Herbalife Ltd.

Good afternoon, and thank you for joining the first quarter 2023 earnings conference call for Herbal Life Limited. During the company's opening remarks, all participants will be in a listen-only mode. Following the open remarks, we will conduct a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Erin Banyas, Vice President and Head of Investor Relations, to begin today's call.

Thank you, Tawanda, and good afternoon, evening, everyone. Joining us today are Michael Johnson, our chairman and CEO, and Alex Amosita, our chief financial officer. Before we begin today's call, I would like to direct you to the forward-looking statement on page two of our presentation and in our earnings release issued earlier today, which is available under the investor relations section of our website. The earnings release includes 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 include certain unusual or non-recurring items that management believes impact the comparability of the period's reference. Please refer to our earnings release for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. Following today's call, The presentation materials will also be made available under the investor relations section of our website. And with that, I will now turn the call over to Chairman and CEO, Michael Johnson.

Thanks, Erin, and welcome to Herbalife on behalf of all of us. Good afternoon to our investors and shareholders and all of our stakeholders. Thanks for joining us today. This is my second callback after my return. We joined you in February and February 14th, and then and now we are in the midst of a significant change, and we're more comfortable with that than we have been in a long time. And I'm going to continue on the promise that we made in our last call in February that our sales will grow and our results will improve. We're evolving, and that's what's been happening over the last six months, and it's going to continue. We still aren't where we want to be, but we have embarked on a significant journey as we laid out on our earnings call in February. Since then, we've engaged more closely with our distributors than we have since 2019. That's hard to believe. We launched our new brand. We've seen net sales trends improve, and we are full steam ahead on executing Herbalife One, our new digital platform. By working closely with our distributor digital team to make sure Herbalife One provides the content data and transaction capabilities to grow their business, I'm excited and, frankly, very confident that Herbalife Executing on this transformation, we'll build our business stronger, reduce our costs, and focus us on all the important elements and metrics in our business. We've secured the balance sheet since then. We've made management changes to align key talent with key initiatives. We're streamlining our team for better operations, product innovation, data and sales analytics, and improved productivity. We have worked very hard to make sure our distributor and customer engagement has increased. We are embracing on change as a company, recognizing we need to continue modernizing and evolving our way of doing business. You know, since 1980, Herbalife has evolved with product and innovation, brand creation, distributor methods of operation, compensation plan enhancements, and customer engagement. We will continue to evolve. We have consistently evolved, adjusted, and grown Herbalife because of the need for great nutritional products and personalized selling that's created a community for nutrition and business opportunity that is unique to our culture and to our market opportunity. Our transformation, it'll take time, but we are working together. We have implemented new initiatives, and we have the right team in place, and we are highly energized. We're beginning to see some early rays of light, some bright spots. We are encouraged by improving trends. Our rate of decline decreased significantly. And as I said in our last call, our results and sales will improve. Our trends tell us we will see growth in the fourth quarter. On to the numbers. Starting with our first quarter net sales of $1.3 billion, we are down 6.3% compared to first quarter 2022 and down 2.6% on a constant currency basis. Our year-over-year reported net sales trends have improved in all five regions from quarter four. The 2.6 constant currency year-over-year quarter decline is trending better than it has in seven quarters. Our new distributor and customer trends are also showing improvement. Quarter one is up 7% sequentially compared to Q4 and only down 2% from Q1 2022. Our first quarter 2023 reported diluted EPS of 29 cents and adjusted diluted EPS is 54 cents. Adjusted diluted EPS was impacted by a 32 cent currency headwind. With that said, we are fully focused on both volume and margin improvements. We took steps to secure our balance sheet and improve our financial flexibility. We're well positioned financially to execute our strategic plan. Alex will give you more details on that financial movement soon. We are seeing increased distributor focus and improved engagement that I will discuss in just a moment. Many of our leading indicators are promising, including high attendance at our events. These are wonderfully positive trends. Which takes us to the basics. Let's talk about our distributor and event highlights. Last quarter, I talked to you about the key pillars of our business, content and distribution. We are expanding and enhancing the content we bring to market to strengthen our distributors with new tools and opportunities to leverage data and analytics. As we have previously discussed with a group of distributors, that we didn't have, we had, excuse me, we had a group of distributors that didn't have the opportunity to be engaged and trained by our senior distributors. They joined us in a time when person to person was replaced by virtual training. We know and part of our DNA is that in person is way more valuable. Let me pause here and tell you a little story. When I was at Disney, we did a deal with McDonald's and we were going to be involved very closely with McDonald's in all marketing efforts around their Happy Meals for all of our films. When we met with McDonald's, it was clear to us that we didn't have an understanding of their culture and they did not have an understanding of ours. So many of us at Disney embarked on a journey to Oak Park in Illinois to go to McDonald's U to understand their culture, to understand their tools, to understand how they train. It was an in-person three-day event that a new franchisee goes through. It was highly valuable for us to understand their culture and to see us. This impact was huge for all of us. It helped us understand the McDonald's customer, the way McDonald's operated, and how to best put our products inside their products to achieve the goals we wanted. We have a similar situation here at Herbalife today. Our new distributors were impacted in a time when they could not receive person-to-person training. These impacted new distributors and almost everyone they sponsored, because few of them had the opportunity to receive in-person training, did not achieve the level of engagement that comes with the result of being person-to-person, attending live events, and having the mentoring necessary for them to succeed. So what we're seeing today is that we are encouraged by the activity level of the new people now coming into the business who are able to receive person-to-person training and able to attend in-person events. Once this new cohort builds their skills and sales teams during the remainder of this year, we expect to see a positive impact on our sales performance. When you think about a distributor at Herbalife, think of a retail outlet. Every time we recruit a new distributor, we are basically recruiting a new retail outfit. The difference is it's more than that. They are retailers, but they're also recruiters. They are the people who build hands-on training, and they project the opportunity for people in meetings to be part of our DNA. In-person trainings create a forum for learning, mentoring, and driving engagement. In-person events are critical. Herbalife distributors learn best from face-to-face training and proper mentoring. Since the beginning of this year, we have held over 700 in-person meetings and reached more than 400,000 attendees, including our annual leadership training event, which was held last month, for the first global in-person event since 2019. That's almost hard to believe. Many distributors are attending an in-person event for the first time in their lives. In fact, at the upcoming Singapore event, of the 22,000 tickets purchased, approximately 70% of the ticket sales are for distributors attending for the first time. The impact and the opportunity for this group is enormous. We've seen it in the past, and we'll see it again. We have 10 major regional events planned for the remainder of this year. In the next three months alone, we will be traveling to Singapore, Nanjing, Lima, Bangalore, and San Antonio. to meet with our distributors face-to-face, share our vision for Herbalife 2.0, and learn from distributors as we launch regional products, promotions, and give them support. We expect to engage over 140,000 distributors. You heard that right, 140,000 distributors at these events. Distributors will leave these events more energized and motivated with enhanced knowledge, training, and an opportunity and a plan to expand their businesses. We will be exchanging different, unique, successful sales methods, opportunities for distributors to train, mentor, motivate, inspire, learn from distributors, distributors to distributors, where learning is key. These events give new distributors the opportunity to better understand the big picture, to see where they fit, and to see what the opportunity looks like at Herbalife for each and every one of them. We find that distributors who attend our events are more active and productive in their businesses. Our brand modernization. Many of you are seeing our new modernized brand for the first time today. As part of the rebranding, we are unveiled a new name, yet an old name, Herbalife. But in brand mark and our new brand mark that represents the company's modernization into a new era focused on health and wellness. We will speed up our vertical platforms around product and biz opportunity. The evolution of our tri-leaf symbol plays tribute to our legacy while inviting new audiences to connect meaningful with this brand. It's refreshed. It looks great, and the opportunity is there in front of us. We will be able to use our new brand mark in a more meaningful way. We feel this is the beginning of our new era, Herbalife 2.0. Our healthy, active lifestyle approach has returned as refreshed as we are seeing more distributor activity and engagement with fit camps, fit clubs, and community workouts that open the door to recruiting and retailing and add a foundation to our moniker Live your best life. Our digital transformation, well, we're full speed ahead. Our brand enhancements will be seen through our modernized digital platform. Herbalife One is progressing and progressing well. This platform is transformational. It will accelerate data utilization and actions. As we have reported, Herbalife One is creating a modern, harmonized, user-friendly, and integrated experience packed with key data and insights to grow and support our customers' and distributors' needs globally. Our early progress is to launch a modernized and cohesive website in 40 markets that represents 80% of our sales by the end of this year. We also have plans to launch a brand new e-commerce platform in two markets this year, with the majority of the remaining markets in 2024 to enhance ease of recruiting signups and retail transactions. On to business revitalization. One of the places the pandemic hurt us was nutrition clubs, especially in China. Nutrition clubs are coming back to life. Distributors are leveraging new creative ideas and success stories implemented in their marketplaces. Operators and distributors are becoming more sophisticated and maximizing nutrition club volume, defining metrics on a per serving basis. Working with regional management and distributors to be and enforce a data-driven approach to identifying new geographies for nutrition club expansion is part of our utilization. We want to give them data for where to go and how to operate clubs that are evolving. Providing distributors with information they need to determine which markets are ideal opportunities and what methods that they put into those marketplaces will maximize sales. We have more methods to the marketplace than ever before. Person to person is where the company started. We moved on to nutrition club, hybrids, fit camps, social media selling, challenges, marathons, offices, and evolving models around preferred members. We're working with distributors to maximize the opportunities we have with their preferred customers. We're working with distributors to activate upselling with their customers, focused with a team here internally to maximize that opportunity. We are enhancing our data analytics and our ability to take action on the data we are collecting to increase preferred customer sales, reminders, suggestive selling, all of the opportunities that are ahead of us and with us today. We have taken steps to modernize our distributors' compensation structure. These are huge. New programs launched on February 1st are designed to consistently enhance the economic opportunity for up-and-coming distributor leaders. We want them to earn faster. We want to stimulate success earlier in their HLF journey. We're continuing. We currently have two months of results, which are hitting our initial expectations. We're seeing an increase in qualifiers, and we're beginning to see early signs of some organizations increasing their royalties and personal productions. We're monitoring this closely to see if the results continue as expected or if tweaks are necessary so we can evolve this program for success. Let me get on to some organization changes. You know, I've been back for six months now. This is Michael 3.0, and I think my team can attest to the fact that I've never been more focused, more passionate about Herbalife than I am today. I've had time to assess, focus, and understand who and what we need to do in order to build a team to have a success built into our DNA deep into the future. We have a deep and incredibly talented team here. I can't mention everyone, but last quarter we laid out a strategic plan, and our team is completely aligned on our brand, our digital information, information, innovation, our distributor engagement, our focus on recruiting, retailing, and retention. So now I'm announcing that we're making changes to speed this plan to our marketplace. It's with a little bit of regret and probably deep regret that I announce Mark Chisel's retirement. Mark has been with us for 16 years of dedicated service. Today, we announced a new organization structure that will provide efficiency scale and position us for long-term growth. But Mark, you've been a super trooper here. You've been a friend to me. You've been a colleague to our distributors and an incredible contributor to this company. As I said before, I'm super proud of this team, but the one wonderful thing we have here is a deep bench. We've appointed Frank Lamberti, who has 18 years of tenure to Chief Operating Officer. This is a huge job, but Frank is the right person. He's got a great team with him, and he is focused on building Herbalife bigger, better, and stronger. The cool thing about Frank is he is a fitness freak. He's health-focused, and he's obsessed with his food intake. That makes him a perfect Herbalife executive. Frank joined Herbalife in 2005 as vice president of investor relations and served in numerous leadership positions, including most recently as the regional president of the Americas, working closely with distributors and their customers. Prior to that, Frank worked as executive vice president of distributor and customer experience. He also worked abroad as senior vice president and managing director of North Asia. Frank has a big job ahead of him. He will be handling all of our digital content, our product innovation, supply chain, sales data analytics, manage our vertical process, and manage our back office. Frank, you're the right man at the right time for the right job. Thank you very much for stepping up. Evie Montesino is an Herbalife success story. 24 years of tenure, we have expanded her role to Executive Vice President and Chief of Staff. She is an inspiration to our distributors and to all of our employees. As she joined Herbalife in 1998 as an assistant for personal care, transitioned to product marketing before joining the North American region where she served in multiple capacities, including director, senior director, vice president of sales, marketing for the U.S. Latin market, and eventually heading in a growth period the entire North American market. EB's expanded management authority is a voice to all employees and distributors through human resources, brand marketing, social media, corporate communications, and our very important worldwide events and sales. EB, congratulations and welcome again to your new role. On top of all this, we've appointed Rob Levy to President of the Americas. Rob has been a partner to me for over 20 years. He's a proven leader, trusted by distributors and his colleagues. a long-time Herbalife and industry veteran with 28 years at the company. Rob has run every region during his tenure. He has been responsible for all distributor-facing businesses, including sales, marketing, distributor operations, and functions. I took a long time to announce these folks because this group has 70 years of combined experience. Their energy and passion belies their time here. Their wisdom will help get us back to growth, innovate, expand Herbalife I told you when I started I told you when I came back that I had started 20 years ago in this company this is an amazing place and we have built an incredible community here the friendships that I have built among our team and our distributors are frankly just amazing we've had some board of director changes and I want to thank John turtle who has been a distributor member of our board for 18 years I want to thank you John for not only for your service, but your friendship. And I want to welcome Stefan Graziani, who joins Juan Miguel Mendoza. They are two of our most data and analytics-driven distributors, and they're going to help us on our digital journey. Their friendship, their consult, and their wisdom will help us move forward faster. So, Alex, let me turn it over to you for some financials, and we'll come back to me for a close.