Earnings Call Transcript
Herbalife Ltd. (HLF)
Earnings Call Transcript - HLF Q4 2025
Operator, Operator
Welcome, and thank you for joining the fourth quarter and full year 2025 earnings conference call for Herbalife Ltd. As a reminder, today's conference call is being recorded. I would now like to turn the call over to Erin Banyas, Vice President and Head of Investor Relations, to begin today's call.
Erin Banyas, Vice President, Head of Investor Relations
Thank you, and welcome to everyone joining us. With us today are Stephan Gratziani, our Chief Executive Officer; and John DeSimone, our Chief Financial Officer. Before we begin today's call, I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, which are both available under the Investor Relations section of our website. The presentation and earnings release include a discussion of some of the more important factors that could cause results to differ from those expressed in any forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or nonrecurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. And with that, I will now turn the call over to our CEO, Stephan Gratziani.
Stephan Gratziani, CEO
Thank you, Erin, and thank you all for joining us today. As we look back on 2025, I want to take a moment to reflect on what we have accomplished and more importantly, discuss where Herbalife is headed and how we are positioning the company for long-term growth. Our vision is clear: to be the world's premier health and wellness company, community and platform. And in 2025, we took deliberate steps to ensure our vision is supported by a strong and resilient financial foundation. We executed with discipline, reducing our total leverage ratio to 2.8x. This meaningful step down from 3.9x at the end of 2023 underscores the strength of our business and our strong sustainable cash generation. We also sharpened how we operate, how we engage and how we create value for our community, the company and our shareholders, and we are advancing innovation, modernizing our digital ecosystem and deepening engagement across our distributor network. With the momentum generated in 2025, we enter 2026 in a position of strength, advancing our strategy to build a more innovative and digitally enabled Herbalife. Let's turn briefly to our fourth quarter and full year financial performance. Q4 marked our second consecutive quarter of year-over-year net sales growth with net sales of $1.3 billion, up 6.3%. India delivered its highest quarterly net sales in Q4. And even without India's outperformance, our Q4 net sales would have still come in above the midpoint of our guidance range. Adjusted EBITDA for the quarter was $156 million. For the full year, net sales were up nearly 1% to just over $5 billion; and excluding FX, net sales were up 2.5% compared to 2024. Full year adjusted EBITDA was $658 million, with margin at 13.1%, marking our second consecutive year of adjusted EBITDA and margin expansion, and we exceeded guidance for both the fourth quarter and full year on each of these metrics. For the year, we generated $333 million in operating cash flows, and we continued strengthening the balance sheet, repaying $283 million of debt in 2025. It was a strong close to the year, and behind these positive financial outcomes is a growing engaged distributor network. Equipping them for success is one of our top priorities. This commitment is reflected in the continued strengthening of our distributor network. In Q4, North America delivered its second consecutive quarter of double-digit year-over-year growth in new distributors, up 19%. Latin America continued its positive trend, achieving its seventh consecutive quarter of year-over-year growth. And while new distributors joining worldwide was down 5% versus a very strong prior year, the 2-year stack provides a more meaningful view. On a 2-year basis, new distributors are up 16%, with 4 of our 5 regions reporting increases, reflecting sustained multiyear momentum. These results underscore the foundational work we have done to support our distributors with enhanced training, improved digital tools and comprehensive resources, all tailored to the needs of each region and designed to position them for success. We will continue to provide them with innovative products and effective tools and training to help them generate interest, drive stronger engagement, increase repeat purchases and maximize long-term customer value. Innovative products are a key part of that equation, providing our distributors with products that excite existing customers, attract new customers and support increased sales remains central to our strategy. Driven by this commitment, 2025 was a strong year for product innovation as we continue to broaden and strengthen our portfolio across key categories. In July, we advanced our weight management offering with the successful launch of MultiBurn. In September, we broadened our skincare portfolio with HL/Skin in EMEA, which is based on cutting-edge K-beauty formulations and supported by an AI-powered facial analysis tool. And in December, we expanded into the high-growth healthy lifespan category with Life I/O Baseline. Beyond these innovative launches, we continue to optimize our global product portfolio to align with the evolving consumer trends and preferences while tailoring our offerings to resonate with local markets. In 2026, we are building on this momentum with exciting new product launches that further modernize and expand our portfolio, supported by new digital capabilities that enhance human connection. The human connection has always been at the heart of Herbalife. As a distributor-led nutrition company, our strength lies in the one-to-one relationships our distributors build with their customers. Our distributors take the time to understand a person's individual needs and support them throughout their health and wellness journey. These fundamentals remain unchanged. What is changing is how we deliver them because we see a future of health and wellness that is even more personalized, data-driven, proactive and accessible. We are modernizing the experience to make it more connected and more effective. We will continue to provide curated product recommendations while laying the groundwork to deliver personally formulated nutritional supplements. Over time, this personalization will leverage data and insights from multiple inputs such as blood biomarkers and connected devices. Central to this strategy is Pro2col, our health and wellness operating system. Since acquiring the Pro2col technology in April of 2025, our focus has been on building a digital experience that supports the strength of our business, leveraging digital tools to enhance, not replace the human connection at the core of our go-to-market strategy. We've implemented a strategic phased beta rollout designed to integrate in-market insights from distributors and customers, enabling us to enhance capabilities and introduce new features in a way that drives the greatest impact. In December, we advanced to the second phase of our beta program with the release of Pro2col Beta 2.0, which included enhancements to the recently launched distributor marketing pages and coach dashboard. We believe our phased strategy is working. The beta group is engaged, providing feedback that is helping us refine the digital experience to ensure it integrates into distributors' daily methods of operation and meets real-world needs. We have expanded the availability of beta access to distributors and customers in the U.S., Canada and Puerto Rico and will begin extending it to select EMEA markets this year. Pro2col is more than a digital tool. It's a key strategic component of our platform vision. It adds a connective digital layer that enhances distributor engagement, supports customers in building sustainable nutrition and healthy lifestyle habits, and generates data that helps our distributors support customers more effectively. Over time, we believe this approach will broaden our reach, making Herbalife more attractive to a wider audience of future customers and distributors. By combining Pro2col's data and technology with our recently acquired proprietary manufacturing capabilities, we are set to deliver precision-made nutritional supplements tailored to an individual's needs and goals at scale. U.S. distributors in the initial Pro2col beta group will have first access to these personalized nutritional supplements by the end of the first half of 2026. Before I close, I want to highlight the exciting announcement we made earlier today. Global sports icon Cristiano Ronaldo has acquired a 10% equity stake in HBL Pro2col Software, which is the Herbalife subsidiary that holds the Pro2col technology. Cristiano invested $7.5 million, along with the commitment to provide services and sponsorship rights to Pro2col. It reflects Cristiano's deep personal commitment to nutrition and performance and our shared vision to scale personalized nutrition and wellness around the world, bringing together science, data, AI, innovation and community to improve the lives of millions. We believe Cristiano's involvement will elevate the visibility of Herbalife and Pro2col, expanding awareness and supporting broader engagement and adoption. After 12 years as Cristiano's global nutrition partner, we are thrilled to welcome him as a strategic investor and business partner. Over the past 45 years, we have built an incredible company with a strong foundation. As the largest publicly traded direct selling company with a global network of more than 2 million independent distributors across 95 markets and over 60,000 nutrition clubs worldwide, we are uniquely positioned to extend our leadership in global health and wellness in ways we believe no other company in the world can replicate. We will continue to build on this solid foundation while also forming strategic partnerships like the one we announced today with Cristiano Ronaldo. We will also continue to identify opportunities that bring differentiated products, services and capabilities that are aligned with our platform vision and add value to our customers, distributors, company and shareholders. As we move into 2026, we are carrying forward the momentum of 2025 with confidence in our strategy, our leadership team, our distributor community and our ability to execute with discipline. Now I'll turn it over to John DeSimone for a detailed review of our results.
John DeSimone, CFO
Thank you, Stephan. Turning to our fourth quarter financial highlights on Slide 8. Our remarks today focus on the quarter with a summary of full year results in the appendix. As Stephan just described, we delivered a strong finish to 2025. Net sales for the fourth quarter were $1.3 billion, with 6.3% growth versus Q4 of 2024 and exceeding the high end of our guidance of 1.5% to 5.5% year-over-year growth. Q4 marked our second consecutive quarter of growth and our strongest year-over-year increase since the second quarter of 2021. On a constant currency basis, net sales increased 5.5% year-over-year, also exceeding guidance. We have now delivered year-over-year constant currency growth in 7 of the last 9 quarters. While FX rates moved slightly against us versus our Q4 guidance assumptions, we still realized an 80 basis point tailwind. Our Q4 net sales outperformance was driven by a record quarter in India with net sales of $250 million, up nearly 15% year-over-year and exceeding our expectations. We believe this was fueled by stronger demand following the reduction of the goods and services tax rate on the majority of our products in late September 2025. Importantly, while India outperformed our expectations, even without this upside, Q4 net sales growth would have been above the midpoint of our guidance range. Adjusted EBITDA was $156 million, exceeding the high end of our guidance range of $144 million to $154 million. Adjusted EBITDA margin was 12.2%, down 20 basis points year-over-year, driven primarily by FX headwinds of 100 basis points and an approximately 90 basis point headwind from employee bonus accruals, which we previously communicated as a meaningful and expected headwind given the 2024 annual employee bonus was fully accrued by the end of Q3 of 2024, and therefore, we had no bonus expense in last year's fourth quarter. These pressures were partially offset by pricing benefits. Adjusted EBITDA excludes an approximately $11 million transition charge related to the September 2025 India GST amendments as the company no longer expects to fully utilize certain input GST credits generated before the law changed. CapEx for the fourth quarter was $19 million, at the low end of our guidance range of $18 million to $28 million. Capitalized SaaS implementation costs were approximately $9 million in the quarter. Gross profit margin was 77.5% for the quarter, down 30 basis points year-over-year. Gross margin was pressured by approximately 100 basis points of FX headwinds, 30 basis points of unfavorable sales mix and 30 basis points of input cost inflation. These were partially offset by 80 basis points of pricing benefits, 10 basis points from lower outbound freight costs and 30 basis points from other favorable cost changes. Fourth quarter net income attributable to Herbalife of $85 million includes $54 million of noncash deferred tax benefits related to the release of valuation allowances in certain of our European subsidiaries, which were established in the fourth quarter of 2024 following changes to our corporate entity structure. Adjusted net income for the quarter was $48 million. Adjusted diluted EPS of $0.45 includes $0.07 FX headwinds versus the fourth quarter of 2024. Our adjusted effective tax rate was 34.7%, down from 40.6% for the Q4 of 2024, which drove an approximately $0.04 favorable impact to adjusted diluted EPS. The lower effective tax rate in 2025 was driven primarily by the geographic mix of income, partially offset by noncash updates to our assessment of uncertain tax positions. For the full year 2025, our adjusted effective tax rate was 29.1%, slightly above our expectations of 27% to 28% due to discrete items in the quarter but still below last year's tax rate of 30.2%. For full year 2026, we expect our adjusted effective tax rate to be approximately 30%, in line with 2025. Operating cash flow was another highlight this quarter at $98 million, up 41% year-over-year. For the full year, operating cash flow totaled $333 million, up 17% versus 2024 and underscoring the durability of our cash generation. Credit agreement EBITDA for the fourth quarter was $173 million. We also repaid $30 million of debt in the quarter, maintaining a total leverage ratio of 2.8x while also increasing our cash balance by approximately $50 million. For additional details regarding the adjustments between adjusted EBITDA and credit agreement EBITDA as well as the calculation of our total leverage ratio, please refer to the presentation appendix and the earnings press release. Turning to Slide 9. Reported net sales for the quarter increased 6.3% year-over-year, while constant currency net sales were up 5.5%. We achieved year-over-year volume growth on a worldwide basis for the second consecutive quarter, up 3.1%. Pricing benefits were approximately $40 million in the quarter, and country mix represented approximately $10 million headwind to net sales. FX had a favorable impact of approximately $9 million in the fourth quarter, representing a year-over-year tailwind of 80 basis points I mentioned earlier. Moving to Slide 10. We have the regional net sales results for the fourth quarter. Three out of five regions delivered year-over-year net sales growth in the fourth quarter on both a reported and local currency basis. On a sequential basis, these same regions showed sequential improvement on both the reported and local currency basis. Latin America delivered its second consecutive quarter of double-digit year-over-year growth. Reported net sales increased 18%, with local currency results up 11%. Results reflected favorable year-over-year pricing and sales mix, approximately 3% volume growth and a 660 basis point FX tailwind. Within the Latin America region, Mexico posted another solid quarter with reported net sales up 19% year-over-year and local currency net sales up 9%, driven primarily by favorable year-over-year pricing, approximately 3% volume growth and significant FX tailwinds. EMEA reported net sales growth for the third consecutive quarter with reported net sales up 9% and local currency net sales up 5%. Higher year-over-year pricing, favorable sales mix and FX tailwinds were partially offset by less than a 2% decline in volume. In Asia Pacific, reported net sales increased 5% year-over-year, while local currency net sales were up 9%, driven by approximately 9% volume growth and favorable pricing, partially offset by unfavorable sales mix and FX movements. As I mentioned earlier, India delivered its highest quarterly net sales in the fourth quarter with reported net sales up 15% year-over-year and 21% up in local currency. Top line growth was driven primarily by an approximately 18% increase in volume, along with a favorable year-over-year pricing and sales mix, partially offset by FX headwinds. In North America, sales declined by less than 1% year-over-year on volumes that were down less than 2%. This is consistent with the expectations we've previously communicated. Execution remains strong and momentum continues to build as we enter 2026. We expect the North American region to deliver full year net sales growth in 2026. China net sales were down 4% year-over-year on a reported basis and 6% on a local currency basis, driven primarily by an 11% year-over-year decline in volume. This was partially offset by favorable impacts from changes in the benefits and timing of the China customer loyalty program as well as favorable FX. Turning to Slide 11. We see the key drivers of the year-over-year improvement in fourth quarter adjusted EBITDA despite an approximately 100 basis point FX headwind and an approximately $11 million employee bonus accrual headwind, given the 2024 bonus was fully accrued by the end of Q3 2024, as I previously mentioned. Adjusted EBITDA for the quarter was $156 million, with margins of 12.2%. On a constant currency basis, adjusted EBITDA was $168 million, underscoring the continued underlying strength of our business. Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our second consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix and input cost inflation driven by lower absorption rates. Salaries represented approximately $8 million headwind, largely reflecting merit increases implemented in the first quarter of 2025. Promotional-related expenses declined by approximately $6 million year-over-year. And lastly, unfavorable year-over-year FX movements resulted in an approximately $12 million reduction in adjusted EBITDA. Before moving on, I want to highlight a presentation change we made to the financial statements to simplify how we report distributor-related compensation and to better align with how we model these costs internally and have historically presented them in the segment disclosure in our 10-K and 10-Q. In summary, we have separated selling expenses from SG&A. We've taken the service fees of our China independent service providers and combined them with distributor compensation previously reported as royalty overrides. These expenses are now presented together within selling expenses on the P&L. Similar updates were made to the balance sheet and cash flow presentation. Importantly, this had no impact on prior period results or key financial metrics. This was simply a presentation change that combined distributor and service provider-related payments within our financial statements. For those looking for continued visibility into China independent service provider fees, that information remains available in our segment reporting disclosures in both the 10-K and 10-Q. Moving to Slide 12. I'll provide an update on the capital structure. We ended the quarter with $353 million of cash, up nearly $50 million from the end of the third quarter of this year. During the quarter, we made the scheduled $5 million amortization payment on the Term Loan B and repaid the $25 million outstanding under the revolving credit facility as of September 30. As of December 31, the revolver was undrawn. Over the last 2 years, we have paid down over $530 million of debt and reduced our leverage ratio from 3.9x to 2.8x. Our financial profile today is much stronger than it was 2 years ago; and depending on market conditions, we may consider refinancing portions of our existing debt. While there can be no assurances regarding timing or outcomes, a successful transaction could meaningfully lower our borrowing costs. Regardless of whether or not we pursue any capital structure initiatives, we remain committed to reducing our gross debt to $1.4 billion by the end of 2028. Turning to Slide 13. I will walk through our outlook for the first quarter and full year 2026. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis. For guidance on a reported basis, we used the average daily exchange rates for the first 3 weeks of January 2026. For the first quarter, we expect foreign exchange to have an approximately $31 million positive impact on net sales. While currency is expected to be a meaningful benefit to the top line in the quarter, it's expected to be neutral to EBITDA for the quarter due to timing. On a reported basis, we expect first quarter net sales growth of 3% to 7% year-over-year, including an approximately 250 basis point tailwind from currency. On a constant currency basis, we expect net sales growth of 0.5% to 4.5% year-over-year. Adjusted EBITDA for the first quarter is expected to be in the range of $155 million to $175 million on both a reported and constant currency basis. Planned capital expenditures for the first quarter are expected to be $10 million to $20 million. Moving to our full year guidance. For the full year, we expect reported net sales growth of 1% to 6% year-over-year, including an approximately 100 basis point tailwind from currency. On a constant currency basis, net sales are expected to be flat to up 5% year-over-year. Adjusted EBITDA is expected to be in the range of $670 million to $710 million or $665 million to $705 million on a constant currency basis. With respect to tariffs, our 2026 guidance includes a preliminary estimate of the impact of tariffs enacted through yesterday, which we are currently expecting to be immaterial. For 2026, we expect capital expenditures to be in the range of $50 million to $80 million. Separately, we anticipate capitalized SaaS implementation costs of $40 million to $60 million, which are incremental to CapEx. Lastly, for the full year 2026, we expect an adjusted effective tax rate to be approximately 30%. Before moving to Q&A, I want to close my opening remarks with one final comment. The financial performance of this business has transformed significantly over the past 2 years. Our sales trajectory looks much different now than it did 2 years ago as we carry a lot of momentum into 2026. Our adjusted EBITDA margin continues to expand and has improved by 180 basis points over the 2-year period. And we've generated substantial cash over the prior 2 years, despite meaningfully higher interest costs. And we have used that cash to pay down over $530 million of debt while lowering our leverage ratio from 3.9x to 2.8x. And while our performance over the last 2 years has improved substantially, more importantly, we believe we have a strong foundation, both strategically and financially, to further generate shareholder value over the long term. This concludes our opening remarks. Operator, please open the call for questions.
Operator, Operator
Our first question comes from Chasen Bender from Citi.
Chasen Bender, Analyst
So I know you guys don't traditionally give guidance by region, but I was hoping you could do a little bit of around the world and give some more color on how you're thinking about sales for the different geographic segments in 2026. I know you called out you're expecting growth in the U.S. But if you could kind of flesh out the comments for your other geographies, especially given the really strong India results and how the GST impact should kind of flow through until we lap those changes, that would be great.
John DeSimone, CFO
Yes. So we don't guide by region. I do want to give maybe a little bit of commentary. It'll be very high level. I will say that we're expecting net sales growth in every region with the exception of China. China is expected more of a 2027 event. And that's about, I think, all I really feel comfortable giving out.
Chasen Bender, Analyst
Okay. Got it. And then as it relates to Pro2col, obviously, there's a lot of excitement building around the organization on that. I was hoping you could kind of frame your expectations in terms of the sales contribution you're expecting from that program and kind of what you've assumed in 2026 guidance. And then I guess to kind of stay in the realm of guidance, just on the EBITDA side, too. You've exceeded your quarterly guidance in each of the last 8 quarters, and if my math is right, you're only guiding to 20 to 30 bps of margin expansion in '26. It seems like you've built in a lot of flexibility there. So I'm just curious to understand kind of what your assumptions are and what's driving that degree of expansion.
John DeSimone, CFO
So Chasen, that's a lot of questions. Let me try to address them all. On the Pro2col side, there isn't much revenue built in at this time. There's significantly more potential for growth than risk. We're currently in the beta phase, having launched commercially in the U.S. in July, and we expect gradual growth from there. We haven't integrated a lot yet, but we will start a few additional beta tests in other markets this year. However, beta testing doesn’t typically generate high volumes; it's mainly a process of acclimation and development. So again, the upside outweighs the downside risk in this area. Regarding SG&A, there is one complication related to the GST in India. A key factor driving sales in India is that the government reduced its GST rate, which is similar to a sales tax, from 18% to 5% for many of our products. This has significantly lowered prices for consumers and has been very advantageous. However, the GST rate for the services provided by our distributors and for our intercompany services remains at 18%. We previously could offset the input and output credits, but now we cannot. As a result, next year, we will face an additional cost of about $16 million from G&A and member compensation due to GST. This will have a negative impact on our bottom line. Our margins, excluding GST, would be approximately 30 basis points higher than what you see in guidance. Even so, we anticipate margin enhancement and improvement next year, which is important to note. There is a slight negative effect on the percentage due to the GST in India. Nevertheless, the GST in India is beneficial for our business as it boosts overall volume.
Operator, Operator
Our next question comes from Nicholas Sherwood from Maxim Group.
Nicholas Sherwood, Analyst
Kind of looking at the product categories, energy, sports and fitness was the fastest grower in 2025. Can you kind of talk about where that momentum came from? And how do you expect to continue that in 2026?
John DeSimone, CFO
Historically, we've seen that category outpace our overall company performance for quite some time. Although there's been a slight decrease in the percentage of our sales from weight management, we've seen a slight increase from targeted nutrition and sports. This growth is coming from various regions, including some growth in sports products following our launch in India this year. I don’t have specific market breakdowns for each category, but that’s the general picture of our business trends.
Stephan Gratziani, CEO
There was also a little bit of an uplift with Nutrition Clubs with Liftoff, which is a very popular product that specifically was designed in the H24 product brand. So that's helped a little bit of the growth here as well.
Nicholas Sherwood, Analyst
Okay. And kind of talking about Nutrition Clubs, I noticed in the 10-K, there was wording about doing training in Europe, Middle East and Africa on Nutrition Clubs for the distributors there. Can you kind of go into any more detail on sort of expanding that Nutrition Club infrastructure in that market or other markets?
Stephan Gratziani, CEO
Yes. Nick, I think you're referring to the Breakfast Budget Clubs, which is a particular model that started in the U.K., which there's a lot of interest, and we do kind of biannual master classes where we'll have thousands of people actually that will come either virtually or physically to learn about this particular model that started in the United Kingdom, which now is starting to take roots in other markets as well. It's a really powerful, small club grassroots where people are literally coming to the club every single day. They're interacting with distributors. They're weighing themselves. They're talking about what kind of food they're eating. They're taking products, and it's really a community-driven one. We actually have a little bit of an uptake as well here in the United States with some of the distributors that have gone to the U.K. and understanding the model. So that's part of the strategy that we have in terms of master classes and making sure that our distributors understand what's happening in different markets, so they can see how it relates to their own and to be able to kind of import it into models in areas and geographies that make sense for them.
Nicholas Sherwood, Analyst
My last question is about the positive retention rates of sales leaders, particularly in North America and Latin America in 2025. How much of that can be credited to the training programs, like the Mastermind program, that have been running for nearly two years? What factors do you believe contributed to the increased retention of sales leaders in 2025 compared to 2024?
Stephan Gratziani, CEO
Yes, there is an incremental improvement. We have a strong base of sales leaders, and the programs we have implemented to better support them—including enhanced education, improved support, and the key account management program—are definitely contributing to our success. The key account managers collaborate with specific leadership levels to review their business metrics, which is very beneficial. Reflecting on my experience as a distributor leader, I believe that when people are better educated and have a deeper understanding of their business, they develop more effective strategies. This all contributes to our progress. It’s challenging to pinpoint a single factor; rather, it’s the combination of various initiatives we've undertaken over the past couple of years that truly makes a difference.
Operator, Operator
Our next question comes from the line of William Reuter from Bank of America.
William Reuter, Analyst
So my first question is around products and how much they may have contributed to expanded sales in fiscal year '25 versus previous years. Was there an increase in that percentage of what you offer that was part of the contribution?
Stephan Gratziani, CEO
We had a very successful launch of MultiBurn just before Extravaganza, which significantly contributed to our performance in Q3. Overall, I believe we're doing well. In EMEA, we successfully launched the Skin product as well. We've been launching products at an unprecedented rate in the company's history, with two very successful launches. We're learning as we go, and with each new product rollout, we're becoming more effective in how we introduce our product lines.
William Reuter, Analyst
Got it. And then just secondarily for me, you have been increasing your number of distributor events over the last 2 years really. What is your expectation for fiscal year '26 in terms of are you going to be doing more events? Are you going to be doing fewer larger events and what the total spending on those may be on a year-over-year basis?
Stephan Gratziani, CEO
Yes, I'll let J.D. address the total spending. Overall, we align with market demands and regional needs. In India, we have increased our Extravaganzas, which are the major events. Last year in the Asia Pacific, we moved from having one to two Extravaganzas. It really varies depending on the region. Generally, we aim to hold more events and increase attendance. We have seen annual growth in this area. After the disruptions caused by COVID, where we weren't able to hold events, we are now ramping up our activities. But I will refer to J.D. for the overall cost details.
John DeSimone, CFO
Yes. There's multiple lines we look at when we think of supporting our distributors, and events is just one of those lines. And event costs are expected to go up next year. A little more than sales is going to go up. But we're funding it both from the sales and from some other lines in the advertising promotion area. So it's not a material change overall.
Operator, Operator
Our next question comes from the line of John Baumgartner from Mizuho Securities.
John Baumgartner, Analyst
I'd like to ask Stephan about the investments in personalized technology and specialized new products like MultiBurn and Life I/O. It seems like a new direction for Herbalife that aligns with the evolving health and wellness market. As you pursue this path with an updated product portfolio, how do you assess the fit between products and customers? Is there an opportunity to attract higher-income households or more dedicated supplement users to complement your existing customer base? How do you plan to enhance your product offerings while also expanding your consumer base to maximize revenue?
Stephan Gratziani, CEO
Yes, that's a great question. The strength of our business varies by region, with different levels of product usage driven by diverse models and motivations. In markets like the United States and Europe, we see a more sophisticated customer with higher expectations. Some markets lag slightly in this regard. We believe there will be a growing demand for personalized solutions, which might mean tailored formulations for some or just the best data-driven product choices for individuals in other markets. We're broadening our offerings to attract a wider audience while also aiming to engage deeper with our existing customer base, which represents a significant $5 billion business across 95 markets. One noteworthy development I've not yet mentioned is our announcement regarding Cristiano Ronaldo. As perhaps the most-followed athlete globally, he continues to excel at 40 years old due to his commitment to health and wellness. His career has revolved around optimizing his performance through personalized health strategies. This partnership, formed 12 years ago, aligns perfectly with our philosophy and the direction of our company, focusing on data-driven health solutions. Pro2col and Herbalife emphasize detailed data that informs precise nutritional needs and overall lifestyle improvements. Real, lasting change comes from this integration of data and lifestyle, supported by our community of 2 million distributors who have been delivering results for 45 years. So, while I may have provided more detail than you requested, we are committed to expanding our customer base and enhancing our existing markets and product lines. We are excited about our future direction.
John Baumgartner, Analyst
That was great. And then my follow-up on India, the volume growth there has decelerated going back to, I think, around mid-2024, but you saw a really nice bounce back in Q4 '25. And John, you mentioned the GST benefit. And I'm curious to the extent to which you saw any sort of related one-off benefits supporting volume this quarter relative to the extent to which this reduced GST, you can ride it as a tailwind until it's lapped late in 2026.
John DeSimone, CFO
Yes. We expect it to be a tailwind until we reach the comparable period in late September of 2026. It may become a declining tailwind. The GST is not anticipated to change from this reduced rate. However, the excitement around it might diminish somewhat, but we definitely expect it to be a tailwind for the next 9 months.
Operator, Operator
Our next question comes from the line of Carolyn Popelka from Barclays.
Carolyn Popelka, Analyst
This is Carolyn Popelka on for Hale Holden. My question relates to the distributor to member model. We've seen pretty outsized distributor growth, especially on a 2-year stack. So I was wondering if you could expand on the relationship between distributor growth and members growth. I think intuitively, with the current market, you might think more people want to be distributors looking for extra income, but on the other side, people might have less discretionary income for health and wellness. So is there a mismatch there?
Stephan Gratziani, CEO
Carol, thanks for the question. I think I just want to make sure, but you're talking about preferred members, I think, which is more of the customer type that you're talking about?
Carolyn Popelka, Analyst
Yes.
Stephan Gratziani, CEO
Okay. Good. Yes. Well, look, it's both. The opportunity that people are looking for to have a financial opportunity, I think we're all clear that, that remains and will continue to remain something that there's a large attraction and interest and need for. At the same time, you said it. Health and wellness and people taking care of themselves and reaching their goals and what's important to them is also a major factor. The one thing that you might see just in terms of the distributor recruiting numbers versus the preferred member numbers is that we did launch 2 years ago something that we called Herbalife Premier League, which put a bit of a focus on distributor recruiting. And when we did that, there was a little bit of a focus on distributors more than preferred customers. For the first year that we ran the program, it ended up having more of a focus on the distributors. We made an adjustment in 2025 to actually account for preferred customers because a lot of markets in their models and flows they really kind of led with preferred customers. So I think as you see those numbers, there might be some level of fluctuation. All in all, it really depends on the distributor models. We could have more preferred customers in India, it drives a lot of growth for us. It's not direct distributor recruiting that drives because it's really attuned to their model and the way that they actually build the business there. So I would say both remain highly interested and attractive, and our distributors are focused on both.
Operator, Operator
Our next question comes from Doug Lane from Water Tower Research.
Douglas Lane, Analyst
I just want to follow up on the Pro2col here. You made the small IP acquisitions last year, and I don't remember Herbalife making a lot of acquisitions in the past. And now you have Ronaldo with an equity partnership in one of your parts of your business, I don't remember you doing a lot of equity partnerships in the past. So is this just one-off opportunistic? Or is this part of a new strategy going forward?
John DeSimone, CFO
Doug, this is John. I think most of that question is going to go to Stephan, but let me see if I can set it up financially anyway for this audience. So our superpower, our strength is our distribution reach, right? We're in 95 countries, tens of thousands of communities, great reach into the consumer base around the world. We are interested from an acquisition standpoint in companies that are relatively small that have great content that don't have that distribution. And so we can buy the content and leverage that strength of ours. And for investors, what I think is important to understand is it augments the core business. It's not instead of. Second is it's not a huge use of cash. We're still looking to do small acquisitions but still get our total debt down to $1.4 billion by the end of 2028. And that content can be technology content. It can be product content. In addition, of course, if we can partner with somebody that can help expand our business in a way that makes economic sense, we're looking to do that, too. So it all has to fit our vision. And so I'm going to pass it to Stephan. He can maybe talk more a little bit about the vision and how things fit.
Stephan Gratziani, CEO
Yes, Doug, thanks for the question. When we consider the four things we've focused on for 45 years, it boils down to what to measure regarding health and wellness. When I started in 1991, our primary focus was weight loss. Customers would ask how much weight they wanted to lose, and we would measure their weight along with various body measurements like hips, waist, thighs, and arms. We've always prioritized measurement, but today, the spectrum of what people monitor for health and wellness has expanded significantly. There’s substantial value in the insights people seek about their health and wellness. As for acquisitions and partnerships, building on what John mentioned, there are promising opportunities in the area of what to measure. Regarding what to take, we’ve been recommending our Herbalife products for 45 years. We believe there are also opportunities in beneficial products or technologies, like personalized formulation technologies, that align with our platform. In terms of what to do, we used to provide guidance on paper, detailing how to take our products and suggesting dietary intakes. Now, this process is digitized. When we think of Pro2col, it involves helping people know what to do and monitoring their progress, which requires a digital application. It's not just about giving instructions but also providing support, such as reminders about hydration and nutrition. These four areas include what to measure, what to take, what to do, and how to support customers. The fifth aspect is who to do it with—the distributors we want to connect more closely with their customers, enhancing customer support, creating more value, and fostering longer, more engaging relationships. Acquisitions are aligned with our platform vision, not aimed at diversifying our business. We make these acquisitions to strengthen our direct sales model and support the 2 million distributors across 95 markets who are fundamental to our success. Our goal is to offer them more appealing products and opportunities to engage customers and grow their businesses. As John pointed out, we are looking for small products and services that enhance our vision and add value for our distributors and customers.
Operator, Operator
At this time, I would now like to turn the conference back over to Stephan Gratziani for closing remarks.
Stephan Gratziani, CEO
Thank you, everyone. I will keep this short, but I believe we can confidently say that we have returned to growth. We recorded growth in Q3, Q4, and for the entire year of 2025. We are forecasting growth in Q1 and for the full year of 2026. This performance reflects our disciplined team. We are practicing fiscal responsibility, strengthening our foundation, expanding margins, generating strong cash flows, fortifying our balance sheet, and reducing total leverage from 3.9 to 2.8, all while positioning the company for sustainable and profitable growth. We're also looking at things from a new perspective. Firstly, we recognize that our strength lies with our distributors and the solid foundation built over 45 years. Today, we announced a partnership with Cristiano Ronaldo, which will provide Herbalife Pro2col and our offerings with unprecedented visibility. We have made strategic acquisitions that we believe will facilitate our leadership in the future of nutrition. Our focus has not shifted; the results we are experiencing today stem from the work we've done over the last two years. This is the culmination of numerous initiatives including market optimization, the Diamond Development Mastermind, key account management programs, the Premier League involvement, and collaboration with Eric Worre to support our distributor leadership, alongside product launches and various training programs. We are committed to our existing business and firmly believe that our direct sales channel, combined with the dedication of our distributors and Herbalife's 45 years of experience along with 60,000 Nutrition Clubs globally, uniquely positions us to achieve what no other company can. Thank you for your continued support. I often end our quarters by asking you to stay tuned, and I appreciate you doing just that. So, please stay tuned for next quarter. Thank you, everyone.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.