- Earnings call transcript Q3 2022

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Operator

Good afternoon, and thank you for joining the Third Quarter 2022 Earnings Conference Call for Herbalife Nutrition Limited.

On the call today is Michael O. Johnson, the company's Chairman and Interim CEO; 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

Good afternoon. will some we statements. call, today's be forward-looking making On in making we about And are statements the good achieved. guarantee while we any these faith, have do results not we factors in our are of the SEC. risk the Descriptions documents filed with included

some also These be that Chairman found exclude I release website. These can that Relations on non-GAAP financial will Interim to referenced. earnings and both in items. believes the management the our additional Investor impact numbers earnings We press Johnson. information for non-GAAP to our which we to today's will CEO, Please release the the adjusted Michael and now period refer measures. reconciliations of non-GAAP can for be on discussing slides be the GAAP measures of reviewing items found turn and on the comparability will the be section comparability over call, see call

Michael Johnson

good the former company you honored for for be in afternoon, Chairman call be you with back everyone, and thank It's Thanks, CEO. Interim great and again back as this this to be that my into about. today. this Eric, I to so stepping am passionate call role and on and on role to us I'm joining great

an our to future be that management. investing will and I select of At future. As are time to companies capabilities interim progress with role and the platform the product times. economies mentor to the will be in onset, Herbalife impacted succession who unprecedented help during second, faced on CEO, dramatic and CEO Since truly broadening navigate the in we've global downs in time, our have working these my and aftermath areas: of technology remarkable. operational the towards had world the portfolio, global in made pandemic. Board we company left transformation immune societies propel first, to been will of embarking key the at the Nutrition ups leader has the not I and as our the us two XXXX, have and focus same rebuild sales Nutrition; a persistence by is Herbalife the closely momentum

over better history, XX have company's individuals affords the This is company, the including potential also in overcome in to However, only income. XX-year global uncertainty. Nutrition's of economic nutrition recessions not Herbalife world their the the nearly similar periods that years the but around my that founded many demand of supplement opportunity we megatrends in and challenges, economic resilience

how seen individuals We tough distributors our even income. have Nutrition both business the to times in good the as successful entrepreneurial spirit supplemental strategies in have look full-time Herbalife and of opportunity for new developed or sales times

John Chairman, leadership of and Alex extremely of goal Chief closely to that good that proud great not overseen the respectful know, miss Amezquita, familiar we I working team. incredibly friend commitment in management Operating As over premier our work being and been course, going incredibly I'm hard with am confident our decade in team have you nutrition a world's team we're We're Schissel, capable our I Vice this Executive a of have among beat. DeSimone, strategies. Officer, my and their our for Mark others, company. and and this of CFO, to And

give call who to the details will you our Alex, over me quarter. turn Let of

Alexander Amezquita

again. and I'm working you, you Thank with be to Michael, thrilled incredibly once

attendees we to that Now from would call like six key take points today. our away the to

QX the which guidance of third the our midpoint was above volume XX.X% First, points to quarter $X.X of compared range. were year, down just billion prior

below in net our strengthening as the expectations. as of a which in was you well quarter U.S. the has impact the dollar FX consistent revenue down the headlines seen significant geographic results had on However, mix QX that of stronger likely significant during and press. financial the Note with headwinds resulted from the X.X%, the U.S. dollar sales have

the the focused our in quarter the expense net adjusted our efforts and range. EBITDA end EPS above shortfall, to sales despite contributed range adjusted high of management QX Second, near guidance

strength a anticipate for active trends softening We could of global quarter. pricing of Third, in key significant leaders as in took a fourth these we significant into markets sales and around as for experienced current a buoyed well softening place result sales world. continue the of the the member June counts. the through Fourth, economic many backdrop that off-cycle metrics actions India new

distributor not trends while behaviors We the referenced improving we protecting emerged we bottom to quarter, are term, are rapidly member anticipate specifically we invest near future for we And last quarter. such volatility able large. the the line persist with our environment addressing in forecast our counts. third to shifting new on on world designed fourth continue keenly to that sixth, while an including Herbalife promotions on growth, we in in in focus our focused One into the consumer metrics QX and with platform the quarter Fifth, at

company year As such, withdrawing is 'XX fiscal guidance. the

We will XXXX February. call earnings revisit guidance in our our ability at provide to next

diluted exceeding near the EPS guidance quarter EBITDA margin in was $X.XX, $X.XX. X.X% prior U.S. headwind net end currency of EBITDA of the in range. adjusted a approximately prior was earnings approximately XXX our to drove during the Reported and projections, volume net the of the of Now compared the which points Despite $XX net for both dollar sales year. on resulted was negatively EPS Reported by to high our to which Reported share quarter a headwind million high end $X.XX adjusted above the third adjusted guidance million, EPS year. declined income of of per resulted of sales our focusing XX.X%, impacted range. $XXX compared year-over-year QX hitting were basis strengthening the of results. quarter expectations. Reported Adjusted in currency

into $XX going debt. ratio pricing capital in We outstanding increases our a where forward our the During allocation XX.X primarily the discuss quarter million ended benefited X.Xx. from net strategically points third at of we above we the price the which from EBITDA, CPI-linked to gross quarter, of debt company as previously moment. X.Xx implemented target reduced communicated, was Drilling our I'll combination in of of percentage U.S. sales, basis sales. strengthened XXX a results. major to headwind significantly the resulted currencies the most quarter impact country India FX our price increase point headwind the net by first well on significant a June. was quarter third XXX against QX of primarily points. as outperformance during net most XX% an approximately Unfavorable as driven and had implemented global The markets in in dollar in basis sales mix leverage

XX.X%, $XXX largely outperformed year, margins, to for our geographic strength EBITDA to EBITDA mix Moving expectations adjusted taken benefited other basis XXX increases headwind while due India. of points of basis of margin was we've in margin the of the where price resulted continued revenue a this adjusted EBITDA and quarter. an from significant in which points, the million XX

we Recall, XXX profit margin of XX.X% in experienced primarily the was headwind our approximately supply Within XXX SG&A, as largely headwind pandemic. disrupted distributor as normalized increased to gross promotional driven an a spend. promotional chain. the it of spend. by XXXX, in of in-person significantly related promotions in year Although quarter of in input more an most of return due approximate costs return events basis were EBITDA prior was improvement, points, This because headwind our a versus to well point basis sequential regions drove the

the of savings see investments. in labor cost to continue impact positive We

strategic approximately improvements, by margin basis to benefited we XX absorbing margin increases. impact quarter, third even of to the leading annual merit During favorable due expansion of and EBITDA efficiencies impact targeted after points the the

points additional headwind to on As EBITDA and margins. mentioned basis earlier, a impact of XX currency had significant led an

leaders the For XXX,XXX last the sales X% year from was and outperformance continued supported India. was QX of improved quarter, of under average by active QX. performance slightly approximately

India, declined quarter. seen versus metric. preferred X% new in Similar our Excluding sales and leaders trends customer were the distributor active second

the a management. the digits slightly for distributor business While preferred and to declines is excluding sequentially improved quarter quarter preferred as area a India, we customers new single the key customer trends, whole metric declined The metrics second sequential 'XX. in new compared the compared to experienced second focus QX of joining the and distributor

actions metric near-term several with already underway. have strategies place market-specific this in for improving We

both we observed Mexico early, we And have results September, observed For up positive in respectively. and example, Korea, promotions in implemented month-to-date while kits. sign-up sequential around XX% XX% a Mexico distributor October Korea, and over new and and in increase

Asia region June. segments the strength a XX%. by to out now Pacific EMEA. America which India, price segments was ahead call from impacted prior significant growth, South quarter our our of to operational combined highlights America and The by APAC was led another effective Vietnam, the been six compared Also, I'd that quarter accelerated our segment. XX% and up previous The in Turning five of the third second approximately grew in Certain reduced in regional are to continued Latin purchases adversely and region markets Central quarter were as few in the the XX%, year. up and which of increases from have Mexico region during the like had into to results.

amplified a continue from As increases price net points XX by regions, X% which in perspective. The our of an pressure net the had of volume was one of in reported currency to on elasticity we sales XX%. monitor resulting saw will the materially APAC down region more sales, in price-sensitive that have impact decline currency local quarter, EMEA

and Turning cash to capital allocation position. our

cash Our unchanged. of as remains long-term company use a prioritization

as macroeconomic remain number by reduced million we our as difficult one As $XX during with backdrop. given I cash, prudent our the always, is earlier, to quarter, And we our service the approximately mentioned debt. priority third debt strategically

this an to of million the additional our funds difficult $XX buybacks Given by share company earmarked reallocating the for the landscape, debt quarter, to fourth that persistence were previously reduce in debt. macroeconomic reduce plans

Turning to cash.

hand. generation we approximately for flow. cash million cash our of generated have currently ability operating $XXX $XXX on year-to-date, of We have remains XXXX, cash million strong, While

resilience strategic line please concludes are will environment. open the actions help over up while call Operator, our taking this remarks. the we do our emerge current As quarter's macroeconomic confident history, by the with have our of we results, not macroeconomic overcome and prepared are that XX-year saying, This we Michael questions. business remain we started the for significantly satisfied out numerous challenges. And from the on us

Operator

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

Your line is open.

Chasen Bender

any culture. offer leaving I'd to start for just at be the thanks to opportunity everyone. wanted having me. the to afternoon just was to little expand to can And like Obviously, maybe change I top, a the Great, on it now for leadership good Where be a on And change. company? disruptive you why John change time the bit give and an right time there's is the

Michael Johnson

this we the lockdown, Michael. chance meet to So is Since had - yet. the a haven't

right. a spark. returning unusual disruptive. provide I this is We management I to a changes Board one back is decided order a in Directors. the highly change this company Most love make to of from You're are The part the am to of three-peat.

have too. leadership leadership in our field, of the friends, our but to stakeholders, will work to all this especially all on them, I've where egocentric, sales in employees relationship employees. little so years in build and I'm you top receptivity I've the team. with here team the relationship a careful spent back want maintained relationships professional can trying personal our field. an just serve with lift management our line Bringing sounds don't XX our company create, our customers, about not lot management got and to warm. motivation of because built phone a it and relationships that be been of - been because for the personal relationships. benefit the our the a the have time I've in the to on away And has build inside own from you I've the We here me I because a morning reception talking our relationships, shareholders maintained time expand and my from a the we this allows company of we extremely to are friends that hard my company, working After they hopefully, team energy in I professional with

I usually different a while think disruptive, has So a it, feel. actually it's is think different to little this I it little disruption. pace don't a

to momentum of And the with the think continuation XX looking we a forward team years the I stronger almost created in ago. it's it that we're building future.

Chasen Bender

in And year, but is why Alex, the And Perfect. months the the macro in left inflation China, maybe this you. aren't guidance? the pull then, se. with one conflict the I I'm you tough forecast terms pressures, you. name why on I get for two ability does maybe these you're just for Can guidance in I it, just in mean, now? Got there's you and lockdown expand your withdrawing rationale of issues per guess new to mean wondering, And really what business? Ukraine,

Alexander Amezquita

it's so a question. good Yes,

lot chain, a through and pandemic, the largely been What we all we've dealing of quarter are while supply headlines necessarily third the So the new. aren't have of the consumer the with dynamic pretty a new, the fallout around in those seen issues pandemic, of behavior is behavior. shift purchasing the

in throughout as largely, in focused and key as preferred customers third leaders of was sales the productivity what know, it been saw the year. new active reduction we As distributors on we've you well. KPIs quarter introduction in and a the But

critical to is for just shifts this should whether quarter these conditions, clearly, to forecast that's just looking our goods, to I'm this just broadly, and or other that productivity which is has - inability through change data, saving environment. this at we're the the in buying moment nondiscretionary behavior, forecast. perhaps say, suggests and but Herbalife to beyond a Nutrition a we're Again, leads supply been purchases so really us out Herbalife is is for But energy Nutrition the unclear shift ability our these behavior other data. as that's forecast is there is appears, simply to And swapping purchases whether in a inability that and suggesting behave going seeing how impacting consumer reduction I what for not again, the macroeconomic through down, dollars

Chasen Bender

Got you.

Okay, if more. great. can And I then sneak one sorry, just in

different entails. campaign specifics bring wondering to offer how the doing could distributors, that in of maybe specifically, I terms what is And of now recruitment? new some new really what terms there then you're was you've drive to what you it just in in Just historically Thanks. versus if done maybe

Alexander Amezquita

Sure.

mature with inflation of you're digits, taking been world clearly, we real where levels single maybe seeing account actually the having unprecedented and like inflationary structure That U.S. high costs has the activities. price double are economies just of in into to even how So into really sensitivity, Europe, how digits. reacting promotional and we're pricing we

portfolio passing demand of part select to price be So member increases either the market figuring for we a to example, out a encourage encourage new in part want X-for-X, where not on ways for kits very along growth. a of the to

in the So I would world. say for to it's really related around demand the impacts we're hurdle around keeping new pricing ability come that and around increases price least or seeing necessarily with significant that the around without at members pace

Chasen Bender

on. Great, I'll pass much. thanks it so

Operator

Please for you. stand by Thank next our question.

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

open. Your line is

Jeff Van Sinderen

you CEO is Board candidate to Michael, plan the back, welcome speak and a In leadership succession do in a light process everyone for you change, long chosen? of to help And permanent once what Hi, to with the Michael. can there then, and how that? looking is around the stay

Michael Johnson

but role permanent anymore, open-ended of Board voted the guess Chairman an is Chairman. the to I'm I of been take permanent the by company, the word

harness gather years. aware, let frankly, field, is distributor that loose also as a who perspective, numbers, tape harness for through volume keen I Board, a So and and innovation, are margin the who's got who the we, brain this sense their has someone entrepreneurialism with red to opportunity, drive but some fundamentally let distributor over it a knows the word, looking the in in heart in both someone to of order the of loose, how companies have connected cut to guess wants wrong

well a a help somebody somebody that at special an good for who to place distributors balance feel product, Herbalife a someone has has that brings passion Someone very passion work build working is their opportunity in wants And businesses a is times. going passion that bit that is very, for challenged opportunity unique. environment a in to who build has Their nutritional to passion a be spectacular. of and who bringing tend them day someone making that nutrition, people as people is as to who in, employee our for is every and economic about opportunity work-life hard. employees terms one an a very

into to Hopefully, harness helm find may an find a because a someone when company And see to understand able steps And going me to exact be I that. will the take it's So give process it that a frame as we right and that away don't us time little quickly be on we'll role He going person. or a we and person, and a go. the want process. bring themselves or time. the date we to who this front. very take is when wanted that we to spectacular opportunity completed huge she fit we of find to at you

Jeff Van Sinderen

Okay, to know to maybe I And think hear then question. just overall, and for recession? a think this the withdrew realize know put great. But guidance kind that, some you pieces exiting or I you year-over-year to that's have do growth I growth is but interested think business grow in you you in can more you of of place and - I if wanted to - the you return face a tough a likely recession? you just Or the do

Alexander Amezquita

take this talking Jeff, that one. with Alex. you. I'll Good is

to So that grow believe we the a do during recession. we ability have

challenges. sort the your of to of between do distinction a Now And to question I we grow to able on recessionary We've and right periods. initiatives obviously, history what make to macroeconomic strategic call But during lot referenced something, facing. get we're about place. have in being a we have the this want the

still still business. pricing are market, that you are macroeconomic like could motivation with distributors were significant help with have had the times So extra if of opportunity to Those the extent for. extent labor obviously, our faced play there sorts sentiment. tight things affecting have consumer the faced and income when some or to you all currently, have our those activities get any even market, a find looking labor an people there have weakening headwinds, these that's to transition current of challenges To favor. Historically, at almost out to they the the a are mantra some stabilization had

So the at income, and a create - time extra motivations extra people that environment get where model of certain looking motivation, Recessionary our for to model that of being distributors have there out push sale. those times, type actually benefit could us. types

There's isn't simply guidance. grow. obviously, out. transitioning opportunity so be. do moment, field. an to right and It's necessarily to times withdrew We away, motivations see right we we have mean And to in us recessionary take the grow the there could it's there why in that's out that those things hard hard want little play we I a forecast when to in But might how environments, lot strategies a - get you for and that potentially not provided the the to we get just

Jeff Van Sinderen

to Okay, then circle to good back wanted a to we for moment, just could. if hear. I And India

is, to those elements? my do what are regions? so, And you really working You're potentially drive I what I to apply strong And that there. guess that other elements or continuing if could there you question to are India is do how of in see growth growth guess

Alexander Amezquita

certainly. Yes,

in things activity great best really and those things a working we or that that be we dive do find try we regions. do and to the what that going understand of might one get a deep other whatever one company, are place, practice as about So in things on when

right in one the things to we've the the customer might uniquely on many And that to studied specifically Now models, are apply fairly preferred - some around see of which in they how India. some other that things places. there's particularly, so India are going strategy going are of

and over it a combination it try India. and is at or best doing things, we continued of replicate are in really the while And can that and also that really closed, success are is practices being else less backdrop in probably lot on the India more things referenced. right happening a it's now. economy. while note, momentum It's not the those we now, less things that is Now still And a the important is places, right those just experienced economy, in those unique we It's other self-contained to that's more specific years. that being or has pretty of that for anywhere look the been going fact world the

strategies, while of we look there. going really promoting outperformance that are the is really a continued happening specific combination again, it things those to definitely in towards India So is

Jeff Van Sinderen

of Got it, questions, my of luck remainder best taking and thanks the for in QX.

Alexander Amezquita

Jeff. Thanks

Operator

Please our stand you. Thank question. by for next

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

open. Your line is

Karru Martinson

afternoon, quarter or distributors we of quarters between was this up putting that and of guidance two the now was saying difference not cohort those there kind kind there before, Good merged still X have a together were who longer-term pandemic last about pulling engaging, still groups groups? Is is talked the of the your metrics. good

Alexander Amezquita

Hi great Karru, question.

QX and them results we've of say and all exactly yet, generally not shown made and those not a the We're two pandemic, at in are if line. effectively comments but trends point you I'm just the cohorts that, that but trending post-pandemic have quite productivity from merged. this seeing material pre-pandemic, groups difference have quite really sure Our

Karru Martinson

in are for even a quarters, the of programs the tight that next place What in couple going headwinds? if labor we non-transitionary way of that have certainly with transition, that you market, function least. to then look probably those macro at kind the us with are are kind to at the And the talking those of you're about, headwinds pricing the things be

Alexander Amezquita

with address and in drive metrics, the company, distributor continue to key for some a to go Yes, we're specific talking actually that about meeting is leadership those us. strategies to that. focus we, we world be key on with strategies big understand the promotional going to member The growth were of do the around activity what can beyond clearly, so new week leadership that next

we're think the focused about we I we're going understanding the Nutrition to successful in strategies that really all that. the sort what help we're really Herbalife to are on do and landscape in, of could think be to

Karru Martinson

the again? how terms debt lastly, ABL in you just that look just be you in And your do will here that And million converts Okay. call, $XX here what do maturity? fourth coming of the guys of quarter at repayment March XXXX, up, in,

Alexander Amezquita

yes, Yes, start we the the did will it quarter, so get so into down with what at third revolver likely to in paying XXXX. the same we maturity as be We'll isn't that $XX XXXX. looking The million. converts

So we various be answer likely have opportunities million to this piece the plenty But do that structure. your to of $XX revolver will against of question, with quarter. capital alternatives the the

Karru Martinson

you much appreciate very guys, it. Thank

Alexander Amezquita

you. Thank

Operator

Thank you. question. next for Please our stand by

the of Neale question comes from Our Ann Barclays. line Mary next with

open. Your line is

Hale Holden

today at from wondering, Holden build long Michael, how look it restart take to And of landscape the been get time. can point I was sort do the excitement to with know you Hale you of through you the It's going Barclays. now, sort as stops think distributor will you've base? - company your where starts growth off over from I and you starting then and engagement this

Michael Johnson

Club, I Circle our executives question. to with and Tomorrow, That's Founder's Egypt, XX get Chairman's on and here all a distributorships. we're plane a great heading the XX, Cairo,

done already said And We're the with high. a They're that We've every call local organizations how We'll who the nicely. impact to business Alex, are world. the instincts. earlier as in growth I the them leaders trade Zoom going other many today. market to say call, to Their of going grown be in but are we created That These I've not has statements all had goal be so on many promises I'm us. We've the me to about new next this on I environments. of friendships, environment. those year. -- company going an don't because are welcoming. we reads played get no this They that I very time a on of going pandemic of to with Eric a you There's is it impact in And opportunity environment, ever. change it growth. let's types all real, for it's in of and think get we for beginning gives economic dignity. see bad health wonderful in have mine. years But no economic never a is So can play enthusiasm have lot the on here. good pretty is now? there. that. people promise opportunity. the a And we to people's is And XX I great want like sometime lot I'm and in on would hopefully, And group. But I'm friendships This that think I'm trade expectation well that lives. back,

being this distributors in here. embrace. and love know get of get the purpose opportunity our the of here. call. So the growth purpose we that's back, on one number that back, goal and me And to my It's me if don't the growth you It's see won't

you to to feel it the think sometimes shot feel to we've And team, highly of motivated I timing, so distributors, highly, got going of And energy from desire move a are I of the just heck I little and energy again. from but get of heck we pull a a a the need And and lot game it. lot a no it and it forward, great a off. team

Hale Holden

was mean, I'm sort with the I you over My sort combined summer, Thank here, second of the took some environment, of it sounds worse the macro if has that question or the the something else? pricing to of productivity And correct if of I you month-to-month getting declines my third it driven comment through those quarter. sort on month, was was just thought wondering pricing the listening like lines just you. was if between

Michael Johnson

we That's evident and clear the so demand. saw in Well, the in reduction data.

demand. performance data in basis and our through could that the a scientists have month-to-month run we reduction We on see the

increase, is Now are pricing to results, the macroeconomic those due the whether conditions, it's the due to what's challenging it's whether results the same.

go you Further, of forth. So region-by-region on and to Europe. things is Pacific, as of different - U.S. to to any the in any going It's one of so give different you with those two hard and sort specificity. I it's attribution What's - probably that's in vary. sort in Asia market-and-market, probably so working can't think in

with right. So comment had seen sort the precision. generally that demand your quantify the I to really to we've elasticity of the of It - data is have third in has amount had some specific think pricing quarter, suggest we impact. don't has But any

Hale Holden

Okay, you, that tomorrow. sense. safe makes Thank travels

Michael Johnson

Thanks Hale.

Operator

showing Michael now the call queue. questions to the no would Johnson I turn I'm to you. over Thank further for back remarks. in like closing

Michael Johnson

a this honor to really call. what for I proud embrace in I'm Thanks, responsibility It's company on the be everyone. and does. that tremendous of really Thanks being this seat. back

Our a mission, people that saying every more in - get show vision one said, joined money. me up forget My really when that this never they're here. day earn brother and is a and spectacular. provide our wealth health", opportunity and I framed frame and little was our company "The it healthier sent a I'll first little to we that creates in opportunity. the helping It's values, something a day,

continue to of and we're our challenges distributors their to and in trends deliver to today, before, we improve Cairo our we outweighs a far a never executives better we'll better incredibly sure and opportunity markets. we are business, are have an return. our each mentioned, in closely, distributors know never challenges. We've in resilient our here. great Now is sales dedicated. I work closely will our got I this make but working that opportunities like ensure result I and of believe We've who as be and passions that team - incredibly with focused got

leverageable future I'm for to looking bright supported of again We a here for us. come. provide a that years distribution you great and all to bright, great channel, a global world-class will have in with by in chapter We've growth got Nutrition. megatrends company a Herbalife being for another ahead forward catalyst

thanks and you. to say much, I let's go team, very always So Thank as Herbalife. the

Operator

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

disconnect. now You may

Herbalife Nutrition (HLF) 1 Nov 222022 Q3 Earnings call transcript