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Herbalife Nutrition Ltd. (HLF) Q1 2019 Earnings Call Transcript

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Herbalife Nutrition Ltd.  (NYSE: HLF)
Q1 2019 Earnings Call
May. 02, 2019, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and thank you for joining the First Quarter 2019 Earnings Conference Call for Herbalife Nutrition Limited. On the call today is Michael Johnson, the Company's Chairman and CEO; John DeSimone, the Company's Co-President and Chief Strategic Officer; Dr. John Agwunobi, the Company's Co-President and Chief Health and Nutrition Officer; Alex Amezquita, and the Company's Senior Vice President of Finance, Strategy and Investor Relations; and Eric Monroe, the Company's Director, Investor Relations.

I would now like turn the call over to Eric Monroe to read the Company's Safe Harbor language.

Eric Monroe -- Director of Investor Relations

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 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-K 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 revisions to any forward-looking statement or to report any future events or circumstances, or to reflect the occurrence of unanticipated events, except as required by law.

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 US 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 also 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.

I will now turn the call over to our Chairman and CEO, Michael Johnson.

Michael Johnson -- Chairman and Chief Executive Officer

Good afternoon everyone and thank you for joining us on our first quarter 2019 conference call. As you saw from our press release today, we delivered net sales growth in four of our six regions, which included year-over-year growth in seven of our top 10 countries. Our geographic diversity is an asset that helps us deliver these results and geographic diversity is uncommon in the nutrition and direct selling industries.

While we had significantly lower-than-expected results in China in quarter one, we reported the highest first quarter volume points in the Company history. The Chinese government recently concluded a 100-day review of the health products industry. This review had an impact on both the Company and our service providers' ability to host meetings in normal gatherings. During the last six months in 2018 attendance at activities hosted by service providers that were pre-approved by the respective local government was approximately 650,000. This includes approximately 330,000 attendances at activities related to Nutrition Clubs. These type of meetings and activities were essentially unavailable during the 100-day review.

In addition, many normal smaller Nutrition Club gatherings which do not require local government approvals were put on hold during this health products review. The good news in the short term is that the normal club activities have begun and local government approvals for meetings in the month of May are ramping up since the 100-day review was concluded. Also, the good news in the long term is that together with our service providers in China we will take this opportunity to implement strategic initiatives we believe will result in our business being less dependent on meetings. Without the impact from China we would not have reduced our guidance for the full year. And we are pleased with the positive momentum of our business globally.

Turning now to the US where we continue to see strong results with net sales increasing 11% compared to the first quarter of 2018, this is the fifth straight quarter of year-over-year sales growth. The resilience and growth of the US is reflective of our strong consumer-based business. We are also encouraged by the overall broad-based strength of our business, which is driven by an opportunity worldwide to provide better nutrition in people's lives. We have a global team of dedicated distributors and employees whose enthusiasm, passion and commitment to Herbalife Nutrition has never been greater. All of us are working everyday to propel the Company toward the future and continue to enhance value.

Now, let me hand this over to Alex, John and John, who will talk in more detail about our results.

John DeSimone -- Co-President and Chief Strategic Officer

As Michael highlighted, we experienced net sales growth in four of our six regions and seven of our top 10 countries. However, first quarter net sales of $1.2 billion was relatively flat on a reported basis compared to the first quarter in 2018. Excluding China, net sales increased 6% compared to the prior year period. Volume points for the first quarter 2019 were approximately $1.5 billion, which represented an increase of approximately 6.1% compared to the first quarter of 2018. This is the largest first quarter volume point result in the Company's history and represents the fourth consecutive quarterly volume point record for the respective quarter.

We reported a net income of approximately $96.3 million or $0.66 per diluted share. Adjusted earnings per adjusted diluted share were also $0.66. Note that our reported and adjusted results include expenses related to the China Growth and Impact Investment Program of approximately $0.7 million that were excluded from our guidance. The impact of currency fluctuations represented a year-over-year headwind of approximately $0.11 on results for the first quarter, $0.03 more than what we assumed in our guidance, primarily related to changes in country mix of earnings.

Reported gross margin for the first quarter of 79.4% decreased by approximately 20 basis points compared to the prior year period. The decrease was primarily driven by the impact of foreign currency fluctuations and changes in country mix, which were partially offset by the favorable impact of retail price increases, lower inventory writedowns and favorable cost changes related to self-manufacturing and strategic sourcing.

First quarter 2019 reported and adjusted SG&A as a percentage of net sales were 37.1% and 35.9%, respectively. Excluding China member payments, adjusted SG&A as a percentage of net sales was 29.4%, approximately 30 basis points higher than the first quarter 2018, primarily driven by our investments in technology and particularly a shift to cloud-based infrastructure.

Our first quarter reported effective tax rate was approximately 28.9% and our adjusted effective tax rate was 26.2%, which was lower than our expectations primarily due to the impact of discrete items, including approximately $2.4 million of excess tax benefits from the exercise of equity grants. As Michael mentioned earlier, our first quarter results in China fell below our expectations. The Chinese government's 100-day review of our health products had an impact on our business, namely, we and our service providers were unable to hold our standard business meetings and our Nutrition Club operators faced increased scrutiny that created an overall hesitation in their activities. The 100-day review period ended on or about April 18th and we expect to ramp up meetings in May as Michael already stated.

Without the impact from China we would not have taken down our guidance for the full year. Fortunately, we have a growth in investment fund in China which we will utilize to advertise and promote our business in China over the next few months to help our distributors recover from the impact of the 100-day review. John will speak more about the strategic plans in China shortly.

Now, let me share the updated guidance. Worldwide volume point guidance for 2019 has been updated to a range of 0.5% to 6.5% growth. Net sales guidance for the full year has also been updated and we are now expecting a range of down 1% to up 5%. This range is reflective of the volume point adjustments and country mix as well as a 210 basis point impact from foreign currency fluctuation, which is 40 basis points unfavorable compared to prior guidance.

Full year reported diluted EPS is now estimated to be in a range of $2.19 to $2.64 and adjusted diluted EPS guidance is expected to be in a range of $2.50 to $2.95. Full year reported and adjusted diluted EPS includes a currency headwind of approximately $0.26, a $0.04 increase from the $0.22 included in our previous guidance, excluding the impact of Venezuela.

Our effective tax rate guidance remains unchanged at 29% to 33% on a reported basis and 27% to 31% on an adjusted basis. For the second quarter of 2019, we estimate volume points to be in a range of down 1% to up 5%. Net sales are expected to be in the range of down 3.5% to growth of 2.5%, which includes an approximate 340 basis points currency headwind versus the prior year.

Second quarter reported diluted EPS is estimated to be in a range of $0.53 to $0.68 and adjusted diluted EPS to be in a range of $0.65 to $0.80. Reported and adjusted diluted EPS include a projected currency headwind of $0.08 compared to the second quarter of 2018, excluding the impact of Venezuela. Our effective tax rate guidance for the second quarter is 30% to 34%, while the adjusted effective tax rate is expected to be in a range of 27% to 31%.

I will now turn the call over to John DeSimone.

Thank you, Alex. Today I'll be sharing an update on our regional performance. The strength of our US business continued in the first quarter with volume increasing by 9% compared to the first quarter of 2018 and net sales increasing by 11%. This is the fifth straight quarter with year-over-year volume point growth and the sixth straight quarter with accelerating volume point trends on a two-year stack basis. The volume point value test we began last year on a few products benefited the comparison in the quarter by approximately 160 basis points.

I think there is something special about the strength of Herbalife that's illustrated by the ability of the US market to not only overcome the challenges of the past few years, but to build it better and thrive. The thing that's special about Herbalife is that our distributors and the Company work together to always build it better. We have a collective purpose. Our products are a real need for the consumer and together we can overcome almost anything. While the comparisons are obviously getting harder, the foundation of the business in the US is strong and distributor movement up the marketing plan is equally strong.

Turning to Mexico, volume points grew by 1%. This is a little bit below our expectations. One of the reasons was the implementation of a 2% price surcharge we instituted during the quarter to mitigate the impact of tariffs enacted by the Mexican government in 2018 on products imported from the United States which are applicable to a significant portion of our product line. The surcharge actually results in a 4% out of pocket increase for our distributors and has impacted their business slightly. Importantly, there's reason to believe that these tariffs could partially or fully be eliminated in the near future as new trade agreements are worked between the US and Mexico.

The Asia-Pacific region reported a 29% year-over-year increase in volume points, which was the fifth quarter in a row the region has set a new all-time record of high volume point performance, in a moment Dr. Agwunobi will provide additional details on India, one of the region's growth drivers. But I want to highlight a few other markets we are excited about. Indonesia's volume was up 26% in the quarter and has continued to strengthen by focusing on a customer base business and daily consumption through Nutrition Clubs and training activities, supported by increased product access points in this expansive market.

Vietnam continues to show strength as volume grew 54% year-over-year in Q1. As I mentioned on previous calls, Vietnam sales in the quarter were benefited by distributor activities in advance of new regulations that were partially implemented in Q1 and additional regulations expected to be implemented in Q2.

And finally, in South Korea we had growth in the market for the second straight quarter. Turning to EMEA, the region grew volume points by 11% in the first quarter, taking the number of consecutive quarters with growth in EMEA up to 36. Volume point increases in the quarter were very broad based, reflecting we believe efforts to enhance the quality and activity of sales leaders including member training, brand awareness, product line expansion as well as enhanced technology tools for ordering, business performance and customer retailer. The growth in the period was led by Spain, South Africa, Turkey and the United Kingdom.

Finally, circling back to China, in the near term we are encouraged by the new meeting approvals that are coming in. Additionally, we are implementing initiatives to reduce our reliance on meetings in the long term, namely, we are improving the economics to service providers with a focus on enhancing the profitability and activity of Nutrition Clubs to allow for smaller footprint clubs. We are also working on a new technology platform that we hope to launch in Q3. We have narrowed our partner choice in China to lead the digital transformation to either Alibaba or Tencent.

I will now turn the call over to Dr. John Agwunobi to provide an update on India and to share some strategic highlights in the quarter.

John Agwunobi -- Co-President and Chief Health And Nutrition Officer

Thank you, John. 2018 was an amazing year and as you've just heard, we are off to a strong start in 2019. I'd like to take a moment to provide an update on one of our growth markets, share some of our innovation related to our product strategy and provide an update on our marketing plan achievements. Over the past few years we've demonstrated exceptional growth in India. Since Q1 of 2016, India's volume point increased at a three-year compounded annual growth rate of approximately 35% and compared to Q1 of 2018, India's volume grew over 47% year-over-year.

There are several factors that we believe are contributing to this performance. First, we continue to broaden our presence in the market, adding product access points, including pickup locations in additional cities. The number of access points in India has increased to 742 in the first quarter of 2019 compared to 454 in Q1 of 2018. This includes third-party drop-off points which have increased over 75% in only one year to 651 in Q1 of '19 versus 368 in Q1 of '18. This increase in our product access ensures our products quickly reach the hands of our distributors and improve customer satisfaction. We continue our focus to expand access points in Tier 2 and in Tier 3 cities to improve delivery timelines.

The underlying distributor metrics we see in the market give us confidence India will continue to see future growth. The activity rate of sales leaders in Q1 of 2019 increased approximately 7% compared to the prior year, up to approximately 63% and our most recent annual supervisor retention rate was 61.7%, a record-high and it improved from 54.7% in the prior year. We have also continued to see steady growth in our preferred customer segment in India, with over 52,000 new preferred customers in Q1, a record-high and a 29% increase compared to the prior year. Additionally, we continue to expand our product line and have demonstrated success in localized products and flavors in India.

Last year we discussed the Formula 1 coffee flavor, similar in taste to a popular Indian frozen dairy dessert that exceeded launch sales expectations. We are pleased to see this product continue in popularity and it's now become our number two selling SKU in India, satisfying the local flavor pallet of the Indian consumer. In the first quarter of this year we launched a probiotics sachet in the market. This product can be conveniently added to a shake, aloe or tea and it promotes the growth of beneficial bacteria in the intestines for those who want to maintain a healthy digestive system, a healthier microbiome. It is specifically formulated with a shelf stable probiotics strain that can survive the acidic gastric passage to germinate in the intestines, not in the summer like so many other common probiotics.

Outside of India, during the first quarter we launched some exciting new products around the world. In the US, we introduced the Select line extension of our top selling Formula 1 meal replacement shake as well as the first ever Select version of our protein drink mix. These new offerings help us attract new customers who seek clear labels and ingredients, and are more natural and easy to recognize.

The Select product addresses these consumers' desires with benefits such as alternate plant-based proteins with pea, quinoa and rice, non-GM and vegetarian ingredients, no artificial flavors, sweeteners or added colors, and they are non-dairy and gluten-free. Additionally, our data shows these consumers spend more money with us. This is the second Formula 1 product in the Select platform, following the Q3 2018 launch in Australia and New Zealand and in addition to the PRO 20 Select which we launched in EMEA.

Before the Q&A, I'd like to highlight that we continue to see incredible distributor engagement on top of the tremendous marketing plan performance in 2018, which included two new distributor shifts qualifying for our prestigious Chairman's Club, we continued this progression with two new Chairman's Club qualifiers already in 2019. It's remarkable that we've had four Chairman's Club qualifiers in less than one year, which is four times the average of the prior three years. We are grateful for the hard work and the relentless passion our distributors and employees bring each and every day to make Herbalife Nutrition the premier nutrition company in the world. I'm proud of what we've done together and I'm confident in our bright future.

Now, this concludes our prepared remarks. Operator, please open the lines for questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question is line of Tim Ramey from Pivotal Research.

Tim Ramey -- Pivotal Research -- Analyst

Thanks so much. John, am I right in understanding that Nutrition Clubs were essentially dark in China in the first quarter or during the holiday period?

John DeSimone -- Co-President and Chief Strategic Officer

I mean that's a good way to thinking about it. I wouldn't say exactly dark, but a lot of their normal activities were I'll say prohibited, that prohibited means it wasn't legally prohibited but it was recommended that gatherings just don't take place during this review and those gathering aren't just meaning that the government has the pre-approval meetings of all sizes. And again this was not a direct selling review, it was a health products review and our Nutrition Clubs aren't even direct sellers right, but they are snacking in the middle of dealing with health products. And so they actually had a number of government visits to clubs, couple of hundred I believe, just early on in and that was having nothing major that came out of it just that the kind of result was hesitation with folks doing anything.

Tim Ramey -- Pivotal Research -- Analyst

Got it. As you probably saw NuSkin had pretty good growth in customers, but really based in on their digital efforts in the 1Q. Would -- you mentioned new digital tools becoming available in the 3Q in China. Would you say that you're -- I don't want to say late to the party, but are you behind the curve a little bit there and have some catching up to do?

John DeSimone -- Co-President and Chief Strategic Officer

Well, yeah, I guess I'd first say, we have a focus on clubs in China. As you know, there's a huge amount of benefit that comes from clubs. In this episode that wasn't the case. But in general clubs are big assets in China. Having said that, balance is needed. Our technology platform was entirely based on selling to service providers and to sales reps and not a platform which their customers could order from us, and that's the partnership we're doing with either Alibaba or Tencent by negotiations right now. So that is something that we're learning. Keep in mind, we don't have the benefit of skincare to kind of move away from health products during this episode like NuSkin did. Relative to that, there was definitely some learnings out of this and I think our key takeaway was we need to create balance as we line up on meetings and gatherings in the future.

Tim Ramey -- Pivotal Research -- Analyst

And just finally, is there anything odd that I need to think about for SG&A ex-China member payments. I guess you mentioned some spending there, but also just what was the impact of the slowdown of the China business on member payments, was it commensurate, was it kind of ratable?

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

Hi Tim. Thanks for the question. So it was ratable, so the SP payments that we make as a percentage of the sales in China, that ratio didn't materially change. So, you'll see us it's come down pretty significantly when you go through the Q and you see the numbers there. As a percentage, it's about the same.

Tim Ramey -- Pivotal Research -- Analyst

Terrific, thank you.

Michael Johnson -- Chairman and Chief Executive Officer

Thanks, Tim.

Operator

And our next question is from the line of Doug Lane from Lane Research.

Doug Lane -- Lane Research -- Analyst

Yeah, hi everybody. So trying to understand the numbers here, the first quarter was largely in the middle of your range, volume points and EPS. So the issue is not so much the first quarter, it's that you entered the second quarter with very little momentum in China. So you're allowing yourself some time period to recover that momentum coming out of the 100-day review. So I guess my question is, is it just a second quarter thing or do you think it'll take the remainder of the year to get China reramped?

Michael Johnson -- Chairman and Chief Executive Officer

Hi, Doug. Thanks for the question. So we do think that we will return to growth in China in 2019. The timing of that is a little uncertain, right. So we're seeing some positive momentum from the government and improving meetings in that market, but there's still uncertainty toward how that will translate into getting back to business as normal. So we're still in a little bit of a wait and see to see how fast it comes back, but we do anticipate at some point to be back in growth mode in 2019.

Doug Lane -- Lane Research -- Analyst

Right. And you're coming out of it from a perspective of literally two weeks since the review period ended, is that right?

Michael Johnson -- Chairman and Chief Executive Officer

Exactly.

Doug Lane -- Lane Research -- Analyst

So, very early days. Okay. And just one last thing, can you give us an update on --

John DeSimone -- Co-President and Chief Strategic Officer

Doug, if I could just add, while it's even -- you might say it's two weeks since it ended, the meetings all stopped (ph) in May. So, that's one day since any meeting that's taken place because once the 100-day period ended and we start applying for permits, and those permits started along for meeting stopped, yesterday.

Doug Lane -- Lane Research -- Analyst

Okay. So there's even a lag from that's, so OK, we really are in the early days of it. Okay, I get it right. All right. Just lastly, can you give us an update on the CEO status. Is there any kind of timing roles, how far down the path have you gone or Michael if you move back in, this will be it for a while?

Michael Johnson -- Chairman and Chief Executive Officer

I have fully moved back in much to probably distress and the happiness from some of my team members here, but no, we don't have an update on that yet. We've got a lot of work to do, as you saw from China. We are completely focused on building the Company. I'm focused on succession, I'm working with John and John here very, very closely to make sure that we've got a really strong team built for the future here. So we'll give you an update at the right time on that, Doug. Thanks for the question.

Doug Lane -- Lane Research -- Analyst

Okay, thank you.

Operator

And our next question is from the line of Beth Kite from Citi.

Beth Kite -- Citi -- Analyst

Terrific. Hi, everyone. Hello. And Alex, great to hear you on the call. Welcome.

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

Thanks, Beth.

Beth Kite -- Citi -- Analyst

So I was wondering if we could begin with talking about a little bit of what's been spoken to so far in the Q&A, but around local currency sales growth for the full year. And then so much as the range expanding from 4 points to 6, is that totally a function of China and just giving yourself more flexibility, they are or are there any other markets that drove that?

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

So both the update to guidance and widening of the range is predominantly because of China. We don't -- had it not been for the 100 -- the impact of the 100-day campaign, it's unlikely we would have updated guidance, we certainly wouldn't have updated guidance down and the range would probably been more at historical levels.

Beth Kite -- Citi -- Analyst

Got it. So I I could take then or could you speak to, I guess I should say, do you still feel confident now that we're two quarters with South Korea posting growth year-over-year two quarters in a row, are you more worried about Brazil, it seems like that had a pretty bad quarter. And then in the US, can you speak to the growth there and was it -- it looks like preferred member growth was good. Was it preferred member growth, was it the iced coffee launch, was it a few things in total, could you just talk to spot (ph) those three markets please?

John DeSimone -- Co-President and Chief Strategic Officer

Hi, Beth. So, Korea was very nominally (inaudible) accelerated to double-digit. We just had some executives down in Korea, meaning distributors over the weekend working on initiatives to enhance the growth. And so I think it hit the level which you can now build, increased sustainable businesses over the long term. Not that it will be spiky growth usually as in this business, but we're quite pleased and actually I now shout out to all of Northern Asia for us because Taiwan also grew in the quarter.

Brazil, well, Brazil been a challenge for a long time. I think the key opportunity for us is segmentation, which launches I believe later this month, starting this month launches segmentation in Brazil. So Brazil was down, but it was down like we expect it to be down, no surprise in Brazil. In the US, it's strength across the board. When I look at not just the financial numbers but all of the non-financial metrics that we track for our new members in terms of volume points, (inaudible) total member sales leaders with volume points, everyone is in the black. They are already strong and I think most impressively for us and this is really unique to those that know us well, is tremendous movement of marketing plan.

Now having said that Q2 comps get tougher US, right, but the broad based strength across the US is something we're quite proud of and I think that distributors deserve a lot of credit for overcoming everything (inaudible).

Beth Kite -- Citi -- Analyst

Great. And I thought of one more on the US before I turn to one more question if I may. And that is do to the new POS tool or the enhanced POS toll rollout to the distributors per plan in April?

John DeSimone -- Co-President and Chief Strategic Officer

Yeah, so it rolled out and it's ramping up. So we rolled out in a coordinated fashion so we can test the system and not overloaded with. It wasn't a big bang. I think it rolls out to everybody in May 18, but it rolled out to a controlled group in April and then I'm equally excited about the customer app, that is the second launch of the Nutrition Club tool that launches an extravaganza where .customers will be able to order their product before they even show up to the club, similar of the way I do want to go to Starbucks (inaudible).

Beth Kite -- Citi -- Analyst

Perfect. And then if I may, I'd like to go back to China, can you remind us at this point how much in total you received in the China grant money. It seems you got some more this particular quarter 1Q '19 and then how much you spent back of it. I feel like that's a fairly small amount that's been spent back so far. Is that right?

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

Yes, Beth. So we received this quarter an additional $21 million from the China grant income. And you know, we carve that out. We've spent this past quarter about $0.7 million. So obviously with the 100-day impact, it was a little unclear about where that spend, what we do. I think going forward there is a lot of the ad and promo spend to get passed the 100-day impact I think we'll be doing significantly more spending in the future. And in total, that brings the growth in investment fund to about $135 million.

Beth Kite -- Citi -- Analyst

Got it, with the vast majority of that still yet to be reach (ph)?

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

With the vast majority available, that's right.

Beth Kite -- Citi -- Analyst

Okay, perfect. And one question on the P&L. For the full year, it was nice to see the operating margin expansion this quarter. Do you expect understanding that you want to spend a lot back in some markets like Brazil and China, but are you expecting operating margin to continue to expand as you go through the year?

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

So a little bit of that will be dependent on how fast China comes back. China, as it is a smaller percentage of our net sales this quarter, actually was a bit of a headwind to us in gross margin and operating margin. As that comes back, that should give a bit of a benefit to operating margin. So a little bit of that answer will just depend on how quickly China does come back.

Beth Kite -- Citi -- Analyst

Great. And one last one, on that converts due in August. I understand I assume we're still waiting for a decision on whether to refinance or to pay back off. If you do refinance, would the objective be in here in '19 or '20 to use the cash, assuming you have quite a bit at that point of $1 billion to use it for buybacks?

John DeSimone -- Co-President and Chief Strategic Officer

Beth, this is John. I'll take that. So, you kind of (inaudible) the point. First, we are comfortable at current leverage ratio. We said that for long time. From a timing standpoint we may pay off this debt in August, our plan is to do that and at some point in time we will finance either before or after depending on circumstances. And the entire purpose of all of that capital structure is to buy back stock. We have a $1 billion buyback program. I think we bought close to $5 billion over the last 12 years since we started that. That's what we believe the appropriate capital structure is of this Company and it's likely the use the cash.

Beth Kite -- Citi -- Analyst

Wonderful. Thank you all so much.

Operator

(Operator Instructions) Our next question is from line of Hale Holden from Barclays.

Hale Holden -- Barclays PLC -- Analyst

Hi, thanks for taking the call. I had just two questions, just as a follow-up on the converts, the current plan is to hold off on stock repurchases until you find a solution for the converts, that's still correct, right?

John DeSimone -- Co-President and Chief Strategic Officer

Well, the priority has always been to be in a position to pay off the converts until we refinance or if refinance, and if we decide to refinance in a later date, we will have a back up and that's been in the priority.

Hale Holden -- Barclays PLC -- Analyst

Okay. And then just as a follow-up on China, if you sign an agreement with BABA or Tencent, does that change your selling margin structure in the market at all?

John DeSimone -- Co-President and Chief Strategic Officer

No, I don't anticipate changing the margin structure by signing a deal for a platform that allows our sales reps in terms of our customers to order directly from the Company on their behalf. I don't anticipate that having any meaningful impact on margin. (inaudible) I'm sure the development cost. I mean if you kind of role in the development cost, but that's just in, we do have $130 plus million in China from this growth initiative funds that we can use to do invest in this platform.

Hale Holden -- Barclays PLC -- Analyst

Okay, thank you very much.

Operator

And at this time, I'm showing that we have no further questions. I'd like to turn the call back over to Michael Johnson for closing remarks.

Michael Johnson -- Chairman and Chief Executive Officer

Thanks, and thanks everyone for being on the call. I'm looking at my notes that John and Alex prepared for me for the call here and experienced back in the Company of a quarter that's actually pretty sensational, net sales of $1.2 billion, growth in four of the six regions, year-over-year growth in seven top 10 markets, $1.5 billion of buying points, the highest quarter in Q1 in Company's history, it's up 6% over 2018 first quarter and our fourth consecutive record quarter. So those are all really good, those are fantastic.

But we understand the focus on China and we are focused on it. We will get through this. Thank God, our business is global. We know our products are great. Our employees and distributors are passionate about what we bring to the marketplace and we are all confident about Herbalife. We are confident also that we will get through this in China and we'll see better days ahead. So looking forward to seeing you. With that said, it's back to work. See you next quarter.

Operator

Ladies and gentlemen, this does conclude the conference . We thank you greatly for joining us for Herbalife First Quarter 2019 Earnings Conference Call. You may now disconnect.

Duration: 37 minutes

Call participants:

Eric Monroe -- Director of Investor Relations

Michael Johnson -- Chairman and Chief Executive Officer

John DeSimone -- Co-President and Chief Strategic Officer

John Agwunobi -- Co-President and Chief Health And Nutrition Officer

Tim Ramey -- Pivotal Research -- Analyst

Alex Amezquita -- Senior Vice President, Finance and Strategic Planning

Doug Lane -- Lane Research -- Analyst

Beth Kite -- Citi -- Analyst

Hale Holden -- Barclays PLC -- Analyst

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