Chasen Bender

Chasen Bender from Citi inquired about Herbalife's sales expectations for its geographic segments in 2026, particularly regarding the strong India results and the flow-through of the GST impact. He also asked about the expected sales contribution from the Pro2col program in 2026 guidance and the assumptions driving the projected 20-30 basis points of margin expansion, given the company's consistent outperformance.

Answer

John DeSimone, CFO, stated that Herbalife expects net sales growth in every region except China for 2026, with China's growth anticipated in 2027. Regarding Pro2col, DeSimone noted very little top-line contribution is built into 2026 guidance, with more upside than risk as it's in beta phase and will launch commercially in the U.S. in July. He explained that 2026 margin expansion is impacted by a net $16 million incremental cost from India's GST changes, which, if excluded, would result in margins being about 30 basis points higher. Stephan Gratziani, CEO, added that the GST reduction is beneficial for the business, driving volume.

Chasen Bender from Citi inquired about Herbalife's 2026 sales outlook across different geographic segments, specifically asking for color on regions beyond the U.S., given strong India results and the expected flow-through of GST impacts. He also asked about the anticipated sales contribution from the Pro2col program in 2026 guidance and the assumptions driving the projected EBITDA margin expansion.

Answer

CFO John DeSimone stated that Herbalife expects net sales growth in every region for 2026, with the exception of China, where growth is anticipated in 2027. Regarding Pro2col, DeSimone indicated very little top-line contribution is built into 2026 guidance, as the program is still in beta phase with commercial launch in the U.S. in July and other beta tests planned. He highlighted that a net $16 million incremental cost from India's GST changes (services tax remaining at 18% while goods tax lowered to 5%) would slightly drag down the percentage margin, making margins ex-GST about 30 basis points higher than guided.

Chasen Bender of Citigroup inquired about the monetization strategy for the new Protocol app, its potential bundling with supplements, and whether its unit economics differ from the core portfolio. He also asked about the competitive landscape and the company's pricing strategy amid consumer value-seeking behavior.

Answer

CEO Stephan Gratziani explained that Protocol will support the existing business and also attract a new customer segment, shifting the model from transactional to transformational. CFO John DeSimone added that the economic model is slightly different due to a subscription basis and a different 'earn base' for distributors. DeSimone noted that very little sales contribution from Protocol is included in Q4 guidance, representing potential upside. Regarding pricing, he stated that increases are aligned with the market, and the company has not seen a negative impact on volume trends, which continue to improve.

Chasen Bender asked about the monetization strategy for the Protocol app upon its Q4 commercial release, including its bundling with the new healthy lifespan supplement, its unit economics compared to the existing portfolio, and the sales contribution assumed in the full-year guidance.

Answer

CEO Stephan Gratziani explained that Protocol will serve as both a value-add tool for the existing $5 billion business and a way to attract a new customer segment with a premium offering. CFO John DeSimone added that the economic model is slightly different due to a new 'earn base' and a subscription model, and clarified that very little sales contribution from Protocol is currently factored into guidance, representing mostly upside potential.

Chasen Bender asked about the monetization strategy for the Protocol app's commercial release, its potential bundling with the new healthy lifespan supplement, and whether its unit economics differ from the existing portfolio. He also sought clarification on the sales contribution from Protocol assumed in the Q4 guidance.

Answer

CEO Stephan Gratziani explained that Protocol will serve both as a value-add tool to support the existing $5 billion business and as a way to attract a new customer segment with a premium offering. CFO John DeSimone added that the economic model is slightly different due to a new 'earn base' and a subscription model with variable shipment costs. He confirmed that the Q4 guidance includes very little contribution from Protocol, viewing it as mostly upside.

Chasen Bender from Citi inquired about the monetization strategy for the Protocol app upon its commercial release, the unit economics of the bundled healthy lifespan supplement, and the sales contribution assumed in Q4 guidance. He also asked about Herbalife's pricing strategy and competitive positioning amidst consumer value-seeking behavior.

Answer

CEO Stephan Gratziani explained that Protocol is designed both as a value-add tool to support the existing $5 billion business and as a way to attract a new, more digitally-oriented customer segment. CFO John DeSimone noted the product's economic model is slightly different due to its subscription basis and earn base, but not materially so. He confirmed that very little sales contribution from Protocol is included in the Q4 guidance, viewing it mostly as upside. Regarding pricing, DeSimone stated the strategy is to remain commensurate with the market, and the company has not seen a negative impact on volume trends from its price increases.

Chasen Bender asked about the monetization strategy for the Protocol app, the unit economics of its bundled supplement, and the expected sales contribution in Q4 guidance. He also inquired about Herbalife's pricing strategy and competitive price gaps amid a value-seeking consumer environment.

Answer

CEO Stephan Gratziani explained that Protocol will serve as a value-add tool for the existing business and also help attract a new premium customer segment. CFO John DeSimone noted the economic model is only slightly different and that minimal contribution from the Protocol launch is included in Q4 guidance, representing mostly upside. DeSimone also stated that the company's pricing strategy is to remain aligned with the market, and they have not observed negative impacts from recent price increases.

Chasen Bender asked about the monetization strategy and ROI for the new Pro2col platform, its potential impact on U.S. Nutrition Club conversions, recent weakness in North America KPIs, and the rationale for the reduced full-year constant currency sales guidance.

Answer

President and incoming CEO Stephan Gratziani explained that while it's early, Pro2col is expected to drive conversions from the nearly 4 million U.S. Nutrition Club consumers. CFO John DeSimone detailed three value components: app revenue, incremental product sales (personalized, Pro2col-specific, and core Herbalife), and new distributor/customer acquisition. DeSimone also noted that North America finished Q1 strong after a weak February and is expected to improve, and the guidance adjustment reflects Q1 performance and caution around China and parts of APAC.

Chasen Bender asked about the distributor churn in North America, where active non-sales leaders remain below new additions, and sought confidence that the new distributor cohort will be more productive than those in the past.

Answer

President Stephan Gratziani acknowledged the need to work through residual attrition after a multi-year decline. He expressed confidence that new distributors will be more productive due to a strong focus on supporting proven and effective business models, citing a highly successful, high-productivity model in the UK as an example of what the company aims to replicate and teach globally.

Chasen Bender from Citigroup inquired about the timeline for stabilizing the core Nu Skin business, the growth drivers within the Rhyz segment, and the reasons behind lagging gross margin improvements despite cost-saving efforts.

Answer

President and CEO Ryan Napierski explained that the near-term focus is on operational simplification, with transformational growth initiatives being more mid-to-long term. He and CFO James Thomas attributed gross margin pressure to significant geographic mix shifts away from high-margin markets like China, which has overshadowed cost-saving wins. Napierski also highlighted the strong performance of the Mavely affiliate platform within the Rhyz segment and the strategic value of its manufacturing arm for market insights.

Chasen Bender of Citigroup inquired about the timeline for stabilizing the core Nu Skin business, the growth drivers for the Rhyz segment, and the reasons for persistent pressure on core gross margins despite cost-saving initiatives.

Answer

President and CEO Ryan Napierski stated that stabilizing the core business is a mid-to-long-term goal, with the immediate focus on operational efficiency. He attributed Rhyz's success to strategic investments like Mavely and insights from its omnichannel brands. Regarding profitability, both Napierski and CFO James Thomas explained that significant geographic mix shifts away from high-margin markets like China have masked the benefits of cost-cutting, but they anticipate 150-200 basis points of core gross margin improvement by the end of 2025 as more impactful SKUs are rationalized.