And so that opportunity for us is — the beauty of this is to build a long-term customer who will use the GLP-1s on a temporary basis and to work with local opportunities, whether it’s a health care provider, whether it is a telehealth company on a local basis, through our distributors and not on a corporate relationship. We just think it works better that way. It fits our model perfectly. We’ve got some distributors who are employing some very engaging ideas. I don’t want to talk too much further about that right now because they’re in kind of the early phases of talking to folks in ways that they can help the GLP customer get on that long-term journey and just off that short-term journey that they’re on now.
Linda Bolton Weiser: Okay. Sounds good. Thank you very much.
Alex Amezquita: Thank you, Linda.
Operator: Please standby for our next question. Our next question comes from the line of Jeff Van Sinderen with B. Riley. Your line is open.
Jeff Van Sinderen: Hi, everyone. Just thinking about the considerable CapEx investments you’ve made and are going to continue to make, so far, where are the benefits from those showing up in the metrics you track?
Michael O. Johnson: So I’m going to — Alex and I are going to double team this one. So the initial investments in our digital were to rebuild our infrastructure. And those don’t show up immediately in the benefits to the business that you can see in numbers. What we had to do because we had an antique and we had to rebuild this thing completely from the ground up. So some of those investments, some of those early investments that we spent in the digital world, we are about rebuilding that infrastructure to get it right. So now we can add componentry to build a platform, to bring in some great providers of products for both the MLM marketplace, the direct selling marketplace, for sales acquisition, for customer acquisition, all of the different tools that our distributors are going to be able to employ in the marketplace and that’s coming in very short order. Alex?
Alex Amezquita: Yes, that’s correct. And just to emphasize that we are about halfway through the program, particularly on the technology spend. We’ll continue to invest in 2024. Our brand sites did in 70% of markets that represent 70% of our net sales, they went live at the end of the year, and the initial metrics that we are seeing are incredible. So significant improvement on all of the metrics that you look at in terms of engagement, in terms of all the things that you would want from someone to engage with your brand site. So we are seeing that. That is obviously just the first step of something external that sits on top of the internal platform that Michael just mentioned, and there is more to come as 2024 rolls out. When I mentioned earlier around the breadth of CapEx, I think we got a question on what was the spread of CapEx related to, that’s related to the prioritization of what capability externally now will we roll out?
Where does that prioritization roll out? How will it affect the markets best? And those will be business decisions as the year progresses.
Jeff Van Sinderen: Okay. Thanks. That’s helpful. And then I understand you guided to flat revenues for the year. But considering that you grew in Q4, what sort of quarterly progression might we anticipate this year? And then I guess to clarify, I think you said margins would be down for ’24. So should we anticipate EBITDA dollars down for the year?
Alex Amezquita: So we are not giving quarterly guidance. We have a relatively flat for the year. There could be some choppiness in — on a quarter-by-quarter basis, but we have relative flat growth for 2024. I think that’s probably as granular as we can get at this point.
Jeff Van Sinderen: Okay. And then I’m sorry, on EBITDA, any color there on what we might expect with margins down?
Alex Amezquita: So on EBITDA, I think I mentioned before, relatively flat top line, no operating leverage obviously from that top line. Gross profit margins relatively flat. And then this is going to continue to be an investment year for us as we position Herbalife One, strategic initiatives to gain growth as we look to the — look for 2024 and beyond.
Jeff Van Sinderen: Okay, all right. So from that, I’m thinking EBITDA down a little bit. And then I just had one other question on the Nutrition Clubs overall because I think Stephan gave some metrics around those. I didn’t catch them all. I think you said $9 million. I wasn’t sure what that was for. But in the U.S., and I don’t know if you have these metrics, if you want to provide them or not. But what are the revenues from the U.S. clubs? Is that the $9 million? And then also, do we have a number for average revenue per club? I’m just curious about that and then maybe margins that the club owners are making on those, if there’s a way to look at that, there may not be, but curious there.
Alex Amezquita: Yes, Jeff, let me — so there was no 9, there was $900 million in sales, but let me just repeat them for you. So 4.4 million Nutrition Club customers in 2023. 55 million transactions. Average transaction, $16.50. That makes up actually right around $910 million retail club sales, okay? So those are the retail prices that customers pay to our club owners in their clubs. And so it’s — to average it out doesn’t really do it justice because you’ve got clubs that are in a small city of 5,000 people that they are operating. They have — how many ever customers they have, their cost basis is whatever it is compared to other clubs that are operating and much bigger cities have higher costs. So in some of the clubs there, they do quite well.
They’re small, it’s low cost. All they’ve got to do is a few thousand in revenue. Other clubs we have that are doing $10,000, $15,000 in revenue monthly. So it’s really, really hard. And of course, we don’t have their costs, right? We have what they purchased from the company. We’ve got the transactional data from what they’re selling things for, but we don’t track what their rents are, what they’re paying electricity and everything. So hard for us to come up with that number.
Jeff Van Sinderen: Okay. Understood. Thanks for taking my question.
Alex Amezquita: Thank you.
Operator: Please standby for our next question. Our next question comes from the line of Anna Lizzul with Bank of America. Your line is open.
Anna Lizzul: Hi. Good afternoon and thanks very much for the question. In general, we get a lot of questions in our coverage these days on Argentina, just given the hyperinflationary environment. Just wondering how exposed are you to Argentina. Are you able to take significant pricing to offset inflation in that market? And separately on China, just any early expectations on results from Lunar New Year this quarter and how things are tracking in that region? Thank you.
Alex Amezquita: Sure. Thanks for the questions, Anna. So regarding Argentina, we obviously have a business in Argentina. The hyperinflation is something that we keep up. We have regular price increases to keep up with that. There is still risk with that as you’re trying to get cash and Argentina pays out, but our exposure is relatively limited as we continue to price with the hyperinflation of that market. As it relates to how 2024 is going, we’ll update you in April or actually in May, rather. We are not going to give any commentary about 2024 at this point.
Anna Lizzul: Okay. Thank you.
Operator: Please standby for our next question. Our next question comes from the line of Hale Holden with Barclays. Your line is open.
Hale Holden: Thank you. Good afternoon. I was just watching videos of Eric Worre, I think we may hire him for our sales desk if you guys don’t [indiscernible].
Stephan Gratziani: He’s going to be busy, so I don’t think probably he’s going to have much time.
Michael O. Johnson: He’s all ours.
Hale Holden: He looks very high energy, so I’m sure he can handle the business. The only question I had was Alex, when you think about cash balances that you want to have on hand to run the company, I know a lot of it is international. But as you start thinking about what debt you would pay down through the course of this year, can you sort of tell us how much cash you would sort of keep on hand as a minimum amount or we should think about you’re not going below?
Alex Amezquita: So it cycles, depending on where we are in expansion or contraction. Obviously, the past couple of years, we’ve been in a bit of contraction. So typically, that’s around $500 million is, I would call it, a safe average in terms of working capital cash or, I would say, cash in the system. We have a couple of initiatives around establishing an in-house bank and other cash management efficiency. So we are looking to see to get the net number down. But I would think for today, a placeholder of $500 million is sufficient.
Hale Holden: Great. Thank you very much.
Alex Amezquita: Sure.
Operator: Please standby for our next question. Our next question comes from the line of Doug Lane with Water Tower Research. Your line is open.
Doug Lane: Yes, hi. Thanks for taking my question. I know it’s getting late here, so I just wanted to follow-up on the conversations about debt pay down and the capital allocation here. So have you articulated a target leverage ratio that you’re shooting for? And then is there some point where a stock buyback makes sense?
Alex Amezquita: So our policy around 3x total debt is still our target. That is an investment-grade target. We are — our excess cash flow right now, we ended 2023 at 3.9x. So our excess cash flow is going to continue to pay that debt down until at least we get to the 3x target. And we have plans to get there with the continual pay down of the free cash flow generation. So we expect strong cash flow generation in 2024 following up 2023 and that’s where we’re going to put it.
Doug Lane: And stock buyback, is that on the table?
Alex Amezquita: Well, we need to get the 3x target before we can ever consider that. But again, Doug, our focus right now is getting our debt levels significantly lower than where they are today.
Doug Lane: Okay, I understand. Just one last thing on guidance. Is there a reason why you haven’t started back up with guidance on your balance sheet is getting deleveraged. Sales have turned positive. It just seems like things are starting to shift in a favorable direction, so I think we’d be anxious to see formal guidance reinstated.
Alex Amezquita: Thanks, Doug. Thanks for that feedback. Obviously, we’ve given you a top line, some top line guidance. We’ve given you some profitability guidance and a bit of a different format than we have historically, but hopefully, that gives you enough to kind of pencil out a forecast for Herbalife.
Doug Lane: Fair enough. Thanks, Alex.
Alex Amezquita: You’re welcome.
