Exclude certain unusual or non-recurring 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. With that, I will now turn it over to Doug Lane of Water Tower Research. Thank you, Erin, and Stephan and John, welcome to Water Tower Research Consumer Products Conference. Happy to be here with you. Yeah, good to see you, Doug. Thank you. Now, Stephan, after 32 years as a top Herbalife distributor with a business that extended across 70 markets, what drove you to leave the business and join the corporate offices at Herbalife? Okay, good question. Well, first of all, 12 years ago, Michael had actually asked me to leave being a distributor and join the team. And I'd say at the time, I had a lot of goals still and a lot of things that I wanted to accomplish as a distributor. After 32 years, establishing quite a big business, becoming the number two distributor in the world, there were a couple other goals that I had. But when the opportunity came, when Michael came back to join him and to now make an impact company-wide and not just in my own personal business, it just was something that I wanted to do, and it was the right time. So now I get to help the world build Herbalife, which is the most exciting thing that I can think of doing. I'm gonna add, so, just how blessed we are to have a distributor who's got 32 years experience, in how many countries? Um, 70. 70 countries. In 70 countries, he's built organizations. He's sold product at street level to customers. He's got a knowledge base unlike any other executive in this company, and we're really blessed to have him. His total organizational sales were pretty big. Yeah, $400 million- So he's also a leader, so he had great leadership qualities before he came into Herbalife, plus he understood the business unlike anybody else. So we're blessed to have him as President of Herbalife. No, it sounds like a treasure trove of experience, and I can tell you, following direct selling as long as I have, it's unusual for, you know, a leader of your caliber to come out of the field and join the corporate offices. So, maybe you're onto something there. You talked at some length on your recent earnings call about strong growth in new distributors in late March and April. What is driving the accelerated growth in new distributors, and why is it so important? So we talked about March and April. I'd say that the groundwork had already started as of last year. You know, we've been focusing on helping, coming out of the pandemic, the transition. There's kind of a newer reality. You know, behavior, some behaviors changed. There was, I'd say, some catalyst. More people went online than ever during the pandemic. And people kind of changed their perception of things, you know? Look at, just from a corporate standpoint, the back to office, you know, some people don't want to come in five days a week anymore. And so a mature business like ours, where you have so many people that have put in really decades, some of them, of their lives into building a business, that then went through a transition, coming out of it, there was some disruption. You know, there was people looking at things differently, and people's behaviors changed in the marketplace. And so I would say last year we started to really lay a foundation and a focus, and the big change really came on one part of actually bringing someone into the company to work with us, that really is an expert in the field of network marketing, direct sales, that literally has trained millions of people over the last couple of decades, and was something that we found would be valuable to give that level of training to all of our distributors. And so this person was actually coaching and had some of our top distributors that were paying $30,000 to be in a mastermind training to access him, his coaching. and when the opportunity came to us to build a relationship with him, and a long-term relationship, and to have him give the same level of training, the same content of training, but on a broad basis for us, we knew that it could make an impact. And so he's been doing that from a training standpoint. He's been in front of hundreds of thousands of our distributors, either live in person or virtually. And we've developed some programs inside of the company that have really made a difference. And we did the launch in March, in front of our top 6,000 leaders, and it helped to accelerate things, and it's the beginning of a process. The new distributors coming into the company, it's really a leading indicator for us. If you have more people that are becoming inactive than you have new people coming in to be active, adding on to the base, then it's very hard to grow sales. So you need to have a new generation of people coming in. You need to keep as many of the existing also that are working. You need to up the productivity of everyone. So it's the beginning of something, but we've had a lot more than just that, that's happening inside of the company. But it's one of the factors that helped to really kind of create that. And you'll be hearing more about that as we go quarter by quarter and through the rest of the year. Certainly, Doug, you've been around this industry long enough to know the importance of growing the number of new distributors, right? The increased reach that gets you, and that's more the top of the funnel for ultimately what we hope to be new sales leaders, that are organizational builders, that create even more reach to customers. So it is the first step in, you know, incremental growth. Yeah, no, that's a good point. Stephan, you just moved into the role of President in the last, you know, couple of months here, and, and John, welcome back as CFO, for your second stint here. But you also have a, a new COO in the last year, and then Michael Johnson returned to the role of CEO. So there's been a lot of change at the top, in just in the last 12, 14, 18 months. So what, what, what should investors read into all these senior management changes going on at Herbalife? So I don't know if it's a change, for sure. John coming back, you know, it's a change, but it's a change back to what was really the most successful CFO of the company in history. And so Michael coming back, there's no question, his passion, his vision. The new COO, Troy, he's a superstar. He has done an amazing job, and he's stepping into a role that's very important, and he's very, very capable. One of the things- He's a veteran. He's a veteran, yeah. These, these aren't new people to Herbalife, right? These are experts at Herbalife. Yeah, and then one thing I'll just mention is having Frank Lamberti in a new role, which is a new role for the company, actually, which is Chief Commercial Officer. And, you know, the way that I look at things is everything needs to lead to top-line sales, needs to... If not, why are we going to spend money? Where are we gonna put our energy and our focus and our bandwidth? And so coming in from a distributor perspective, that is the way I look at things. So if we are going to put money into an area, how is that gonna impact the top line commercially? If we are gonna build out digital, how is that going to impact? If we're gonna work on brand or sponsorship or product development, whatever it is, it has to lead to building a top-line business for us, more distributors, more customers, more retention, more duplication. And so bringing everything under a commercial leg of the company, it's just helping us really to focus, and so that's been also a big part of the reorganization. We just feel like everything is coming together, and you know, maybe John can talk about just the reorg in general that we've gone through. We just feel like we are lean and fit and ready to build for the future now. Yeah, I'll use that as a bridge. It's a little tangential to your question, but you know, we have what seems like a lot of new leaders at the executive level, but they're really old leaders, right? They've all been in... Most of them have been in the position they're in. If they haven't, they've been a veteran at Herbalife for a long time and know the company very well. But within the restructuring, we've really done three core strategic changes. First and foremost, what I think is the most important is we've taken our top countries and had them report directly into Stephan. So we removed layers. We had regions and then super regions and then the corporation. So what was going on in the street level, for example, in Mexico or in the US or in India, there were layers between what was happening in the street and the president of the company. Well, Stephan's an expert at sales, right? It's what he's done for 32 years, and we want his influence more directly impacting the market. So by removing those layers, he can have more influence on the bigger countries within Herbalife's portfolio. So I think that's, and that helped top line, and that's the most important thing we could do. The other two pillars of the reorganization were we wanted to reduce the layers. We had far too many layers. We had as many as 13 layers in this company, and we wanted to get down to eight, and we mostly achieved eight. I think in one organization, in manufacturing, we have nine layers. We also wanted to increase the span of control of each manager. The important thing is that while that saves money, and it certainly saves a lot of money, and we've publicized the amount of money it's going to save, more importantly, it's made us more flexible, more agile, more entrepreneurial, less bureaucratic. It's gonna help us as a company perform better, perform more efficiently. There's lots of strategic benefits to the reorganization that resulted in cost savings, but it wasn't driven by cost savings. No, that makes sense. You know, one asset that I've always thought that Herbalife has that other direct sellers do not, and I've always thought it's underappreciated, are your nutrition clubs, and there's a lot of them around the world now. I know they started in Mexico, but they're global now, and I think the last number I saw was 67,000 global doors, essentially. You know, to put that in perspective, I think Starbucks says they have around 38,900 globally and Subway 37,000. So it really does hammer home the kind of reach that you have on at the street level in bricks and mortar. So how do you plan to leverage this asset? Where can you go from here with your nutrition clubs? So Doug, we agree. We, we think that this is a very special part of Herbalife, and it's a big differentiator. You know, listen, I don't know of another company in direct sales that has commercial, physical, brick-and-mortar locations like we have, and surely not the quantity, if there are other companies that even have them. We've got different types of clubs all around the world. If you go to Mexico, we've got variations of clubs. Some are in homes, some are in very small locations. Some of them are more kind of bigger brick-and-mortar commercial locations. In the U.S., we've got approximately, you know, 10,000 clubs. These clubs are commercial clubs that are very focused on food service primarily. That's very unique. The 10,000 out of the 67,000, they're mostly in the United States food service-based clubs, where the rest of the world is really more multi-service based clubs. Okay, they're not looking at just kind of what they're serving to people, but they're looking at what kind of services they're giving people. People come in for a wellness evaluation. They might come in for a cooking class, a healthy food cooking class. They're building communities out of these clubs. They are working with their customers and their distributors and building their Herbalife business out of the clubs. So we've got a variation of these. One thing that we're very clear on is we wanna grow the clubs, and we have a lot of room for growth. In the United States, there's a lot of room for new growth of clubs. What we do realize, though, is that this new business that we have, and I call it new because it's really been just the last 10 years that we are really in, kind of probably more like eight really, into a food service model. You've got to imagine that eight, nine years ago, we didn't have food service as a business in the United States. The clubs we had in the U.S. were just like all of the other clubs in the world. Now we've got these locations. We reported the 4.4 million customers that walked into one of those 10,000 clubs last year, and they made 55 million transactions, right? They purchased 55 million transactions, a tea, a shake, a protein waffle, maybe some other item, and it accounted for $910 million of retail sales for those 10,000 locations. But from a food service standpoint, as a company, we really haven't gotten to the point of understanding what exactly are people purchasing on an individual basis? Where is it trending this month, or, you know, this quarter compared to last quarter? Are they drinking more teas? And if it's more teas, what kind of variations, what kind of product strategy should we have to lead into that to be able to leverage it? Very, very much like a traditional... I don't wanna say we'd ever wanna become a franchise. That's not our model. But if a franchise food service business doesn't know what they're selling, right, and where they need to go and from from a seasonal standpoint or whatever, then they're really not on top of it. So we've got room to improve in that area. We also wanna help those clubs to transition from food service to multi-service. Because we know exactly how many people come in and buy, but we also know exactly of them, how many are buying something at home and using it. We know exactly how many of them are becoming preferred customers and then distributors. There's a whole opportunity for us to leverage what we have in the United States from a food service standpoint, but to build in the back end, which is people consuming at home, customers referring people to consume at home also, and become distributors, and then ultimately help other people with the products. So, so we have an expansion plan, we've gotta get more focused on and, and leverage the food service plan, and then we've gotta expanding the services outside of food service plan. So that's specifically talking to the U.S., and for the rest of the world, it's maybe to bring some food service aspect to the rest of the world that we don't have, and to leverage a growth plan of clubs, and also to help to support the multi-service part of things. So, so big opportunities. India, I'll just mention really quickly, virtual clubs. They have an incredible model, virtual clubs that are happening. We haven't really taken that model and brought it around the rest of the world. So we see a lot of opportunities, and we really do believe that clubs are the differentiator for us and huge part of our, our strategic approach for the future. Well, India has certainly been a success story for Herbalife, so whatever you can take from there to the rest of the world sounds like a good idea to me. Over the past several years, Herbalife has segmented the marketplace and made technology upgrades in order to gain a better understanding of the end consumer. How's the company leveraging these new end consumer insights, and how does Herbalife One enhance these capabilities? You wanna take it? Yeah, I'll take it first. So let me just describe Herbalife One to the audience. So Herbalife One is our technology project to upgrade all our technology, the infrastructure, the integration component, and most importantly, the tools that consumers and distributors will see. And what we've done so far is the first two, the foundation, the database work, and the integration layer, which we're now launching all these tools. But we've really just put in or just about to put in the customer database that will allow us to leverage the data information. It's nothing but an opportunity right now. We're not leveraging all these transactions that we have coming into the system. Stephan talked about 55 million transactions in the U.S. alone in our nutrition clubs. We're not using that data yet. That data now, how we use it, that's an opportunity. When we get to use it? Sometime in the near future, when these tools are up and running in a way that allows us to have good access to the data, that's when we'll be able to leverage and increase productivity. So we're not even there yet. If I look at the technology side, we've built this amazing infrastructure, we're just now learning how to leverage it. Do you wanna- Yeah. Go ahead. So, I think longer term, if we just take the customers, right? We know that in the U.S., the 4.4 million that walked into a nutrition club, there's a set of customers there. There's other customers outside that actually purchased the products from a distributor. There's millions of customers, and for the most part, the millions of customers like John's talking about, we don't have their data. We might have a name, a first name, last name, an email address, a phone number for them, what they purchased, just as an example here in the U.S., but we don't have if it's a woman or a man. And if it's a woman, how old is she, and does she wanna lose weight? And if it's a 25-year-old guy that purchased, you know, what is the interest? Is it building muscle? Is it being more energetic? We don't have the kind of data that once we have it, is going to allow us, from a marketing standpoint, from an AI standpoint, to be able to actually go and put something in front of them that's gonna have them say, "I wanna buy that," or, "I wanna know about that," or, "I wanna take a next step towards something." And so ultimately, where we're going is building out this platform where we will have tens of millions of customers that actually are connected to the platform because they're getting value from it. And so then we have all of the data... and we can actually create, you know, a lot of different ways to approach supporting them and bringing them through a journey that we're just not doing now. So, you know, it's we built some very good tools, but they were very disconnected, and they were tools that were built in the last 10 years, in the last 15 years, and it's just today technology has changed so much, that we just needed a better system. And so like John says, we're now getting to the point where it gets exciting. The integration layer, the data layer, and then now being able to start building on top the commercial applications that are gonna allow us to leverage all of the data that we're gonna have. So really excited, and the timing, and it's a process. I don't think there's any company that takes on the size of the transformation that we are, and it's just multi-year. So step by step, we're gonna start stacking and building on top of it, the layers. You know, again, it's long term, we know where we're going, we know what this is about, and we know what we wanna do, so. Well, yeah, and this process has been underway for several years, so, it is a process for sure. I'd be remiss if I didn't ask you about the GLP-1 craze. It certainly disrupted the weight loss industry, and weight loss is still Herbalife's largest category. Some other brands, like WeightWatchers and Medifast, OPTAVIA, have jumped all in to GLP-1. Other nutritional supplement companies are keeping their distance, and so where does Herbalife fit into the spectrum here? So it's interesting. You know, I think if you look at what how they approached, WeightWatchers approached it, and how OPTAVIA and Medifast approached it, I think they approached it top-down, to be honest with you. I think for the leadership there to look at that industry and say, "Well, you know, we really need to... It's gonna change the weight loss industry," they made some decisions to kind of go all in. And I think what you're finding and, you know, what we're seeing, if you look at the recent, you know, quarterly, is that the success at which they're doing that is... And by the way, like, I don't wanna- It's questionable what's happening right now. I will tell you that it's very hard to take an organization that has been healthy food, healthy lifestyle, anti-medicine, okay? And tell them that they are now going to work hand-in-hand with GLP-1 medicine, and the organization is gonna just do that, and just that's the option that they have. We're taking a bottom-up approach and a top-down approach, meaning responsibly monitoring everything that's happening, looking at the best options, but also understanding from a business need from our distributors where they're at. And when the time comes, and if the time comes, that the two are meeting together, we will find the right strategy forward. And that strategy, without going into detail, because it is top-down and we have a lot of things that we're looking at, it could be a natural supplement, okay? Which enhances, supports, is a, you know, another option for someone that would go down a medical route of GLP-1s. It could be a support program for people that are on. It could be an educational program to help people not have to be on, or to help people come off of. There's a lot of options for us. So we are top-down, we are bottom-up, and we're gonna make sure that the timing of whatever we're gonna do is going to be additional, it's additive, and it's not gonna be something that's gonna have a negative impact. We're focused on top-line growth and doing it strategically and intelligently. So, you know, we are being very responsible about it, but it's a timing and, and a way that we're gonna do it that's gonna be important. It sounds like you're not interested in getting into the pharmaceutical business, and I get that. But there's also a need there for nutritional supplementation, and that's something you might consider helping your consumers with. Yeah, and I wouldn't say we're not interested in it. I think we have to be semi-interested in it. Okay. The question is how and what is the right timing for it? Whether, you know, it's this year, next year, or the year after. That industry's pivoting also. You know, it's the competition, the compound, the different things that are gonna be coming out. So we're monitoring everything very closely. The one thing also is, you know, we are the first direct sales company to be approved, you know, to have a DPP program, a Diabetic Prevention Program, from the CDC. So we have currently some of our distributors, which are getting certified to administer a Diabetic Prevention Program, which is, you know, a program based on the CDC, which educates people and supports them in a lifestyle change to be able to prevent diabetes, okay? Or to, you know, help them in that. Which, by the way, the medicine, the GLP-1 was originally designed for that, right? So we have a lot of different ways of looking at this, and again, it's gonna be bottom-up, top-down, timing, strategic, and additive. And that's the way we've got to approach this. Got it. All right, we'll stay tuned. John, you recently reinstated providing guidance to the Street after pulling it in conjunction with the third quarter of 2022 earnings release. What was the catalyst for the reinstatement? And I also noticed that unlike before, there's no Adjusted EPS outlook given, just net sales, Adjusted EBITDA, and capital expenditures. So, why no Adjusted EPS? All right, well, I'll start with the first part of that question. So, you know, I haven't been CFO in a while. I came back just a couple of months ago and reinstituted guidance. Some of that is a philosophical belief that I have, that we are... This company and this industry should be providing guidance to the extent that, you know, we have some reasonable expectations that we believe in. We should let investors know what those are. I think it's a benefit to investors. I've also seen how the analyst models have really diverged from one another, and they've kind of gone all over the place without us providing guidance. I think, you know, it's a philosophical change. We'll continue to give guidance. We'll give guidance for the current quarter when we do an earnings release, and we'll give it for the current year. That's the expectation. Why did we choose to go with EBITDA instead of EPS? I believe EBITDA is more reflective of the value of this company, given where our, you know, interest is right now. You know, we've got some pretty high debt costs. We're gonna pay that down, and so over time, EPS will go up just from switching the, you know, level of debt and moving it over to the equity component. So I don't think it's a fair reflection of the valuation of this company, and that's why we pulled it. Now, for an investor who wants to see EPS, it's not that hard to get from our EBITDA to our EPS number. I think analysts can do the work to get from that point, but EBITDA is what I believe we should be valued on. Oh, fair enough, and, and obviously, free cash flow is going to go to pay down that debt, at least in the near term. I think if I correct me if I'm wrong, but your internal goal is to get the leverage ratio down to 3-1 by the end of 2025. So, again, there, there's your use of free cash flow. But, maybe it's too early, John and Stephan, but what about after 2025? And then you're at, let's say you're at the 3-1 as anticipated, where's the free cash flow gonna go? Is it gonna go back to the bias towards stock buyback that you had before? Is there any discussion of reinstating a dividend? What's the thinking? And, and lastly, what's the thinking on acquisitions? Yeah, so, I, look, what I'm about to say is circumstantial. It's based on today's circumstances and what we see. We have a goal to get to 3- 1 because we never wanted to exceed 3- 1, and so we wanted investors to know that that's our expectation by the end of next year. That's a good investment grade level of debt. Not that we're investment grade, but that's the investment grade level that we wanna be at. But given the current circumstances, which is the cost of the debt, the tax friction from the interest on the debt, I would like to continue to pay down debt for the subsequent couple of years, maybe pay down $1 billion of debt over the next 4-5 years. I think if we pay down $1 billion of debt, if nothing else changes in the enterprise value of Herbalife, that moves $1 billion of value from debt holders to equity holders. That doubles the stock price. There's a, there's a huge opportunity at this point, I think, for continuing to pay down debt. Having said that, we have a history where we've given dividend, and we have a strong history in buybacks, where we repurchased over $6 billion of stock, almost $6.5 billion of stock since we started the program. The thought can change based on the circumstances in 2026. In 2026, the cost of debt comes down, depending on what's going on with the market and the stock price, we may choose to buy back stock, but that's not our thinking at the moment. Our thinking at the moment is we'll just continue to pay down debt, and we think that'll generate a lot of value for the equity holders of the company. Yeah, no, that's a lot of money to move out of debt and into equity, so I'm sure the equity holders would be happy with that thought process. So anyway, we're running up on time here. I don't know if you have any final thoughts, you wanna share? Yeah, nothing specific, just excited about the future. You know, we're coming out of this reorganization now. I think we're organized in a way, like I said, lean, fit, ready to fight. Yeah ... directionally, where trends are going, you know, we're feeling very positive about it and just excited with what we have coming up in the next couple of years. Yeah, I kinda hope we're at an inflection point. You know, we... COVID kind of changed things, right? We were- we had a good growth rate. We hit COVID. We accelerated for two years, came out of COVID, behavior changed. We had two years of declines, and things have just stabilized, right? Maybe not everywhere, but in general, things have stabilized. We're starting to see growth in new distributors, meaningful growth in new distributors that we disclosed on the last earnings call. I think we have our management team in the right place. I think there was a decent amount of instability over the last few years in the management team, and we've created stability, stability with people who have been here before, like Michael and I, or Stephan has got 32 years experience, or even Troy, our new COO, has been here for a decade. I think we've got stability. We got the at the executive level, we got people in the right box, and combining that with the stabilization in the business, you know, knock on wood, we, you know, hopefully a continuation of growth in new distributors. I think we're at a a good inflection point, but, you know, I don't wanna get too excited because we have to see how those new distributors perform, but it's just- it's got that feel right now. No, I think the numbers back that up. So thank you, Stephan. Thank you, John. I appreciate you joining us today. Thank you. Thanks, Doug. Happy to do it. Thanks, everybody, for participating in our conference. To learn more about Herbalife, please visit the investor page on their website, herbalife.com. Please note, the views expressed in this fireside chat may not necessarily reflect the views of Water Tower Research, LLC, and are provided for informational purposes only. This fireside chat may not be distributed or reproduced without the written consent of Water Tower Research and should not be considered research nor recommendation. WTR is an investor relations firm and not a licensed broker-dealer, market maker, investment bank underwriter, or investment advisor. Additional disclaimers can be found at Water Tower-