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Why Herbalife’s New CEO Says He’s Done With Bill Ackman’s ‘Hogwash’

Herbalife’s incoming CEO hasn’t even officially started the job yet, and already he’s had enough of Bill Ackman.

When Richard Goudis, currently COO of Herbalife (HLF), takes over as CEO this spring from Michael Johnson, he will also inherit responsibility for defending the nutrition products company in its seemingly eternal war with Ackman, the Pershing Square hedge fund manager. Johnson announced in November that he would step down after spending nearly four years fending off short-selling attacks from Ackman, who accused the company of being a pyramid scheme and bet $1 billion that Herbalife stock would fall.

But on a conference call late Thursday to discuss Herbalife’s 2016 earnings, Goudis signaled that he won’t hear any such accusations on his watch, and said the company’s results should shut Ackman up once and for all. “We put to rest all of the hogwash out there about not having real customers,” Goudis said.

Goudis was referring to Ackman’s assertion that Herbalife, a multi-level marketer of weight-loss shakes and nutritional supplements, must be a pyramid scheme because most of its distributors never received any compensation from the company for their sales—and that therefore, the company didn’t seem to have any true customers.

That debate has come to a head recently after Herbalife paid $200 million to settle a Federal Trade Commission investigation last summer. In a twist, the FTC deal may have not only helped Herbalife prove the legitimacy of its customers, but also encouraged much of the settlement money to funnel back into the company.

Fortune reported earlier this month that as many as hundreds of recipients of the nearly 350,000 settlement checks sent by the FTC—to Herbalife buyers who never made their money back— were not actually “victims” of a direct marketing scam, as the agency alleged, but rather Herbalife fans. Protein shake users rather than sellers, they had signed up as Herbalife distributors to get a discount on products they consumed themselves. Some of them say they’ll even use the money to buy more Herbalife. (For more, read “Herbalife Paid a $200 Million Fine. Then the FTC Screwed it Up.”)

While the FTC settlement stipulates that such Herbalife distributors designate themselves going forward as discount customers, or “preferred members” as the company calls them, the regulatory agency made no such distinction when it cut the checks.

Now, Herbalife says the categorical transition has revealed a larger contingent of discount customers than its skeptics had imagined—and they are buying more Herbalife product than even the company itself had expected. Herbalife now has about 300,000 preferred members, including former distributors who converted to the new status as well as new people who just joined since mid-January, when the company said it had just 200,000 preferred members, Goudis said on the call.

“While the segmentation of preferred members is exceeding our expectations to date in terms of the number of preferred members, more importantly is the documented volume that this group represents is also exceeding our expectations to date,” he said, noting that the cohort had already surpassed the consumption volume that Herbalife did not expect them to hit until May. That helped Herbalife achieve record volume in 2016, which was up 5% for the year, more than making up for a decline in 2015. Those results should quash “all doubt about the genuine consumer demand for our nutrition products,” Goudis added.

Still, Herbalife’s 2016 profit declined more than 23% from the prior year to $260 million, mostly due to the $200 million FTC payment. The company’s sales for the year were flat at about $4.5 billion, coming in slightly below Wall Street’s expectations. Herbalife stock initially rose in after-hours trading, then gave back those gains.

There is at least one threat on the horizon that Ackman is hoping will drag Herbalife’s stock price down: “Betting on Zero,” a documentary exposé on Herbalife starring Ackman, hits theaters in March.