Good afternoon, and thank you for joining the Fourth Quarter and Full Year 2018 Earnings Conference Call for Herbalife Nutrition Limited. On the call today is Michael Johnson, the Company's Chairman and CEO; John DeSimone, the Company's Co-President and Chief Strategic Officer; Dr.

John Agwunobi, the Company's Co-President and Chief Health and Nutrition Officer; and Eric Monroe, the Company's Director, Investor Relations. I would now like to turn the call over to Eric Monroe to read the Company's Safe Harbor language..

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

For a complete discussion of risks associated with these forward-looking statements in our business. We encourage you to refer to today’s earnings release and our SEC filings including our most recent annual report on Form 10-K. Our forward-looking statements are based upon information currently available to us.

We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events except as required by law.

In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements, prepared in accordance with U.S. Generally Accepted Accounting Principles, referred to by the Securities and Exchange Commission as non-GAAP financial measures.

We believe that these non-GAAP financial measures assist management and investors in evaluating our performance and preparing period-to-period results of operations in a more meaningful and consistent manner, as discussed in greater detail in the supplemental schedules to our earnings release.

A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC. These reconciliations together with additional supplemental information are also available at the investor relations section of our website, herbalife.com.

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

Good afternoon everyone. Thank you for joining us on the call today. Let me start out by saying our momentum at Herbalife Nutrition is as strong as ever.

It's great to be back on this call with you and then resuming my formal role, I'm really excited about continue to propel us toward the future building off these tremendous fourth quarter results that you saw in our press release today. We believe the trajectory of our business is incredibly promising.

The progress we've made to innovation, driving our product portfolio and building out our technology platform to help our distributors to improve their productivity and profitability is truly remarkable.

As you know, I am extremely familiar with the world-class leadership team that we have overseen these strategies and I'm confident that we won't miss. I have been working closely my good friends and co-presidents, Dr.

John Agwunobi and John DeSimone; Chief Operating Officer, Dave Pezzullo; Executive Vice Chairman, Des Walsh, and others as we leverage our momentum and continue to drive our strong performance in growth. I'm incredibly proud of this management team and their hard work and commitment to our goal of being the world's premier nutrition company.

Our company is as strong as ever and our solid foundation, unmatched enthusiasm and results have positions us well for long-term growth. Our performance has been outstanding. Thanks to the incredible efforts, dedication and skills of our independent distributors and employees.

John DeSimone will go to the financial details shortly, but I like to call out a few highlights from 2018. For the full year, we reported net sales growth of over 10% compared to 2017, including year-over-year increases in 8 of our top 10 markets.

In terms of volume points from the full year, we set a new all-time record high for the Company including growth in 5 of our 6 regions. In 2019, we plan to not only continue our growth but also to expand our mission around the world, one distributor and one customer at a time.

This is a great time to be part of Herbalife Nutrition and we're leading this talented team of distributors and employees who are committed to continuing this momentum and driving results. Let me now turn it over to John DeSimone..

Today, I will start by discussing the Company's fourth quarter and full year 2018 reported and adjusted results, which include key market highlights. I will then review our first quarter and full year 2019 guidance. Fourth quarter net sales of $1.2 billion represented an increase of 9% on a reported basis, compared to the fourth quarter in 2017.

Full year 2018 worldwide reported net sales of $4.9 billion represent a year-over-year increase of 10%.

Volume points for the fourth quarter 2018 were approximately 1.5 billion, which represents an increase of approximately 11.8% compared to the fourth quarter of 2017 and benefited by approximately 70 basis points from a number of tests we implemented during 2018 related to changes and product volume point values.

This is the largest fourth quarter volume point results in the Company's history and represents the third consecutive quarterly volume point record as both the second and third quarters volume point results were all time highs as respectively.

It is therefore no surprise the full year 2018 volume points of approximately 5.9 billion was an all-time record high. Four of our six regions AMEA, APAC, China and Mexico set volume point records in 2018, although, Mexico was aided by approximately 180 basis points from the previously discussed volume point value adjustments.

With respect to earnings related to the U.S. tax reform, the Company recorded a non-cash charge of approximately $29.5 million.

This represents an additional valuation allowance on foreign tax credit carry forward resulted from the finalization of the provisional charge within the one-year measurement period together with the further guidance released by the Treasury Department in Q4.

Due to this non-cash charge during the quarter, we reported a net income of approximately $48.9 million or $0.34 per diluted share. For the fourth quarter adjusted earnings per adjusted diluted share was $0.63.

Note that our adjusted results include expenses related to the China growth and impact investment program of approximately $8.2 million or $0.04 per share that was excluded from our guidance. Despite our adjusted EPS including these expenses that were excluded from our guidance, we still exceeded the high-end of our guidance range of $0.60 per share.

As a reminder, these expenses were fungible are effectively funded by China grants that have already been excluded from our adjusted results. These expenses were not incurred during the comparable period of the fourth quarter 2017 and are not included in our future guidance.

Additionally, our adjusted EPS figures continue to exclude items we consider to be outside of normal company operations or we believe will be useful to investors when analyzing period-over-period comparisons of our results. Please refer to our fourth quarter 2018 earnings press release for additional details on these adjustments.

The impact of currency fluctuations represented a year-over-year headwind of approximately $0.06 per share on results for the fourth quarter and approximately $0.05 per share on a full-year basis. Reported gross margin for the fourth quarter of 81% increase by approximately 20 basis points compared to the prior year period.

The increase was primarily driven by the favorable impact of retail price increases and country mix, partially offset by unfavorable cost changes related to self-manufacturing and strategic sourcing and the negative impact of foreign currency fluctuations.

Fourth quarter 2018 reported and adjusted SG&A as percentage of net sales were 40.9% and 40.6%, respectively.

Excluding China member payments, adjusted SG&A as percentage of net sales was 30% approximately 40 basis points higher than the fourth quarter of 2017, primarily driven by the timing of event spending where a large distributor event, which was held in Q3 of 2017 was held in the fourth quarter of 2018.

Our fourth quarter reported effective tax rate was approximately 57% and was primarily driven by the previously mentioned valuation allowance of $29.5 million. Our adjusted effective tax rate was 26.4%, which was lower than our expectations primarily due to the impact of geomics.

Turning to the full year 2018, reported net income was $296.6 million or $1.98 per diluted share compared to reported net income of $213.9 million, or $29 per diluted share for the full year 2017. 2018 adjusted diluted EPS was $2.88 per adjusted diluted share, reflecting a 19% increase compared to the $2.43 per diluted share for the full year 2017.

Our business generated substantial cash flow from operations in 2018. $648 million in cash flow from operations represents an approximate 10% increase from the $591 million generated in 2017.

2018 reported and adjusted results were negatively impacted by expenses of approximately $14 million or $0.07 per share related to the China growth and impact investment program as well as approximately $0.05 per share from foreign currency fluctuation.

Our full year adjusted tax rate of 24.8% benefited by approximately 260 basis points or $0.10 per adjusted diluted share due to excess tax benefits in the exercise of equity grants. As a reminder, our 2019 guidance does not include any future potential tax effects from equity grants that could benefit our tax rate.

Now, let me shift to review our regional and market highlights. The strength of the U.S. business continued into the fourth quarter with volume increasing by 12% compared to the fourth quarter 2017. We ended 2018 with year-over-year growth in every single quarter.

The 2K supervisor qualification pilot continues to help drive distributor engagement and has been extended until the end of 2019. Last quarter, we started testing a small volume point value change on a few products. These test benefited the comparison in the quarter by approximately 180 basis points.

In China, our Q4 volume points increase by 4% although we did experience growth in the quarter. The rate decelerated from our prior two quarters results as the comparison was more challenging this quarter.

Turning to Mexico, volume points grew by 10% and record of the largest fourth quarter in Mexico history, the volume point value changes we discussed last quarter benefited the comparison in the quarter by approximately 180 basis points.

The active member program continued to help fuel the market with new member activity and productivity rate both increases as compared to the prior year period. The Asia Pacific region reported a 30% year-over-year increase which was the fourth quarter in a row. The region is setting new all-time record volume point performance.

The EMEA region grew by 11% in the fourth quarter, taking the number of consecutive quarters with growth in EMEA up to 35. The volume point growth in the quarter was led by Spain, Turkey and South Africa, all of which grew over 20%. Let me now move ahead to guidance.

For the full year 2019 much of our guidance remains unchanged from the guidance provided last quarter, that sales going to increase slightly, and we now expecting to grow in a range of 45 to 8%, up from the previous range of 2.8% to 6.8%.

For the first quarter 2019 we estimated net sales to be within a range of 0.5% to 4.5% growth, which reflects an approximate 600 basis points currency headwind. Volume point growth is expected to be in the range of 4% to 8%.

First quarter reported diluted EPS is estimated to be in a range of $0.51-$0.61 and adjusted diluted EPS guidance is estimated to be in a range of $0.60 to $0.70 per share. Capital expenditures for the first quarter are expected to be within a range of $30 million to $40 million.

And first quarter effective tax rate guidance is expected to be between 30% and 34% on a reported basis and 27% and 31% on an adjusted basis. I will now turn the call over to Dr. John Agwunobi to review some of the strategic highlights from the quarter..

Thank you, John. After our last earnings call, we hosted many of you at our Investor Day in New York. Over the course of that meeting, we spoke in detail about the key strategies we believe are the growth engines for our business. Let me provide an update on our product, technology and distributor difference strategy.

In my role as Co-President and Chief Health and Nutrition officer, one of my priorities is to ensure that the products we offer to our distributors are science-based and fit within our global nutrition philosophy.

I take pride in our product strategy and how we are providing our distributors the opportunity to sell more products to existing customers, appealing to new customers and attracting new distributors. An example of this was the introduction of our new high protein iced coffee, which many of you sampled at Investor Day.

Our iced coffee drink mix has only 2 grams of sugar per serving and it gives consumers a protein and energy packed way to start there day, enjoy an afternoon pick-me-up or saver an evening treat.

At Investor Day, you were also able to see firsthand our distributors' excitement around this new product category and to hear how they use this product to attract new customers as well as create an incremental sale to existing customers by fulfilling a brand-new day part.

In addition to coffee, around the globe, we launched approximately 100 new products in the fourth quarter bringing our total number of new products launched in 2018 to over 230.

At Investor Day, we also detailed our technology strategy, which is focused on building on our robust backend infrastructure and developing front end tools designed to help our distributors improve that productivity and profitability, while increasing distributor to customer conductivity.

It also enhances customer experience with a high touch and high-tech set of solutions. For our Nutrition Clubs, we developed a number of enhanced technologies for both operators and consumers. This suite of tools will make it easier to own and operate a Nutrition Club by helping operators set up, manage and grow their Nutrition Club businesses.

The distributor facing tools is expected to be released in May of 2019. We're also developing a customer facing Nutrition Club app. Customers will be able to stay connected with their Nutrition Club and there distributors browse the club menu and just like your favorite coffee house or restaurant, they will be able to preorder right off the menu.

Their favorite shake tea, aloe or other drink or snack will be waiting for them when they arrive. The customer app is scheduled to be released in July at our North American extravaganza. Additionally, in January, we launched a full release of HN connect to our entire U.S.

distributor base to ensure our distributors are educated on how to take advantage of the tools robust capabilities. We also announced upcoming training webinars for the tool in February. Even with our focus on products and technologies, I believe Herbalife Nutrition is a people business, a relationship business.

Our distributors invite their customers to be a part of a community, part of a team that can help them achieve their desired results. It's more than just selling products at the end of the day our distributors sell results and this is our biggest competitive advantage. We call it the Distributor Difference.

As a company, it’s our responsibility to support our distributors with not only technology, tools and some of the world's finest high quality products, but also with education and training. They need that training to effectively sell the products with success.

One way we do this is by providing world-class training led by some of the industry's leading experts at our sales event. We recently hosted several events for our future distributor leaders in Mexico, in Las Vegas and in Miami in order to share best practices and learning as well as to inspire and motivate.

One thing that is evident at these events is the success we are seeing in our distributors progressing up our marketing plan. Our tremendous marketing plan performance in 2018 is a testament to our corporate and distributor leadership.

We had the second highest number of new presidents team qualifies globally in our history and highest in the last five years. In the U.S. and in India, we are seeing extremely high levels of distributor engagement, which we believe is an indication that we can continue to implement segmentation successfully in markets where our distributors wanted.

Segmentation provides Herbalife Nutrition and our distributors with improved visibility to those who joined to pursue the business opportunity or to those who joined simply to access the products at a discount.

We believe there are numerous additional benefits of segmentation, including an improved customer experience through personalized product oriented communication a simple low-cost lineup and a natural progression for those who eventually choose to become business builders.

In fact in December 2018, we launch segmentation in Italy and have plans to implement the same in Brazil in the second quarter of this year. Finally, today we announced record retention results for the last 12 month requalification period ending in January 2019.

The approximately 68% retention rate is reflective of the ongoing sustainability of our business and the opportunity we offer to our distributors. As you can tell I'm extremely excited about the future and I'm optimistic about where we are going. This concludes our prepared remarks. Operator, please open the lines for questions..

[Operator Instructions] Our first question is from the line of Tim Ramey from Pivotal Research Group..

Couple of questions, Dr. John, I was struck by the number of new products you said you annoyed and it almost feels like the numbers to big. I don’t know how many that comes down to in anyone market. I’m hoping you’re not asking distributors in market ex to learn a hundred new things.

Tell me about your ability to get people a focus on that number of new product?.

Tim, thanks for your question. Just to allay any concerns you might have there, the numbers actually spread around the entire world it’s not in anyone market. Obviously, a lot of it was flavor extensions in countries that needed more flavors, either seasonality or to match up there specific cultural and social needs.

But there were some -- obviously, there were some really big new products that were new to the entire portfolio, coffee, we've mentioned a couple of flavors, there. So as you know, we tend to count different flavors as each as a difference skew so different numbers..

Sounds good, John, on the 2K qualification.

I was not aware that there was a sunset to that, maybe I miss that at some point is that always been the plan that this was not the new way of going forward for the duration?.

Yes, look, it doesn’t mean it won’t be the new way generally when we do anything that a qualification change, we do it as a promotion in order to test that there are unintended consequences and make sure we've accomplished what we want to accomplish. So, we just want another year under our belt.

So, I wouldn’t say that we don't expect to be permanent, but we have not yet implemented as determined as we through one more year of the results and see how we're performing too..

And I saw this key in the 10-K on the 100-day program in China.

I assume that had no impact on the fourth quarter since it was announced in the first quarter, but is there anything else there would be comps that would explain the relatively slower growth rate in China in 4Q?.

I will break it into two buckets, so let’s talk Q2 and then we will talk on a Q4 -- excuse me, and then we will talk Q1. So in Q4, it was a tough comp, right. We went from a negative growth in Q3 of last year to almost 10% growth in Q4.

If you look at the two year stack, we're pretty comparable to where we were in Q3 and still much ahead of where we were in Q2, but I do think a primarily had to do with just people working really hard during the year and just relaxing toward the end of the year because it's really probably the end of the year we saw so weakness in China.

So, it did underperform our expectations, but I don’t think it's anything systemic.

Having said that, when you look into Q1, there is this 100-day program, it was not directed to us but us and a lot of other competitors have as a result cancelled most now all of our meetings during the first quarter, and that could and will we expect to have an impact on Q1. It doesn't change our expectations beyond Q1.

I think 100-day sometime in early April or mid-April. So Q2 should be fine and as should at the rest of year, but it will definitely have an impact in Q1, it will be reflected in our performance..

[Operator Instructions] And our next question is from Beth Kite from Citi Research..

I will just tag on to Tim’s question a little bit more. Just for the investors and try to better understand.

What else do you understand about this 100-day campaign in China?.

So, look, I can't say that I -- you never know everything but the way it's been explained, it was product claim based nothing to do with our company directly. But in China, I think there one of their objectives is social stability.

And I think there was a lot of negative press around the product claim that brought attention to the types of products we sell, which are functional foods and healthcare products. And so, that’s started this and with that negativity just propel the Company I believe to take a closer look at the industry.

But again it's not Herbalife, this is the industry..

And then for the first quarter since it is at least 30 days into this investigation by now, a little bit more, have you seen a material change in sales? Are you hoping things get better sort of second two third of this 100-day window? Or kind of how should we think about progressing through the first quarter versus what you experience somewhat you anticipate in my experience in China related to that?.

It's hard to tell because it started in January and it definitely impacted January sales, but then February 5th through 15th with China New Year. And during that time period, it was just ended, our sales are always weak and so it's really tough to tell how it's going to bounce back.

So, it's our expectations that the Q1 will be a challenging quarter for our China business. And again, just to clarify earlier, it's not even a direct selling challenges, both direct selling and not direct selling regarding products that are healthcare and functional foods..

And then I guess turning forward into your full year sales growth guidance. I think the implied is that it rose, right; both foreign exchanges to be a slightly pressure and local currency sales growth guide have gone up.

Is that right for your 2019?.

Local currency sales and reported net sales have been increased slightly correct..

And then, can you tell us any particular regions that maybe other than China where you potentially changed your expectations for the year versus guidance in late October?.

So, it would be nothing -- by the way nothing changed material, so let me start up there. There was nothing material.

Generally, what happens as you finish Q4 and you relocate all your quarter which what we do for budgetary purposes when we update and there was a pretty high performance level Q4 and so we took some things up in a couple of regions, but nothing material.

So you can't pinpoint just to one, it's kind of pretty broad small increases offset by some minor decreases in certain regions, so more of a mix issue. It didn’t deliver a lot for the bottom line. It delivered about $0.03 at the bottom line.

It would initiate bottom line guidance from the mixed change that we saw in our guidance different last quarter..

For two countries in particular, it looks like from the full year local currency sales performance in India that the fourth quarter was again quite strong.

Can you talk us about India, are we, I mean, it’s attached rate growth here to end '18, are you still sort of in the early days or still seeing exceptionally strong growth? When might you expect that to moderate? And then while I am asking about countries as well, I feel like Brazil was probably a bit of disappointment in the fourth quarter.

So kind of where do we go from here with Brazil?.

I’m actually going to add a third country to that. So in India, we've got a great quarter -- 50,000. So we have segmentation in India. 50,000 new preferred members joined in the fourth quarter which by the way was more preferred members joined in U.S. and U.S. preferred program is strong, so definitely a lot of momentum in India.

Obviously, these growth rates not sustainable it's going to moderate overtime. So, I keep strong double digits as you might get double digits for a little while longer, but it's going to moderate into high singles for the time in India.

Brazil, yes, Brazil continues to disappoint, but hopefully segmentation which we've launched in April, and it's April because of programming requirements. So, we’re programming it now, hopefully that become a catalyst like I think the distributors in Brazil are very, very engaged and very motivated.

Rob Levy just came back from Brazil event last -- I believe it was last week, and he felt encouraged. So, there's some opportunity in Brazil. And just to thank you to distributors in Korea, Korea for the first time grew almost 10% in volume points in the quarter.

So I wanted to makes sure we mentioned that because we talked about some of the negative performance overtime, and so just want to celebrate the positive performance..

If I could ask one more of you, John, and then one for Michael. John, I don’t think the converts came out just now. So can you give us an update -- probably didn't come in the prepared comments.

Can you give us an update, are you still intended to refinance those? Is there anything along the lines of the converts you can update us on?.

Yes, it's going to be pretty much the same which is, this is our intention to refinance, but to be in a position to pay option we choose to, that refinance can happen either before the converts due or when it's due or even after it's due, it just becomes a timing issue.

But from an overall leverage standpoint, we have said in the past that we’re comfortable with the current leverage. And so, we do choose to pay down for a separate transfer reasons then we will just lever up or we may lever up before. So, it's all circumstantial based on the economics of the debt market and also the use of cash.

One of the interesting things to consider, it's the purpose of the cash would be a buyback in any buyback we do now it helps the stock. I heard this when the converts become due because now you have to issue more stock because they're well above the convert price.

So that actually creates a little of our premium in the purchase price that we buy back stock before end, so that's just another consideration to take into account..

And now, Michael, quickly welcome back and Mike during the call today, two questions for you.

One, now that you are back, I know, you've been obviously active on the aboard since you were CEO, but is there anything you should come back that you said, hey, I’m going to tweet this and we're going to do something a little bit differently? And then secondly, is there anything that you can share with us in terms of the timeline from being a permanent CEO?.

The first question pretty simple as Chairman of the Board, I have been very involved in the Company's strategy for oversight and couldn’t agree with it more. Based on the focus on better product to focus on making sure, our distributors have tools to grow their incomes, to attract more distributors and customers and retain them.

There is going to be no change in that. It’s a fabulous undertaking that's taking place there. So frankly, a revolutionized I think and evolution in direct selling in the business and giving incredible tools.

So I would take from a strategic standpoint, it is -- let’s continued to grow this company with tremendous product build a great brand with making sure this tools are there for our distributors to attract more distributors and more customers, that’s what makes the Company grow.

As part of timeframe, not so far, we know how to transition, the CEO into this company, we've proven that pretty well. We've transitioned a lot of executives in the new role. And we're going to prepare to do that over the next period of time and I can't define period of time right now, but I'm excited to be here I am excited to be with the team.

John and I were talking about this morning, we've got over 170 years of management experience and this senior team is pretty amazing, when you think about it. And so the bench is strong, the bench strength is even better, and I'm excited about helping everyone here grow their business.

So thanks Beth and that's probably a little bit of choose to answer, but the best you’re going to get today..

And our next question is from the line of Akshay Jagdale from Jefferies..

So I wanted to ask about profitability in the fourth quarter.

How did that spare relative to your internal estimates or targets this quarter?.

Yes, pretty close to what you would expect, I mean, we’re in high end of volume guidance but within the range high end of the range and little above our EPS guidance, there was some tax already benefit, but some of the other things that hit during the quarter were expecting.

We had little lower gross margin this quarter than last quarter that was driven by both FX, right. We talked a lot about that on the call last quarter where there was a favorable FX impact from timing growing out of inventory that reversed in Q4 that was about 90 basis point impact.

And there was about another 40 basis points impact from the new tariffs in Mexico. If we go hope go away, we're encouraged by some signs of those tariffs go away and these are with tally deferred tariffs that hit in Q4.

We're actually earning some money at 2% surcharge to our distributors, which they're still aware of this week to cover about two-thirds of that tariffs, when we forward and when the tariff go away, the surcharge will, that impacted, but we knew that was coming to.

And then of course, there was a timing of major event that last year happened in Q3 and this year happened in Q4, that also is going to skew the SG&A results compared to a year ago, but we knew about that. So I think pretty much something close to expect..

So given some puts and takes, but overall in line or in the range right.

There is an asset bit the lower what we were expecting from a profitability standpoint for the quarter? And that’s where it was coming from, but everything you mentioned was factored that you said you had anticipated but perhaps the magnitude was within the range, but a little bit there is a range for a reason.

Is that perhaps the way to think about it?.

Yes, I mean there is always puts and takes and I think when you think of currency, there is always moves a little more or little less than you think, it's on the exact science. So yes, there could be some movements. I don’t know exactly what you modeled. But nothing that I can think of that was a major deviation from expectations..

And then, the sales growth guidance changing for '19 FX and price mix related.

Can you help me understand why that I guess didn't have impact on profitability per se or your outlook there?.

Look, so about half of the change, a positive change in net sales guidance is from currency. The other half is much mix related, which doesn't always fall the bottom line depending on which country. And the currency did have an impact on the bottom line about $0.03, but not meaningful enough to change the range.

It’s a pretty larger range, so we kept the range the same, but that would have gone through about $0.03 impact. Now, the reason why does it flow anymore than $0.03 is that some of the inventories have already been made, right, and it's going to flow through at today's rates or should when it was made.

And so, when we have some hedges in place, so not all that closer..

And then going back to China. Obviously, you've mentioned all the experience that you have combined. Is there a President came to what's happening there that gives you a guide? Your comfortable as you think about the full year and thinking about volume point and just the growth in that business for '19 and then it seems kind of it's….

Yes, I think what we are experiencing in China is not uncommon.

I mean, there has been a times over the last few years where the industry cancelled meetings, and again it's like the last time it was the national congress, there was another one who have its focus on industry from some local companies that did something I don't remember exactly what it was.

But again, you got to think of this in the context of China, what they're trying to accomplish, which is of course social stability. So to the extent that they want to look deeper into an industry and that industry could be product related or to a direct selling business models, they are trying to do it.

And I think the last time went up in 90 or 100 days. And we recovered from that too, but during that time we didn’t have meetings..

And again, I guess, if there was a seasonal time for this to happen, there is probably the perfect time right because this is the time you have the lowest amount of sales.

Is that fair?.

Jan and Feb are the lowest months of sales for China, that’s correct. So from a timing standpoint, you are right..

And how do you see this resolving? I mean, what's the usual protocol like 90 to 100 days like before that do you get a sense as to I mean can this be expanded? Or how -- when will you have a better sense of where we are headed?.

Yes, look again, we are not a target of anything and to be clear right, this is just an overall industry-related initiative. And again, these types of things happen in China, that's why China is still long-term while we believe it's positive, it comes that it's spiky sometimes. And so, this is not -- it's a not uncommon in China.

And our meeting is a meeting that's bounded on our business -- excuse me, in China, it's a business started on meeting and so when you don’t have meetings, it impacted the business but it is generally short-term..

Just one last one with the changes going on, that on the management's side, I mean, how you view -- how have you communicated with when I look at the distributor community and so what's been their reaction basically kind of get a sense for like just and this is distraction does not like how should we think about? What's the feedback that you've gotten from the distributors since the change happen?.

This is Mike. It might be able to little tougher to me to respond to that, but there is could be the reaction, it's been pretty good. They know me. They've known me for 16 years. There is a consistency that comes along with me and the team is the same team that it's been. The unfortunate circumstances have put me here or behind this and we go forward.

I've been to Las Vegas and Mexico with our distributors. I'll be there in Singapore in next week and a half with them on the chairman club calls, founder circle club calls. There is a not a lot of change. It's kind of back in driving the same car just than a little higher rate of speed because things have moved up and they're getting better.

And you know there they run their own businesses as you know and customer walking through that door today doesn't really matter, if it's client or the CEO or you're the CEO.

I mean, it matters to this leadership of course because they want direction in serenity and they want performance out of us and the service their business needs, but spot market and nutrition, the CEO of Herbalife's an unknown character to anyone..

And our next question is from the line of Doug Lane from Lane Research..

Mike, on the topic.

What really you said today on the timing of announcing the successor as CEO?.

Well, Beth asked that question. I'm going to -- Doug, I don't mean to push to aside, but the same thing is, we'll get there when we get there. And we've got -- as I said before, a great team enormous amount of experience, we've transitioned this, a CEO very successfully into the business before and will do it again.

So, I just don’t want to set a timeframe Doug because you know there is a -- I got a work to the board, we've got to work with the management team and we've got to make sure that the decision that we’re making is absolutely holds from all the way around..

John, on Asia Pacific, I mean that really was the region that beat my numbers the most. I know you've mentioned India and I think we've been talking about India for a few quarters now.

And now Korea, are there any other spots within Asia seem like a pretty, pretty handy be at least as far as my numbers were concerned?.

Yes, I mean Vietnam was also a terrific performing country in this quarter, and some of that is because there is new regulation is going to effect in January that I think it requires eight hours of in person training or something that effect become a distributor. So, there is a lot of people signing up before that, new rulings went into effect.

There is a little bit of pull forward from Vietnam, but overall those are the two big ones. I mean there is a lot of good performance for countries in Asia. And look now have Korea as a drag as it's been financially and I mean that just mathematically speaking, right. Not having that'd be drag and that should contribute to growth helps a lot too..

So, it sounds like it was a good number, but not necessary we shouldn’t be modeling it out, carrying into 2019 here because of the some of these one-time issues.

And what's your confidence to Korea?.

I mean India grew, net sales were up 42%, local currency net sales were 58%, that's not sustainable. You can’t model that right. Vietnam had volume points up almost 60% that’s not going to happen, that is event driven. India is not event driven. India has got a lot of momentum.

It has got a lot of good things going, a lot of good business activity, but those numbers aren't sustainable..

And Korea is growing a solid stable business..

And Korea is almost, from a net sale standpoint, actually grew 10.3% and from a local currency net sales, 10.3 grew to 12.2%, so double-digit sales growth for Korea is a meaningful contributor now. The number nine largest country in Herbalife, so it’s a meaningful sized country, we turned around that really helps.

I mean there is somewhat what you said you’re not going to model in Q4 growth rates going forward.

But it's not as exceptionally as maybe you think I think overtime other than Vietnam, which is event driven all the time growth rate will come down because these growth rates aren't sustainability, but I still think you’re going to have strong growth rate..

And you’re showing good about the sustainability here in Korea..

I mean that’s been the focus for now for a few years..

And then lastly just to go back to China because of such an important market for you and you're off to a slow start and you've got really tough comparisons in the second and third quarter.

So I assume, modeling growth in China this year but maybe not in the double digits?.

We’re modeling growth in China this year, we’re going to get whether its single or double-digit but it's -- we’re modeling growth, again keep your expectations Q1 like but we're modeling growth..

And our next question is Ivan Feinseth from Tigress Financial..

My first question on the launch of the new coffee drink, can you give us some idea of the level of success as this has been one of your most successful launches and what type of feedback have you been getting like a big driver of new distributors and new customers?.

We will say this. Our distributors remained very excited by this coffee launch. And indeed, although we've only launched in the U.S. other regions around the world are clamoring to be next in line. So we do have time to take coffee to other regions, other countries, it's already just over 2% of total U.S.

sales about rather volume and it's exceeding our expectations nicely, in a good one..

Now where -- for this past quarter, where were the strongest regions? Where did you see the strongest growth for new distributors and new customers?.

I think when you are asking where is the strongest growth, let's talk with volume first and then we will talk about some distributor metrics, right. So from a volume point, I am going to start with the regions. North America had double-digit volume growth, EMEA had double digit, APAC almost 30%, Mexico had double digits.

As you know, South and Central America declined driven mostly by Brazil. But there was a weak point in China was single digits, so it's really strong broad-based growth. And even within the regions, it was very broad based.

The APAC had a lot of countries like Russ and in EMEA, I think 75% or 80% of the countries in EMEA group, so it's very broad-based. And most of distributor metrics actually are underlying that growth and support it.

And when you think of average asset sales leaders, which is one of the metrics that we value internally almost all everybody with the exception of China where China had active sales leaders up 31% in Q4. The growth rate declined from Q3, was up 42%. Every other regions statistics improved sequentially. So it's very broad.

In the new preferred members, in the U.S., it was up 20% -- 22%. In India, it was up I think it was 50% plus in preferred members, which think of those as customers. Now, we don't have that data everywhere, but that is an advantage in those markets, but there is segmentation and where there is segmentation, the markets are performing really well..

Now as far as the new digital and technology initiatives, how are your distributors and your customers taking to that? Are you seeing that drive growth? Is it working out as planned? Is it exceeding plan?.

Let me speak specifically to HN-connect, which was the big CRM/communication technology that was launched in phases over the last year or so here in the U.S. By the end of the third quarter in 2018, we had 6,000 distributor signed up in the program.

By the end of January of this year, so a little more than a quarter later, we are now up to 24,000 distributors signed up. We are going to continue growing the use of -- the signups rather.

And our hope is that as individual distributors increasingly use of the systems, it will feed the AI tool, the artificial intelligence tool, that’s embedded providing even more feedback and even more impact in the tool. We are going to continue to roll it out here. It's actually rolled out in the U.S.

so continue to deepen into use and its effectiveness with the use of AI tools before we then take it to other countries around the world other markets..

Are you seeing any kind of demographic trends in new distributors and new customers, if it's more younger people, older people, women, men? Are you measuring this kind of data and seeing thing that are surprisingly positive surprisingly negative?.

With time, we will learn those levels of detail. Obviously with 24,000 people in just the fourth quarter and little beyond, we are still kind of understanding how it's used, it's going to continue growing. We will have a better sense of who the primary new person is as we start to see this overtime. Get it time..

And on the horizon, what other areas of new products do you see or are looking to roll out? And what kind of feedback are you getting from your distributors as far as their customers asking for help or products to address certain needs for example?.

Let me just stop and talk about process for a second, I'll do this quickly, okay. So we work with our distributors in developing new products. These are formal product committees structured by country, by region, growing up to even a global look is through that process that we identify -- and its push and pull, okay.

We will identify and stuff and bring it to them. They are going to get stuff and bring it to us and through that processes how we launched products. And we don't announce products on investor calls until we tell our distributors about them. So….

I didn’t mean like specific products.

I just thought maybe like general areas of products?.

I mean clearly -- we're always going to be in the business of helping people live healthier lives, sports performance and fitness. Obviously brain health and aging are big trending fields. We're also working as you know on trying to take coffee around the world.

So there is less of category opportunities and lots of places that we have our product developers, our marketing teams and as John mentioned the product committees in active discussion on, but we won't, obviously announce specific products in this call..

I understand. Alright thank you very much..

Alright. And our next question is from the line of Hale Holden from Barclays..

I just had one question. John, I think you said in the script that you had tested a volume point value change on a few products for the benefit of comp in the quarter by 180 basis points.

So I was wondering if you could give us a little bit more color on that?.

Sur. So it wasn’t 180 basis points for the global number but it was the 180 in a couple of different markets. I think it was under 100 basis points globally, like 70% basis points globally.

So we assign a volume point value to a product, it generally has the same value everywhere in the world and it's through those volume point accumulations are how our distributors become eligible for earnings.

And in certain markets we are deviating from the standard global number through just the socioeconomic climate or conditions in those marketplaces. But we are doing that that through test to make sure there are none -- no untended consequences.

So in order to be transparent with investors, any impact from those tests, we want to make sure you know for modeling purposes. But it's strictly based on testing certain theories we have in different markets..

And next question we have a question from the line of Tim Ramey from Pivotal Research Group..

So couple of things one Dr. A on the huge sign up with the HN-connect. Are we seeing any churn there at all? Is it too soon -- do you see people drop for a couple of months and drop or is there anything you can report on churn rates for the….

It's way too early for us to have a handle on churn. Most of those 24,000 beyond the 6,000 that we are already in the program at the end of the third quarter. Most of the 24,000 literally signed-up in the month of January or thereabout, so December and January the last few months. So it's just way too early for us to think about churn.

We're still rolling out and teaching users all of the advantages and the kind of strengths of the program, they are still learning it and once again, once we've had people using the programs for a while that will then improve the artificial intelligence and the impact that these tools have on their businesses.

I don't expect to have churn numbers that we can even begin to look at for a number of months, if not through the rest of this year..

And one more for John on China. There is such a discontinuity between sales growth and volume growth.

I wasn't aware of any particular price increase that you took that would have driven that? Is that mix somehow or…?.

It’s a great question. It's purchasing mix, depending different in China -- different purchasers get potentially different discounts.

And so when you see what you think is sales growth above and beyond what would normally be a ratio between volume points and net sales will be an offset in SG&A which is why you’re seeing the China member payments go up by a corresponding amount..

I think I get it. But I might take it offline. Thanks so much..

And at this time I would like to turn the call back to Michael Johnson for closing marks..

Thank you very much and thanks everyone for being on the call today. Congratulations to team Herbalife, to our distributors, employees, for having a great quarter, great year, not missing a beat. It's an honor to be in this feat. It always has been. I’m tremendously proud of what this company does, our mission, vision our values.

How we go into the marketplace. It's really a spectacular mission that we show up everyday helping people get healthier and the opportunity to earn more money. It’s a spectacular company. We appreciate your support, you guys have been tremendously supportive of me, of the Company, of everything that we do.

Looking forward to another great quarter and being with you again soon. Thank you all very much..

Ladies and gentlemen, this does conclude the Herbalife fourth quarter full year 2018 earnings conference call. We thank you for your participation. You may now disconnect..