Good afternoon, and thank you for joining the Q3 2020 Earnings Conference Call for Herbalife Nutrition Limited. On the call today is Doctor. John Agonobi, the company's Chairman and CEO John DeSimone, the company's President Alex Amezquita, the company's Senior Vice President of Finance, Strategy and Investor Relations and Eric Monroe, the company's Senior Director, Investor Relations. I would now like to turn the call over to Eric Monroe to read the Company's Safe Harbor language.
Before we begin, as a reminder, during this conference call, we may make forward looking statements within the meaning of the federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For a complete discussion of risks associated with these forward looking statements in our business, we encourage you to refer to today's earnings release and our SEC filings, including our most recent Annual Report on Form 10 ks and quarterly report on Form 10 Q. Our forward looking statements are based upon information currently available to us. We do not undertake any obligation to update or release any revision to any forward looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events.
In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements prepared in accordance with U. S. Generally Accepted Accounting Principles referred to by the Securities and Exchange Commission as non GAAP financial measures. We believe that these non GAAP financial measures assist management and investors in evaluating our performance and preparing period to period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release. A reconciliation of these non GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC.
These reconciliations, together with additional supplemental information, are available at the Investor Relations section of our website, herbalife.com. Additionally, when management makes reference to volumes during this conference call, they are referring to volume points. Will now turn the call over to our Chairman and CEO, John Agwunobi.
Good afternoon, everyone. Thank you for joining us on the call today. During the Q3, we achieved another worldwide sales record with reported net sales exceeding $1,500,000,000 and growth of 22.3% compared to the prior year. 3 of our 6 regions, North America, Asia Pacific and EMEA, along with 24 countries, set new quarterly net sales records. Volume points grew for the 10th consecutive quarter and for the Q3 in a row, we set a new record high.
The success was broad based as we had volume growth in all 6 of our regions for the first time since 2013. We have also seen growth in our sales force, which is now the largest it has ever been. In the Q3, new distributors and preferred members grew 57% with increases in every region. Approximately 65% of these new distributors and preferred members are millennials or Gen Z, part of an increasingly health conscious and younger demographic. We believe that an increased interest in health and wellness is continuing to drive demand for our nutrition products.
Our products and our innovative direct sales channel allow us to help consumers reach their nutrition goals through education and community, healthier eating and a more active lifestyle. Technology has been key during these times. We have seen our distributors turn to social media in higher numbers to reach new customers and to stay connected. We are empowering our distributors with enhanced technology tools for ordering, analyzing business performance and customer retailing. The combination of our traditional business methods and a more advanced digital infrastructure creates a more resilient sales force and channel.
Additionally, our training activities have shifted to a virtual online format, which has extended our reach to an even larger audience. At some of our larger events, attendance has been well above prior year levels. We expect to utilize an efficient hybrid event model in the coming years. I now want to pivot to our outlook for the future. For the Q4, we expect the momentum to continue with net sales growth in the range of 10% to 20%.
Looking ahead to 2021, we expect to build off this year's 13% year to date net sales growth and project full year 2021 net sales to increase between 3% and 11%. Alex will provide more details on our guidance. We also announced today a distribution of warrants to our shareholders in an effort to provide the potential for enhanced value to all of our shareholders. Alex will also provide additional information on these warrants and you can also find a Q and A document available now on our Investor Relations website. Let's dig a little deeper into our regional results, starting with the U.
S, where volume points were at an all time high and grew 50% for the quarter. We continue to see strength across all our channels in the U. S, led by customer direct shipping, which increased approximately 90% compared to the prior year. Sales coming from Nutrition Clubs also increased for the Q3, including more home deliveries from Nutrition Clubs to their customers, an approach that has seen increased use as a response to the pandemic. Over the past two quarters, we have seen a material acceleration in new distributors in the U.
S. With year over year growth of 75% in Q2 and 85% in Q3. Our analysis into the behavior and ordering patterns of this new distributor cohort show similar trends to distributors that entered the business prior to the pandemic. The activity rates and productivity of these new distributors gives us confidence in the future retention rates of the U. S.
Business. In China, volume points grew 1% compared to the Q3 of 2019. Although meeting attendance is not back to historical levels, we are encouraged that certain cities in China are beginning to allow larger in person group meetings to take place. These types of large gatherings have not taken place in China since last year's 100 day review, And we expect to utilize a combination of in person and virtual meetings going forward in China. India returned to growth in the quarter, increasing by 16% compared to the prior year.
Restrictions imposed in the market due to the lockdown continue to ease. By the end of the quarter, our company locations were open to take orders, receive payments and to pick up product. However, we continued to see our members favor home delivery, where volumes still exceed pre pandemic levels. The growth in India contributed to a record quarter for the Asia Pacific region, which increased 10% versus the Q3 of 2019. In Mexico, volume points were up 7% in the quarter following 5 quarters of single digit declines.
New members in Mexico grew 26% during the quarter with 58% of new members coming from the millennial and Gen Z demographics compared to only 51% at the end of last year. The EMEA region set another volume point record and grew 34% in the quarter, the 42nd consecutive quarter of growth dating back to 2010. The growth came from countries such as Spain, which was up 43%, Turkey up 6 37% increased 82% and the United States members are turning to social media to connect with their customers and are using technology to carry out their sales and training activities. Finally, South and Central America returned to growth and were up 16% in the quarter. This was led by double digit increases in Colombia, Chile and Peru, while Brazil was down just 1% in the quarter.
Sales have rebounded as product access challenges from the pandemic have eased, and we are seeing distributors utilize virtual events similar to what we've seen in other regions to improve the reach of their training. Additionally, we have 2 leadership changes to share. Effective November 9, Bosco Chiu, who has been with Herbalife Nutrition for 27 years, has assumed the new role of Chief Risk Officer, where he will work across all business units to lead our enterprise risk management, internal controls, ethics and compliance strategy. In conjunction with this move, Alex Amezquita, who celebrated his 3 year anniversary with the company this week, will become our company's new Chief Financial Officer. He will now be responsible for all corporate financial functions at the highest level.
Both will report to me and with these executive leadership transitions, we strengthened an already strong and high performing senior management team. I look forward to working closely with Bosco and Alex as they assume their new responsibilities. So what you've heard today is that in the Q3 of 2020, Herbalife Nutrition continues to set records. I am confident in the resilience and in the innovation of our distributors, the future of our business and our continued growth potential. I now turn the call over to Alex
to review the financials. Thank you, John. 3rd quarter net sales of $1,500,000,000 represented an increase of 22.3% on a reported basis compared to the Q3 in 2019. Currency normalized during the Q3, but still drove a headwind of approximately 280 basis points. Adjusting for the change in foreign exchange rates, net sales for the quarter increased 25.1 percent.
We reported net income of approximately 138,100,000 dollars or $1.04 per diluted share. Adjusted earnings per diluted share were 60% compared to adjusted EPS of $0.72 for the Q3 last year. The impact of currency fluctuations represented a year over year headwind of approximately $0.12 on results for the Q3. Note that our reported and adjusted results this quarter include expenses related to the China Growth and Impact Investment Program of approximately 3,200,000 dollars Reported gross margin for the Q3 of 78.8 percent decreased by approximately 165 basis points compared to the prior year period. The decrease was primarily driven by the unfavorable impact of foreign currency fluctuations and increased freight costs related to orders being shifted to home delivery versus member pickup as a result of COVID-nineteen that we called out a quarter ago.
Q3 2020 reported SG and A as a percentage of net sales was 34.8 percent and adjusted SG and A as a percentage of net sales was 34.6%. Adjusted SG and A excluding China member payments was 26.5%, approximately 240 basis points lower than the Q3 2019. This was largely driven by a decrease in member promotion and event costs as a result of delays, cancellations and reformatting of promotions and events due to the COVID-nineteen pandemic. A significant amount of the underspend on these items from the 1st 3 quarters of the year is projected to be spent in the 4th quarter. Our 3rd quarter reported effective tax rate was approximately 19.5 percent and our adjusted effective tax rate was 16.3 percent, which was lower than the prior year, primarily due to favorable changes in the company's geographic mix of income and a reduction in the income tax rate of certain foreign jurisdictions.
As John mentioned, we are issuing guidance for the remainder of 2020 providing initial guidance for 2021. While there is still uncertainty related to the impact that COVID-nineteen might have on the future performance of the business, we have gained increasing confidence in the business and operational trends in response to the impact of COVID-nineteen throughout 2020. For the Q4 2020, we estimate volume point growth in a range of 10% to 20%. Net sales are also expected to be in the range of 10% to 20% growth, which includes an approximate 3.50 basis points currency headwind versus the prior year. 4th quarter reported diluted EPS is estimated to be in a range of $0.45 to 0 point 7 $5 to 0 $0.85 Reported and adjusted diluted EPS includes a projected currency headwind of 0 point 2019.
The sequential reduction in EPS from Q3 to our Q4 guidance is primarily driven by the previously mentioned increase in SG and A due to advertising and promotion that was deferred from the 1st 3 quarters of the year. However, Q4 adjusted diluted EPS guidance implies full year 2020 adjusted diluted EPS guidance of $3.48 to $3.78 which implies 23% to 34% growth over 2019. Initial guidance for 2021 builds off the double digit top line growth implied in our full year 2020 guidance. 2021 worldwide volume points are estimated to be between flat 8% growth with worldwide net sales growth of 3% to 11% on a reported basis, which includes an approximate 80 basis points tailwind due to currency. Constant currency net sales are expected to be in a range of 2.2% to 10.2% growth.
Full year 2021 guidance for reported diluted EPS is in the range of $3.50 to $4 with adjusted diluted EPS in a range of $3.65 to $4.15 dollars Reported and adjusted diluted EPS are expected to be currency neutral compared to 2020. EPS guidance excludes the impact of any future expenses related to the China growth program, share repurchases and excess tax benefits from equity exercises. Turning to cash flow and our share repurchase activity. During the 1st 3 quarters this year, we generated over $500,000,000 in cash flow from operations and we currently have over $1,000,000,000 of cash on hand. During the Q3, we also completed $800,000,000 in share repurchases, which included $750,000,000 from the modified Dutch auction self tender offer completed in August, followed by $50,000,000 of open market repurchases over the remainder of the quarter.
We have approximately $700,000,000 remaining on our existing share repurchase authorization, and we will prudently return excess cash to shareholders on a consistent basis. To potentially unlock additional shareholder value, we are making a pro rata distribution of warrants where shareholders of record will receive 1 quarter of a warrant for each common share held. The warrants provide all of our shareholders the opportunity to potentially take advantage of the option value embedded in the warrant. The exercise price of the warrant is $67.50 with a maturity of 7 years in which the warrant will only be exercisable at maturity. Should the warrants be exercised at maturity, the company has the ability to net settle the warrants in shares, which minimizes any impact on our diluted share count.
The record date for the distribution is November 16 and the payment date will be December 14. We continue to believe the repurchase of common shares along with the distribution of warrants is consistent with the company's long term goal of maximizing shareholder value. This concludes our prepared remarks. Operator, please open up the line for questions.
Thank you, sir. I show our first question comes from the line of Doug Lane from Lane Research. Please go ahead. Yes.
Hi. Good afternoon, everybody. Congrats, Alex, on your promotion. Alex, can you elaborate on the warrants here and what the expected dilution is to your EPS count going forward?
Hi, Doug. Thanks for the well wishes. Sure. So the warrants themselves, so the exercise price is $67.50 The way that the warrants will be accounted for is effectively treasury stock method. So while the share price is below the exercise price, there's actually no dilution at all to EPS.
As our stock price becomes above the exercise price, again, we'll use treasury stock method in which that means the value above $67.50 will be what is reflected into the denominator in calculating adjusted EPS. It's also probably worth noting that while there is that potential dilutive effect to EPS, overall shareholders, if you receive this warrant and you're holding both the warrant and the equity that you had, there's no dilution to your equity value that you withhold because the dilution that is in EPS is countered by the accretion of the ultimate underlying shares that you're holding. So effectively, if you hold the warrants, you're no different from an equity ownership in the company and effectively no different from a value perspective from that lens.
Right. No, that's helpful. Thanks. And how have you calculated the impact of warrants to your EPS guidance for next year?
They are not they have zero impact on the EPS guidance of next year because obviously we are below the stock price or the exercise price. So that is a non factor.
Okay. That makes sense. And then you mentioned $700,000,000 left on your stock buyback. I assume that no stock buyback is factored into your EPS guidance for next year as of yet as well?
That is correct. And as you probably heard in my remarks, post the tender offer, post the $750,000,000 of tender offer, we did do $50,000,000 worth of open market repurchases. I think going forward, again, I think this is a message we've been saying, that the company generates a lot of cash. We typically don't have a lot of uses for those cash. So excess cash, returning cash to shareholders by way of a repurchase is a good way to do that.
I think that $50,000,000 level that we did last quarter is probably a good level, generally speaking, as we look forward. Obviously, it might be less, it might be more depending on the facts and circumstances of the repurchases factored into the EPS guidance for 2021.
Okay. And then just lastly, I mean, the acceleration in growth here has been pretty astounding. And I've dealt with these models for a long time, and I just need help understanding how you expect this momentum, this acceleration that we're seeing to revert back to the single digits so quickly in 2021?
Yes. Well, so I think if you look at the guidance range that we have in Q4, right, so Q4 is volume point growth between 10% 20%. So I think even in Q4, what we're effectively saying is on the high end of the range, the business continues to perform as you've seen through much of Q2 and through Q3. And in the low end of the range is a beginning of a deceleration to a more normal growth rate. Now obviously, we're still in a circumstance where there's not as much visibility as we have historically had.
But as we look at the sustainability metrics, as we look at the underlying metrics, we can see the top end of the range being a plausible outcome and we could see the low end of the range be something as COVID might have some impact on the business.
Yes, Doug, this is John D. I'm going to jump in and just add to Alex's comment. Look, I mean, the growth rates this year are tremendous, and you follow the CIGI industry for a long time. And there are spikes in growth and some leveling off. I like to look at our guidance and stack it up over 2 years to see that the sustained growth this year becomes part of the foundation.
Once you start comping the numbers we've had this year, it gets a lot harder. So I prefer to I think the easier way is just look at 2 year set.
Okay, fair enough. Thanks, John.
Thank you. Actually, our next question comes from the line of Karru Martinson from Jefferies. Please go ahead.
Good afternoon. I'd like to offer my congratulations, Alex, as well on the promotion. Just in terms of the distributor growth, I mean 85% in the U. S, what is the typical person coming in in terms of their involvement here? You mentioned 65% globally, I think millennial and Gen Zs.
What are you seeing in the U. S? And how are they spending?
Yes. This is John. Dale, I'll take that one. I mean, the mix is mixing younger, skewing younger, which is exciting for us as a company. And I know you're asking for the U.
S. Specific. I don't have the U. S. Off hand.
But in general, across almost all of our markets, the new members coming in are millennials of Gen Zs. Mexico was a market that was kind of further behind some of the other markets. And in the Q3, 65% of their new members were Gen Z and millennial owned. So that's a big pickup. So, there's strength in non distributor base getting younger and that's exciting.
As far as their purchasing patterns from an overall volume standpoint, not much different than what we've seen pre COVID. So we've got a lot more people coming in. Productivity around those people are pretty standard, and the activity rates are pretty standard. So that's also encouraging. So it's not a short term trial basis.
We're seeing pretty good sustainability from those people coming in that's not dissimilar from what we've seen in the past.
Okay. And then when we look at the product mix that you guys have during the quarter, are you still seeing kind of the immune essentials and things that are more COVID related outpacing the rest of the portfolio or some shift on that? Or are you still seeing meal replacement and weight loss holding the bulk of the business?
Yes. It's still broad based growth across the product portfolio. I don't think one particular product sector is disproportionately or just making a material difference in the we're seeing all boats rise here.
Okay. And then when we look at the guidance for next year, how much is built in, in terms of new product introductions? Or how should we think about that pipeline as we go out to next year?
Yes. When we build guidance, we don't necessarily build guidance from a product standpoint. We look more from the distributor and sales metrics. So I don't have a great answer to that question in that way. I would say, generally speaking, though, the refreshing our product portfolio is instrumental for distributors to be successful out there in the field.
That's part of their ability to be competitive and remain competitive. So I would say generally as we do product introductions that is just an underlying assumption in the effectiveness that we see them out in the field. So we continue to launch into different products as well to continue to penetrate different segments of the markets. As you know, we've been talking a lot about choice. So as we talk about clean label and those types of products, as we talk about further penetration into our sports line and as we talk about further investing in localization of flavors specific to different markets, all of those aspects help our distributors be successful out there.
Thank you very much guys. Appreciate it.
Thank you. Our next question comes from the line of Hill Holden from Barclays. Please go ahead.
Thank you for taking the call. I had two questions for you. Alex, I was just wondering the thought pattern behind the warrants. I'm sure you had multiple different things on the whiteboard that you were considering and why you thought the warrants were the most efficient sort of shareholder distribution method?
Sure. So there's no judgment on most or least. To me, the warrants become just another lever in unlocking shareholder value or the potential to unlock shareholder value. Obviously, there's a lot going on in the business. We had a great Q2.
We continue to have a great Q3. And as we look into guidance of next year, the business is going to continue to grow. So from a company standpoint, the biggest way that we can return shareholder value is to make sure this business continues to grow. There are other things that the company can do with its capital structure in the form of share repurchase, which is a lever. And now we have this warrant distribution.
And candidly, the warrant distribution provides an opportunity, not an obligation, but provides an so I don't think it's mutually exclusive. It's just another lever in the set that a shareholder may or may not take advantage of as we move forward. So that's sort of the rationale and how I would put the warrant in context with all of the other things available to a shareholder investing in Herbalife Nutrition.
Got it. And then my second question is we've been trying to track you guys on WeChat and the level of activity seems like it's very high. And I was wondering with the resumption of the bigger in person China meetings, if that would be a growth accelerator in 2021? Or if alternatively, you guys think you did such a good job virtually this year that it was just sort of more additive? Or how I should think that through?
Yes. So this is John, D. And so I assume when you're talking WeChat, you're talking the personal stores that we've helped create for our members in China on WeChat. WeChat is using a lot of things. The volume coming from that personal store in Q2 was in the low 20s and Q3 was in the mid-20s.
It's building, but it's still got a lot of growth left. Meetings, by the way, are not fully back in China, not even close. The big cities, in fact, meetings still have a lot of restrictions in some of the rural areas, which is where we're seeing some of the strength is more in the rural areas, not the big cities, is because the meetings are coming back. But, I suspect over time, next year and the year after, you'll see a big acceleration in the sales that are coming from the digital platform as we enhance both the functionality, because it's a fairly new tool and the training behind it.
Great. Thank you so much. I appreciate it.
Thank you. Our next question comes from the line of Sebastian Barbero from Jefferies. Please go ahead.
Hi, team. Thanks for taking my question and congrats on a great quarter. Firstly, I was wondering if you could talk more about the trends in North America and Europe. I'm trying to understand what is leading to the sizable outperformance relative to other regions. And is it related to higher adoption of digital tools in these developed markets?
So this is John D. I'll take that one too. So it's really a trifecta. It's 3 things. It's 1st and foremost customer interest in the product, okay?
That's the foundation. Behind that, of course, is distributor engagement, which is incredibly strong right now. And then the third, which is how you combine those 2, it is the use of technology a bunch of different technology platforms and social media platforms. And in the developed markets, those are stronger. The infrastructure is stronger behind some of those tools.
And certainly, even the ability to deliver the products and things like that are easier in more developed markets.
This is John A. I'd just add that within the distributor engagement piece, there's also the fact that there are many potential distributors sitting at home looking for new ways to fill their day, to generate income for their families, to perhaps start new businesses. It makes it easier for distributors as they recruit their sales force, as they build their sales team.
Thanks. And switching on to China, I was wondering what does your full year or what does your 2021 guide embed for growth in the region?
Okay. Thanks. Yes. So we don't provide guidance by region. So just generally, I'd just point you to the overall volume growth of
2021. Okay. And many of your PS initially have cited issues with their supply chain. Anything to report here or has been pretty smooth for you guys?
Yes. Look, it's been pretty smooth. It has not been entirely smooth. That was mostly a reflection of just substantial sales growth. It has created some out of stocks on some products, and it's been painful for some distributors who sell those products.
It's been manageable, but certainly we got an impact from it. It's tough to quantify. But it's certainly something we've been able to overcome, but it's not consistent.
And last one on CapEx for 2021. It's almost double what it was in 2019, but obviously there was a bit of underinvestment in 2020. Is that just a catch up effect?
That's right. It's a bit of a catch up. Obviously, the volume this year, part of it is going to be into our manufacturing to help with being able to sustain that volume, not only for next year, but for the for our growth trajectory going forward. Part of it for technology, continuing to invest in technology, particularly around distributor tools. And part of it is just spikiness.
Thanks.
Thank you. I show our last question comes from the line of Ivan Feinseth from Tigress Financial. Please go ahead.
Thank you for taking my question and congratulations on another incredible quarter and congratulations to Alex and Bosco on their promotions.
Thank you, Alex.
Thanks. First of all, for the great growth, where do you see the drivers or where did you see the drivers coming from, especially since you say that the increase in distributors is breaking more toward younger people, toward millennials? What product lines are driving people to Herbalife to become a distributor, to become a customer? And so where do you see like key
drivers? Well, I mean, one thing that's a broad question. And there's a lot of different ways we can take it. But I think a piece of the question could be answered in some of the product categories that we are going into, to attract different demographics and different folks. So clearly, our H24 sports line attracts a younger demographic and active healthy active lifestyle demographic that seems to resonate with all demographics, but particularly with that younger demographic.
So we know it's a huge opportunity and we're seeing that opportunity as we've rolled out that sort of sub brand, if you will, really resonating with the younger generation.
Yes. The other thing, by the way, Ivan, that we're pretty excited about on a go forward basis is the fact that we've just launched in the U. S. 2 products that I think are going to appeal not only to Gen Z and millennials, but perhaps even to older customers as well. So this is less about the answer to your question on recruiting younger distributors and more to the fact that we're hoping to engage and retain a broad swath of customers as we go forward.
We're launching in fact, we've actually launched a couple of, I think, innovative products in the U. S. Recently, Memory Armor, which is a 300 milligrams of bacopa, which is an Indian traditional herb with actually a fair amount of science behind it that is known to impact cognitive function and brain health. And then our very first entry into the cannabinoid marketplace with 2 topical products, a balm and a serum for outer use on the skin and containing, I think, a really material amount of cannabinoid hemp extract. It's the beginning of our journey into that space.
It's called Enritual, and I think it's going to be an amazing product in the U. S. And at some point, we'll take it to other countries as regulation allows.
I would like to get into more specifics on some of the nutrition that I don't want to do it here. I welcome the opportunity to speak offline. Absolutely. Then just 2 other things. When you spoke about there were some shortages of out of stock.
Do you think that the incredible results could have even been more incredible if the inventory was deeper?
So yes, there were some sales loss certainly when we were out of stock. I'm not going to get into quantifying it. I mean, the results are great. And so probably would have been immaterial to the overall performance, but definitely lost some sales.
And what were some of the like the largest selling single items in the quarter? You could just give us some overview or quick highlights.
Well, it's still Formula 1, which is a meal replacement shake, our tea products and our aloe products still represent a huge portion of our sales.
Our nutrition clubs around the world have done very well in this last quarter last 2 or 3 quarters actually. And those are products that are their mainstays, F1, allo and T.
Yes. And adding on to that, Ivan, really across all of our categories, I mentioned this in an earlier question, all boats have risen. Weight management is up 18%, targeted nutrition is up 28%. Our energy line is up 32%. And so I mean that kind of gives you some perspective.
It's really all both rising.
And just quickly as an example, there's an article in The Wall Street Journal that's saying one of the even younger people who have had COVID are experiencing memory loss. Do you think that's the driver of the new memory product or helping it?
No, no, no. It's completely unrelated. We have actually very, very carefully thought to separate anything that we do from the pandemic. Our hearts go out to those that have lost loved ones or those that are suffering. And we've been very clear, the team and our distributors, on focusing on our traditional business.
It's the traditional business that's performing and it's not about a direct response to COVID in any way.
Okay. And then my last question, you keep talking about digital tools and investments in digital tools. What are some of the areas you're going to expand? And also, you have some great content that you have on this Herbalife Fitness website with exercise videos. What are your thoughts?
How are you going to be incorporating that more into your customer engagement and giving ways to like monitor progress and things like that?
So this is John D. I'll take that. So first
on the technology side, they fall into a number
of different buckets by the way. Some of them is in fact capturing customer transaction data. Segmentation as you know has been rolled out in a number of countries. It's in 8 countries as of today. Over the next 6 months, it will be in 8 more.
By the end of next year, 80% of our volume maybe in excess of 80% of our volume will come from countries that have the preferred customer program and that's there's a lot of programming in there and it's country by country. It's not something you just turn on a switch and roll it out. So that's certainly one. There are POS tools that we will roll out. So the U.
S. Has a version of a POS tool. We will look to roll that out in countries that want it. And there are a number of countries that want it, because we think that's an efficiency tool for distributors that have clubs, but it could be used for more than just clubs. And I think it also can help increase the economic value of their customers.
There's also just general online tools. So we have tools that are online sign up, online ordering. Those are the best in class for us will get rolled out globally. So there's just a whole host of tools that we're going to invest in over the next year plus. It will take more than a year by the way, but a big investment comes next year.
And then there's, of course, on the sports side, we are going to look to make sure that that portal has got all that information is easy to use and in different formats. So it could be mobile and things like that. And that's I think not only ties into our Herbalife24 program in general, but even those who want on Herbalife24, there will be a version on the fitness portal for them also to do some basic fitness.
Thanks for the question, Ivan.
Thank you and congratulations again.
Thank you. Thank you.
I show no further questions in the queue at this time. I'd like to turn the call back over to the Chairman and CEO, John Agunobi, for closing remarks.
Thank you. I'll keep this very quick. We're very proud of the work of our independent distributors around the world. They've really, I think, risen and grown their businesses and supported their customers in a way that makes us all extraordinarily proud. I'm also particularly proud of our team and the way that it has responded to that growth and to that increase in demand for our services, our products.
And
when all
is said and done, big congratulations from myself to Alex Amezquita, our new CFO and to Bosco Chiu, who is transitioning from CFO to what I think is going to be a critically important role as Chief Risk Officer. Our goal being to be a model in that space in the future. The future is bright. And as we say around here, we all feel like we've only just begun. And I'll end on that.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.