HLF - Earnings call transcript Q4 2021 | Herbalife Nutrition Ltd.

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Operator

Good afternoon and thank you for joining the Fourth Quarter and Full Year 2021 Earnings Conference Call for Herbalife Nutrition Ltd.

On the call today is Dr. John Agwunobi, the company’s Chairman and CEO; John DeSimone, the company’s President; Alex Amezquita, the company’s Chief Financial 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.

Eric Monroe

Before we begin, as a reminder, during this conference call, we may make forward-looking statements within the meaning of the federal securities laws. anticipated. and that to to could from discussed assumptions risks and differ involve those uncertainties and cause or statements are known subject unknown materially These actual results

with For report XX-K. these we a on you to SEC Form and refer earnings to of most filings, complete risks including encourage forward-looking in our our discussion statements business, release our today’s associated recent annual

currently or available any forward-looking any to the We or upon statements events. Our forward-looking undertake update are to unanticipated do report events any obligation to information to to any release based revisions not reflect or or of us. statement occurrence future circumstances

during website, greater more in principles Commission as differ manner these These assist accordance the prepared to reconciliation of addition, maybe in at non-GAAP to Exchange call, measures referred measures reconciliations, these most included period-to-period supplemental Securities are is Investor U.S. measures measures investors a and financial preparing additional performance meaningful discussed financial performance information, the SEC. in our from GAAP in in available release. the accepted measures generally as comparable and believe to statements In release of with section non-GAAP schedules discussed earnings that our We A that press herbalife.com. the and financial by evaluating our and consistent earnings the results our supplemental in to detail of submitted together with Relations accounting certain contained this operations non-GAAP financial comparable in measures. financial management our

will our turn to this CEO, conference Agwunobi. Chairman volume the volumes call Additionally, when points. they call, during to management are makes and John over to referring now I reference

John Agwunobi

to for their products. world joining afternoon. to due wellness us call nutrition year continued pandemic, goals XXXX by sales channel around you during high-quality Thank for access the our pursue giving was consumers Nutrition. help nutrition global direct Even this another uncertainty of the them entrepreneurial record on Herbalife period today. Good the and our

demand of $X.X billion, nutrition full year resulted an company. the the X% our the prior in year, and products for For for annual an of to record compared increase net sales

annual regions: individual annual EMEA, records. diluted America and earnings share largest markets, year three company. of share and earnings adjusted million Asia-Pacific, reported was and XXXX $XXX set XX% the XXXX compared XX Full year of of $XXX net an XX% respectively EBITDA to and net adjusted with per along full XXXX. the Full Our records per income for $X.XX sales of were both $X.XX of diluted increase million North reported year

and For was month, distributors actually normalized the up a XX% active customers, more year, new of the brought X% year. company compared XXX,XXX in compared an to XXXX We down X.X per compared XXXX averaged leaders million we just X% sales and increase for XXXX. over the record to which to full preferred and

of ongoing year, Today, retained, digital in a our demographic our and drives leaders increased ending for We from of we of Nutrition XX.X% preferred believe this last by the to attract continued sales record attractive the and prior re-qualification also business media with broaden as innovative millennials January Club announced business offer sales period sustainability reflects our results XX-month opportunity retention XX.X%. distributor were result level younger social Z. activity last up Gen of our customers that the distributors. business leader year’s record new This we tools. XXXX. and and We our or identifying new a including ways, engaging new XXXX, reach in with of models two-thirds utilization and This in audiences high of of to the

The XXXX. X% compared stack fourth X% net growth fourth a of challenging the of quarter our was we On QX to basis, quarter by year-over-year impacted sales to X-year trend of $X.X decreased to billion compared the the saw Turning comparison of quarter, a fourth period. XXXX.

distributors India, the XX%. grew touch As XX% that strong increase including year-over-year was preferred in underlying into will go continued on The in to few metrics, we and by a as X% shall I The of sales regional region growth, to a year-over-year by compared XXXX. as year. quarter members well region our a had in expect is forward-looking Asia-Pacific now back performance, growth which supported key initiatives prior led I India contribute little strength growth return of deeper to new half another XX% a the active up leaders. in in

home investments making current opened Bangalore. state-of-the-art to of planned be center. distributor center support product to new foot in will control and XXX,XXX a designed in plus accelerate employees with are This local product The the allow facility, years. to quality the facility newly as X suburb business the meeting level development and contain to approximately square new launches. X,XXX facility It global further new over market a will growth research us lab, from India also a space India We to XXX we accommodate state-of-the-art jobs go a will a in a next of services

X% decline comparison This we challenging a period. of quarter. America, is saw net Looking against the decline at a in in up year prior North sales

growth of the area the our We is compared business. to stacked year Club of compared by Nutrition U.S. locations, increased strength Nutrition XX,XXX an rate with North region continued XX% X-year than of the America ended the end approximately XXXX. XX% XXXX. Club However, to increase of in over QX in more One

distributor force XXXX. with are far which of October in see return across began by the energized events XX the and North sales to in-person events in-person continued our region, so America is We separate excited in

variant, the our in-person and all and events events distributors. events. these believe face-to-face discussions, that has Although the we inspiration an elements several are important characteristic our ideation, for of QX disrupted of the the high attendance team are motivation been were Omicron And by interactive for building social source

this Additionally, of vegan ever are we to to XXXX. America, nutrition product line and savvy that a as in vegan to will the and recently looking line in of dietary settlements. we believe pleased in comparison, are acquired expected first share property products a organic brand that intellectual our new for launch experienced in market challenging the region. certified consumers early vegan reach resulting X% We allow us decline. year-over-year who It’s will serve North EMEA basis a

solid saw business. year-over-year actually we region, which of the number active the the the the in sales reflects X% increase in and of a continued foundation EMEA strength leaders, However,

the grew the of to XX% stack XXXX. at X-year fourth Looking quarter region, in the EMEA compared

distributor lower are of of XXXX QX we new combined and preferred the period. the XX% XXXX, to numbers customer normalized comparison Although compared more than growth saw

early is completely a all is enhancing growth confident sales we in contributed in this three re-architect and aimed are region new vendor benefiting retaining challenges the declined in adversely our continued a for end XXXX. project in this available our ultimately ordering our distributors We digital net Pandemic-related in overhaul training at with In to expect going intermittent and ordering platform e-retail capabilities our mind. And and attracting, QX be of sales sales disruption. the in XXXX. in of currently Nutrition following by pandemic-related project will the the in the We for that of selection to modernize quarter our consumption daily up disruption are was performance designed Clubs entrants of China strategic growth to the our goal declined XX% and Mexico, in impacted in new distributors’ initiative The as time. softness X% over the the as quarter business in phase quarters fourth platform. initiatives stages platforms compared to current The and remain new of market to region market.

system a number flow it’s more Herbalife believe system business basis our pandemic-related for this exciting high payment its receive basis. directly force we a for on weekly commission their is our cash during and Nutrition any and their new that of a to initiated commissions our in we This of earnings do their an at receive a Beginning kind expedite attendance first instead restrictions, enables to Although patterns. distributors payment the Nutrition frequently by sales a monthly opportunity Clubs. impacted government wasn’t that Mexico, weekly year quarter case impacted

be extending it will of the including success, additional program’s to this analyzing impact We its in future. possibility and evaluate on the metrics markets distributor

consumer restriction year-over-year. related throughout contributed For More and to XX% our the spending. as government which pandemic persisted South Central and negatively Nutrition the the region, American such quarter The activity. Brazil region COVID-XX fourth and in have to in where Club challenges, Colombia, broadly the has markets impacted macroeconomic quarter the impacted impacted declined region, was

the in we Turning initiating to XXXX year. to the range flat growth outlook, guidance be for X% are sales of net to our

XXXX net sales quarter-to-quarter progression of of will quarter in the shape to in X%. the down performance. of We range XX% expect to decline the year-over-year cadence first We down comparisons estimate our

year. will expect growth in anticipate back year-over-year by being we in return of the the expect previously across to However, the other XXXX in felt impacted improve many unique inflationary that And we be to to line second pressures quarter. companies, Like decline stated, we markets. half the as many the bottom

increases in This all of that our supply observing as shipping than pricing local basis to pressure, keeps labor at usual partially a costs XXXX, currently net year. cost supply XXX raw each respect strategy, are higher of and with will our in the markets. well materials, our facilities. executing in to our offset manufacturing We can cost offset in on up increases will chain don’t headwind our events return in and for cost expected full that pricing chain way prices for to versus are gross expect to We to we due levels a however, activities, anticipate, per increases, resulting adjusted distributor cost with XXXX. profit result in and we of which earnings declines in-person points share a which In adjusted EBITDA is increases approximately CPI increase expected normalized by fully as

business margins expect ongoing $XX offset efficiency anticipated both we specific of are and opportunity to transformation growth. is in structural our Our face. transformation achieve operations are our office, first is scalable the our the savings program, that of goal program ensuring SG&A through organizations realignment back also in $XX One phase Once the front margin executed, near-term quarter’s this referenced of through This a help infrastructure year. will improvements our result and on support within productivity the to fully with program pressure million to we business our and processes call. efforts improve per incremental last to first million and efficient of to

more provide the second annualized will moment. magnitude it on the a transformation that assessing also well Phase anticipate our a and X. XXXX and Alex we’re program, are will same QX as result for annual phase of in just planning guidance details which We in preliminarily savings our as program, as in

XXXX, to of part full sports continue fast-growing strategy, execute innovation. have portfolio. in continue contributed year. new on XXX increase We Approximately categories product of over fitness which growth our energy, regional to lead launches product our SKUs of including to with an XXX in long-term SKUs category, core the XX% company’s the our and new these been And product for

I only member team industry Nutrition the the the top in our and in employers confident contributions Alex. Our well health of Nutrition to is commitment am of employers of Forbes shake. Herbalife one grow distributors and economic are good work nutrition, that of and will of is now number as us The to and company factors I midsize Each recently XXXX our XXXX success nutrition one not will one in but brand And only as is of the positive us continue impacts turn the the beyond. as rankings. the call all the be one expand to and product in America’s as I opportunities valued, access Euromonitor dedication world’s their in and Herbalife named world. that around selected our to one also these best the active honored XX number the was that by rooted over employees. led to lifestyle helping am our

Alex Amezquita

John. Thank you,

sales mentioned, As record sales John active a Herbalife in EBITDA, for XXXX. and retention few record sales, global a leaders income, of number the are of metrics: XXXX a of Nutrition set leaders was the year net across net adjusted

our of we However, decrease the the was sales that demand the quarter X% to quarter net comp This a with fourth in fourth XXXX. for XXXX benefited line to compared exited results from we continue nutrition in with the for our quarter surge products. in expectations as

reported increase X.X% X% improvement approximately sequential in decreased And decrease decline XXXX X-year the for of fourth by versus XXXX impact prior XX.X% in third the year. the as currency, currency growth Normalizing represented and a was on year-over-year quarter. a country SG&A volume was improvement decline for margin respectively. sales unfavorable it quarter the of price increased by in pandemic, net sequential quarter, points there impact to The net of of X.X% XX fourth in This However, XX.X% net sales a declining local as currency in to approximately quarter of the drag fourth the quarter were XXX Fourth basis by fourth comparing percentage partially on the a largely representing versus local versus decreases headwind basis driven adjusted sales X-year to with increases. to costs by quarter. year-over-year chain, X.X% an the basis, in points. as quarter Currency XXXX. quarter a offset gross decline of of the sales of stack. the QX The was XX.X%, stack were net by XX.X% and mix. grew our the third compared supply X.X% year-over-year Reported in growth prior driven well was

quarter SG&A as net Excluding payments, points the basis unfavorable sales to China XX.X%, adjusted XXXX. XXX was percentage fourth member a compared of approximately

events. we to in During the member a the XXXX ex-China sales for This variance versus return to the of of significant in spend promotion an to explains same events in the increase fourth quarter increase sales XXXX, and in-person net against quarter Omicron, impact the was fourth SG&A lower adjusted nominal period as costs in largely there began prior of XXXX. payments

quarter. million we of income $X.XX versus per expectations quarter, a share, $XX.X $XXX and reported within our million fourth $X.XX for were EBITDA tailwind year. share approximately the of adjusted $X.XX both was or in prior net Currency diluted the adjusted the of For quarter of per the earnings

continue adjusted operations. to Our consider diluted EBITDA company normal be we EPS figures exclude items outside of to and

$XX.X This of on carve-out a Please our parties million as refer to two accrual quarter, the you our principal disclosure will agreed XX-K notice related terms have a in to Rogers for information. lawsuit we settlement. have the additional

from approximately for reported XXXX full the excluding billion sales basis XXX a on was full results, points XXXX $X.XX diluted year, $X.X adjusted EPS touching of a $X.XX reported briefly Now $X.XX approximately XXXX. compared currency constant both year reported on currency XX% and approximately year to increased adjusted approximately diluted tailwind net X% foreign benefited fluctuation. of the basis. On earnings Currency by EPS share Venezuela. an per full of basis, per share grew

year our XX.X% of of basis XX.X%, geographic mix rate adjusted full rate from points improved adjusted to approximately income. tax of due tax XXXX Our XXX primarily

XXXX observed the first Turning quarter of continue to sequential to through the year XXXX. quarter our we for and expect of guidance we line as XXXX, current top improvement full the trend progress fourth in

be the fourth quarter quarter XXXX challenging to comparison anticipated XXXX quarter that first pandemic mid-XXXX. is than more in of in began the of modest of reacceleration given line the of top The first surge XXXX the

to the in in projected on growth expect currency. point of resulting reported full for the a net half sales of which to XXX an to due We includes approximate to basis, basis flat return second growth XXXX, year headwind X%

will labor leverage To to pressures power. in margin manufacturing raw and continue negative cost delivery near-term, have in expected we from the home our offset EBITDA of adjusted costs, the partially and the profit gross at freight pricing for significant are shift to consistent currency, to related news variances seen input pandemic. be pressured to the the of Further, headlines ongoing the onset margins XXXX we Our and costs. with experienced increases materials, these

support as they certain the as repositioning This regions distributors and actively functions productivity serve service We affect well transformation through to centers, efficiencies internally John shared engaged our increase technologies closer improvement realignment investment our are initiatives. in operations program both and also better programs in effectively customers and earlier. to involves infrastructure program of for better to front and to more global the strategic the local office new markets leverage of back referenced

total this in the expenses with $XX We these XXXX, will $XX first to incur million. approximately expect to in $XX million be incurred charges phase of throughout most charges million pretax the of initiative of We carved SG&A range in remaining XXXX. out

impact XXXX, We in expect the this the XXXX. full first increasing with phase the result will savings range million million annual beginning savings expected in XXXX of in begin to $XX incremental $XX some savings with of to through in

magnitude to in expected phase savings also are annualized of as the Phase second XXXX with in begin same a the program X. ongoing We assessing

for the diluted in adjusted This our EPS of range to result, a headwind. approximate we an includes $X.XX As $X.XX. projecting are the to year, currency full be $X.XX

million EBITDA approximate also due We which to year providing the in range $XX guidance to of headwind million, an are adjusted full $XXX $XXX includes currency. million

Our XXXX quarterly completing million buyback assumption guidance reflects $XX in we the share amount repurchase per a which minimum basis. the on includes anticipate quarter, of

continue the from business base the model. take value reliable We consistent share there is project in repurchases We repurchase, of to a to for opportunistic incremental year. of share for course potential level guiding cash our flow over leaving place while believe room

quarter, have to continue million $XXX million, respectively. second, anticipate repurchasing million approximately $XXX of pattern XXXX We demonstrated $XXX in during pattern this and in third We of consistency by the and this XXXX. fourth consistency

XXX estimate versus points in down X%, sales year. approximate of we basis headwind quarter, range the decline to XX% first to includes which the For currency an net down prior the

back half. a year-over-year of by comparisons of year, lead to decline the will in growth the for sales expect half the first net We progression the followed in the

first in $X, of the currency expected is to $XXX $X.XX $XXX projected adjusted which a quarter of the EBITDA million to in diluted of First headwind range of XXXX. be $X.XX expected EPS compared to Adjusted to includes million. to quarter range be the is

structure cash our to Turning capital share flow, activity. and repurchase

cash generate for Our year of impact substantial business primarily Operating of from several $XXX flow sales XXXX, net million full unfavorable down to to was declines. continues related year-over-year accounts due to flow cash XXXX the

repurchases to we expect in just turn over After the this million $X year, $XXX growth. of on at we of when around to XXXX, For end the second the in XXXX, completing share just business under billion returns had hand. half the the year cash of during

per cut $XX repurchases share billion million a open which earlier, mentioned our our authorization. of the $X.X line the the approximately into quarter remarks. up we will remaining minimum I on please As year, share Operator, for guidance have in concludes in our This repurchase included questions. X-year for prepared

Operator

with Thank Nicholson you. [Operator the first from question comes of Wendy Citi. Instructions] Our line

Your line is open.

Wendy Nicholson

afternoon. of had good a Hi, couple I questions.

to quarter First, earnings great. with including that’s just I worth repurchases in you, million the none is regard it each you think literally you with to or of But I all the is doing or it’s to there guidance, kind of a think different rest Alex, and in committing for the $XX and are year? it the do a actually then So number million for of buyback $XX annual new per the is regard first each million quarter the chance would and an quarter $XXX guide? quarter

Alex Amezquita

key The thanks really for the is Hi, Wendy, here. consistency the question.

of how out. it So is $XX million a sort we profiling quarter see

$XXX sheet, cash and can the that use It quarter doing other Now greater be on could extent XXXX. at been for than least we obviously, have like opportunistically million we’ve initiatives $XX have of three that four don’t that balance and cash we to of the two, be every a any million.

guidance that to this given and program And committed baseline that to share sign our investors commitment provided. we have level create just know program. gives projection beyond the we’re hope, So words really, we we’re of repurchase the historically that we to folks share trying a of our in some repurchase

Wendy Nicholson

That’s Well that’s then And questions, Okay. two other fair. understood. okay. I have if

pricing unchanged? unusual first or scattered throughout you we lead to environment cost or regard obviously, about is increases mechanisms? year unprecedented it doing I of maybe no I’m still need you to you’ve cover And anything one tied But this to front know your we anything aggressively? one, I there just CPI. The one talks differently is just with is. price do current to with annual mean, and second in to we that the environment about with regard does strategy how on regard the company to that number wondering, pricing had really these pricing. think historically say, well, where Or pricing needed anything more the is every

Alex Amezquita

sticking to strategies, great raw consistent unprecedented said, CPI. a said, like local question. pricing taking you just up consistent costs are market’s freight, There with and which our on is unprecedented With that’s are we that Yes, are materials, with At labor. very price on present, times. historical each at we input down

we might we have the So more evaluating, we respective demand those that take But how that to are is there on do? can impact affect and obviously, markets. of

demand, present, something those we that practices. balancing at have look is so margin historical sticking that strategic preserving two to And at, hurting but to objectives, without going another we take are our to just are

Wendy Nicholson

in of the incremental And the it. things testing regard just that’s sellers just one thought there Mexico yet different – hog And change of direct thought potential payments said was similar? the very the you if of business? are something other I I risks it interesting. do the and Got where it. there are Does but costs an because made I’m Are Mexico before. to But that because heard not to change that? Got doing know you’re something wondered, the thinking I new I was or hadn’t cadence a any question any it that any you of commission. interesting it of more that frequency you was I with John, comment, of don’t Q&A, the think to I mean then the

John DeSimone

Yes.

take So is I’ll DeSimone. John this that question.

it, can I’ll answer them. each if see I me let So of get

before, then of allow even yes, check we the money right? we sooner, earlier, to weeks do the are negligible – than does there and get basically, getting get get is that I their cost in I commissioned So the can competitive reason money no it, if really the their business. pocket believe. end What in we now if to And because material the pocket there risk The month, it to new cadence was till is is impact it the I’d of wait weekly. distributors have So doesn’t It have we historically. payments have it processed. much X competitors to would the do quicker get in I people’s a time And visibility do by before transaction commission too, being sooner. be offer

So we it’s If successful, there being will Mexico. take we be, tested in elsewhere. it’s possibilities which is then believe it it

John Agwunobi

just at add and on Well, they cash Mexico, the is to mean, and this there this. in A. them it’s going world, are just distributors it for excited Mexico of more distributors our get early point commits in, are just many those able early I’ll I’ll in engage John I new it seeing be by purposes, in cash to think, be I recognize – very kind easier like to add journey. to around money makes that markets coming true, them in have your that an quicker flow their pocket it of

Wendy Nicholson

Got it.

thanks Sounds much. great. Terrific, so

Operator

you. Thank

next comes of Wissink with Steph from Our line the question Jefferies.

open. is line Your

Steph Wissink

assume assumption about afternoon, little on the I just follow-up if Good the a bit X%? seen that are ask and of in versus And a guidance, China what sense particularly persistence years? market, last couple or upper that by that some attributes us key variance, the over that wanted everyone. see you you of influx to you the flat if you. Thank Does the at could to west question talk willing that give as end? you’ve are

Alex Amezquita

really we by mean, I market. don’t market Yes. guide

‘XX. say, first more, comping of in how set ‘XX we was the back on etcetera. sort That profiling the this midpoint that surge earning of is in normalize the expect base to and that than versus inflection normal off And a demand exceptional present of I to we the guidance, prior normalized degree, reflects out generally point I half to the there would at of years unique speaking, the I about more range X where think thing that we’re the in year that the of XXXX, think that what of of X% the provide an we different that of probably year. still and time is in China, then this grow surge X% don’t quarter the as really in is the the year guidance circumstances expect starting year. that in first demand of half some the

see the onset So is really on pandemic. guidance the the progressing business we of reflective just demand that surge how saw the more we past of the of

Steph Wissink

chain. helpful. question earlier if seeing the the And supply Okay. in kind a spot slightly basis you much That’s give lens you’re then of volatility a how of the And how you’re buying some can us of cost basket follow-up curious hedge or pricing. into my I’m you the versus just to where costing? control Wendy’s much one of different costs on the on maybe

Alex Amezquita

Yes.

is So number buckets there that question. a in of

could ingredients of hedging, of protein, like isolate, some soy, you our ahead in time. biggest we lock but use So price the guess word that I

on prices price at probably ‘XX. input one the over in locked XXXX increase, ingredient, versus a that single of for the That’s of full attractive our relatively low the our spots It’s versus raw that digits year of in ‘XX lot and ‘XX that’s see. cost CPI So of cost. you major the prices might input brighter

again, typically market And all have those escalated prices. buys really freight we’re of for big others those the you off can are or However, those or or and our out piece it’s well freight familiar material demand issues us. costs that from significantly as spot commodity-type lock in something it’s many whether whether of types of is really not or dairy in that the things, with, hedge all so a prices, resins freight. Further, or input cost

to subject prices really that. on spot all You’re of

that we’re the going productivity of we sort aspect, term on bit that to in that’s costs, best to input a the a to some have to see doing going solution be some So look those little ‘XX. can we’re if delivery around particularly of of home improvements but manage manage how to longer

Steph Wissink

you need and Okay. run you seeing or supply My start fluidity on is like case you feeling for to as back where adjusting cash working of question your hand bit sheet? Great. last the think protection you a inventory your inventory an come on levels. see to you improvement a capital balance of can the the with higher into bit Are some just in you efficiency business are

Alex Amezquita

we have In and level it. we has in inventory it of up, took a as our into up, we sense, excess our run hot the company, out little half you created might turned forecasts Generally but some manufacturing produced speaking, as makes inventory the markets, would ran generally, what liked a what ‘XX, back to lot of plants be experienced recall, guidance that then of above it’s bit and all inventory. ‘XX, where a strategic came

inventory is first a least Obviously, duplicate you little half we we’re that variances if you hit still significantly there – to XXXX. look there look affect working have year a continue gross bit has of inventory, were on the our ‘XX, get off negative that we’re at bit a as of through So And our variances, is off that margin than manufacturing sheet. little into a on where manufacturing of ago. if a for profit going implied which as sort balance of we’re at the higher work a of levels we working inventory off to our will too of are The those XXXX. they

Steph Wissink

Alright. Very you. helpful. Thank

Operator

Thank you.

Riley. line next of comes Van with Sinderen from Our question Jeff B. the

is open. line Your

Jeff Van Sinderen

umbrella. on, relatively younger concentration ultimately, product And line fast-growing Can touch touch for forward? whole umbrella, you that SKUs going said, Hi, sense everyone. attract XXX helped and expectations feasible part around your Maybe level the of ‘XX. I business growth line performance year. know for what term? seems new line of I the a on to performance over think, just longer of has us enhancing I performance as been of you a really had last Under it that guess, call line product to that give the that I demographic I has sort would how you you’re wanted segment. a

John Agwunobi

this question. Yes. get I second A. might might part I get that you of you repeat to is to John your –

kinds are we products only Let XXX we’re to number our Yes, have we’re that in me adding of the specialized SKUs few new the it’s SKUs, actually new we’ve excited the energy, – the of overall – protein, actually fronts. core it’s hydration. things category. going our as business. a XXX Sports are on And It was first part types in core more It BCAAs It’s But Nutrition to really would we flavors science category, answer around business, flavors, well product. very SKUs are wasn’t expect. indicated, we it’s terms different that also about One, done the first. we world. products, new it’s the a like in of that that and you deeper flavors not very expanding of in and into addition XXX

countries well, as actually a new within as in formulations, We tablets to number forth. so have powders space, from flavors, also of that and new our well, new energy quite gone packet sizes dramatically, expanded line

demographic excitement. then start line, line younger no vegan it further even lot go does And a business. and taking by launch sports we When have drive is our the there yes, the into doubt as organic into So, will to vegan we a well. of I

number quite the been becoming mix. to it’s for growing well I question, overall becoming business and of XX%. full your years we a now added increasingly had a coming think you, our increasingly – in of of sports second year, up time actually caveat would goes we this was off a similar an And the I part For years. important There have part but base, the growth it’s is our remind think prior just small to and

one last I will strategy add Now, It’s long-term part of thing. just going forward. a central X-year our

Our he in as to trying are goal in top push for will of ask add internal the And And I his targets markets. candidly that we colleague, indeed, we number and towards sports we we is global around John, have world. the one head. have well. a become he a is stop to nutrition are big wants brands to that target shaking anything, of my there gearing

your unanswered. there So, I will questions left of one I it unless leave

Jeff Van Sinderen

products products guess just great. I follow-up to some Okay. No. vegan being line, mentioned that, that, what as weight also I am a at and or the then you line, in guessing, least vegan you And vegan the The other you was that line. performance would in have have line be perhaps sports That in the vegan. integrated would partially having control are also

have now, if vegan not products you I think some I mistaken? am

John Agwunobi

Yes.

category. market. of vegan develop This used for is But a end-to-end about products branded individual broader within that kind of are in weight is our European few a sports performance that number us inside lines, full end a SKUs different. usages this of trying to have and management, especially line we other So,

Herbalife So, full family the develop brand brands. own line within a trying we Nutrition are its to of under

and Our initially XXXX launch U.S. early is there. target being the further to here world afield then in around the take our from it goal to

Jeff Van Sinderen

I just could one Okay. And in then squeeze more. if

you Just guess digital think driving generally important your you initiatives or hoping the what that headway impact year make are that complete this towards business sales. on do I speaking, are considerable more could most to,

John Agwunobi

Yes.

all, I space customers. interact strategy their involves of supporting kind in think, first of digital with our way the whole our distributors the better

better word, distributors, of distributors. And lack plays productivity different of of include number plays buckets our will for efficiency so like there. is of, our for It kind for there activity a things a

and quickly, starting enhancement then pushed I And an around their think of it’s I their world. overall the underway, the spreading customers. one to think fastest distributors that move Europe, in to is us the e-retail ability to on, but have the

We that. to are do just going

speak. the times will specialist keep of e-retail our have responsible the the launch In other something, enhancing that the with do. for just to us partnership words, is I the focused so specialty of with a allows to space work up principally vendor distributors not functions vendors time. and but kind think be goal the on also it’s in But to that – over to the side

Jeff Van Sinderen

Thanks great. luck. best of for my and questions Okay, taking

Operator

you. Thank

from Reuter line question William the of comes Our next with Bank of America.

Your line is open

Mary Ann

Mary Bill. if it’s availability costs on materials, if challenge of Can higher? are for Ann This between have you raw materials and the Hi. seeing you taking are more our any raw Thanks significant or just labor? And for freight a touch most that inflation question. the is been where

Alex Amezquita

the and the of Yes, it’s the significantly goods, the from earlier disproportionate on prior I more well The pricing on quite overall basket variances say in basket has year. increased. I are just one call raws wouldn’t of in doing on. that are our pricing we or some But the other. mentioned

Mary Ann

Thanks very it. Got much.

Operator

you. Thank

comes Doug line Research. with of Lane question from Our next the Lane

is line open. Your

Doug Lane

chain? a more Yes. you everybody. understandable in you Hi COVID down in what mentioned Can where how Is or impacting you is big are. COVID supply particular Club on COVID several Nutrition is your – Is exactly impacting given Is business it times your the can particular it drill we in little these events? mean your bit attendance? go-to-market? comments, where it is to which days? ability I just But

John Agwunobi

Yes.

depends a which about, obviously, in XX more you color. it world, region Doug, So regions try the big give the little because to talking will all countries, in we are we right. is I are around But you on of answer are the

that in were didn’t a in while of governments peak shutdown. us customers are to our actually degree, clearly, that Club-based some opening want And the markets COVID, from the Club. Clubs. remember U.S. think cases, found for Nutrition lesser to So prevented I go like and to they many markets India, Nutrition Nutrition We during a the Nutrition I Mexico, in of Clubs

the of in normal. corner to those back Nutrition up things Clubs markets favorite are rapidly on has And the and surge community, beginning passed reopening, However, customers that their Club are by. at mini to most are showing the COVID Nutrition today, for back get

area. one that’s So,

positives, I what a let’s there but The to your were think here was – second I the little because about. bit, speak – that’s am obviously, negatives question some talking about

think, The COVID, you chain. point them. is say second supply safe entire industry impacts of supply I And area, to chain it’s as because the think facing obviously, out, was I the

inbound, On freight, cost like that in the side of in longer shipping, think of out, to impacted, on back. ways going the I I and end, little outbound the containers, words, other are front heal, those think bounce freight in but a a kinds to side has take things, Things been the also are to going longer lot east COVID the chains. a to is significantly. for in of those to still supply think West Even though most get There I of the COVID has back impact the take of part, to diminished normal. little on

– markets. it The some in is who Asia. at Omicron but the the West degree pretty anything in to months, what’s Hong yet go don’t about good look what I was in knows those think East and now, China, the peaked four if of is is three months, beyond has you If the – in quickly, in will there future There pass lesser anything happen many pass. Kong, sorry, Omicron for happening – a months was fairly right, to by, should thing two to peak

on is So, just lifeblood be meetings thing that second in-person are say our business. of would area. would I last the The the and They meetings.

walking – have the opportunity we in excited. up young business. or you trying inspiring with to And her setting customer nurturing the And do weight. We entrepreneurs these her She she is trying heavily needs business others, the of experienced where would and whether side, learn before be build her them, teaching have to she plan, her to there gone others out working people from the or need rely are is right others, And who coach needs so all relationship We business. that on a is the they on she as events. it are coach. as distributors more lose that

a biggest we we are positives in as is are the reopening. company One of a the company, In-person sense as again. that, general, fact that happening events

going attend them, the the to that show all will We our of many acceleration. many as the schedule world. around events year of rest of through am executives have a I dramatic of

how are So, feeling long process. The because of, of we quite important think wave, that. mark for about that part an one would it question to good through APAC are I kind its get does be Omicron they take too

Doug Lane

How – months. long of guess you to that. in to recent had with by mean, events virtual this year, go events COVID, you you I you and with some do regional I are from predict get fully think just be looking I for half and that up standpoint, can’t know But instance? running pretty I your second much planning your the before conventions

John Agwunobi

of of of all speaking then. world, all transition around the and have to almost to going doubt to live to leaders of end year. now In learned to aspects we positive every I between try world expects have the no And many that on market There in. have to hold the a are our virtual will events we the the by mix of be in-person

to the then are in-person on kind of they to going the events layer as world. begin top of We that happen around

COVID of the exits. our ramps So, most answer of year end hosting is here some by to your to dramatically countries kind fully events have of up the trajectory between this question of with the and we kind as live there pretty expect that

Doug Lane

That’s Okay. you. very Thank helpful.

Russia you us Brazil it on? global with big geopolitics the forecast Just you and one about company. thinking how your about how possibly give you in last going a or think what you are build question, are can Can in you

John Agwunobi

Yes.

one DeSimone, who worked to closely with John this throw the me markets. so our Let President,

John DeSimone

Doug. Hi, Yes.

just company look, together. other like business has got So markets, we are putting in those every plans contingency

and company are We there in have – this on distributors and XX rely who customers countries. are we

isn’t the the to. we money banking get we that circumstances relations chains to countries what depending out think risk expect have regions U.S. and U.S., right that They are. on can now, on be with the Really, into good. is biggest can I those come have able products supply the the will different coming don’t the We from side, get we from more

biggest quarter. a risk is to got risk perspective, XX but million I it’s least there million with we know. outcomes at have plans XX manage in from in You to a it’s us. That’s the in the are lies. reasonable kind biggest just is look, probably give volume the there probably will of and continue hopeful to points that place Ukraine, to never any we where And not the in you material see Ukraine we itself, Brazil, risk a country not It’s is Russia, events. But big. risk mean

Doug Lane

Thanks John. helpful. That’s Okay.

Operator

Thank you.

Matthew Miller comes Our of the Partners. question from Berry next line Value with

is line open. Your

Matthew Berry

Hello any guys. you you provide almost at are know call. big Thank quarter on my thoughts this two Could you months step point, down get of maybe could taking in off. first that the I this you the obviously, have don’t I you – guidance, reading expecting year? for provide data but are you And of that

to XX% a step big you X%, minus the minus that’s So, point. think are down, I volume on

have sales on leaders what volume So, really of sort of got those really would number that that sales producing? driving that the you that’s are you Is that Is of what’s be it points any out leaders in driving there? that? the additional business are data And helpful? number the seeing

Alex Amezquita

Yes.

question. great a it’s So,

nuances profiling. so this the bit little is the And a of

the health QX, growth be QX, clearly, In QX. continues had actually stronger. strength sequential over of So to the and we in business

the that we you of about with numbers what out, is and look off where QX. slightly that with the the said, about that And or current the business in like flat comping if the less midpoint that’s is the called of Now, more of. business were you guidance, to either at state the downside

So, the if you middle ‘XX, go back reaccelerated to we the the pandemic. first with experienced of of XXXX in surge quarter that we from the

getting “Hey, and the of numbers, more business some looking are top you the difficult comping of getting than isn’t you is line this off QX.” but if So, well, better, Actually, it’s saying, at those better of health comp. a are

at look put in of have perspective. that, kind that when some of you – to that’s So, you

for of Right. example net first you XX% growth the go if in of So, reaccelerated year. the go ‘XX, sales quarter with to last first you and back back, we quarter

XX.X% we in a net – make year quarter. growth Does the are of that off XX% So, sales versus comping sense? quarter fourth

Matthew Berry

appreciate parts. you. we a Alex. help on the get there something moving But detail probably That Thank is makes okay, I because definitely is into I little sense. offline more a And few guess on this that, could

Alex Amezquita

Sure. Thanks.

Operator

you. Thank

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

Your line is open.

Hale Holden

be a me for CapEx year? possible a of for just quick ones. had it would also housekeeping this estimate Great. give us I Thanks for squeezing Alex, to in. you couple

Alex Amezquita

Sure.

And Our digital on that have of CapEx midpoint. technology initiatives that’s some slightly to the guidance programs front million number the historically. in help business to again, these of is getting $XXX from too, that’s that end of elevated the to the we mentioned, been – supporting some John where

Hale Holden

charges you cost second are called the The the efficiency gave, on this SG&A? that that year in out you does doing is or that saves that exclude question guide you include in EBITDA

Alex Amezquita

Yes.

the tune that not that – to types EBITDA So, to charges basket million of $XX $XX mentioned I we and total million, that in number. of in is excluded the the XXXX charges the

be will guide that out that expect XXXX. in for EBITDA We carved

Hale Holden

are all lot maybe And less And from wondering or concern you a performance a on, if and a probably healthy becomes sales of should got for be. which you I your of then behaviors I focus the but endemic, as been Great. pandemic than loss a is that and they was it emerge picture seeing if discussion that was guys? you were at weight from big there one, has

John Agwunobi

all. not are performance seeing It’s our at concern, a sales not in it and we

going In beyond increased A is of believe fact, things. to demand be the we there couple pandemic.

and the fight to has the bacteria on from their the of harms think pandemic health external First people lot conditioned their I world. threats of on and of on immunity their to all, a and viruses focus and ability

active on go sitting demand increased get years weight for to is couch. healthy people to lockdown that to second weight. of work forth, we The an there again, believe, management all again, reason we so X try unfortunately, their going they emerge back and And many people be, gained is, as and on after think get once

at point kind fact not was It major by years pandemic. Lastly, prior – there are people X sports, believe the living and that towards in demographics. the by surge, big from believe years activities, follow there in obesity increase the trend our of see. continue. to are The to slowdown, I the pandemic. going to has the surge, a because a And We And younger pandemic, business, that been industry as but data especially is been a impacted in be year. outdoor to have thing, been it’s that’s epidemic there sports will the long-term that, to the news are and just continues be headline There a evidenced you issue. has that up nutrition not X the unless the would we that the we prior trends the least healthy indication more going no XX% that then it’s for subtle, in

Hale Holden

Great. I Thank you it. so much. appreciate

Operator

closing you. remarks. Thank like CEO, Agwunobi, to now I back would turn John call over to the for

John Agwunobi

you. Thank

we gone a of little our because glad have have of kind forth. issues confident to little very I in, very the will of we future. are than out did therefore, And am with call as We typically deeper you a we we end your a a of. complicated lot saying, we delivering. have for look it’s with to go to had Obviously, and Thank all might an in are end attending. you. It’s of year, for pandemic we listen, the today. proud strategy so deliver opportunity longer questions quickly, working. continue and long-term I we that by It’s into going gone

of you the for you tactical repurchase is will those an this important given XXXX. guidance part of our We rest if And have year. take our you recognize for share play program that midpoints,

very are Demand mean lot a the on all leave I about are to market good it as look for as say and the continue that pointed and products forward road Alex thank market, will customers its you we some and that I we opportunistic that, future then The to out attending. consistent, we them, with our to you really to kinds the of of at world. XXXX be on to Look at at when move As base, point. to going we support the our will around and that be – for more speaking and see. forward. profile continues of pleased look make try all on continues top something sell it as for we least out, we are to the I we a that say And beyond, feeling distributors company.

Operator

you Ladies and participation. this conference Thank gentlemen, concludes for call. your today’s

now may You disconnect.

Herbalife Nutrition (HLF) 24 Feb 222021 Q4 Earnings call transcript