# DEAR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_HLF_2020/NYSE_HLF_2020.mmd` · pages 1-7_

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DEAR SHAREHOLDERS:

As I write my first Annual Shareholder letter, I can't help but reflect on what an important, tough and yet exciting year it has been. While all of us at Herbalife Nutrition were celebrating the 40th anniversary of our unique and special company, we were also dealing with the unprecedented impact of the COVID-19 pandemic. Certainly, 2020 was a year filled with unimaginable loss and hardship for too many people around the world, and our hearts go out to everyone affected by the pandemic. While we are all looking forward to better days ahead, for now, we must all continue to focus on keeping everyone safe and healthy. Nothing is more important.

During this most challenging time, our employees and distributors came together to support their communities and each other. Whether it was providing good nutrition to frontline workers, donating products and resources to feed those in need, or simply checking in on fellow teammates, our care for others was at the forefront of our response. I'm extremely proud to say that helping others is the hallmark of our company.

2020 was a year of change for everyone, and a year that required innovative and entrepreneurial solutions to new challenges and opportunities. Once again, our distributors rose to the occasion. They were nimble and resilient. They refused to allow the challenging circumstances to get in their way as they helped their customers achieve results and continued to build ever stronger businesses with their teams. Virtual meetings and trainings replaced in-person gatherings, on-line ordering and take-out replaced in-person nutrition club consumptions, and on-line workouts with our distributors and experts replaced exercising in fit clubs and other locations.

Yet the restrictions imposed by the pandemic also provided us an opportunity to reach and support more people in a more efficient manner than ever before. In fact, in 2020, more than 335,000 people attended our virtual Extravaganza events, more than twice the number we have ever reached at these events when they were in person. It is clear that the learnings and innovation of 2020 will live on long past the pandemic. Our community and our business emerges from the storm that was 2020 stronger than ever and better prepared to take on the future.

The events of the past year have also confirmed for me the important role we play on a daily basis in the lives of millions of people. By providing quality nutrition products to help people become healthier, and a business opportunity that provides supplemental and full-time income for those wanting to create their own businesses, Herbalife Nutrition is changing lives and improving communities all around the world.

It is clear, the strategy we put in place more than three years ago focused on compelling products, powerful technology and enhanced distributor education is working, as evidenced by our record-breaking performance in 2020. Our net sales of $5.5 billion in 2020 was the highest in our history, up 14% compared to 2019. Three of our regions – Asia Pacific, EMEA and North America – also set annual net sales records. We further measure the sustainability and strength of our business through sales leader retention; and another record was set with a retention rate of 67 percent, representing more than 300,000 sales leaders retained for the 12-month qualification period ending in January 2021.

It's also important to note that for the full year 2020, approximately 65% of our new distributors and preferred members are Gen-Z or Millennials. This compares to 59% in 2019, which means our company is getting younger and is well positioned for the future.

We expect the momentum that we are currently seeing in our business to continue in 2021 as the demand for healthy nutrition and supplemental economic opportunities remains robust. Even as we fine tune our strategy with a view to deepening and accelerating its impact in the 95 markets which we serve, our continued focus on products, technology, distributor education and corporate social responsibility will lead to our growth.

## Products

We believe continuing to respond to consumer trends and local preferences will provide our distributors with the products they need to grow their businesses. To this end, we are continuing to launch products in popular local flavors, such as Arroz con Leche in Mexico, and product lines that meet local demand like our Ayurvedic line of

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supplements in India. We are also providing consumers greater choice through products that use alternate protein sources and non-GMO ingredients. Finally, we are expanding into more dayparts with products for use in baking, as well as soups, snacks and evening protein shakes that will provide for additional product use at home, as well as support extended hours of operation in our distributors' nutrition clubs.

We have seen an increase in the demand for our line of immunity products and recently launched Memory Armor for brain health, and you can expect to see more products in targeted functional areas as we look to the future.

We are also meeting the demands of a younger, on-the-go population with products like an all-in-one shake pouch introduced in China, where you just add water, and tea packets for nutrition clubs for their customers to enjoy later. Finally, we are expanding our Herbalife24 sports nutrition line, and making it available in more markets as the demand for sports nutrition also increases. In fact, the Sports Nutrition category will continue to outperform the market as it continues to grow within our portfolio.

Lastly, we know the science behind our products and our quality programs are second to none. Our goal is to lead the industry in testing and transparency, so consumers have a better understanding of our ingredients and the efficacy of our products. We want to be known as the most scientifically grounded, most trusted and most transparent company on the planet. We want to be at the forefront of rigorous scientific research and apply that knowledge to reach beyond what we think is possible today when we think of nutrition and its impact on the health, wellness and the performance of our bodies.

## Technology

Our distributors are our unique competitive advantage, and their time is their most important asset. That's why we will focus on providing them with tools and technology to help them run their businesses more efficiently, freeing up their time to focus on the important one-on-one relationships they have with their customers and their teams. We have already seen significant distributor adoption of our on-line tools, allowing them to be more efficient and more focused on servicing their existing customers and finding new customers. We saw an exciting number of distributors embrace social media and accelerate the digital transformation of their independent businesses during the lockdowns of 2020.

We're excited to announce the company will be hiring its first-ever Chief Digital Officer, who will be charged with helping steer the digital transformation of the company, an effort designed to help us better engage, adopt, support and leverage the exciting advances in social media and e-commerce that we are seeing around the world. We believe this digital transformation will enable us to leverage the power of our global data, and the use of Artificial Intelligence will help unlock the full potential of our distributors around the world.

## Distributor Education and Success

Product quality is an important element of our growth strategy, but the quality of our distributors is just as critical. The education and training we provide our distributors are crucial to their success and the success of our company. Our distributors are trained on our products, general nutrition, health and fitness. Most notably, they also receive in invaluable education on how to run a successful business. Not only is the company dedicated to helping deepen their expertise, but our distributors are also dedicated to mentoring and training each other and sharing their successful business methods and experiences with each other around the world.

Our goal is that every customer, as they strive for results, will have access to high-quality information, coaching, programming, community, and support no matter where in the world they are, directly from their distributor or from the company on behalf of their distributor. And our goal for every distributor is that they will never be alone as they start, build and sustain their businesses. They will benefit from the collective expertise of 41 years of experience from other distributors, a business community and a company dedicated to supporting them as they grow.

## Long-Term Growth Algorithm

Our strategies related to product, technology and distributor success support the foundation of our long-term growth algorithm by driving net sales growth in the mid-single digits. Prudently managing our investments and

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expense structure provides operating leverage to carry operating income growth in the mid- to high-single digits. This net sales and operating income growth ultimately ladders up to earnings-per-share growth in the high-single to low-double digit growth as we efficiently return the excess cash that our business generates through share repurchases. Together, the net sales, operating income and earnings per share drivers form our long-term growth algorithm which we believe is an attractive financial model for our shareholder base.

## Corporate Social Responsibility

Given our expertise, our scale, our network and our global reach, we have developed a corporate social responsibility strategy that leverages these strengths to improve our communities in three meaningful areas: 1) providing greater access to nutrition, 2) increasing economic opportunities, and 3) strengthening environmental stewardship.

I have a passion for sustainability and plan to bring an even greater focus to our impact on people and our planet. Our Herbalife Nutrition Foundation and Nutrition for Zero Hunger initiative are two ways we are working with nonprofit organizations through grants, partnerships and programs that bring good nutrition and nutrition education to underserved communities. We'll continue to expand the reach of both programs to work toward creating a world where no one goes hungry.

Furthermore, as a company focused on providing economic opportunities, we have the expertise to help others with economic empowerment, especially those in underrepresented communities. We have been working with groups such as LULAC, The Urban League and Chrysalis sharing our knowledge and reach to expand economic opportunities in the communities they serve. We look to reach even more people as this initiative grows.

We are also focusing on our environmental impact, reducing our use of plastic, using recycled materials in our packaging and reducing the amount of packaging in our products. We are also working with our vendors and suppliers to find ways to extend our impact. For example, we intend to work with our thousands of "seed to feed" partner farmers, big and small, all around the world to identify ways to help them run more sustainable and successful businesses.

Finally, we're taking a fresh look at the vendors we work with and will always endeavor to buy products and services from only those companies that share our commitment to people and the planet.

One thing that separates us from other companies are the millions of distributors we have in every corner of the world who can help us carry out our corporate social responsibility initiatives. We'll be enlisting them to increase their efforts to recycle, reduce waste, use water efficiently, eradicate hunger and provide even more economic opportunities for more people around the globe.

I'll close this letter where I began. This has been an interesting first year as Chairman and CEO of Herbalife Nutrition – but I wouldn't trade it for anything in the world. It has reaffirmed my belief that ours is a unique and special company that continues to improve lives and strengthen communities around the world. And it has bolstered my confidence in our exciting future.

I hope you share in my confidence and excitement about what's to come in the years ahead.

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Dr. John Agwunobi

Chairman and Chief Executive Officer