Good afternoon and thank you for joining the Third Quarter 2020 Earnings Conference Call for Herbalife Nutrition Ltd. On the call today is Dr.

John Agwunobi, the company’s Chairman and CEO; John DeSimone, the company’s President; Alex Amezquita, the company’s Senior Vice President of Finance, Strategy and Investor Relations; 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..

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 involve assumptions and are subject to known and unknown risks 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 and quarterly report on Form 10-Q. Our forward-looking statements are based upon information currently available to us.

We do not undertake any obligation to update or release any revision to any forward-looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events.

In addition, during this call, certain financial performance measures maybe 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 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, John Agwunobi..

Good afternoon, everyone. Thank you for joining us on the call today. During the third quarter, we achieved another worldwide sales record, with reported net sales exceeding $1.5 billion and growth of 22.3% compared to the prior year.

Three of our six regions, North America, Asia-Pacific and EMEA, along with 24 countries set new quarterly net sales records. Volume points grew for the tenth consecutive quarter, and for the third quarter in a row, we set a new record high. The success was broad-based as we had volume growth in all 6 of our regions for the first time since 2013.

We have also seen growth in our sales force, which is now the largest it has ever been. In the third quarter, new distributors and preferred members grew 57% with increases in every region. Approximately, 65% of these new distributors and preferred members are millennials or Gen Z, part of an increasingly health conscious and younger demographic.

We believe that an increased interest in health and wellness is continuing to drive demand for our nutrition products. Our products and our innovative direct sales channel allow us to help consumers reach their nutrition goals through education and community, healthier eating and a more active lifestyle. Technology has been key during these times.

We have seen our distributors turn to social media in higher numbers to reach new customers and to stay connected. We are empowering our distributors with enhanced technology tools for ordering, analyzing business performance and customer retailing.

The combination of our traditional business methods and a more advanced digital infrastructure creates a more resilient sales force and channel. Additionally, our training activities have shifted to a virtual online format, which has extended our reach to an even larger audience.

At some of our larger events, attendance has been well above prior year levels. We expect to utilize an efficient hybrid event model in the coming years. I know what to pivot to our outlook for the future. For the fourth quarter, we expect the momentum to continue with net sales growth in the range of 10% to 20%.

Looking ahead to 2021, we expect to build off this year’s 13% year-to-date net sales growth and project full year 2021 net sales to increase between 3% and 11%. Alex will provide more details on our guidance.

We also announced today a distribution of warrants to our shareholders in an effort to provide the potential for enhanced value to all of our shareholders. Alex will also provide additional information on these ones and you can also find a Q&A document available now on our Investor Relations website.

Let’s dig a little deeper into our regional results. Starting with the U.S. where volume points were at an all-time high and grew 50% for the quarter. We continue to see spread across all our channels in the U.S. led by customer direct shipping, which increased approximately 90% compared to the prior year.

Sales coming from nutrition clubs also increased for the third quarter, including more home deliveries from nutrition clubs to their customers, an approach that has seen increased use as a response to the pandemic. Over the past two quarters, we have seen a material acceleration in new distributors in the U.S.

with year-over-year growth of 75% in Q2 and 85% in Q3. Our analysis into the behavior and ordering patterns of this new distributor court shows similar trends to distributors that entered the business prior to the pandemic. The activity rates and productivity of these new distributors gives us confidence in the future retention rates of the U.S.

business. In China, volume points grew 1% compared to the third quarter of 2019. Although meeting attendance is not back to historical levels, we are encouraged that certain cities in China are beginning to allow larger in-person group meetings to take place.

These types of large gatherings have not taken place in China since last year’s 100 Day Review and we expect to utilize a combination of in-person and virtual meetings going forward in China. India returned to growth in the quarter increasing by 16% compared to the prior year. Restrictions imposed in the market due to the lockdown continues to ease.

By the end of the quarter, our company locations were open to take orders, receive payments and to pickup products. However, we continued to see our members favor home delivery, where volumes still exceeds pre-pandemic levels.

The growth in India contributed to a record quarter for the Asia-Pacific region, which increased 10% versus the third quarter of 2019. In Mexico, volume points were up 7% in the quarter, following five quarters of single-digit declines.

New members in Mexico grew 26% during the quarter, with 58% of new members coming from the millennial and Gen Z demographics compared to only 51% at the end of last year. The EMEA region set another volume point record and grew 34% in the quarter, the 42nd consecutive quarter of growth, dating back to 2010.

The growth came from countries such as Spain, which was up 43%, Turkey, up 137% increased 82% and the united members are turning to social media to connect with their customers and are using technology to carry out their sales and training activities. Finally, South and Central America returned to growth and were up 16% in the quarter.

This was led by double-digit increases in Colombia, Chile and Peru, while Brazil was down just 1% in the quarter. Sales have rebounded as product access challenges from the pandemic have eased and we are seeing distributors utilize virtual events similar to what we have seen in other regions to improve the reach of their training.

Additionally, we have two leadership changes to share. Effective November 9, Bosco Chiu, who has been with Herbalife Nutrition for 27 years, has assumed the new role of Chief Risk Officer, where he will work across all business units to lead our enterprise risk management, internal controls, ethics and compliance strategy.

In conjunction with this move, Alex Amezquita, who celebrated his 3-year anniversary with the company this week, will become our company’s new Chief Financial Officer. He will now be responsible for all corporate financial functions at the highest level.

Both will report to me and with these executive leadership transitions, we have strengthened an already strong and high performing senior management team. I look forward to working closely with Bosco and Alex as they assume their new responsibilities.

So what you have heard today is that in the third quarter of 2020, Herbalife Nutrition continues to set records. I am confident in the resilience and in the innovation of our distributors, the future of our business and our continued growth potential. I now turn the call over to Alex to review the financials..

Thank you, John. Third quarter net sales of $1.5 billion represented an increase of 22.3% on a reported basis compared to the third quarter in 2019. Currency normalized during the third quarter, but still drove a headwind of approximately 280 basis points. Adjusting for the change in foreign exchange rates, net sales for the quarter increased 25.1%.

We reported net income of approximately $138.1 million or $1.04 per diluted share. Adjusted earnings per diluted share were $1.15, an increase of approximately 60% compared to adjusted EPS of $0.72 for the third quarter last year.

The impact of currency fluctuations represented a year-over-year headwind of approximately $0.12 on results for the third quarter. Note that our reported and adjusted results this quarter include expenses related to the China Growth and Impact Investment Program of approximately $3.2 million.

Reported gross margin for the third quarter of 78.8% decreased by approximately 165 basis points compared to the prior year period.

The decrease was primarily driven by the unfavorable impact of foreign currency fluctuations and increased freight costs related to orders being shifted to home delivery versus member pickup as a result of COVID-19 that we called out a quarter ago.

Third quarter 2020 reported SG&A as a percentage of net sales was 34.8% and adjusted SG&A as a percentage of net sales, was 34.6%. Adjusted SG&A, excluding China member payments, was 26.5% approximately 240 basis points lower than the third quarter 2019.

This was largely driven by a decrease in member promotion and event cost as a result of delays, cancellations and reformatting of promotions and events due to the COVID-19 pandemic. A significant amount of the under-spend on these items from the first three quarters of the year, is projected to be spent in the fourth quarter.

Our third quarter reported effective tax rate was approximately 19.5% and our adjusted effective tax rate was 16.3%, which was lower than the prior year primarily due to favorable changes in the company’s geographic mix of income and a reduction in the income tax rate of certain foreign jurisdictions.

As John mentioned, we are issuing guidance for the remainder of 2020 and providing initial guidance for 2021.

While there is still uncertainty related to the impact that COVID-19 might have on the future performance of the business, we have gained increasing confidence in the business and operational trends in response to the impact of COVID-19 throughout 2020. For the first quarter of 2020, we estimate volume point growth in the range of 10% to 20%.

Net sales are also expected to be in the range of 10% to 20% growth, which includes an approximate 350 basis points currency headwind versus the prior year. Fourth quarter reported diluted EPS is estimated to be in the range of $0.45 to $0.75 and adjusted diluted EPS to be in the range of $0.55 to $0.85.

Reported and adjusted diluted EPS includes a projected currency headwind of $0.10 compared to the fourth quarter of 2019. The sequential reduction in EPS from Q3 to our first quarter guidance is primarily driven by the previously mentioned increase in SG&A due to advertising and promotion that was deferred from the first three quarters of the year.

However, fourth quarter adjusted diluted EPS guidance implies full year 2020 adjusted diluted EPS guidance of $3.48 to $3.78, which implies 23% to 34% growth over 2019. Initial guidance for 2021 builds off the double-digit top line growth implied in our full year 2020 guidance.

2021 worldwide volume points are estimated to be between flat and 8% growth, with worldwide net sales growth of 3% to 11% on a reported basis, which includes an approximate 80 basis points tailwind due to currency. Constant currency net sales are expected to be in the range of 2.2% to 10.2% growth.

Full year 2021 guidance for reported diluted EPS is in the range of $3.50 to $4 with adjusted diluted EPS in the range of $3.65 cents to $4.15. Reported and adjusted diluted EPS are expected to be currency neutral compared to 2020.

EPS guidance excludes the impact of any future expenses related to the China growth program, share purchases and excess tax benefits from equity exercises.

Turning to cash flow and our share repurchase activity, during the first three quarters this year, we generated over $500 million in cash flow from operations and we currently have over $1 billion of cash on hand.

During the third quarter, we also completed $800 million in share repurchases, which included $750 million for the modified Dutch auction self tender offer completed in August, followed by $50 million of open market repurchases over the remainder of the quarter.

We have approximately $700 million remaining on our existing share repurchase authorization and we will prudently return excess cash to shareholders on a consistent basis.

To potentially unlock additional shareholder value, we are making a pro rata distribution of warrants where shareholders of record will receive one quarter of a warrant for each common share held. The warrants provide all of our shareholders the opportunity to potentially take advantage of the option value embedded in the warrant.

The exercise price of the warrant is $67.50 with a maturity of 7 years in which the warrant will only be exercisable at maturity. Should the warrants be exercised at maturity, the company has the ability to not settle the warrants and shares, which minimizes any impact on our diluted share count.

The record date for the distribution is November 16 and the payment date will be December 14. We continue to believe the repurchase of common shares, along with the distribution of warrants is consistent with the company’s long-term goal of maximizing shareholder value. This concludes our prepared remarks.

Operator, please open up the line for questions..

Thank you, sir. [Operator Instructions] Our first question comes from the line of Doug Lane from Lane Research. Please go ahead..

Yes, hi, good afternoon everybody and congrats Alex on your promotion.

Alex, can you elaborate on the warrants here and what the expected dilution is to your EPS count going forward?.

Hi, Doug. Thanks for the well wishes. Sure. So the warrants themselves, the exercise price is $67.50. The way that the warrants will be accounted for is effectively treasury stock method. So, while the share price is below the exercise price, there is actually no dilution at all to EPS.

As our stock price becomes above the exercise price, again, we will use treasury stock method in which that means the value above $67.50 will be what is reflected into the denominator in calculating adjusted EPS.

It’s also probably worth noting that while there is that potential dilutive effect to EPS, overall shareholders if you receive this warrant and you are holding both the warrant and the equity that you have, there is no dilution to your equity value that you are withholding, because the dilution that is in the EPS is countered by the accretion of the ultimate underlying shares that you are holding.

So, effectively, if you hold the warrants, you are no different from an equity ownership in the company and effectively no different from a value perspective from that lens..

Right. No, that’s helpful. Thanks.

And how have you calculated the impact of warrants to your EPS guidance for next year?.

They are not – they had zero impact on the EPS guidance of next year, because obviously, we are below the stock price or the exercise price, so that is a non-factor..

Okay, that makes sense.

And then you mentioned $700 million revenue stock buyback, I assume, no stock buyback is factored in your EPS guidance for next year as of yet as well?.

That is correct. And as you probably heard in my remarks, post the tender offer, post the $750 million of tender offer, we did do $50 million worth of open market repurchases. I think going forward, again, I think this is the message we have been saying the company generates a lot of cash.

We typically don’t have a lot of uses for those cash or excess cash returning cash to shareholders by way of the repurchase is a good way to do that.

I think those – that $50 million level that we did last quarter is probably a good level, generally speaking, as we look forward, obviously, it might be less, it might be more depending on the facts and circumstances of the quarter, but back to your original question, guidance does not have any of those repurchases factored into the – factored into that EPS guidance for 2021..

Okay, thanks.

And then just lastly, the acceleration in growth here has been pretty astounding and I have dealt with these models for a long time and I just need help understanding how you expect this momentum – this acceleration that we are seeing to revert back to the single-digits so quickly in 2021?.

Yes. So I think if you look at the guidance range that we have in Q4, right, so Q4 is volume point growth between 10% and 20%.

So, I think even in Q4, what we are effectively saying is, you are on the high end of the range, the business continues to perform as you have seen through much of Q2 and through Q3 and in the low end of the range, it is beginning of a deceleration to a more normal growth rate.

Now, obviously, we are still in a circumstance where there is not as much visibility as we have historically had, but as we look at the sustainability metrics, as we look at the underlying metrics, we can see the top end of the range being a plausible outcome and we could see the low end of the range be something as COVID might have some impact on the business..

Yes, Doyg, this is John, I am going to jump in and just add to Alex’s comment. Look, I mean, the growth rate this year is tremendous and you follow this industry for a long-time there. It’s – there are spikes in growth and some leveling off.

I like to look at our guidance and stack it up over 2 years to see that the sustained growth this year becomes part of the foundation. Once you start comping the numbers we have had this year, it gets a lot harder. So I prefer to – I think the easier way is to just look at to your stack..

Okay, fair enough. Thanks, John..

Thank you. I show our next question comes from the line of Karru Martinson from Jefferies. Please go ahead..

Good afternoon. I would like to offer my congratulations Alex as well on the promotion. Just in terms of the distributor growth, I mean, 85% in the U.S., what is the typical person coming in, in terms of their involvement here, you mentioned 65% globally, I think millennial and Gen Z’s, what are you seeing in the U.S.

and how are they spending?.

Yes, this is John De. I will take that one. I mean, the mix is mixing younger, it is skewing younger, which is exciting for us as a company. And I know you are asking for the U.S. specific, I don’t have the U.S. offhand, but in general, of course almost all of our markets, the new members coming in are millennials or Gen Zs.

Mexico was a market that was kind of further behind some of these other markets and in the third quarter 65% of their new members were Gen Z and Millennial. And so that’s a big pickup. So it’s this strength in non-distributor base getting younger and that’s exciting.

As far as their purchasing patterns, from an overall volume standpoint, not much different than what we have seen pre-COVID. So we got a lot more people coming in productivity, while most people are pretty standard, and the activity rates are pretty standard. So that’s also encouraging.

So it’s not a short term trial basis, so we are seeing pretty good sustainability from people coming in. That’s not dissimilar from what we have seen in the past..

Okay.

And then when we look at the product mix that you guys have during the quarter, are you still seeing kind of the immune essentials and things that are more COVID related outpacing the rest of the portfolio or is there some shift on that? Are you still seeing meal replacement and weight loss holding the bulk of the business?.

Yes, it is still broadly, across the product portfolio and pick one particular one particular product sector is disproportionately we are just making a material difference in the mix. We are seeing all boats rise here..

Okay.

And then when we look at the guidance for next year, how much is built in, in terms of new product introductions or how should we think about that pipeline as we go out to next year?.

When we gave guidance, we don’t necessarily give guidance from a product standpoint, we look more from, the distributor and sales metrics. So I don’t have a great answer to that question in that way.

I would say generally speaking, though, refreshing our product portfolio is instrumental for distributors to be successful out there in the field that is part of their ability to be competitive and remain competitive.

So I would say generally as we do product introductions that is just an underlying assumption in the effectiveness that we see them out in the field. So we continue to launch into different products as well. If you can continue to penetrate different segments of the markets, as, we have been talking a lot about the choice.

So as we talk about clean-label and those types of products, as we talk about further penetration into that sports line, and as we talk about further, investing in localization of favors specific in different markets, all of those, aspects help to help our distributors be successful out there..

Thank you very much, guys. Appreciate it..

Thank you. Our next question comes from the line of Hale Holden from Barclays. Please go ahead..

Thank you for taking the call. I had two questions for you, Alex. I was just wondering the thought pattern behind the warrants.

I am sure you had multiple different things on the whiteboard that you are considering why you have the warrants for the most efficient, sort of shareholder distribution method?.

Sure. So there is no judgment on most or least, to me, the loans become just another level in unlocking shareholder value or the potential to unlock shareholder value. Obviously, there is a lot going on in the business, we had a great Q2, we continue to have a great Q3 as we look into guidance for next year, but it is going to continue to grow.

So from a company standpoint, the biggest way that we can return shareholder value is to make sure that this business continues to grow. There are other things that the company can deal with its capital structure, in the form of share repurchase, which is a leverage and now we have this warrant distribution.

And candidly, the warrant distribution provides an opportunity, not an obligation, but provides an opportunity for a shareholder to potentially take advantage of the option value embedded in the warrant. And so I don’t think it’s usually exclusive.

It’s just another whether in the set data shareholders may or may not take advantage of as we move forward. So that’s, sort of the rationale and how I would put the warrant in context with all the other things available to share holder investing in Herbalife Nutrition..

Got it. And then my second question is we can kind of track you guys on WeChat and the level clearly seems like it’s very high.

And I was wondering with the resumption of the bigger in person China meetings, if that would be a growth accelerator in 2021 or if alternatively, do you guys think you did such a good job virtually this year, that was just sort of more additive or how I should think that through?.

Yes sure. This is John De. And so I assume we are talking on WeChat, you are talking about personal stores that we helped create for our members in China on WeChat, you get a lot of things the volume going to net personal store in Q2 is in the low 20s. In Q3, it was in the mid-20s. It’s building, but it’s still got a lot of growth left.

Meetings, by the way, are not fully back in China, not even close to big cities. As a matter of fact, meetings still have a lot of restrictions in some of the rural areas, which is where we are seeing some of the strength is more in the rural areas and not in the big cities is because the meetings are coming back.

But I suspect over time next year and the year after you will see a big acceleration, the sales that are coming from the digital platform as we enhance both the functionality, because it’s a fairly new tool and the training behind it..

Great. Thank you so much. I appreciate it..

Thank you. Our next question comes from the line of Sebastian Barbero from Jefferies. Please go ahead..

Hi, thanks for taking the question and congrats on a great quarter. I was wondering if you could talk more about the trends in North America and Europe.

I am trying to understand what is leading to this sizable outperformance relative to other regions and is it related to higher adoption of digital tools in developed markets?.

So, this is John De. I will take that one too. So it’s really a triad of factors. It’s three things. It’s first and foremost customer interest in the product. Okay, that’s the foundation.

Behind that, of course, is distributor engagement, which is incredibly strong right now and then the third which is how you combine those two, it is the use of technologies of a bunch of different technology platforms and social media platforms.

And in the developed markets, those are stronger the infrastructure is stronger behind some of those tools and certainly even the ability to deliver the products and things like that are easier in more developed markets..

This is John here.

I just add that within the distributor engagement piece, there is also the fact that there are many potential distributors sitting at home looking for new ways to fill their day to generate income for their families to perhaps start new businesses that make it easier for distributors as they recruit their sales force as they build their sales team..

Thanks.

And then switching on to China, I was just wondering, what is your full year or what is your 2021 guide in that for growth?.

Yes. So we don’t provide guidance by region. So just generally, I have just pointed to the overall volume growth of 2021..

Okay.

And many of your peers in the industry have signed in issues with their supply chain, anything to report you or it’s been pretty smooth from you guys?.

Yes, it’s been pretty smooth and has not been entirely smooth. That was mostly every question just substantial sales growth, has created some out of stocks on some products and it’s been painful for some distributors who sell those products. It’s been manageable.

But certainly, if we have had an impact from it, it’s tough to quantify, but it’s certainly something we have been able to overcome, but it’s not – it’s not non-existent..

Okay.

And last one on CapEx for ‘21, it’s almost double what it was in 2019, but in the – I have been around their investment in ‘20, just a catch up effect?.

That’s right. It’s a bit of a catch up. Obviously, the volume this year, part of it is going to be into our manufacturing to help with being able to sustain net volume, not only for next year, but for the – for our growth trajectory going forward.

Part of it’s for technology continuing to invest in technology, particularly around distributor tools and part of it is just spikiness..

Thanks..

Thank you. I show our last question comes from the line of Ivan Feinseth from Tigress Financial. Please go ahead..

Thank you for taking my question and congratulations on another incredible quarter and congratulations to Alex and Bosco on their promotions..

Thank you, Ivan..

Well – thanks, first of all, for the great growth, where do you see the drivers or where did you see the drivers coming from especially since you said that the increase in distributors is working more towards younger people, towards millennials, what product lines are driving people to Herbalife to become a distributor, to become a customer and so where do you see like the key drivers?.

Well, I mean, one thing that is a broad question. And there is a lot of different ways we can take it. But I think, a piece of the question could be answered in some of the product categories that we are going to attract different demographics and different folks.

So clearly our H24 sports line, attracts the younger demographic and active, healthy active lifestyle demographic that seems to resonate with all demographics, but particularly with that younger demographics. So we know it’s a huge opportunity.

And we are seeing that opportunity, as we have rolled out that that sort of sub brand, if you will, resonating with the younger generation..

Yes. The other thing, by the way, that we are pretty excited about on a go forward basis is the fact that we have just launched in the U.S. two products that I think they are going to appeal not only to Gen Z and Millennials but perhaps even to older customers as well.

So this is less about the answer to your question on recruiting younger distributors and more to the fact that we were hoping to engage and retain a broad swath of customers as we go forward. We want you we have actually launched a couple of, I think, innovative products in the U.S.

recently, memory armor, which is a 300 milligrams of Bacopa, which is an Indian traditional herb with actually a fair amount of science behind it, that it is known to impact cognitive function, and brain health and then our very first entry into the cannabinoid marketplace with two topical products, a balm and a serum for adult use on the skin.

And containing, I think, really material amounts of cannabinoid hemp extract it is the beginning of our journey into that space. It’s called Enrichual. And I think it’s going to be an amazing product in the U.S. and at some point, we will take it to other countries as regulation allows..

I would like to get into more specifics on some of that nutrition that I don’t want to do it here. I welcome the opportunity to speak offline..

Absolutely..

Then just two other things when we spoke about there were some shortages of, out of stock.

Do you think that the incredible results could have even been more incredible if the inventory was deeper?.

So yes, we do there were some sales loss, certainly when we went out of stock, I am not going to get into quantifying and the results are great. And so probably would have been immaterial to the overall performance, but definitely a loss in sale..

And what were some of the, like, the largest selling single items in the quarter if you can just give some overview or quick highlights?.

Well it is still, Formula 1, which is a meal replacement shake is our key products, and our Aloe products still represent a huge portion of our sales,.

And our nutrition clubs around the world, have done very well in this last quarter that two or three quarters, actually. And those are products that are their Mainstays. F1, Aloe, and Tea..

Adding on to that, Ivan, really across all of our categories, I mentioned this in an earlier question all boats have risen weight management is up 18% targeted nutrition is up 28% our energy line is up 32%. And so I mean, that’s that kind of gives you some perspective, it’s really all boats rising..

Then just quickly as an example, there was an article in the Wall Street Journal that saying one of the even younger people who have had COVID are experiencing memory loss, do you think that’s the driver of the new memory product or helping it?.

No, it’s completely unrelated. We have actually very, very carefully thought to separate anything that we do from the pandemic as to how to deal with a lost those that are suffering.

And we have been very clear, the team and our distributors are focusing on our traditional business, traditional business is performing and it’s, not about a direct response to COVID in any way..

Okay.

And then our last question, you keep talking about digital tools and investments in digital tools, what are some of the areas you are going to expand? And also you have some great content that you have on this Herbalife Fitness website, with, exercise videos? What are your thoughts? And how are you going to be incorporating that more into your customer engagement and, giving ways to like monitor progress and things like that?.

Yes, John De. I will take that as first, on the technology side, they fall into a number of different buckets by the way. Some of them is in fact capturing customer transaction data. Segmentation, as you know, it’s been rolled out on a number of countries, in 8 countries as of today.

Over the next 6 months, it will be an 8 more, by the end of next year, 80% of our volume, maybe in excess of 80% of our volume will come from countries that have the preferred customer program and that there is a lot of programming in there country by country. It’s not something you just turn on the switch and roll it out. So, that’s certainly one.

There are POS tools that we will roll out. So the U.S. as a version of a POS tool, we would look to roll that out in countries that want it. And there are a number of countries that want it, because we think that’s the efficiency tool for distributors to have clubs, but it can be used for more than just clubs.

And I think it also can help increase the economic value of their customers. There is also just general online tools, so we have tools that are online sign-up, online ordering, those are the best-in-class, for us, we will get rolled out globally.

So, this is just a whole host of tools that we are going to invest in over the next year plus it will take more of the year by the way, but big investment comes next year. And then there is of course on the sports side, we are going to look to make sure that that portal has got all that information, it is easy to use in different formats.

So, it can be mobile and things like that. So I think not only it ties into our Herbalife 24 program in general, but even those who are on Herbalife 24, there will be a version of fitness model for them also to do some basic fitness. Thanks for the questions..

Thank you and congratulations again..

Thank you..

I show no further questions in the queue at this time. I would like to turn the call back over to the Chairman and CEO, John Agwunobi for closing remarks..

Thank you. I will keep it very quick. We are very proud of the work of our independent distributors around the world. They have really, I think, resumed and grown their businesses and supported their customers in a way that makes us all extraordinarily proud.

I am also particularly proud of our team and the way that it has responded to that growth until that increase in demand for our services, our products and you know, when all is said and done, a big congratulations from myself to Alex Amezquita, our new CFO and to Bosco Chiu who is transitioning from CFO to what I think is going to be an critically important role as Chief Risk Officer, our goal being to be a model in that space in the future.

The future is bright. And as we sit around here, we all feel like we have only just begun. And I will end on that..

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect..