Earnings Call Transcript - HLF Q2 2022

Eric Monroe, Senior Director, Investor Relations

Good afternoon. On today's call, we will be making some forward-looking statements. And while we are making those statements in good faith, we do not have any guarantee about the results we will achieve. Descriptions of our risk factors are included in the documents we filed with the SEC. We will also be discussing some non-GAAP financial measures. These non-GAAP and adjusted numbers refer to measures that exclude items management believes impact the comparability for the period referenced. Please see the earnings release for additional information on our comparability items. These GAAP to non-GAAP reconciliations can be found in the earnings press release and the slides we will be reviewing on today's call, both of which can be found in the Investor Relations section of our website. I'll now turn the call over to Chairman and CEO, John Agwunobi.

John Agwunobi, Chairman and CEO

Thanks, Eric, and good afternoon, everyone. Thank you for joining our second quarter 2022 earnings call. You might have noticed that we've enhanced the format of our call by adding a slide presentation to accompany our verbal remarks. We hope the enhancement not only makes it easier to absorb our quarterly update but also provides for a richer understanding of our business performance. I'll start with the highlights of what we'd like you to take away from our call today. First, I'm pleased to announce our second quarter financial performance exceeded the top end of our guidance range for net sales, volume, adjusted EBITDA, and adjusted EPS. As you might recall, last quarter, we saw a slowing of business trends and certain underlying KPIs at the end of the first quarter, which continued in April. With that backdrop, we're also pleased to update you that, compared to April, our business trends and metrics appear to have stabilized in the months of May and June. That said, we acknowledge that there's still a significant amount of work to accomplish, particularly around improving our new distributor and new preferred customer metrics. I'll go deeper into our KPI trends in a moment. To address the macroeconomic landscape that many companies are facing, we implemented meaningful price increases in mid-June to partially offset the dramatic inflationary increases that we are seeing in our input costs. As a reminder, our raw material manufacturing overhead and freight costs are increasing ahead of local consumer price indices. We believe the timing of these pricing actions largely drove the top line outperformance that we achieved in the second quarter. Specifically, pre-buying ahead of the price increase resulted in sales activity being pulled forward from July into June. Our guidance for the third quarter includes the impact of this pull forward. It should be noted that, even without the pull forward, our Q2 top line performance was in line with our guidance. As such, we are reaffirming our full year 2022 guidance for net sales and volume. We're also reaffirming our adjusted EBITDA guidance for the full year 2022. We anticipate the execution of expense management initiatives that helped drive our adjusted EBITDA performance in the second quarter will continue throughout the year and will help absorb the significant incremental FX headwind on EBITDA. However, in addition to the FX headwind, an increase to our full-year tax rate as well as the incremental cost of our variable rate debt as a result of Fed tightening are primary drivers of a $0.25 reduction to our adjusted EPS guidance range. Looking to the future, after significant analysis on our digital strategy, we are launching Herbalife One. This will be the cornerstone of our front-end distributor-facing technology platform. More on this investment in our future in just a moment. But let's get into the details of the second quarter. Reported net sales for the second quarter declined 10.3% compared to the prior year, which exceeded the high end of our guidance range. As a reminder, our second quarter of 2021 was the largest quarter in the company's history, which benefited from situational demand related to the pandemic. With this backdrop, despite the year-over-year decline, when compared to the last prepandemic second quarter of 2019, net sales grew meaningfully by 12.3%. Reported net income of $87 million resulted in adjusted EBITDA of $195 million, which is also above our guidance range. EBITDA margin in the quarter was 14%, which was a sequential improvement compared to our Q1 margin. Reported earnings per share of $0.88 resulted in adjusted earnings per diluted share of $0.96, beating the top of our adjusted EPS guidance range. In addition to the top line beat, the team took decisive actions to execute on expense management initiatives that contributed to the bottom line beat. This is in addition to our transformation program that we discussed last quarter. We completed approximately $30 million of share repurchases in the second quarter, bringing our year-to-date total to approximately $132 million. This buyback was consistent with our methodology of returning our excess cash flow to shareholders through share repurchases. Our underlying business trends and KPIs stabilized during the remainder of the second quarter compared to April levels. One of our KPIs, average active sales leaders, showed monthly improvement in the months of May and June. For the quarter, average active sales leaders of approximately 482,000 was just 3% under last year but were significantly higher than prepandemic levels, which were in the low to mid-400,000. New distributors and preferred customers joining the business have also stabilized off April trends, showing a slight improvement in the months of May and June. While still above prepandemic levels, our recruiting trends remain meaningfully below 2020 and 2021. We view this as an opportunity to drive growth, and we are working closely with our distributor leadership on ways to increase the number of new members entering the business. During our first quarter call, we stressed the importance of returning to in-person events as a potential catalyst to return to growth. As a reminder, we believe that the interactive discussions, face-to-face team building, and social elements that are characteristic of our in-person events are all an important source of ideation, motivation, and inspiration for our distributors. Based on a sample we analyzed from a series of U.S. events in April, we measured both increased activity rates and productivity from distributors that chose to attend an in-person event versus non-attendees. During the 2 months following the event, May and June, we observed an improvement of 8 percentage points in activity rates and a 10% improvement in productivity from those that attended an event in person versus non-attendees. Again, we believe in-person events are one of the best opportunities to educate, train, and motivate our distributors, particularly those that are new to the business. Turning to our regional results, where I will highlight activities from our 2 largest regions. The Asia Pacific region had another quarter of growth, up 15% compared to the prior year and set a quarterly sales record for the company. The region was led by continued strength in India, which grew 30%. India is supported by strong underlying metrics, including 25% year-over-year growth in new distributors and preferred customers and 37% growth in active sales leaders. The preferred customer program in India has been a significant driver of growth in the market as both a means to engage new product consumers as well as to introduce consumers to the potential business opportunity. Over 40% of our total sales leaders in India converted from the preferred customer program to become distributors and go on to eventually qualify as sales leaders. Looking at North America, we saw a decline in net sales of 16% in the quarter. This decline is against a challenging prior year comparison period from the largest quarter in the region's history. However, compared to Q2 2019, prior to the pandemic, the business increased by approximately 23%. Distributor recruiting remains a focal point for the region. Just a few weeks ago, we hosted our first in-person region-wide extravaganza for NAM since 2019, with an attendance of over 20,000. As a result of the stabilization of business trends observed during the second quarter, despite a significantly stronger U.S. dollar, we are reaffirming our volume point net sales and EBITDA guidance for the year. Our guidance continues to imply year-over-year net sales will show growth for the fourth quarter. For the full year, our updated adjusted earnings per share guidance includes a projected year-over-year currency headwind of approximately $0.55 per diluted share, an incremental $0.32 headwind from prior guidance. Moving on to the launch of Herbalife One, the future of Herbalife Nutrition's digital technology. Designed to supercharge distributor growth and elevate customer experiences around the globe, Herbalife One will be our first-ever unified data and AI-powered global digital platform, enabling growth by delivering a best-in-class digital experience around the world. From reimagining sign-ups, e-commerce, downline management to providing seamless payment options and other innovative capabilities to drive ongoing engagement, satisfaction, and loyalty, Herbalife One will help differentiate and strengthen our leadership in the market. We will build Herbalife One on a brand-new architecture that will allow for scalability, flexibility, performance, and speed to market of future capabilities, laying the foundation for our future success. We are projected to invest approximately $400 million in this program, with net incremental expenditures of $200 million to $250 million over the next 3 years. Herbalife One represents the single most significant investment in the company's history, and it demonstrates our confidence in the potential of our business. I'm also proud to announce that we're making some executive leadership promotions to ensure we are better supporting our independent distributors and unleashing the potential and power of our regional teams. John DeSimone will become Executive Vice Chair of the company. John's vast experience and unmatched knowledge of our company will enable him to work on transformative growth initiatives that are central to the company's future. Additionally, we are looking to move more responsibility to the regions, and we're creating 3 regional presidents. Stephen Conchie will be the Regional President of APAC and China. Edi Hienrich will be the Regional President of EMEA and India, and Frank Lamberti will be Regional President of the Americas. These individuals have proven to be effective leaders, and their new titles reflect the importance of their roles. These 3 people will also report directly to me, and I look forward to their continued contributions. Before I turn it over to Alex, I'd like to say that we have unwavering confidence in the resilience and strength of our distributors. We continue to innovate with local product development, which resulted in approximately 60 new SKU launches during the second quarter and over 20 new launches so far in Q3. We believe our ongoing investments in our business and products will drive performance and ultimately create meaningful shareholder value. I will now turn the call over to Alex.

Alexander Amezquita, Chief Financial Officer

Thank you, John. I'll start by reviewing our financial performance for the second quarter, followed by guidance and close with comments related to our capital structure, cash, and share repurchase activity. Second quarter net sales of $1.4 billion represents a decline of 10.3% on a reported basis compared to the second quarter in 2021. As John mentioned, net sales were materially above our guidance range, largely due to increased activity in the month of June as a result of pre-buying ahead of the pricing action we executed mid-month. Normalizing for the pre-buying that took place in June, we estimate net sales for the quarter would have been in the upper half of our guidance range. The U.S. dollar strengthened significantly against most major currencies during the second quarter and had a significant impact on our Q2 results as well as full-year forecast. FX was a 440 basis points headwind to net sales, which was 170 basis points unfavorable compared to the Q2 guidance. We benefited from 510 basis points of pricing, which was largely from the price increases taken prior to the start of the second quarter. We will not see the majority of the benefit of the pricing actions taken in mid-June until the third quarter. Moving to margins, where adjusted EBITDA of $195 million resulted in an EBITDA margin of 14.0%, which outperformed our margin expectations for the quarter. Although gross profit of 77.3% in the quarter was a sequential improvement, it drove an EBITDA margin headwind versus prior year of approximately 200 basis points, primarily driven by increased input costs in our supply chain related to raw materials and manufacturing overhead as well as shipping costs. Within SG&A, we experienced an approximate 110 basis point headwind related to distributor promotional spend. This headwind was largely from the timing of a major distributor event that took place in the second quarter of 2022, but took place in the first quarter of 2021. Recall, in 2021, our distributor promotions were significantly disrupted because of the pandemic, and we are now returning to more normalized levels of promotional spend. In the second quarter, we saw an increase in professional fees spending versus prior year, primarily related to the digital initiative Herbalife One, noted earlier, which accounted for approximately 40 basis points of EBITDA margin pressure. We are beginning to see the positive impacts of cost savings in labor and benefits. During the second quarter, we benefited by approximately 70 basis points of EBITDA margin expansion due to efficiencies and targeted strategic improvements, as well as lower employee bonus accrual, leading to favorable margin impact, even after absorbing the impact of annual merit increases. There was an approximate 40 basis point net benefit from the impact of price increases, mix, and other items. As mentioned earlier, currency had a significant impact and led to an additional 70 basis point headwind on EBITDA margins. Adjusted EPS for the second quarter was $0.96, above our guidance range of $0.60 to $0.80. FX was a headwind in the quarter of approximately $0.13, which was $0.06 unfavorable from what was assumed in guidance. Our higher tax rate, primarily driven by geo mix of income, was an approximate $0.09 headwind in the quarter compared to our guidance assumption. Moving to guidance for the full year, where we are reaffirming our net sales estimates to be in a range of down 10% to down 4% on a reported basis. We are absorbing an incremental headwind of approximately 210 basis points compared to our prior guidance due to the ongoing strengthening of the dollar. The full year currency headwind is now 440 basis points, which is reflective of the average U.S. dollar to foreign currency exchange rates for the first 2 weeks of July. I want to highlight that the midpoint of our fiscal year guidance for 2022 of down 7% is coming off the accelerated growth we experienced in 2020 and 2021. The $5.8 billion of net sales we achieved in 2021 was just under 20% growth from 2019. We are still netting approximately 11% growth going from the prepandemic era to the midpoint of our 2022 guidance. As John stated, our guidance assumes a return to year-over-year net sales growth in the fourth quarter. We are reaffirming our adjusted EBITDA to be in a range of $680 million to $740 million. We are reducing full year 2022 guidance for adjusted diluted EPS to a range of $3.25 to $3.75. This $0.25 reduction to the range of our prior adjusted EPS guidance is primarily driven by unfavorable FX headwinds as well as a higher tax rate and interest expense. FX now represents a year-over-year headwind of approximately $0.55 for 2022, $0.32 unfavorable from the $0.23 full year headwind assumed a quarter ago. Turning to our cash position and our share repurchase activity. Our cash generation ability remains strong. And during the first half of 2022, we generated approximately $229 million of operating cash flow. We expect that the cash generation in the back half of 2022 to track ahead of the back half of 2021. We currently have approximately $580 million of cash on hand. During the second quarter, we completed approximately $30 million in share repurchases, which we executed while remaining prudent with the cash given the difficult macroeconomic backdrop. While we continue to be opportunistic with future share repurchases, we are modifying the buyback assumption used in guidance. During the third quarter, the company plans to reallocate the $50 million previously designated for share buybacks to strategically reduce outstanding debt. We are currently tracking above our target leverage ratio of 3x gross debt to EBITDA, and this debt payment will help bring us closer in line. Share repurchases may still be executed opportunistically during the third quarter but are not assumed in guidance. Our guidance does assume that $50 million of share repurchases are resumed in the fourth quarter to maintain the pattern of consistency we began in the beginning of 2021. We continue to believe the repurchase of common shares is consistent with the company's long-term goal of maximizing shareholder value.

Operator, Operator

Our first question comes from Chris Neamonitis with Jefferies.

Christopher Neamonitis, Analyst

Congrats on a nice quarter. My first question is just around the demand following the pricing action in June. So it sounds like you're keeping a watchful eye on trends. And I know you're sitting here today with only 1.5 months of data. But based on what you're seeing through July, could you tell us what you're seeing relative to trends in demand?

Alexander Amezquita, Chief Financial Officer

Yes, I'll take that one. Thanks for that question. Obviously, that is something that we're watching closely. It's a little different to comment yet on what we're seeing in July. We really need to see August to make those comparisons to really kind of isolate what is really demand elasticity versus all of the other factors that are going around the world, the macro backdrop that we're experiencing. So we'll need a couple of months, August and September especially, to really have a comparison where we can isolate what is demand elasticity versus other factors.

Christopher Neamonitis, Analyst

Okay. That's fair. And then maybe if I could ask about the sales guidance. Nice to see the reiteration today. But I'm curious, the outlook is still based on April trends run rating through the rest of the year, right? So maybe could you walk us through your thought process in leaving that unchanged despite what kind of sounds like an initial rebuild of momentum?

Alexander Amezquita, Chief Financial Officer

Sure. There are a number of competing factors affecting the profit and loss statement, so I will discuss it item by item. Looking at the trends from April, the underlying key performance indicators and the volume achieved in each region indicate that we are essentially in the same position as we were back in April. The guidance given in April and now shows similar business performance for the remainder of the year. When analyzing the net sales, the pricing actions we implemented in mid-June are being offset by the foreign exchange headwinds due to the strengthening U.S. dollar against most major currencies. Essentially, the benefits from pricing are being negated by foreign exchange effects. Regarding earnings per share, some of the expense management from the second quarter will help mitigate the foreign exchange impact on our net sales. However, for EPS, we are also facing an increase in the tax rate and higher interest rates on our variable rate debt. Together, these three factors will largely offset one another in our EBITDA, but we still anticipate a $0.25 decrease in our EPS range. There are many different factors affecting each line of the profit and loss statement, but fundamentally, the underlying business shows strength compared to our April figures. While there's a timing issue with some revenues shifting from the second quarter to the third quarter, the overall strength of our business remains consistent with our April levels.

Christopher Neamonitis, Analyst

Great. That's super helpful. And then maybe just last one for me, so if you were to recast the sales guidance, maybe using the old approach that embeds all of the various KPIs that you've historically looked at, how would that shake out versus what you've reiterated today? And then maybe separately, if we were to compare those KPIs to how they looked at Q1 when you last reported, is it safe to say there's been a broad-based improvement sequentially?

Alexander Amezquita, Chief Financial Officer

I missed a little bit of your initial question. Are you asking about our KPIs as they stand today compared to where they were in April? Is that the question?

Christopher Neamonitis, Analyst

That's essentially the question. And then if you were to use kind of a historical approach of guidance setting, where would that land relative to what you've reiterated today?

Alexander Amezquita, Chief Financial Officer

Yes. So first of all, our guidance setting, we're using the same approach in which we used last quarter, which is effectively where we're run rating today. Where we're run rating today is effectively where we were run rating in April. So our KPIs haven't meaningfully changed. Now the one caveat to that is we had April, and it's not a lot of months of data, right? We had April. We saw May stabilize off of April. And then we had June, which was impacted by pricing. If you normalize for some of that price increase activity, you take reasonable estimates, you would have a June that looks stable off of May. And so that is effectively a stabilization of the KPIs that John mentioned at the beginning of this call. And so that's what's carrying forward into the guidance for the rest of this year.

Operator, Operator

Our next question comes from the line of Jeff Van Sinderen with B. Riley.

Jeff Van Sinderen, Analyst

I know you mentioned product mix maybe shifting a little bit. Any trends you can touch on there? Maybe also speak to kind of what you're seeing in the weight control segment of the business, the performance segment. And then also, if you could just speak to the product, how you're rolling that out, how that's being received so far.

John DeSimone, President

Yes, this is John. I'll take that. We are observing the same trends in our product categories that we have seen for the past couple of years, particularly with sports nutrition performing well. Meanwhile, the active lifestyle and healthy weight segment is seeing a slight decline. This aligns with where we are launching new products and attracting new consumers. Customers who purchase sports nutrition or health and wellness products are showing improved lifetime value compared to those focused on weight management, which is typical. Weight management is still significant for us, reflecting a lifestyle change for many, though some consumers are very goal-oriented. We are witnessing this gradual shift. It's not large since weight management remains the bulk of our portfolio, but the change is noticeable. Additionally, our distributor base is evolving. At our recent event in Detroit, we saw many healthy individuals participating beyond just weight management. This trend is ongoing, and we plan to continue launching more sports nutrition products and expanding globally.

John Agwunobi, Chairman and CEO

Yes, this is John Agwunobi. I would like to add that in the broader nutrition and fitness space, we're observing a long-term trend where individuals are increasingly using sports nutrition for their weight management goals. People who typically would have opted for traditional weight management products, such as high-protein, low-calorie options, are now turning to sports nutrition solutions as an alternative, whether as part of their fitness routines or lifestyles. They are seeking out products designated as sports nutrition, and the distinction between the two categories is becoming less clear. The positive aspect for us is that we are strong in both areas. Regardless of whether customers choose our traditional weight management products, with Formula 1 as our key offering, or our Herbalife24 sports nutrition line, we find that they move easily between the two, looking for high-protein supplementation and low-calorie nutrition. We are experiencing significant growth in our sports nutrition category and a slower increase in our weight management segment.

Jeff Van Sinderen, Analyst

Okay. So I'm sorry, just to clarify, you're saying weight management is still growing?

John Agwunobi, Chairman and CEO

Yes, as a category, let me see if I can find the exact number for it.

Alexander Amezquita, Chief Financial Officer

To clarify, our year-over-year growth rates for net sales decreased by 10%. However, the trends show that sports and fitness are still outpacing our weight management category. Specifically, weight management is down by double digits, while energy, sports, and fitness are effectively flat. This indicates significant outperformance. I want to emphasize that while there is still a contraction, energy and sports and fitness are surpassing weight management, reflecting our overall company performance.

Jeff Van Sinderen, Analyst

It seems like we've experienced some stabilization over the past few months, and I understand you're projecting growth in Q4 compared to last year. It appears you will see growth in some areas, and based on your comments, it seems that sports nutrition will continue to be the fastest-growing segment. Please correct me if I'm mistaken on that.

John DeSimone, President

Yes. To summarize, we anticipate that sports nutrition will outperform the other nutrition categories. While we have several performance metrics to consider, we expect sports nutrition to experience faster growth than weight management in our sales. We believe all the categories we offer will return to growth next year, but the most significant growth is expected in sports nutrition among our three major categories: weight management, health and wellness products, and sports nutrition.

Jeff Van Sinderen, Analyst

Right. Well, I mean, given kind of what you're seeing the shift to people, I guess, maybe using sports nutrition more for weight control, that seems to be a real positive, I would think. One other thing I wanted to ask you about, and then I'll let someone else jump in, just wanted to ask if there's anything more you can offer in giving us color on the Herbalife One product, what that will consist of. Obviously, it's a large investment, and it seems like it's extremely well thought out, and I would think going to be a phenomenal product with that level of investment. But maybe you could just talk about some of the benefits for distributors, consumers, and then also the data from that system that you'll collect, big data that you can analyze and apply to improve your business.

John Agwunobi, Chairman and CEO

Thank you for the question. It's important for us to highlight how significant this initiative is internally. For many years, our distributors have emphasized the need for us to leverage our consumer-facing and distributor-facing technology as a competitive advantage. Our online interactions with new distributors and customers are usually their first experience with us, and they play a critical role in defining our brand. A major focus of Herbalife One is to enhance the online experience, whether through social media or traditional online interactions, ensuring it reflects the appealing nature of our business. We aim to create a tool that attracts individuals to the Herbalife Nutrition lifestyle and community. We hope this technology will streamline the process of signing up new distributors and facilitate faster and more efficient transactions, whether between distributors and the company or between distributors and customers. Additionally, as you've mentioned, it will enable us to collect data that not only supports standard e-commerce practices but also informs our decision-making regarding new products and how to package and promote them across different regions. Ultimately, we believe this new tool will help us increase sales more rapidly. It will also provide our individual distributors with valuable data to better target customers and monitor their businesses' growth. To illustrate our approach, we see this as a complete overhaul rather than just fixing existing issues. We're striving to advance to the next level of technology to stay ahead of the competition. We expect this effort will benefit our distributors, who have collaborated with us over the months to help design this solution. They have been deeply involved in identifying areas of improvement and opportunities in the market, aiding us in creating Herbalife One, which we plan to implement over the next three years.

Jeff Van Sinderen, Analyst

Great to hear. It sounds like it's going to be phenomenal. Best of luck.

Operator, Operator

Our next question comes from the line of William Reuter with Bank of America.

William Reuter, Analyst

You mentioned that pricing increased 5% on a year-over-year basis during the second quarter, but that didn't include much benefit of the June price increase. How large was the June price increase such to think about how much the year-over-year increase should be in the third quarter?

Alexander Amezquita, Chief Financial Officer

So the global price increase was 10%, which went into effect in mid-June. There were some markets that were not part of that global price increase, including China, India, Vietnam, and Malaysia for regulatory reasons and otherwise. So those will be going into place in Asia Pacific, in Vietnam and Malaysia, that was earlier this month in July. We're slated to have that price increase in India in September and I think also in Q3 for China. So other than that, the world received a 10% price increase in mid-June.

William Reuter, Analyst

That's very helpful. I can understand that with the shift in sales from July into June it may be very difficult to get any sources of data that indicate how consumers are responding to the higher prices. Is there anything you've heard from your representatives or that you've been able to see which can kind of give you a sense for how underlying demand may have changed or price elasticity?

Alexander Amezquita, Chief Financial Officer

We are closely monitoring all of our markets to gain a better understanding of the situation. However, it is still too early for me to confirm any specific observations as they remain anecdotal at this stage. Let us gather more data, and we will return in the upcoming quarter with a more informed perspective on what we are observing, supported by substantial evidence behind our comments.

William Reuter, Analyst

I understand that. It seems the $50 million that was expected for share repurchase will now be used for opportunistic debt repayment in the third quarter. You mentioned returning to share repurchases in the fourth quarter with that same $50 million. Does this imply that there will be no opportunistic debt repurchase in the fourth quarter, or was that not addressed?

Alexander Amezquita, Chief Financial Officer

Yes. We didn't explicitly address it. In the fourth quarter, if you look at the midpoint of our guidance, we'll see the fourth quarter of 2021 drop off. This will allow our target leverage ratios to improve in that quarter as 2021 rolls off. Our focus is on managing our gross debt closer to the target now. The profit and loss statement should take care of itself to some extent in the fourth quarter. If we find it necessary to be more cautious about our debt levels, we will certainly do so, but that is not our expectation. If we meet our guidance, we expect to have significantly moved towards our target leverage, which means we can reinvest that excess cash back into our share repurchase program.

Operator, Operator

At this time, I would like to turn the call back over to Dr. John Agwunobi for closing remarks.

John Agwunobi, Chairman and CEO

Thank you very much for joining the call and for your questions. I would like to share a few final thoughts. We are pleased to see that our numbers are beginning to stabilize compared to the April figures, as highlighted by both myself and Alex, which is an important development. However, the real work lies ahead of us. I want to communicate clearly to our investors and the community that we are determined to strive for more. While it's encouraging to see stabilization, it presents us with an opportunity to focus on future growth. We anticipate growth in the fourth quarter, as previously mentioned. Achieving this will require hard work internally, and our teams, including both staff and distributor partners, are excited and motivated. There is a palpable sense of enthusiasm and purpose when engaging with distributors and during events. As we move into the next phase of our journey, our focus will be on building upon this foundation, generating growth, and ultimately delivering shareholder value. I look forward to our next conversation next quarter.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.