

So to make this happen, first of all, for the more sophisticated markets and the more sophisticated consumers is important because if not, you look like a company that's basically a mid-level company. And so our distributors, a lot of them are excited about the new technology and the platform and the acquisitions that we made because it gives them a way to go to market with something that's exciting. They can talk to a larger spectrum of people.

At the same time, to your point, the core business, that's not everybody, which, by the way, is a good thing because 2 years from now, it will be even more. And 3 years from now, it will be even more. So we will, by then, for the majority of people, be offering the products and services that they're accustomed to. That the market in general has -- it's just become part of what the mainstream is doing.

All right. So on the acquisitions that you've done and for those that may be reading a transcript later, there's -- we're going to insert "sarcasm" here. But I assume that master of the universe sell side banker came into your office and was like, these are the acquisitions you should do and source them for you with a 50-page deck, and that's why you bought into them?

Not really. One of the things that I did when I came into the company is I wanted to get in touch with what was happening in the industry. So one of the first things that I did was go to an industry event where all other direct sellers were coming together. At that event through networking, like a lot of times what happens at events, I met a very interesting individual who was speaking about actually AI at the conference and omni-channel and was the president of a smaller direct sales company, and we started to get to know each other. And we kind of had a shared vision. We -- he was based in California. So we would go on hikes and talk about business. And it really came out of a conversation about the vision for Herbalife to become that platform.

And what ended up happening, he said, "Well, that's so crazy because that's really what we're focused on is developing the technology to do the same thing." And so it actually started through a networking event and through just building a relationship and through just this common vision. And that's really what led to the acquisitions. I mean, John, at that point, stepped in and we started to really look at it from a strategic standpoint for the company, if this was something that we wanted to do and align with us.

Yes. Look, I think it connects to Stephan's vision even before he became CEO. Just by way of set up, one of our core assets is our reach into local communities on a global scale. We have over 2 million distributors. We have over 60,000, almost 64,000 Nutrition Clubs. That's brick-and-mortar locations around the globe. And part of the vision to leverage that asset was to digitize it, right? It's a very analog business that we've been operating. And one way to digitize it is through this application that connects customers through distributors to the company. That piece was missing. And there's a ton of value that can be created with that data, with that connection that can increase the long-term value, lifetime value of a customer and create long-term sustainable growth, and that was the goal.

And Stephan had the vision before I even met this individual he was talking about. But what he found was that, that company that we ultimately acquired had a big head start on us on that digital application. So that's why we ultimately purchased it.

And then I -- before we talk about what you bought, the last time the company did an acquisition before 2025, John, was when?

We've done a couple of small ones, nothing announceable, but pretty small. So we did one, I think, in 2019. It was an ingredient company. Again, we have this asset. There's 2 types of acquisitions that really -- and they're all going to be small, but that really fit what would help create value for Herbalife's core business. One is -- and both have to do with leveraging that asset of our distributor base and they are reaching to local communities with customers. One is product. And if I go back even 15 years ago, we acquired a sports brand. It might have been a little less than that. That was an opportunity to acquire a company that had great science, but didn't have distribution.

What do we have? We had the distribution. So we acquired the sports line. that was a huge opportunity for us and a very successful one. In 2019, it was an ingredient company that we could roll out into our Nutrition Clubs in the U.S. We acquired that one. In this case, it's a little bit of both. It's the technology that can help leverage that distribution asset and create more value from the consumers, but there's also some products that came along with the acquisition.

All right. So -- and I was the sports nutrition that I was thinking about, I had missed the ingredient company. Pruvit, Pro2col and Link BioSciences, all somewhat connected. You've got a controlling interest in Link Biosciences. So maybe you could walk through what all 3 of those do and how they fit in and what you're hoping to get from...

I'll start and you can jump in. I mean, so it looks like 3 acquisitions, but it was really 1 transaction. So those 3 companies were very connected to each other. Pruvit was a direct seller. They were investing in the Pro2col app and tied to Link Biosciences as a way to grow their business. And so for us, it was a package deal. But it comes with 3 different components. So it comes with the digital product, which will meaningfully, we think, drive Herbalife sales. It came with Link Biosciences, which we bought a controlling interest of, which is really personalized nutrition, which is incredibly helpful for Herbalife. And then it came with Pruvit, which has product that we can use and a distributor network that we want to bring over. So it really does fit 3 different kind of legs of our growth strategy, even though it's kind of 1 transaction.

Yes. And I think the piece that is interesting that we haven't really maybe gone a lot into, it's the personalized nutrition piece. So if you think of the way Herbalife and most every other company in terms of nutrition supplementation works is that they come up with formulations, they manufacture and they sell to many. And so yes, it could be specific to a woman or a man or specific to some type of benefit someone is looking for, but it's a formulation of 1 to many. And if you think of where we believe the world is going to go and where nutrition will end up going, it will become more personalized. And so this technology and the development of this was a process of 8 years.

We now have controlling interest in this process. And it is a way of formulating a one-to-one formulation. So if you can imagine, I don't know how many of you in the room, how many of you take supplements. Just raise your hand, how many you take supplements okay? So pretty much everybody. How many of you have like more than 2 supplements on your kitchen counter or more than 3, more than 4, more than 5? Okay, we have 5 over here. How many do you have? Just a number, 9 okay. So you have 9 supplements.

Do you have supplements?

Probably about 17. So if you think of 9 or 5 supplements that you have, there's a reason why you bought them. You heard about something, someone you met is using something. You got educated on something and you decided to buy these supplements. So you have these 5 or 9 different supplements sitting on the counter. If you think about the future, the way the future will look is just think about taking a photo of all of the labels on the supplements and actually being able to onboard and say, I'm a man or I'm a woman, I have this goal, maybe I have these conditions. This is what my activity, my behavior is like. And it takes all of that information, and you can imagine in some of the supplements that you have, you have some redundancy. There's some ingredients that are in some that are also in others, but they're sold as units.

So what the AI can do and the algorithm can do and what it currently can do is look at everything that you're taking on with the inputs and come up to a one-to-one formulation. And so think of putting the 5 maybe on the side or the 9 on the side or maybe if you're taking some omegas or something like that, you're going to still need to take those because they wouldn't be functional on that. But that is the power of personalized, individualized nutrition formulated on a one-to-one basis. And so now we have the majority interest in this manufacturing process and technology.

It is going to give us access to a broader spectrum of customers. It's the beginning. It's something also that we believe will be playing a very important role in the future. So it was an opportunity for us as a company to jump ahead and be leading in something and where we believe science and technology nutrition is going to go in the future. So it's all of the pieces together.

So how do the distributors get about -- I have my own distributor. I connect with her and she convinces me that this is a good idea for me. And then we have to state my biomarkers in theory. Presumably, you don't want her taking my blood. So how do I input myself into that?

Yes. So it's really interesting because if you look at -- and I don't know if you -- what your Instagram really looks like or where you spend time, but...

It's scary.

It's scary, right? So the function healths of the world. I don't know if you are listening to podcasts or the types of things that you listen to. But there is a pretty quickly advancing world of biomarkers and concierge health and wellness and support. And so obviously, we're not doctors. What we want to do as a company is we want to make available services and products at scale and less expensive. For customers and for our distributors to be able to go to market with something. So I will tell you that we're in the process right now of looking at different types of testing. These would be at-home tests. So people don't have to and we're not doctors, the -- it's making the service available to them. So they can have access to it in an easy way. Unlike some of the other companies function, for example, is a newer company.

What they've done is that they've built the platform to be able to give people access to go and to get their blood drawn and then to give them the information and connect them to someone that can help them. And so think of Herbalife as a platform aggregating, whether it's wearables, whether it's different services and information and being the place that also holds information and can personalize and customize your nutrition aspect, but also have a coach and be a part of a community. We were talking earlier that for you, the WHOOP, the biggest aspect is the community. That's our superpower. That's our strength. That's what we built 45 years of, and it's what really makes a difference in people's lives when they're actually going for any type of objective?

Like we were talking about it earlier, whether you keep the WHOOP or not and whether you up the membership, what you love about it is the community. And so that's really the aspect of Herbalife that makes it work because the individual relationship and the community and the support. It's -- do you know how you should -- how many cups of water you should drink, do you know what you should eat? Do you know when you should stop beating? Do you know? We all know those things. The question is, what does it take to do it?

Right. So the -- because we keep bringing the WHOOP up. The WHOOP is a subscription model for me, I think, I pay for 1 year. They do have the medical aspect they haven't rolled out. What's the revenue opportunity -- what's the revenue model for protocol and how does it fit with the current distributor base?

Sure. I'll start. I'll put it into 4 buckets just to keep it easy to memorize. So it's a health and wellness app for those who are unfamiliar with it. That in itself will be a revenue-generating opportunity for us. Because the app adds value. And I don't want to forget this, I'm going to say it now, one of the differentiating factors for Herbalife with this app that most other companies don't have is we already have the customers, right? We already have 2 million distributors with tens of millions of customers looking for the app.

So we don't have a CAC issue, right? There is almost no cost to get those customers. They are looking for this app. But that app itself can generate revenue. So that's one. Two, there are products we're launching through the app that will be incremental product sales that we don't have today. And when we launched the app in beta form last month, we launched a new product also with it. So that's another opportunity for incremental sales.

Three, subscription revenue, it's kind of a subset of the other ones, but I'd like for it to stand out because we -- a lot of companies in our business have a lot -- large percent of their revenue drive to subscription sales. We have almost none, but these products lend themselves to subscription sales. So it's a little more recurring revenue, very -- more easily predictable.

And then lastly, and I think I actually think what's going to be the most value in the near term is the acquisitions and the launch of the app has generated a lot of energy within our sales force in general, and we're seeing that activity translate into more Herbalife sales, right, which is just an energy infusion into the distribution network. And we've seen that before, how you mentioned Herbalife24 when we bought the sports line, the value created through our distributor network is much greater than just the sales of the sports products. And I think that's what we're going to see with the Pro2col.

Presumably, you can sell the sports products through Pro2col too at some point?

Yes. There's a lot of crossover sales that will happen in -- there's a lot more opportunities. But those are the 4 simple buckets to remember, right? There'll be incremental opportunities beyond that.

I think it's also important to level set, that it's probably a revenue opportunity, not for '25, but for outer years.

We launched it in beta form last month, it was actually July. It will be launched commercially in the U.S. sometime in Q4, maybe in 2 stages, and then roll it out to other regions next year. So yes, it's much more of a 2026 event. It'll have a little impact in 2025. With the exception of that indirect energy infusion, you'll see more of that this year.

Okay. Let's talk a little regionally. North America. We've seen net sales trends improve. You mentioned on the last earnings call that July was the first instance of a year-over-year volume growth in North America since April 2021, which for me was a big deal. So maybe you can walk through what you're doing with the Nutrition Clubs or with North America generally that's driving some of the stability and how we get back to small growth there, I guess?

Yes. I mean I'm going to step back for a second and do a little set up and then answer the question. So over the last 7 quarters, we've had 5 of those quarters with constant currency net sales growth on a global basis. The 2 quarters that didn't grow on a constant currency basis were down 10 bps and 30 bps, so pretty close to flat. So sales have been stabilized, at least on a constant currency basis globally.

We've had a headwind for currency that's now turning into a tailwind, so that's nice. But within those -- that global number, there was a big drag from the U.S., right, from North America, who was underperforming. Their volume was down 8% in Q1, 6% in Q2, but in July, it was the first quarter of volume growth we've seen, like you said, in over 4 years.

Some of that is that energy infusion that took place with the launch. Some of it is we launched some new products. We did want to -- doesn't mean we're going to necessarily have volume growth in North America in the third quarter, but definitely a meaningful sequential improvement in Q3 over Q2. It doesn't mean we won't have volume growth. I just don't know if it will extend to full volume growth. But it's a sign of the stability being rebuilt in the U.S. And I think that's important for our investors that are in the U.S. I think showing the U.S. that can turn around, be stable and then inflect into growth, builds credibility into the whole business.

I think it's super important for a lot of -- let's just leave that there. But Stephan, maybe you can talk about the Nutrition Clubs and how that has improved and some of the stuff you're doing there to convert customers, longer-term customers?

I think the business in the U.S., a good part of it is based on the Nutrition Club model, which is a fantastic model. I mean, we have approximately 10,000 Nutrition Clubs in the U.S., 4 million consumers walking in purchasing, some 50 million transactions. It's a great business. It's a great recurring revenue. It's great for the distributors. Where the opportunity lies is in the conversion of those customers walking in to actually be customers that will buy something and start using it at home to put the supplements on their counter. And so what we find is that because of the model of the Nutrition Clubs, which is super strong, it's more of a consumption-based basically sale. It's transactional.

Someone comes in at lunch time, they have a shake, they maybe have a tea. They go home, they may come back twice a week, 3 times a week. It's great. We love it. But having the time to bring them into a conversation about their health and their wellness, it's not something that's easily done from the person behind the counter who's trying to just at lunch time, serve 50 or 60 or 70 customers. And so there's a very -- there's a huge amount of excitement from the distributors, especially some of the leaders who have very large organizations.

That's the Pro2col as a way for them to start a simple conversation. And just to kind of back to my past as a distributor, a lot of what I spent time on, especially the last 4 or 5 years, was developing a lot of digital marketing and tools and sales processes because the company didn't really offer those things. It was my responsibility as a distributor. So I had to figure out how to go after the customer and to bring them in and to convert. And first time ever as a company, not only are we launching the application, but we're also launching a tool set for all of the distributors, including Nutrition Club owners to be able to attract and bring customers into a flow.

So something as simple as a QR code that sits at a cash register that says answer 9 questions about your health and receive $4 off your next visit. And then that gets them into a process of answering some questions. So that now there can be an engagement process. And that's semi-automated and can bring someone through and actually have them looking at their health and wellness and offering them a solution. So Nutrition Club business is super strong. We're seeing recovery there. And at the same time, we know that there's this huge opportunity, because the 4 million customers, a very small percentage of them are brought in to be consumers for the health and wellness part outside of the transactional part.

So -- and that's just 1 element. There's other elements. So it's, I would say, very promising for the U.S., and we're very excited. We -- as we committed to commercialize in Q4, I think, by the time we get through the first quarter of next year, we're going to have the data of all the customers that have come in, and we will, for the first time in 45, 46 years have 2 types of customers. Customers that have come through this process and then customers that have come through other processes and being able to look at their behaviors, the retention of those customers, the volumes that they're purchasing, the LTV and start making comparisons. But it's an iterative process. It's just the beginning for us. And that is the beginning of this modern platform that we are developing into as a company.

All right. I'm going to go to run my question list here a little bit because we've got 4 minutes left. GLP-1s, friend or foe?

I would say friends. I think that it's something that, number one, people are focused on weight loss. Now by the way, I say friend for us. I don't know if it's the $2 billion lawsuit, the 1,800 people currently that are in the process of the suit, if it's friendly in that way. I think that there's a lot that we don't know yet. I think that as a company, we have basically three ways we look at it. If people want to be on GLP-1s, we want to support them. We want to make sure their bone health, their muscle retention, that they're getting good nutrition if they're not eating. If they're eating less, they're getting the best nutrition possible. So we want to be there as a support if they choose to go down that route.

If they choose not to go down the route and they want a more natural solution, we're going to be there for them. And if they choose to go down that route and then as they come off the off-ramp and now they want to maintain because they don't want to do that for the rest of their lives, we'll be there to meet them at the off-ramp. So for us, it's -- we want to be there and support no matter what, wherever someone is out in their journey. That's the most important thing.

This is not a $2 billion lawsuit against you, is that right?

No, no, no.

It's otherwise.

Correct. Yes, Novo Nordisk, yes and Ozempic. Thanks for the -- I appreciate the transcript. Thank you very much.

No sarcasm quotes there. John, can we talk about guidance for a little bit, because coming out a couple of years really in between your tenure that guidance was a little rocky or not achievable, but now you've got 3 quarters of hitting guidance. And I think 1 of the things that some investors have is how is your ability to predict core annual guidance and how you feel that you have a handle on it or not handle on it, when you provide it to the Street.

Well, I like the way you started the question that we've exceeded our EBITDA guidance now for 6 or 7 straight quarters. We have a tight control on expenses. We have a tight control on anything capital that goes out the door. We have a very robust forecasting process. I think when it comes to revenue, it's a little, a little more risk on the revenue side, although we've gotten really good and the models are converging. We use a lot of different models to predict revenue, and they've been converging. We've been really good on revenue projections, too.

But then on EBITDA, I want to say we run it like a PE firm. I mean all new hires go through a new hire committee of executives. We -- there's a small group of executives that control spending really well, and that's how we were able to -- so we have a robust forecast process and we have a really tight control on spending.

Which given the amount of countries that you operate in, and the fact that you don't fully control or you don't control your sales force?

It doesn't matter what country you in, if you want to hire somebody new, even a replacement, it comes through with a corporate -- a small group of corporate committee, we meet every 2 weeks. It's just that everything gets relooked at in the eyes of, I have to present it to the executive committee. Do I really need it? And so that in itself is a good control. We do the same thing with intake for tech requests. It's like I said, it's almost like a like a PE mindset inside.

So let's talk about in the last 30 seconds, you have here, valuation of your stock. It's been up. It's been down. It's been sideways?

I'll happily take it. We met with an investor today who said our evaluation is abysmally low and that's true for a company that generates a lot of cash. We generate cash, even in our lean years, we generated cash. For a company that's stable in sales. For having EBITDA multiple of what we have is unheard of, and I think that's just nothing but opportunity. The thesis that I would put forward that I think creates value for shareholders is operating in 4 buckets.

So 1 is we're going to pay off a lot of debt. That money transfers, that value transfers from debt holders to equity holders. You could double the stock just based on what we've committed to pay down debt between now and the end of 2028.

Second is margin enhancement. We went from 11.3% adjusted EBITDA in '23, at 12.7% last year, and we're going to beat that this year. So we have -- our margins are coming back. Our sales have stabilized, hopefully inflecting to growth. That's where -- this is the first quarter, I think, we're guiding to net sales growth since I've been back. So all of that should lead to an EBITDA multiple that at worst case, goes from abysmally low to low and you can make a lot of fun, right? I mean it's like it's just a real opportunity. And I think once the U.S., again, we started to see some strong numbers in the U.S. Erin and I will get on the road, meet more investors, tell the story. We're starting to get more access to investors, and I think that's important to get in the multiple up, which I think is really where the value can be created.

All right. Well, I think that's it. We have you guys in the breakout for anybody who wants to join around the core.

Thank you very much.

Thank you.