Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $1.3 billion, down 1.7% compared to 2024, but flat on a constant currency basis [7][24] - Adjusted EBITDA was $174 million, exceeding guidance, with an adjusted EBITDA margin of 13.8%, down 30 basis points year over year due to unfavorable currency impacts [24][27] - The company paid down $55 million in debt during the quarter, maintaining a total leverage ratio of slightly under three times as of June 30 [27][28] Business Line Data and Key Metrics Changes - Product innovation included the launch of Multi Burn, a non-pharmaceutical weight loss supplement, and the introduction of a healthy lifespan product [6][19] - Distributor growth initiatives led to strong engagement, with nearly 38,000 attendees at training events globally [9][10] - New distributor growth was flat year over year, but four out of five regions saw increases, with Latin America leading at 16% growth [9] Market Data and Key Metrics Changes - In North America, net sales were down 4%, primarily due to a 6% decline in year-over-year volumes, but July marked the first month of year-over-year volume growth since April 2021 [33][8] - Latin America reported a strong performance with constant currency net sales up 9%, despite reported net sales being down 1% [31] - EMEA net sales were flat on a reported basis, while Asia Pacific saw a 2% decline in reported net sales [32] Company Strategy and Development Direction - The company aims to transform into a data-driven wellness platform, integrating technology and personalized solutions to meet evolving consumer needs [4][5] - The acquisition of Link Biosciences is expected to enhance personalized supplement formulations, providing a competitive advantage [21] - The company is focused on expanding its product offerings and enhancing distributor engagement through digital tools and AI [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's transformation and noted signs of accelerating momentum in sales [5][8] - The outlook for Q3 includes projected net sales growth of 0.5% to 4.5% year over year, with adjusted EBITDA expected to be between $150 million and $160 million [38][39] - The company has raised and narrowed its full-year net sales guidance range to down 1% to up 3% year over year [39][40] Other Important Information - The company is integrating the Protocol app, which aims to enhance distributor-customer connections and provide personalized health insights [11][12] - The launch of the Protocol app is expected to create new monetization opportunities and attract a new customer segment [48][63] - The company plans to expand the Protocol platform globally, with regulatory assessments underway for key markets [68] Q&A Session Summary Question: What are the monetization strategies for the Protocol app? - Management indicated that the app will serve as a tool for distributors to enhance customer engagement and will have options for both product and app subscriptions [48][63] Question: How does the company view pricing in relation to competitors? - The company plans to take pricing in line with market conditions and has not seen significant pressure from competitors [56][58] Question: What are the plans for high-cost debt management? - The company is considering refinancing options for high-cost debt as market conditions improve [69]

Herbalife (HLF) Conference Summary - June 04, 2025 Company Overview - Herbalife is a global health and wellness company and the largest publicly traded direct seller in the world with approximately $5 billion in net revenue [8] - The company operates in over 90 countries and has more than 2 million distributors globally [9] - Herbalife is recognized as the number one protein shake, weight management brand, and active lifestyle nutrition brand in the world [9] Key Business Model Insights - Herbalife's nutrition clubs, which originated in Mexico, have expanded globally with around 65,000 locations, surpassing the number of Subway and Starbucks outlets [12] - Nutrition clubs allow consumers to purchase individual servings of Herbalife products, fostering frequent interactions between distributors and customers, which enhances community engagement [16][18] - Approximately 40% of sales in the U.S. come from these nutrition clubs, with two-thirds of U.S. sales attributed to club owners who also sell take-home products [19] Regulatory and Business Model Changes - Following a 2016 settlement with the U.S. Federal Trade Commission (FTC), Herbalife changed its commission structure to only pay distributors after products are sold to end users, enhancing data collection capabilities [24][26] - The settlement led to the introduction of preferred customers, allowing distributors to register customers who buy directly from Herbalife, which was not previously possible [28] Pandemic Impact and Recovery - During the pandemic, Herbalife saw an increase in distributor sign-ups and club operations as their products were classified as essential [30] - Post-pandemic, the company faced challenges as many new distributors left after COVID-19 restrictions eased, leading to a need to rebuild the distributor base [32][33] - By late 2023, Herbalife began to stabilize and grow its distributor base again, with consistent growth observed in 2024 [33] Leadership and Strategic Direction - The return of former CEO and the appointment of a top distributor as CEO has brought stability and strategic focus to the company [35][40] - The new leadership is focused on leveraging the distributor base to introduce innovative product ideas and enhance growth [43] Recent Acquisitions and Innovations - Herbalife announced acquisitions aimed at enhancing its product offerings, including a health and wellness app (Protocol) and a personalized nutrition company (Link Bioscience) [42][44] - The acquisitions are intended to provide personalized nutrition solutions based on consumer data, which is expected to be a significant growth area [46][48] Financial Performance and Capital Allocation - Herbalife generates substantial cash flow and has a negative working capital position, allowing for strategic capital allocation [56] - The company has focused on paying down debt, achieving a leverage ratio of 2.97, with plans to reduce it further [58] - Over $6 billion in stock has been repurchased since the CFO's return, with a focus on returning value to shareholders [57] Market Outlook and Investment Thesis - The stock is considered undervalued, with opportunities for margin improvement, sales growth, and increased enterprise value [66] - The company is positioned to leverage unique consumer data and enhance its direct selling model through technology and community engagement [66] Conclusion - Herbalife's strategic initiatives, including the expansion of nutrition clubs, regulatory adaptations, and recent acquisitions, position the company for future growth and recovery in the direct selling market [66]