Herbalife Ltd.

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1. Good afternoon, and thank you for joining the fourth quarter and four year 2022 EARNEST conference call for Herbal Life Nutrition Limited. On the call today is Michael O'Johnson, the company's chairman and CEO. Alex Amiskita, the company's chief financial officer. John DeSimone, the company's chief strategy officer. Mark Schiffel, the company's chief operating officer. and Eric Monroe, the company's Senior Director, Investor Relations. I would now like to turn the call over to Eric Monroe to read the company's safe harbor language. You may begin.

Good afternoon. On today's call, we will be making some forward-looking statements. And while we are making those statements in good faith, we do not have any guarantee about the results we will achieve. Descriptions of our risk factors are included in the documents we filed with the FCC. We will also be discussing some non-GAAP financial measures. These non-GAAP and adjusted numbers refer to measures that exclude items management believes impact the comparability for the period referenced. Please see the earnings release for additional information on our comparability items. These GAAP to non-GAAP reconciliations can be found in the earnings press release and the slides we will be reviewing on today's call, both of which can be found on the investor relations section of our website. I'll now turn the call over to Chairman and CEO, Michael Johnson.

Thanks, Eric. And welcome, everyone. And I find it a little bit ironic that I'm talking to you on Valentine's Day. My first day back with Herbalife after two and a half years was on Halloween. So I'm coming to you on two American holidays. And now I'm going to give you a report in my first 100 days. I started on October 31st and immediately jumped on a plane to Cairo, Egypt in November 2011. And we met with our distributor leaders, our chairman's club and founder circle. We did a follow-up meeting with them in Los Angeles in the first part of December to take action in the lift sales and to formulate a strategic plan for growth. We listened, we learned, we made decisions. We put a plan in place to modernize and relaunch Herbalife. We presented it to our up-and-coming distributor leaders in Lisbon, Portugal, and in Dallas, Texas, to inspire, to listen to them, to energize, and to present the foundation of our relaunch of Herbalife, which we call Herbalife 2.0. This was and is to our next-level leaders. We have launched new promotions. Our in-person events in 2023 alone have totaled 170. We've reached 175,000 distributors face-to-face. That's a big change from our pandemic times. We've set up a digital task force made up of select distributors in our internal team, to speed the time to market for Herbalife 1, our digital transformation. We have set up two internal committees, a volume committee to drive growth and a margin committee to manage cost. With all that said, there's no way to get around that we are disappointed in our performance for fiscal 2022 and our last quarter. Our fourth quarter net sales of $1.2 billion were down 10% from the prior year. On a constant currency basis, sales were down 4%. Our full year net sales of $5.2 billion were also down 10%, but on a constant currency basis, down 5%. The strength of the dollar has obviously impacted our EPS as well. Our full year adjusted EPS of $3.40 was impacted by a $0.60 currency headwind. We generated significant cash flow in 2022. Our FY operating cash flow was over $350 million. Through our cost management efforts in the fourth quarter, we maintained adjusted EBITDA flat to the fourth quarter in 2021. Now on to the future. And here's my promise. Our sales will grow and our results will improve. I'm fully aligned with our board, our investors, our distributors, and our employees to usher in a new era of growth for Herbalife. Here's our vision on how we're going to deliver. Our business is built on two major platforms, our content and our distribution. Our content is our product. We're going to grow our product portfolio to position Herbalife as the premier public health and wellness company. We started in 1980 as a weight loss company. We evolved in the 2000s to a nutrition company. Today, we are launching ourselves into the future to be a public health and wellness company. New products, new services, coaching, wellness evaluations available through our distributor platform for our customers. We shall see this company grow. We have enormous opportunity to grow our company through enhancing our daily nutrition products with expanded lines such as vegan and choices in proteins. We are expanding Herbalife24 to include new product enhancing our current ingredient profile. We've actually brought back the founder, the creator of Herbalife24, a product that expanded our distributor base to our consumers and to our distributors. We are exploring opportunities for sleep products and coaching. We will continue to build upon our weight management platform. We have other categories we're exploring regionally. In India, which is a growth market for us, our product line is unique to that market. We are unleashing products regionally in Europe and Asia and China, and we'll look forward to synergies to it. and opportunities to globalize some of our regional product offerings. Our plan is to reach more consumers with more offerings through our distributors than ever before. Our next platform is distribution, and it's our distributors that give a voice and a passion, if you will, to our product. Our distributor base, it's global, 95 markets. Our entrepreneurial distributors have a unique relationship with their consumers. Today, we're modernizing our compensation structure, including new promotions to energize and incentivize our distributors to make it easier to earn early in their journey. Through our digital platform, we will accelerate the transference of data to better understand our consumers and our preferred customers to work alongside our distributors to enhance their sales. Which brings me to our digital platform, Herbalife One. This is our largest investment ever. Our digital platform, Herbalife One, is transformational. It will accelerate data actions. Herbalife One will be our first-ever unified data-powered global digital platform that will enable growth by delivering best-in-class digital experience for distributors and consumers around the globe. From simplifying sign-ups to providing a best-in-class e-commerce experience with enhanced data analytics to suggested and targeted selling features, Herbalife One will modernize, differentiate, and strengthen our leadership in the marketplace. Data visibility is improving in Herbalife, but we want to do it better. We need better data utilization, and we know it. Where else? Our brand. We are refreshing our brand. We're relaunching it, which allows us to operate in a variety of verticals. We will roll it out at our leadership event in one month from today. Our vision? It's both short-term and long-term. Our plan to return to growth in the near term is made up of a well-defined plan. It's growth for the short term. Let's recruit and retain customers and distributors. Pretty simple. Expand nutrition clubs, high opportunity by analyzing metrics and giving more information and data to distributors entering this highly profitable area. Growth preferred customer programs. We are enhancing data analytics to take action on the data we are collecting in order to drive growth. and we need to better maximize the usage of our data for visibility and opportunity. Distributor compensation enhancement, as I mentioned before, we are creating economic incentives and promotions to motivate, drive, and reward distributor activity. I said it before, I'll say it again. We need to improve visibility, improve our data and analytics. High tech, high touch in this company. Herbalife One will be the underpinning of our operations going forward. Today, we are saying we have no guidance in our forecasting because we just launched new initiatives and need time to analyze and digest before we can accurately forecast into the future. On margin enhancement, we have 70 million of ongoing efficiencies identified through our transformation program. We are making difficult and, frankly, unpopular decisions. Seven percent reduction in our global workforce, price increases in 2023, zero-based budgeting, every expense to be analyzed, including our professional fees. But we are still investing for growth, as you've seen in Herbalife One. Personally, I'm focused on getting Herbalife rolling again. It's the only Herbalife I know. How to grow volume, build content, enhance our distribution, and create better margin opportunities. We have a shared vision with our distributors and management for building customers and building distributors' businesses stronger. This is our Herbalife of today, it's our Herbalife of tomorrow, and it's our promise to you. So let's take it over, Alex, and show them what we got.