Good afternoon, and thank you for joining the Fourth Quarter and Full Year 2023 Earnings Conference Call for Herbalife Ltd. [Operator Instructions] As a reminder, today's conference 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.

Thank you, Towanda, and good afternoon, good evening, everyone. Joining us today are Michael Johnson, our Chairman and Chief Executive Officer; Stephan Gratziani, our President; and Alex Amezquita, 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 Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. 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 Chairman and CEO, Michael Johnson.

Thank you, Erin, and Happy Valentine's Day, everybody. You guys, when I returned to Herbalife in late 2022, we met in Cairo immediately. It was the first of November and we set out a vision for Herbalife, and that vision is to be the world's premier health and wellness company, community and platform. We are working on it and we're working towards it and the results are getting very exciting. 2023, though, was a very challenging year. We all know that. So we laid out a plan to have net sales growth by the fourth quarter, which we delivered. Our year-over-year net sales trend improved every quarter in 2023. We modernized our brand, we updated our look, and we modernized our digital atmosphere. We enhanced our data management and transactional capabilities. We launched new websites in markets representing 70% of our sales. On the product front, we introduced 17 innovative products that supported our distributors' businesses and we launched our first ever vegan line, and it was so successful, the demand higher than anticipated, we experienced out of stocks. Not proud of that, but it's been a great line with great success. We had strong cash generation. Our 2023 free cash flow exceeded 2022. We paid down debt ahead of schedule. Our transformation program. We took out $115 million out of SG&A, which exceeded the $70 million we set out to achieve. We did this through an aggressive back-office consolidation. This helped us build out centers of excellence in Krakow, Guadalajara, Bangalore, and Kuala Lumpur. We employed an aggressive distributor engagement plan. Between corporate and distributor events were back in action. Our retention is up. Those are the news points from 2023. So now let's focus on where we're going in 2024. We know the road ahead. Our top line…

Thank you, Michael. Well, it's been an exciting 6 months since I joined the company. Last quarter, we talked a little bit about the long-term vision of things for the company and really how we are going to be a sustainably growing company in the future. Michael has mentioned becoming the world's premier health wellness company, community and platform, and so a little bit just to talk about that. We have tens of millions of customers. We've got millions of distributors that work every single day face-to-face with customers adding value to their lives. They are teaching them better nutrition habits. They are involving them in healthier lifestyle habits. They're getting them on Herbalife products and helping them to get results. As a company, many of those and most of those customers don't live on a platform with us. As a company, we can deliver a lot more value to them, and that's part of what the Herbalife One ecosystem is going to be about. As a company, delivering more value to customers and allowing those customers to be closer to the company live in a platform and with the platform that delivers value to them, that they want to be a part of and that they have many of their needs met, and they're stacked on top of the distributor's value, what they bring every single day. And so long-term, this is where we're going as a company. In the future, the vision is to have tens of millions of customers and support millions of distributors and deliver value to both of these parties. Shorter term, we have things to work on as Michael said. When I first came in, the focus was getting close to the markets with a specific attention on China, the U.S. and Mexico. We…

Thank you, Stephan. I'll begin my section with the key financial highlights. Our fourth quarter revenue was $1.2 billion. This is up 2.9% versus the fourth quarter of 2022 and is the fourth consecutive quarter of improved year-over-year net sales trends. And while we know there is a lot more work to do in several of our key markets, delivering on the expectation of net sales growth in the fourth quarter is an important step as we move forward. For the year, we achieved $5.1 billion of net sales, which is down 2.7% versus 2022. Our current expectation is that we will improve our full year net sales trends to relatively flat versus 2023. For fourth quarter, we held gross profit margin flat versus Q3 at 76.3%. Compared to Q4 of 2022, gross profit margin was down 120 basis points. While the pricing actions we have taken over the past year provided an approximately 100 basis point benefit, we continue to face headwinds from input cost inflation and unfavorable manufacturing absorption rates on lower production volumes, which drove an approximately 210 basis point negative impact. As we look forward to full year 2024, we expect gross profit margin to be relatively flat to 2023 levels. We have seen input cost inflation stabilize and now trending at levels at or below our ability to price in 2024. Q4 adjusted diluted EPS was $0.28. On a year-over-year basis, the fourth quarter was negatively impacted by higher input cost inflation, the non-repeat of $9 million of non-income tax items and an increase in our technology spend as we continue to enable capability in our Herbalife One platform. Our 2023 adjusted effective tax rate was 25.3%, and we anticipate our full year 2024 adjusted effective tax rate to be slightly elevated versus full year…

[Operator Instructions] Our first question comes from the line of Chasen Bender with Citi. Your line is open.

Great. Thanks for taking the question. I'd like to start on 4Q results and specifically on the SG&A line. Alex, can you help explain why SG&A dollars were up almost 7% in the quarter and why we haven't seen those $27 million of cost savings show up in the P&L? And just related to that, for the increased cost savings target of $115 million next year, when will that show up in the P&L? And do you expect that to get dropped to the bottom line or is your thinking here that, that will need to get reinvested?

Chasen, great question. So the savings are showing up in SG&A. It's being offset, as I mentioned, by the investments we're making in our digital technology, in our events, in our people and other things to modernize Herbalife. That has been a big initiative in 2023 and we continue to be in investment period as we move through 2024. The benefit of the transformation program has been allowing us to continue to make those investments. And so there has been a significant increase in our technology spend and a significant spend in areas that are going to strategically move the company forward. So while you are correct in that the overall SG&A spend is higher in '23 versus 2022, it is being offset by all of those savings initiatives that we've mentioned.

Got it. And then just changing gears, could you maybe expand on your expectations for flat sales in '24 and specifically comment on what you're expecting from regions and on a price versus volume basis? And related to that, do you expect constant currency sales to be positive year-over-year, and similarly, do you expect EPS to be up year-over-year in 2024?

That's a lot of questions, so we'll break that down piece by piece. So our expectation for net sales growth being flat does not include -- from a currency standpoint, we do expect there to be some headwind to currency in 2024. So that net sales expectation of flat includes currency rates as they are, which would bake in some level of a headwind in 2024. By the way, that FX currency does not only impact top line but there is an impact across the P&L from top line all the way down to EPS. So that generally covers the currency question. What is in our expectations for 2024, we're not going to go region by region, but the big factor that I can point out is India has been a large contributor to our overall buoyancy in our top line. So in 2022, India provided almost 30% of net sales growth. In 2023, it was 18% of net sales growth. So as we go to 2024, just thinking law of large numbers, we have a much more modest expectation for the overall contribution of growth from India. So as India's expectation of growth moderates and other markets are in recovery, it yields more of a flat growth expectation for 2024.

Got it. And then did you -- do you have any expectation for EPS in 2024?

So from a margin perspective, we have flat top line so there's not an operating leverage expectation for 2024. Gross profit level will largely stay where it is, although as I mentioned, we had some input cost inflation stabilizing over CPI level price increases that we are able to take in 2024, so gross profit margin remaining relatively flat. And as I mentioned, we continue to be in an investment period for the modernization of Herbalife. So overall, I do see margin levels being probably a bit below where they are in 2023 as we continue to invest for future growth.

Got it. Appreciate the color. I will pause there and pass it on.

Thank you. Please standby for our next question. Our next question comes from the line of William Reuter with Bank of America. Your line is open.

Hi. Thanks for taking our question. This is Rob Rigby on for Bill. So I guess can we just dive a little bit deeper into your expected uses of free cash flow in 2024? You mentioned repaying some more debt, but if you could just provide some color -- some more color around that, that would be appreciated. Thanks.

Yes, it's actually pretty simple. Our excess cash flow is going to go down to repaying our total debt levels. So I mentioned we are in a refinancing. We have bonds that are due at the end of 2025, which become callable in the third quarter of this year. So as cash is generated, we will look down to take down our total debt levels with that excess cash.

Okay, great. Got it. Thank you. And then just one follow-up. Your CapEx guidance is pretty wide at $145 million to $195 million. What are some of the pieces that could kind of move it from the lower end [technical difficulty].

So there's two component -- there's two significant components of that CapEx spend. One is in our technology spend, and we've mentioned Herbalife One and where we are in that process. So there is some variability on what types of applications, the prioritization of those applications and whether or not it makes sense to accelerate or defer potentially some of those programs into '25 and '26, and that will just be a business decision as we see those markets evolve. That creates one element of variability. And the second element of variability is we've had a bunch of deferred CapEx that we haven't been able to put in place on our manufacturing facilities. And so we have some automation programs. We have some deferred CapEx that we have to evaluate whether or not those automation programs make sense to put into place now or does it make sense to defer those again until 2025. So those are large components of that variability.

Got it. Great. Thank you. I will pass it on.

Thank you. Please standby for our next question. Our next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open.

Good afternoon. Thanks for the question.

Hi, John.

First off -- hey, good afternoon. Stephan, I wanted to come back to your commentary regarding distributor training. It's really encouraging that you're ramping the resources there. You made it very clear the need to raise capabilities. But having been in the Herbalife system for quite some time, why do you think such resources are now necessary? Is this a function of the nutrition space having become more crowded over the years across channels, new competitors coming in, in bricks and mortar, where these folks need a sharper skill set versus history? Or is it just more of a function of differences in the background of these folks coming into the system relative to 5, 10 years ago?

Yes. John, there's probably a couple of different things. Good to talk to you, by the way. I think if you take the overall base of people that come in, and let's just take the Nutrition Clubs in the United States just as an example because I talked about that. When people come in, they come in for a specific model, right? So they come in, someone says, "Look, open up your own Nutrition Club. Here's what you're going to do. You need to have this as your menu. This is how you set up your club. This is what you're going to be doing." And they had -- they might have come from any background. They might have had 0 business background, 0 marketing background. They just come in. Maybe they were doing -- maybe they were a housewife. Maybe they were a college student, but didn't have the experience of running a business. And so people get into a very specific model. They learn specific skills. But as you know, the market changes, right? So there's different aspects that start to be aspects that potentially. For example, they're using social media and they post and the algorithms actually are working quite well. And what happens is the algorithm changes. But they're not social media experts so they don't know how to deal with the advertising or social media marketing. So the skills that are needed as you progress in a business and as new models come, what ends up happening is that people have gaps. And so really having the DMO training specific and allowing them just for example, to bring in the WeDo as a Nutrition Club owner, they're not used to offering these different services. So there is a level of that. So the training, I would say overall, it does change over time. There is a need for it, but there's also, from an industry standpoint. So for example, you've been to Events Extravaganza. It brings a certain value. There's the bigger picture. There's recognition. People have an understanding of product training and things like that, but it's not specific to the skills that they're going to need to run their clubs, for example. So really, what we are doing is identifying gaps in the training. And on the DMO side, that's one of it, but also why we're so excited about Eric Worre is because it really is about the leadership training. Someone that starts as a distributor, simply getting their customers to building a team, managing a team, innovating through their different models, working with different people at different levels. So it's the gaps that we are trying to close right now, and it's just part of, I think, just the natural progression of business in the world that we live in today.

Okay. Thanks for that. And then as a follow-up, your comments on the preferred conversion rates in the U.S. Nutrition Clubs, I think I heard the spread was like 1% to 10%. And I'm curious, I know it's very early days and it's a pretty wide network, but I guess how do you think about where that spread should be? Is 10% at the high-end too low? Can it be 20%, 30%? I'm just sort of curious like what you would think is sort of achievable going forward as you implement these sort of resources?

Yes, so it's really kind of model based, right? By the way, we give 10%. There's over 10%, okay? It's not the majority of people. Obviously, it's a small subset of people. But when we actually break it down, it could be their demographics, where they're living. It could be, and most of the time is, the models that they're doing and the services that they're offering. So if it's just foodservice, for example, the conversion, we know is much lower, they're more focused. There are maybe higher volume clubs where they have more customers coming in and out, and they are just doing everything that they can to make sure the customers get the service that they need to buy the food item that they're trying to purchase and be on their way. Other clubs, they have better conversion. People are coming in. What they're coming in for could be a variety of things. They might be coming in, some of these clubs have workouts that are happening a couple of times a week. Some of the clubs, people are doing wellness evaluations. Some of the clubs, they're running challenges where they'll have weekly meetings and they'll have groups of people that are coming in. Those types of clubs have higher conversion. So we believe long-term that the more people focus on multi services, the higher the conversion is going to go. Now by the way, I don't want to talk about the tech stack because this is the bigger picture of things for the future. But having technology that allows someone to, for example, simply scan a QR code on a shake, and it says maybe would you like to have more information about what's in the shake? This brings them to a platform that says, "Hey, here's what's in the shake? And would you like to join a platform where you can get recipes, where you can learn about nutrition, where you can track your daily steps on a day, how you slept last night?" Everything that's wearable, everything that's connected today that it actually is a place for them to live on a platform, that add value to them, that's connected to their distributor, that's connected to the company, that's connected to the club that they're connected to. And so this is the opportunity for us in the future. Part of it is tech based and part of it is really upskilling and allowing our distributors to have access to the information they need to be able to go out and add these additional services into their businesses to be able to get the conversion up.

And that scan that you're referencing, is that -- is the idea to be on a product label or elsewhere, like advertising? Like where would that scan actually be for consumers?

The sky is the limit, John, right? I mean, in today's world of marketing, I mean, it is so wide and so large. So it could be on a shake. When someone buys a shake at a club, it could print out based on the ingredients that are in there. Scan this, you're good to know. By the way, you could have something that someone walks up to a club and it says, take our questionnaire, right, answer five questions and be able to refer a friend or be able to win something as a prize. Marketing today, social media marketing, it's so vast and it's so broad and it's -- there's so much opportunity there. So what's beautiful about this is if the technology is there, it's unlimited what you can do. And our distributors are amazing. They are creative, they are always pushing the envelope. And as a company, it's our job to make sure that we're supporting them and everything that they need to be able to take their businesses wherever they want to go.

Thanks, Stephan. Very helpful.

Thank you.

Thank you. Please standby for our next question. Our next question comes from the line of Linda Bolton-Weiser with D.A. Davidson. Your line is open.

Yes, hello. So I was wondering, Stephan, when you were talking about the account management operating model, I'm just curious about like those people that will be doing that, are those -- will those be corporate employees? And if so, does that kind of add over time, like something to your cost structure to implement that type of model?

Yes. So Linda, we have already corporate employees that do interface with distributors. And so it's part of what's already happening there. As we add and we are actually going to be having more and more of them, it's really about how we are designing and we are going to reallocate resources to this area. Quite honestly, the distributors that are out there, we look at any market, right? There's different ways that they have access to information. We are finding actually that having company employees that are on the ground, that are visiting the clubs or visiting distributor leaders and that are sharing information with them that's relevant because, again, going back to John's question, why do we need the training? Why do we need this type of connectivity, is because some people come into the business. They get a result on the products, they're inspired, but they don't have a background in business. They don't know how to read the numbers, or they don't know how to specifically sometimes plan, and they just don't have the background. So this is something that we are going to be formatting, developing with our leadership to be able to understand where can we give the most value to the distributors. We already have, in some regions, what we would call regionals that are actually on the ground, in the field, meeting distributor leadership. It's part of what they're doing is what they're going to be doing in the future, but we are really going to standardize and format this. And by the way, then if we think about AI and the information and the data and how things can be automated, and we can take a program and know what's delivering the value is, but then we can also automate the program to deliver the value to more people. So this is just the beginning of something that's going to be very, very big for us in the future and that we're very excited about, and as mentioned, we will reallocate and we will automate.

Great. And then I was wondering if you could talk a little bit more about China. And what exactly was done there to kind of bring about this turnaround? I'm wondering how much of it is just the general market there becoming more open and -- or is it specific actions that you took? And just remind us, too, is China less of a Nutrition Club market? I don't think that was as much the focus there. Is that the case?

Well, it's quite interesting. So to answer your question, it's kind of both. It's obviously coming out of the pandemic, they were the last ones. They were the longest in the lockdowns. They were the last ones to come out. And so the distributors or the service providers that we have there, quite honestly, they had a very difficult time. And in terms of clubs, they actually started to adopt and implement Nutrition Clubs right before the pandemic. And so I don't know if you just kind of visualize and imagine, imagine thousands of service providers that opened up clubs, took locations just before the pandemic and then all of a sudden, they didn't even have a chance to get off the ground. So it was really disruptive. And I would say what is kind of leading the turnaround, a couple of things. One, number one, getting closer to the leadership there and supporting the service provider leaders and then actually understanding after a couple of years that the company is there to support them. And so this started early last year with Michael and myself meeting with them in March. We went together also in April. I went another 2x there and met personally with distributors or service provider leaders and local staff. And I would say that everything is coming together. They also had a back to growth plan that's really kind of lined up and organize things for the year. So we have positive numbers. Things are looking very good there. Again, they're coming off a 2-year very strong disruption. It's going to take a bit of time to build momentum there, but we do have positive momentum happening. And so again, we are feeling very, very good about this.

Great. And I was just wondering, why was the price mix all of a sudden seemingly in China, it looks like it was down about 11% or so. It looked a bit like an anomaly. Was there something that caused that in the numbers?

Say that -- the price mix, say that again, Linda.

For China -- yes, sorry, for China, I saw it looked like the price/mix, like it looked like the volume point growth was really strong, but the price/mix was -- I thought volumes were up 28% and price/mix was down 11%. Is that wrong or …?

I'll have to come back to you on that, Linda.

Okay. Yes, we can do that offline. And then just another, I guess, financial one for you, Alex. On the free cash flow for 2024, I guess I'd be picturing it to be maybe down somewhat because -- what would be the working capital benefits? Are you expecting some more of those in 2024?

Yes, so the working capital benefit in 2023 was largely rightsizing the inventory, that isn't a benefit that we are expecting to see in 2024 because we are now at the rightsized level. So we are not going to have that contributor, which was a significant contribution to our 2023. We do expect one thing that we did do in 2023 is we had our cash flow conversion get back to our stronger levels where it was above 1x. You might notice that in 2022 is below 1x. So we expect that cash flow conversion still to be strong in 2024. However, the working capital piece is not going to be a contributor to that 2024 benefit.

You mean conversion of EBITDA to cash flow or net -- adjusted net income to cash flow?

We typically look at it from an adjusted net income basis.

Okay. Okay. And then just in terms of the GLP-1 stuff that you talked about, that's very clever that they're reaching out to prescription providers to look for clients. I'm just wondering if you're in the works for doing something more formalized, some sort of partnership where you can actually partner with a GLP-1 provider to get a funnel of kind of customers? Is that something you're thinking about?

Hi, Linda, it's Michael. I've been waiting for that question from you. So we have studied this really carefully. And we've looked at health care providers, telehealth, we've gone back and forth on it. We think the best method to the marketplace for this is to work locally, is to work with the opportunity for our distributors to work with longevity clinics, work with doctors, work with different areas in their local marketplaces to provide a product that's complementary. We don't see ourselves in the near future offering a GLP-1 product. We believe that our strength is in the behavioral modification, giving product to people that complements a GLP-1 user on their journey. As you know, you're on that personal journey. 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.

Okay. Sounds good. Thank you very much.

Thank you, Linda.

Please standby for our next question. Our next question comes from the line of Jeff Van Sinderen with B. Riley. Your line is open.

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?

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?

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.

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?

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.

Okay. And then I'm sorry, on EBITDA, any color there on what we might expect with margins down?

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.

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.

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.

Okay. Understood. Thanks for taking my question.

Thank you.

Please standby for our next question. Our next question comes from the line of Anna Lizzul with Bank of America. Your line is open.

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.

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.

Okay. Thank you.

Please standby for our next question. Our next question comes from the line of Hale Holden with Barclays. Your line is open.

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].

He's going to be busy, so I don't think probably he's going to have much time.

He's all ours.

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?

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.

Great. Thank you very much.

Sure.

Please standby for our next question. Our next question comes from the line of Doug Lane with Water Tower Research. Your line is open.

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?

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.

And stock buyback, is that on the table?

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.

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.

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.

Fair enough. Thanks, Alex.

You're welcome.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Michael Johnson for closing remarks.

Let's get you all home for Valentine's Day, that's pretty important. Our company is metric focused as we should be. There's no doubt about it. We need to improve on some of our metrics. We've got a lot of energy behind what we are doing. But it wouldn't be me if I didn't tell you a little personal story to close our call today because, frankly, that's what I do. High-touch is vital in today's business, and the reality is we are in a high-touch business. And recently, I had the opportunity to follow my team all the way to the national championship. We chased Michigan from Ann Arbor to Houston. And I did it with a childhood friend of mine, one of my best friends and still today, someone who I ski race with and raise spikes with and he was an incredible athlete in his youth. But like many of us, not me necessarily, but he gained too much weight. And when he was young, he was this incredible athlete, but he let himself go. He purchased Herbalife products years ago and he never really met the success that he wanted to meet. And he did not modify his lifestyle. So he found a Herbalife distributor in our small town in Southern Michigan where we grew up, a world team member who within our home town. And like many, he thought about GLP-1s because he wanted to have a quick transformation in this body. But the real transformation came when he started to work with a distributor at a Nutrition Club at our hometown. He lost weight by being held accountable. Early in this journey, that weight started to come off. By this, in this wonderful Herbalife distributor through weekly visits, he was held accountable to be measured, to discuss calorie intake, nutrition training, proper use of Herbalife product. His distributor is what we call a transformational distributor. For 13 years in southern Michigan, he helped people get active and healthy and he's built a successful business doing it. This is what makes us so special and unique and opportunistic. This is why all of us sitting around this table here today and all the distributors listening in from around the world know that Herbalife is an incredibly unique company. Weight loss, it's back in the discussion. Our vision of being the world's premier health and wellness company, community and platform has never ever been more relevant. We are excited about 2024, I hope that came across today. Our challenges are overshadowed by our opportunity. So as we say to everybody at Herbalife, All GH. Let's go, Herbalife. Thank you, guys.

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