Financial Data and Key Metrics Changes - The company has seen a stabilization in global net sales growth, with five out of the last seven quarters showing constant currency net sales growth [57] - North America experienced a significant turnaround, with July marking the first year-over-year volume growth since April 2021 [56][58] - The adjusted EBITDA margin improved from 11.3% in 2023 to 12.7% in the previous year, with expectations to exceed this in the current year [90] Business Line Data and Key Metrics Changes - The nutrition club model remains strong, with approximately 10,000 clubs in the U.S. and 4 million consumers participating in around 50 million transactions [64] - The company is focusing on converting nutrition club visitors into long-term customers who purchase products for home use [66] Market Data and Key Metrics Changes - The company operates in 95 markets, with India being the largest market where Herbalife is perceived as a premium brand [26] - The U.S. market is showing signs of recovery, with a focus on leveraging the existing distributor network to drive sales [58][66] Company Strategy and Development Direction - The company aims to transition into a digital-first health and wellness platform, similar to models like Airbnb and Uber, to better connect with customers and distributors [20][21] - Recent acquisitions, including ProveIt and Link BioSciences, are intended to enhance the company's digital capabilities and personalized nutrition offerings [36][38] Management's Comments on Operating Environment and Future Outlook - Management views the rise of GLP-1 medications as an opportunity to support customers in their weight loss journeys, regardless of their chosen path [70][71] - The company has a robust forecasting process and tight control over expenses, which has led to consistent guidance achievement [84][85] Other Important Information - The company is in the process of launching a health and wellness app that is expected to generate revenue and enhance customer engagement [48][49] - The app will facilitate incremental product sales and subscription revenue opportunities, although significant impacts are anticipated in 2026 rather than 2025 [55] Q&A Session Summary Question: How is the company managing guidance and revenue predictions? - The company has exceeded EBITDA guidance for six or seven consecutive quarters and maintains a robust forecasting process [84][85] Question: What is the company's stance on GLP-1 medications? - Management considers GLP-1 medications a friend, aiming to support customers regardless of their weight loss choices [70][71] Question: How does the company plan to leverage its distributor network? - The company is focused on converting nutrition club visitors into long-term customers and enhancing distributor engagement through new tools and technology [66][68]

Core Viewpoint - Shanghai Municipal Communications Administration has reported that 145 apps (SDKs) have violated user rights, requiring immediate rectification and self-assessment from the involved companies, including Herbalife (Shanghai) Management Co., Ltd. [1] Group 1: Company Overview - Herbalife (Shanghai) Management Co., Ltd. was established in 2014 and is primarily engaged in business services, with a registered capital of 2 million USD and paid-in capital of 942,000 USD [2]. - The company reported total net sales of 1.222 billion USD for Q1 2025, a decrease from 1.264 billion USD in the same period last year [2]. - In the Chinese market, net sales for Q1 2025 were 64.8 million USD, down from 75.2 million USD year-on-year [2]. Group 2: Financial Performance - For the fiscal year ending December 31, 2024, net sales in China were 297.6 million USD, a decline of 29.8 million USD or 9.1% compared to the previous year [2]. - The decrease in net sales was attributed to a 6.5% drop in sales volume, a 2.5% adverse impact from sales mix, and a 1.6% negative effect from foreign exchange fluctuations [2]. - In 2023, net sales were 327.4 million USD, reflecting a 63.6 million USD decline or 16.3% year-on-year [3]. Group 3: Management Changes and Challenges - In January 2024, Herbalife appointed Cai Menghong as the new General Manager for the China region, taking over from Li Yanliang, who had been in charge since 2007 [3][4]. - The company is facing tensions with its distributors, highlighted by a case where a long-term distributor was accused of "low-price sales" and had their account frozen, leading to public disputes over unpaid fees [4].

Group 1 - The event held in Xining, Qinghai, on August 7-8, 2025, focused on optimizing the consumer environment and boosting health consumption, gathering representatives from market regulatory departments and 56 direct selling companies [1][4] - Herbalife's flagship product, a nutritional shake, has been popular since its launch in 1980, supported by five years of localized clinical research in collaboration with Shanghai Renji Hospital and Xinhua Hospital, confirming its safety and effectiveness for overweight/obese populations in China [3] - Herbalife was awarded the title of the world's leading retail brand in weight management and nutrition for 2024 by Euromonitor International, highlighting the company's commitment to scientific innovation [3] Group 2 - Herbalife has established over 67,000 nutrition club locations globally, creating an integrated health service ecosystem through its "product + service" model, which enhances community engagement and promotes health awareness [5] - The "Healthy China Tour" brand initiative has successfully reached over 100,000 participants across 44 cities, with plans for 2025 to expand to cities like Xi'an and Xiamen, promoting scientific weight loss and dietary nutrition knowledge [6] - Herbalife's representative, Li Xia, shared successful health community service cases at the event, emphasizing the company's role in promoting scientific weight loss and enhancing health literacy [8]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $1.3 billion, down 1.7% compared to 2024, but flat on a constant currency basis [7][24] - Adjusted EBITDA was $174 million, exceeding guidance, with an adjusted EBITDA margin of 13.8%, down 30 basis points year over year due to unfavorable currency impacts [24][27] - The company paid down $55 million in debt during the quarter, maintaining a total leverage ratio of slightly under three times as of June 30 [27][28] Business Line Data and Key Metrics Changes - Product innovation included the launch of Multi Burn, a non-pharmaceutical weight loss supplement, and the introduction of a healthy lifespan product [6][19] - Distributor growth initiatives led to strong engagement, with nearly 38,000 attendees at training events globally [9][10] - New distributor growth was flat year over year, but four out of five regions saw increases, with Latin America leading at 16% growth [9] Market Data and Key Metrics Changes - In North America, net sales were down 4%, primarily due to a 6% decline in year-over-year volumes, but July marked the first month of year-over-year volume growth since April 2021 [33][8] - Latin America reported a strong performance with constant currency net sales up 9%, despite reported net sales being down 1% [31] - EMEA net sales were flat on a reported basis, while Asia Pacific saw a 2% decline in reported net sales [32] Company Strategy and Development Direction - The company aims to transform into a data-driven wellness platform, integrating technology and personalized solutions to meet evolving consumer needs [4][5] - The acquisition of Link Biosciences is expected to enhance personalized supplement formulations, providing a competitive advantage [21] - The company is focused on expanding its product offerings and enhancing distributor engagement through digital tools and AI [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's transformation and noted signs of accelerating momentum in sales [5][8] - The outlook for Q3 includes projected net sales growth of 0.5% to 4.5% year over year, with adjusted EBITDA expected to be between $150 million and $160 million [38][39] - The company has raised and narrowed its full-year net sales guidance range to down 1% to up 3% year over year [39][40] Other Important Information - The company is integrating the Protocol app, which aims to enhance distributor-customer connections and provide personalized health insights [11][12] - The launch of the Protocol app is expected to create new monetization opportunities and attract a new customer segment [48][63] - The company plans to expand the Protocol platform globally, with regulatory assessments underway for key markets [68] Q&A Session Summary Question: What are the monetization strategies for the Protocol app? - Management indicated that the app will serve as a tool for distributors to enhance customer engagement and will have options for both product and app subscriptions [48][63] Question: How does the company view pricing in relation to competitors? - The company plans to take pricing in line with market conditions and has not seen significant pressure from competitors [56][58] Question: What are the plans for high-cost debt management? - The company is considering refinancing options for high-cost debt as market conditions improve [69]

Financial Performance - Q2 2025 net sales reached $1.3 billion, aligning closely with the midpoint of the company's guidance range[12] - Adjusted EBITDA for Q2 2025 was $174 million, surpassing the company's guidance[12] - The company repaid $55 million in debt, including $50 million of 2025 Notes[12] - The company's gross profit margin increased by 10 bps year-over-year to 78%[31] - Adjusted diluted EPS was $0.59, which includes an $0.11 year-over-year foreign exchange headwind[31] Regional Performance - New distributor growth occurred in 4 out of 5 regions year-over-year, with Latin America leading at a 16% increase[12] - Worldwide net sales decreased by 1.7% year-over-year, but remained flat on a constant currency basis[34] - Latin America experienced a 9% increase in local currency net sales[34] Product Launches and Initiatives - The company launched the Herbalife Flex45 Challenge globally[12] - The company expanded the Diamond Development Mastermind Program to South and Central America[12] - The company launched MultiBurn, a multifunctional weight-loss supplement[12] - The company unveiled the beta version of the Pro2col digital platform[12] Future Outlook - The company projects net sales to increase between 0.5% and 4.5% year-over-year for Q3 2025[42] - The company anticipates adjusted EBITDA between $150 million and $160 million for Q3 2025[42] - The company expects full-year 2025 net sales to range from a decrease of 1% to an increase of 3% year-over-year[42]

[Executive Summary & Q2 2025 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) Herbalife reported Q2 2025 net sales of $1.3 billion and adjusted EBITDA of $173.6 million, while launching new weight-loss and healthy lifespan supplements and a digital platform [Second Quarter 2025 Financial Highlights](index=1&type=section&id=1.1.%20Second%20Quarter%202025%20Financial%20Highlights) Herbalife reported Q2 2025 net sales of $1.3 billion, near the midpoint of guidance, and adjusted EBITDA of $173.6 million, exceeding guidance Q2 2025 Key Financial Highlights | Metric | Value | | :--- | :--- | | Net sales | $1.3 billion | | YoY Change (reported) | -1.7% | | YoY Change (constant currency) | Flat | | Net income attributable to Herbalife | $49.3 million | | Adjusted net income | $60.5 million | | Adjusted EBITDA | $173.6 million | | Diluted EPS | $0.48 | | Adjusted diluted EPS | $0.59 | | Total leverage ratio (June 30) | 3.0x | [Key Product and Digital Platform Introductions](index=1&type=section&id=1.2.%20Key%20Product%20and%20Digital%20Platform%20Introductions) In July, Herbalife launched MultiBurn™, a new multifunctional weight-loss supplement, and unveiled the beta version of its Pro2col™ digital platform along with a healthy lifespan supplement, signaling a focus on innovation - Launched MultiBurn™, an all-new, multifunctional weight-loss supplement supporting metabolic health, in July[4](index=4&type=chunk) - Unveiled the beta version of Pro2col™ digital platform and a healthy lifespan supplement at the North America Extravaganza in July[4](index=4&type=chunk) [Management Commentary & Operational Review](index=2&type=section&id=Management%20Commentary%20%26%20Operational%20Review) The company reported Q2 2025 net sales of $1.3 billion, improved gross profit margin, maintained distributor engagement, and launched new products and digital platforms [Second Quarter 2025 Financial Performance](index=2&type=section&id=2.1.%20Second%20Quarter%202025%20Financial%20Performance) Herbalife's Q2 2025 net sales were $1.3 billion, a 1.7% year-over-year decrease, but flat on a constant currency basis due to 170 basis points of foreign currency headwinds - Net sales of **$1.3 billion**, down **1.7%** year-over-year, but flat on a constant currency basis due to **170 basis points** of foreign currency headwinds[5](index=5&type=chunk) Q2 2025 Gross Profit Margin Drivers | Factor | Impact (basis points) | | :--- | :--- | | Pricing | +70 | | Lower inventory write-downs | +20 | | Foreign currency headwinds | -60 | | Input cost inflation | -10 | Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Gross profit margin | 78.0% (up from 77.9% in Q2 2024) | | Net income attributable to Herbalife | $49.3 million (3.9% margin) | | Adjusted EBITDA margin | 13.8% (down 30 bps vs. Q2 2024) | | Net cash provided by operating activities | $96.0 million | | Capital expenditures | $22.8 million | - Redeemed **$50.0 million** aggregate principal amount of 7.875% Senior Notes due 2025 in June 2025[9](index=9&type=chunk) - Company remains on track to reduce outstanding debt to **$1.4 billion** by the end of 2028[10](index=10&type=chunk) [Distributor Engagement and Training Initiatives](index=2&type=section&id=2.2.%20Distributor%20Engagement%20and%20Training%20Initiatives) Herbalife's distributor growth initiatives, including the global Herbalife Flex45 Challenge and the Herbalife Premier League program, continued to drive engagement - Distributor growth initiatives, including the global Herbalife Flex45 Challenge and Herbalife Premier League training and recognition program, drove continued engagement[10](index=10&type=chunk) - Number of distributors joining worldwide in Q2 2025 was flat year-over-year, but four of the Company's five regions reported year-over-year growth in new distributors[10](index=10&type=chunk) - Latin America led new distributor growth, up **16%** year-over-year[10](index=10&type=chunk) - The Diamond Development Mastermind Program expanded to South and Central America markets, with approximately **8,900 distributors** committed since its August 2024 launch in the U.S. It will expand to India in August 2025[11](index=11&type=chunk) [Detailed Product and Digital Platform Launches](index=3&type=section&id=2.3.%20Detailed%20Product%20and%20Digital%20Platform%20Launches) Herbalife launched MultiBurn™, a next-generation, multi-action weight-loss supplement in the U.S., with plans for Puerto Rico in September 2025 - Launched MultiBurn™, a next-generation, multi-action weight-loss supplement, in the U.S. and will launch in Puerto Rico in September 2025[13](index=13&type=chunk) - Unveiled the beta version of the new Pro2col™ health and wellness digital platform, with over **7,000 distributors** engaged[14](index=14&type=chunk)[15](index=15&type=chunk) - Released an early version of a healthy lifespan supplement formulated with Niagen, with commercial launch planned for Q4 2025 in the U.S. and Puerto Rico[14](index=14&type=chunk)[15](index=15&type=chunk) - CEO Stephan Gratziani stated these launches reinforce the company's commitment to innovation, transformative growth, and long-term value creation[16](index=16&type=chunk) [Key Financial Metrics](index=4&type=section&id=Key%20Financial%20Metrics) Worldwide net sales for Q2 2025 were $1,259.1 million, declining 1.7% year-over-year but flat on a constant currency basis, with strong growth in Latin America [Regional Net Sales and FX Impact](index=4&type=section&id=3.1.%20Regional%20Net%20Sales%20and%20FX%20Impact) Worldwide net sales for Q2 2025 were $1,259.1 million, a 1.7% decline year-over-year, but flat on a constant currency basis Regional Net Sales and YoY Growth (Decline) | $ million | Q2 '25 | Q2 '24 | YoY Growth (Decline) including FX | YoY Growth (Decline) excluding FX | | :--- | :--- | :--- | :--- | :--- | | North America | 272.4 | 283.2 | (3.8)% | (3.8)% | | Latin America | 210.2 | 211.7 | (0.7)% | 9.5% | | EMEA | 287.9 | 287.8 | 0.0% | (1.0)% | | Asia Pacific | 408.6 | 416.7 | (1.9)% | (1.2)% | | China | 80.0 | 81.7 | (2.1)% | (2.2)% | | Worldwide | 1,259.1 | 1,281.1 | (1.7)% | (0.0)% | | $ million | YTD '25 | YTD '24 | YoY Growth (Decline) including FX | YoY Growth (Decline) excluding FX | | :--- | :--- | :--- | :--- | :--- | | North America | 526.8 | 549.0 | (4.0)% | (3.9)% | | Latin America | 416.9 | 425.9 | (2.1)% | 10.1% | | EMEA | 561.2 | 565.7 | (0.8)% | 1.1% | | Asia Pacific | 831.1 | 847.9 | (2.0)% | 0.2% | | China | 144.8 | 156.9 | (7.7)% | (7.3)% | | Worldwide | 2,480.8 | 2,545.4 | (2.5)% | 0.7% | [Financial Outlook](index=5&type=section&id=Financial%20Outlook) The company provides Q3 and revised full-year 2025 guidance, projecting net sales growth and increased adjusted EBITDA, based on specific exchange rate and tariff assumptions [Third Quarter 2025 Guidance](index=5&type=section&id=4.1.%20Third%20Quarter%202025%20Guidance) For the third quarter of 2025, Herbalife projects reported net sales growth between +0.5% and +4.5% year-over-year, with adjusted EBITDA expected to be in the range of $150 million to $160 million Third Quarter 2025 Guidance | $ million | Net Sales | Adjusted EBITDA | CapEx | | :--- | :--- | :--- | :--- | | Reported | +0.5% to +4.5% YoY | 150 – 160 | 20 – 30 | | Constant Currency | +0.5% to +4.5% YoY | 155 – 165 | | | Q3 '24 Actuals | 1,240.3 | 166.5 | 27.1 | [Full-Year 2025 Guidance (Revised)](index=5&type=section&id=4.2.%20Full-Year%202025%20Guidance%20%28Revised%29) Herbalife has revised its full-year 2025 guidance, raising net sales and adjusted EBITDA expectations while reducing capital expenditures Full-Year 2025 Guidance – REVISED | $ million | Net Sales | Adjusted EBITDA | CapEx | | :--- | :--- | :--- | :--- | | Reported | (1.0)% to +3.0% YoY | 640 – 660 | 75 – 95 | | Previous Guidance (Apr 30 '25) | (2.5)% to +2.5% YoY | 625 – 655 | 90 – 120 | | Constant Currency | 0.0% to +4.0% YoY | 685 – 705 | | | Previous Guidance (Apr 30 '25) | +0.5% to +5.5% YoY | 690 – 720 | | | FY '24 Actuals | 4,993.1 | 634.8 | 122.0 | [Guidance Assumptions](index=5&type=section&id=4.3.%20Guidance%20Assumptions) The financial outlook is based on specific assumptions, including the use of average daily exchange rates from the first two weeks of July 2025 for local currency projections and preliminary estimates for the impact of incremental tariffs enacted as of August 5, 2025 - Net sales and adjusted EBITDA guidance use average daily exchange rates for the first two weeks of July 2025 to translate local currency projections[21](index=21&type=chunk) - Outlook includes preliminary estimates of the impact of incremental tariffs enacted as of August 5, 2025[21](index=21&type=chunk) [Company Information & Disclaimers](index=6&type=section&id=Company%20Information%20%26%20Disclaimers) This section provides details on the Q2 2025 earnings webcast, an overview of Herbalife Ltd., and important disclaimers regarding forward-looking statements and associated risk factors [Earnings Webcast and Conference Call](index=6&type=section&id=5.1.%20Earnings%20Webcast%20and%20Conference%20Call) Herbalife's senior management will host an audio webcast and conference call on Wednesday, August 6, 2025, at 5:30 p.m. ET to discuss the second quarter 2025 financial results - Herbalife's senior management team will host an audio webcast and conference call to discuss Q2 2025 financial results on Wednesday, August 6, 2025, at 5:30 p.m. ET[22](index=22&type=chunk) - Access to the webcast and conference call requires registration via provided links, with slides available on the Investor Relations section of Herbalife's website[22](index=22&type=chunk) [About Herbalife Ltd.](index=6&type=section&id=5.2.%20About%20Herbalife%20Ltd.) Herbalife Ltd. (NYSE: HLF) is a global health and wellness company established in 1980, providing science-backed nutrition products to consumers in over 90 markets - Herbalife (NYSE: HLF) is a premier health and wellness company, community, and platform, founded in 1980[23](index=23&type=chunk) - The company offers science-backed nutrition products to consumers in more than **90 markets** through independent distributors[23](index=23&type=chunk) - Distributors provide one-on-one coaching and a supportive community to inspire healthier, more active lifestyles[23](index=23&type=chunk) [Forward-Looking Statements and Risk Factors](index=7&type=section&id=5.3.%20Forward-Looking%20Statements%20and%20Risk%20Factors) This release contains forward-looking statements that are subject to inherent risks and uncertainties, many beyond the company's control, which could cause actual results to differ materially from projections - The release contains forward-looking statements subject to change and inherent risks and uncertainties, many of which are beyond the company's control, that could cause actual results to differ materially[25](index=25&type=chunk)[26](index=26&type=chunk) - Important factors include global economic conditions (inflation, unfavorable foreign exchange, tariffs), ability to attract and retain Members, regulatory compliance, adverse publicity, competitive nature, legal and regulatory matters, risks associated with operating internationally and in China, ability to execute growth initiatives, effectiveness of new technology, business disruptions, supply chain, reliance on IT infrastructure, privacy laws, contractual limitations, intellectual property, product concentration, reliance on senior management, acquisition integration, debt covenants, tax laws, and share price volatility[26](index=26&type=chunk)[29](index=29&type=chunk) - Additional factors and uncertainties are set forth in the Company's filings with the SEC, including the Annual Report on Form 10-K for FY2024 and Quarterly Report on Form 10-Q for Q2 2025[27](index=27&type=chunk) [Condensed Consolidated Financial Statements](index=9&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the condensed consolidated statements of income, balance sheets, and cash flows, detailing Q2 2025 financial performance, asset and liability positions, and cash flow activities [Condensed Consolidated Statements of Income](index=9&type=section&id=6.1.%20Condensed%20Consolidated%20Statements%20of%20Income) For the second quarter of 2025, Herbalife reported net sales of $1,259.1 million, a decrease from $1,281.1 million in Q2 2024 Condensed Consolidated Statements of Income (Three Months Ended June 30) | $ million | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $1,259.1 | $1,281.1 | | Cost of sales | 276.9 | 283.1 | | Gross profit | 982.2 | 998.0 | | Royalty overrides | 406.5 | 415.3 | | Selling, general, and administrative expenses | 447.9 | 502.3 | | Operating income | 132.6 | 80.4 | | Interest expense, net | 53.6 | 57.7 | | Income before income taxes | 79.0 | 12.2 | | Income taxes | 29.8 | 7.5 | | Net income | $49.2 | $4.7 | | Net income attributable to Herbalife | $49.3 | $4.7 | | Diluted EPS | $0.48 | $0.05 | Condensed Consolidated Statements of Income (Six Months Ended June 30) | $ million | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $2,480.8 | $2,545.4 | | Cost of sales | 542.1 | 568.1 | | Gross profit | 1,938.7 | 1,977.3 | | Royalty overrides | 808.3 | 830.5 | | Selling, general, and administrative expenses | 879.8 | 994.5 | | Operating income | 255.4 | 152.3 | | Interest expense, net | 105.6 | 95.6 | | Income before income taxes | 149.8 | 46.2 | | Income taxes | 50.2 | 17.2 | | Net income | $99.6 | $29.0 | | Net income attributable to Herbalife | $99.7 | $29.0 | | Diluted EPS | $0.97 | $0.29 | [Condensed Consolidated Balance Sheets](index=10&type=section&id=6.2.%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Herbalife's total assets were $2,736.1 million, a slight increase from $2,728.1 million at December 31, 2024 Condensed Consolidated Balance Sheets (as of June 30, 2025 vs. December 31, 2024) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Total current assets | $1,102.9 | $1,143.7 | | Property, plant and equipment, net | 465.8 | 460.2 | | Total assets | $2,736.1 | $2,728.1 | | **LIABILITIES AND SHAREHOLDERS' DEFICIT** | | | | Total current liabilities | $1,094.3 | $1,230.4 | | Long-term debt, net of current portion | 1,973.5 | 1,976.6 | | Total liabilities | $3,390.5 | $3,529.2 | | Total shareholders' deficit | $(654.4) | $(801.1) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=6.3.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $96.2 million, a decrease from $116.3 million in the prior year period Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | $ million | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $96.2 | $116.3 | | Net cash used in investing activities | $(69.4) | $(69.0) | | Net cash used in financing activities | $(132.4) | $(240.2) | | Net change in cash, cash equivalents, and restricted cash | $(94.5) | $(206.2) | | Cash, cash equivalents, and restricted cash, end of period | $343.6 | $389.3 | - Acquisition of business and assets accounted for **$25.5 million** of cash used in investing activities for the six months ended June 30, 2025[35](index=35&type=chunk) [Supplemental Information: Non-GAAP Financial Measures](index=12&type=section&id=Supplemental%20Information%3A%20Non-GAAP%20Financial%20Measures) This section provides explanations and reconciliations for non-GAAP financial measures, including adjusted net income, EPS, and EBITDA, along with the impact of currency fluctuations [Explanation of Non-GAAP Measures](index=12&type=section&id=7.1.%20Explanation%20of%20Non-GAAP%20Measures) This section details Herbalife's non-GAAP financial measures, including adjusted net income, adjusted diluted EPS, adjusted EBITDA, and credit agreement EBITDA - Non-GAAP financial measures include adjusted net income, adjusted diluted EPS, adjusted EBITDA, and credit agreement EBITDA[36](index=36&type=chunk) - These measures exclude impacts of certain unusual or non-recurring items like restructuring initiatives, digital technology program expenses, gains/losses from debt extinguishment, and certain tax adjustments, to facilitate period-to-period comparative assessment of core operating performance[36](index=36&type=chunk)[37](index=37&type=chunk) [Currency Fluctuation Impact](index=12&type=section&id=7.2.%20Currency%20Fluctuation%20Impact) Herbalife's significant international operations mean total net sales are continuously affected by fluctuations in the U.S. dollar against foreign currencies - International operations provide a significant portion of total net sales, which are affected by fluctuations in the U.S. dollar against foreign currencies[40](index=40&type=chunk) - The company uses 'net sales in local currency' and 'adjusted EBITDA on a constant currency basis' to assess underlying business performance by removing the effect of foreign currency fluctuations[40](index=40&type=chunk) [Reconciliation of Adjusted Net Income and EPS](index=13&type=section&id=7.3.%20Reconciliation%20of%20Adjusted%20Net%20Income%20and%20EPS) For Q2 2025, reported net income attributable to Herbalife was $49.3 million, which adjusted to $60.5 million Reconciliation of Net Income Attributable to Herbalife to Adjusted Net Income (Three Months Ended June 30) | $ million | 2025 | 2024 | | :--- | :--- | :--- | | Net income attributable to Herbalife | $49.3 | $4.7 | | Expenses related to Technology Realignment Program | 3.6 | - | | Expenses related to Restructuring Program | 0.7 | 48.8 | | Digital technology program costs | 0.4 | 6.0 | | Deferred income tax effects, net, related to corporate entity reorganization | 7.8 | - | | Adjusted net income | $60.5 | $54.8 | Reconciliation of Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share (Three Months Ended June 30) | $ per share | 2025 | 2024 | | :--- | :--- | :--- | | Diluted earnings per share | $0.48 | $0.05 | | Expenses related to Technology Realignment Program | 0.03 | - | | Expenses related to Restructuring Program | 0.01 | 0.48 | | Digital technology program costs | - | 0.06 | | Deferred income tax effects, net, related to corporate entity reorganization | 0.08 | - | | Adjusted diluted earnings per share | $0.59 | $0.54 | [Reconciliation of EBITDA, Adjusted EBITDA, and Credit Agreement EBITDA](index=15&type=section&id=7.4.%20Reconciliation%20of%20EBITDA%2C%20Adjusted%20EBITDA%2C%20and%20Credit%20Agreement%20EBITDA) For Q2 2025, reported EBITDA was $163.2 million, adjusted EBITDA was $173.6 million, and Credit Agreement EBITDA was $192.4 million Reconciliation of EBITDA, Adjusted EBITDA, and Credit Agreement EBITDA (Three Months Ended June 30) | $ million | Jun 30 '25 | Jun 30 '24 | | :--- | :--- | :--- | | Net income attributable to Herbalife | $49.3 | $4.7 | | EBITDA | 163.2 | 102.5 | | Amortization of SaaS implementation costs | 5.7 | 8.7 | | Expenses related to Technology Realignment Program | 3.6 | - | | Expenses related to Restructuring Program | 0.7 | 48.8 | | Digital technology program costs | 0.4 | 6.0 | | Adjusted EBITDA | 173.6 | 180.0 | | Credit Agreement EBITDA | 192.4 | 208.0 | | Credit Agreement Total Leverage Ratio | 3.0x | | Reconciliation of EBITDA, Adjusted EBITDA, and Credit Agreement EBITDA (Six Months Ended June 30) | $ million | 2025 | 2024 | | :--- | :--- | :--- | | Net income attributable to Herbalife | $99.7 | $29.0 | | EBITDA | 316.7 | 203.6 | | Amortization of SaaS implementation costs | 11.4 | 12.3 | | Expenses related to Technology Realignment Program | 3.6 | - | | Expenses related to Restructuring Program | 4.0 | 65.5 | | Digital technology program costs | 2.8 | 17.0 | | Adjusted EBITDA | 338.5 | 318.3 | | Credit Agreement EBITDA | 384.4 | 367.5 |

PART I. FINANCIAL INFORMATION This section presents Herbalife's unaudited financial statements and management's analysis of its financial performance [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Herbalife's unaudited condensed consolidated financial statements and detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, detailing assets, liabilities, and shareholders' deficit Unaudited Condensed Consolidated Balance Sheets (in millions) | ASSETS (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $320.9 | $415.3 | | Receivables, net | 96.2 | 68.9 | | Inventories | 513.1 | 475.4 | | Prepaid expenses and other current assets| 172.7 | 184.1 | | Total current assets | 1,102.9 | 1,143.7 | | Property, plant, and equipment, net | 465.8 | 460.2 | | Operating lease right-of-use assets | 181.8 | 185.7 | | Marketing-related intangibles, net | 316.5 | 312.3 | | Goodwill | 101.0 | 87.7 | | Deferred income tax assets | 427.8 | 398.6 | | Other assets | 140.3 | 139.9 | | **Total assets** | **$2,736.1** | **$2,728.1** | | LIABILITIES (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Accounts payable | $91.8 | $70.0 | | Royalty overrides | 328.8 | 334.1 | | Current portion of long-term debt | 168.0 | 283.5 | | Other current liabilities | 505.7 | 542.8 | | Total current liabilities | 1,094.3 | 1,230.4 | | Long-term debt, net | 1,973.5 | 1,976.6 | | Non-current operating lease liabilities | 165.4 | 169.5 | | Other non-current liabilities | 157.3 | 152.7 | | **Total liabilities** | **3,390.5** | **3,529.2** | | SHAREHOLDERS' DEFICIT (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total Herbalife shareholders' deficit | $(660.5) | $(801.1) | | Noncontrolling interest | 6.1 | — | | **Total shareholders' deficit** | **$(654.4)** | **$(801.1)** | | **Total liabilities and shareholders' deficit** | **$2,736.1** | **$2,728.1** | [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) This table outlines the company's revenues, expenses, and net income over specified periods Unaudited Condensed Consolidated Statements of Income (in millions, except per share amounts) | (in millions, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,259.1 | $1,281.1 | $2,480.8 | $2,545.4 | | Cost of sales | 276.9 | 283.1 | 542.1 | 568.1 | | Gross profit | 982.2 | 998.0 | 1,938.7 | 1,977.3 | | Royalty overrides | 406.5 | 415.3 | 808.3 | 830.5 | | Selling, general, and administrative expenses | 447.9 | 502.3 | 879.8 | 994.5 | | Other operating income | (4.8) | — | (4.8) | — | | Operating income | 132.6 | 80.4 | 255.4 | 152.3 | | Interest expense, net | 53.6 | 57.7 | 105.6 | 95.6 | | Other expense, net | — | 10.5 | — | 10.5 | | Income before income taxes | 79.0 | 12.2 | 149.8 | 46.2 | | Income taxes | 29.8 | 7.5 | 50.2 | 17.2 | | Net income | 49.2 | 4.7 | 99.6 | 29.0 | | Net income attributable to Herbalife | $49.3 | $4.7 | $99.7 | $29.0 | | Basic EPS | $0.48 | $0.05 | $0.98 | $0.29 | | Diluted EPS | $0.48 | $0.05 | $0.97 | $0.29 | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This table details net income and other comprehensive income components, reflecting total comprehensive income Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $49.2 | $4.7 | $99.6 | $29.0 | | Other comprehensive income (loss): | | | | | | Foreign currency translation adjustment | 24.2 | (21.6) | 32.9 | (31.5) | | Unrealized (loss) gain on derivatives | (4.4) | 7.1 | (8.1) | 6.1 | | Total other comprehensive income (loss) | 19.8 | (14.5) | 24.8 | (25.4) | | Total comprehensive income (loss) | $69.0 | $(9.8) | $124.4 | $3.6 | | Total comprehensive income (loss) attributable to Herbalife | $69.1 | $(9.8) | $124.5 | $3.6 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes cash inflows and outflows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows (in millions) | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $96.2 | $116.3 | | Net cash used in investing activities | (69.4) | (69.0) | | Net cash used in financing activities | (132.4) | (240.2) | | Effect of exchange rate changes on cash | 11.1 | (13.3) | | Net change in cash, cash equivalents, and restricted cash | (94.5) | (206.2) | | Cash, cash equivalents, and restricted cash, beginning of period | 438.1 | 595.5 | | Cash, cash equivalents, and restricted cash, end of period | $343.6 | $389.3 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the financial statements [1. Organization](index=7&type=section&id=1.%20Organization) This note describes Herbalife's global business model, product categories, and geographic operating regions - Herbalife Ltd. is a global nutrition company selling weight management, targeted nutrition, energy, sports, fitness, and outer nutrition products through a network of independent members[23](index=23&type=chunk) - The Company operates in five geographic regions: North America, Latin America, EMEA, Asia Pacific (excluding China), and China[23](index=23&type=chunk) [2. Significant Accounting Policies](index=7&type=section&id=2.%20Significant%20Accounting%20Policies) This note details the accounting principles and methods used in preparing the financial statements - The Company's unaudited condensed consolidated interim financial information is prepared in accordance with SEC's Regulation S-X and U.S. GAAP, with all necessary normal recurring adjustments[24](index=24&type=chunk) - Recently adopted pronouncements, ASU No. 2024-02 and ASU No. 2023-05, did not have a material impact on the Company's financial statements[25](index=25&type=chunk)[26](index=26&type=chunk) - New accounting pronouncements, including ASU 2023-06, 2023-09, 2024-03, 2024-04, 2025-03, 2025-04, and 2025-05, are being evaluated for potential impact on future financial statements[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - Revenue is generally recognized when product is delivered to Members, with specific recognition policies for China independent service providers and third-party importers[35](index=35&type=chunk) - Distributor allowances (discounts, rebates, wholesale commissions) are recorded as a reduction to net sales, while royalty overrides are classified as an operating expense[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - The Company recognized approximately **$4.8 million** in government grant income from China during both the three and six months ended June 30, 2025, with no such income in the prior year[46](index=46&type=chunk) - A **$10.5 million** loss on extinguishment of debt related to the 2018 Credit Facility and partial redemption of 2025 Notes was recognized in other expense, net, during the three and six months ended June 30, 2024[47](index=47&type=chunk) - The Company acquired certain assets of Pruvit Ventures, Inc. and Pro2col Health LLC for **$19 million** in April 2025, primarily consisting of intangible assets and software, with potential contingent payments up to **$25 million** for Pruvit and **$46 million** for Pro2col[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - In April 2025, Herbalife formed HBL Link Bioscience, LLC (**51% owned**) and acquired Link BioSciences Inc.'s assets for **$6.5 million**, which was accounted for as a business combination, resulting in **$7.2 million** in goodwill[54](index=54&type=chunk)[55](index=55&type=chunk) [3. Inventories](index=16&type=section&id=3.%20Inventories) This note provides a breakdown of inventory components, including raw materials, work in process, and finished goods Inventories (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Raw materials | $73.3 | $74.0 | | Work in process | 10.7 | 8.1 | | Finished goods | 429.1 | 393.3 | | **Total** | **$513.1** | **$475.4** | [4. Long-Term Debt](index=16&type=section&id=4.%20Long-Term%20Debt) This note details the company's long-term debt obligations, including credit facilities and senior notes Long-Term Debt (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Borrowings under senior secured credit facility | $353.0 | $359.9 | | 12.250% senior secured notes due 2029 | 771.0 | 768.2 | | 4.250% convertible senior notes due 2028| 272.7 | 271.9 | | 7.875% senior notes due 2025 | 147.3 | 261.8 | | 4.875% senior notes due 2029 | 595.8 | 595.4 | | Other | 1.7 | 2.9 | | **Total** | **2,141.5** | **2,260.1** | | Less: current portion | 168.0 | 283.5 | | **Long-term portion** | **$1,973.5** | **$1,976.6** | - The 2018 Credit Facility was refinanced and replaced in April 2024 by the 2024 Credit Facility, consisting of a **$400.0 million** Term Loan B and a **$400.0 million** revolving credit facility[63](index=63&type=chunk) - The 2024 Credit Facility requires compliance with financial covenants, including a maximum total leverage ratio (stepping down to **4.00:1.00** by September 30, 2025) and a minimum liquidity of **$200.0 million**; the Company was in compliance as of June 30, 2025[68](index=68&type=chunk) - The Company issued **$800.0 million** of 12.250% Senior Secured Notes due 2029 in April 2024, with proceeds used to repay existing debt[74](index=74&type=chunk) - The 2024 Convertible Notes matured on March 15, 2024, and the remaining **$197.0 million** outstanding principal was repaid in cash[79](index=79&type=chunk)[80](index=80&type=chunk) - The Company redeemed **$65.0 million** and **$50.0 million** aggregate principal amount of the 2025 Notes in February and June 2025, respectively, reducing the outstanding principal to **$147.3 million** as of June 30, 2025[89](index=89&type=chunk)[90](index=90&type=chunk) Annual Scheduled Principal Payments (in millions) | Annual Scheduled Principal Payments (in millions) | Amount | | :------------------------------------------------ | :----- | | 2025 | $157.6 | | 2026 | 20.7 | | 2027 | 20.5 | | 2028 | 297.7 | | 2029 | 1,710.0| | **Total** | **$2,206.5** | [5. Contingencies](index=26&type=section&id=5.%20Contingencies) This note discloses potential liabilities from tax matters, legal proceedings, and other uncertain events - The Company is involved in various tax matters, including delayed VAT refunds and a **$23.2 million** tax assessment in Mexico for 2019, which it is appealing[101](index=101&type=chunk)[102](index=102&type=chunk) - In Brazil, the Company faces tax assessments totaling approximately **$15.9 million** related to withholding/contributions and significant ICMS indirect tax assessments (e.g., **$29.3 million** for 2013, **$10.9 million** for 2014 in São Paulo), for which it has provided surety bonds and is litigating[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - In India, the Company has received VAT and Service Tax assessments of approximately **$12.0 million** and income tax assessments totaling approximately **$101.3 million** for fiscal years 2017, 2018, 2020, 2021, and 2022, which it is litigating[106](index=106&type=chunk) - A lawsuit against a former technology services vendor resulted in a **$1.5 million** judgment in favor of Herbalife on a fraudulent concealment claim[108](index=108&type=chunk) - A class action lawsuit was filed in October 2024 alleging misclassification of distributors as independent contractors, which the Company intends to vigorously defend[109](index=109&type=chunk) [6. Segment Information](index=28&type=section&id=6.%20Segment%20Information) This note provides financial data by geographic operating segments, including net sales and contribution margins - The Company operates in **95 markets**, organized into five geographic regions: North America, Latin America, EMEA, Asia Pacific, and China. All regions except China are aggregated into the 'Primary Reporting Segment'[110](index=110&type=chunk)[111](index=111&type=chunk) Net Sales and Contribution Margin by Segment (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Net sales:** | | | | | | Primary Reporting Segment | $1,179.1 | $1,199.4 | $2,336.0 | $2,388.5 | | China | 80.0 | 81.7 | 144.8 | 156.9 | | **Total net sales** | **$1,259.1** | **$1,281.1** | **$2,480.8** | **$2,545.4** | | **Contribution margin:** | | | | | | Primary Reporting Segment | $507.7 | $513.7 | $1,007.5 | $1,014.9 | | China | 28.6 | 27.9 | 51.9 | 54.0 | | **Total contribution margin** | **$536.3** | **$541.6** | **$1,059.4** | **$1,068.9** | Net Sales by Geographic Area (in millions) | Net sales by geographic area (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $265.3 | $275.3 | $513.0 | $534.0 | | India | 203.6 | 204.6 | 412.9 | 408.1 | | Mexico | 137.2 | 142.7 | 263.7 | 283.6 | | China | 80.0 | 81.7 | 144.8 | 156.9 | | Vietnam | 60.2 | 62.9 | 135.6 | 138.5 | | Others | 512.8 | 513.9 | 1,010.8 | 1,024.3 | | **Total net sales** | **$1,259.1** | **$1,281.1** | **$2,480.8** | **$2,545.4** | [7. Share-Based Compensation](index=30&type=section&id=7.%20Share-Based%20Compensation) This note details expenses and activity related to stock appreciation rights and restricted stock units - Share-based compensation expense was **$10.4 million** for Q2 2025 (down from **$11.8 million** in Q2 2024) and **$22.0 million** for H1 2025 (down from **$23.7 million** in H1 2024)[117](index=117&type=chunk) SARs Activity (in thousands) | SARs Activity (in thousands) | Outstanding as of Dec 31, 2024 | Granted | Exercised | Forfeited/expired | Outstanding as of Jun 30, 2025 | | :--------------------------- | :----------------------------- | :------ | :-------- | :---------------- | :----------------------------- | | Number of Awards | 11,002 | 2,646 | — | (467) | 13,181 | | Weighted Average Exercise Price Per Award | $12.12 | $7.72 | — | $16.27 | $11.09 | Restricted Stock Units Activity (in thousands) | Restricted Stock Units Activity (in thousands) | Outstanding and nonvested as of Dec 31, 2024 | Granted | Vested | Forfeited | Outstanding and nonvested as of Jun 30, 2025 | | :--------------------------------------------- | :------------------------------------------- | :------ | :----- | :-------- | :------------------------------------------- | | Number of Shares | 6,289 | 1,779 | (2,725)| (388) | 4,955 | | Weighted Average Grant Date Fair Value Per Share | $12.56 | $8.10 | $15.14 | $10.85 | $9.68 | [8. Income Taxes](index=31&type=section&id=8.%20Income%20Taxes) This note provides details on income tax expense, effective tax rates, and unrecognized tax benefits Income Tax Data (in millions) | Income Tax Data (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income taxes | $29.8 | $7.5 | $50.2 | $17.2 | | Effective income tax rate | 37.7% | 61.5% | 33.5% | 37.2% | - The decrease in the effective tax rate for Q2 2025 was primarily due to changes in geographic income mix and a decrease in tax expense from discrete events[124](index=124&type=chunk) - Total unrecognized tax benefits, including interest and penalties, amounted to **$50.6 million** as of June 30, 2025, with a possible decrease of up to **$8.4 million** within the next twelve months due to statute of limitations expiration and audit settlements[125](index=125&type=chunk)[126](index=126&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) is not expected to have a material financial impact on the Company's consolidated financial statements, based on preliminary analysis[127](index=127&type=chunk) [9. Derivative Instruments and Hedging Activities](index=33&type=section&id=9.%20Derivative%20Instruments%20and%20Hedging%20Activities) This note describes the company's use of foreign currency derivatives for risk management and hedging - The Company uses foreign currency derivatives, including forward and option contracts, as freestanding derivatives (no hedge accounting) and cash flow hedges to mitigate foreign currency exchange risk[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - As of June 30, 2025, the aggregate notional amounts of all foreign currency contracts outstanding (including cash flow hedges and freestanding derivatives) were approximately **$846.7 million**[131](index=131&type=chunk) Derivative Instruments and Hedging Activities (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Amount of (Loss) Gain Recognized in Other Comprehensive Income (Loss) | | | | | | Foreign exchange currency contracts relating to inventory and intercompany management fee hedges | $6.6 | $(2.0) | $(2.1) | $4.8 | | Amount of (Loss) Gain Recognized in Income (Derivatives not designated as hedging instruments) | | | | | | Foreign exchange currency contracts | $3.8 | $(9.4) | $(11.4) | $3.1 | [10. Shareholders' Deficit](index=36&type=section&id=10.%20Shareholders'%20Deficit) This note details changes in shareholders' deficit, including net income, share repurchases, and other adjustments Changes in Herbalife Shareholders' Deficit (Three Months, in millions) | Changes in Herbalife Shareholders' Deficit (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | | Balance as of March 31 | $(736.0) | $(1,036.6) | | Issuance of common shares | 0.6 | 0.8 | | Additional capital from share-based compensation | 10.4 | 11.8 | | Repurchases of common shares | (4.6) | (3.4) | | Net income (loss) | 49.3 | 4.7 | | Foreign currency translation adjustment | 24.2 | (21.6) | | Unrealized (loss) gain on derivatives | (4.4) | 7.1 | | Acquisition | — | — | | **Balance as of June 30** | **$(660.5)** | **$(1,037.2)** | Changes in Herbalife Shareholders' Deficit (Six Months, in millions) | Changes in Herbalife Shareholders' Deficit (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Balance as of December 31 | $(801.1) | $(1,060.3) | | Issuance of common shares | 0.9 | 1.5 | | Additional capital from share-based compensation | 22.0 | 23.7 | | Repurchases of common shares | (6.8) | (5.7) | | Net income (loss) | 99.7 | 29.0 | | Foreign currency translation adjustment | 32.9 | (31.5) | | Unrealized (loss) gain on derivatives | (8.1) | 6.1 | | Acquisition | — | — | | **Balance as of June 30** | **$(660.5)** | **$(1,037.2)** | - The Company has not declared or paid cash dividends since 2014[138](index=138&type=chunk) - No common shares were repurchased through open-market purchases during the six months ended June 30, 2025 and 2024. Share repurchases of **$6.8 million** (2025) and **$5.7 million** (2024) were due to shares withheld for tax purposes related to share-based compensation plans[140](index=140&type=chunk)[143](index=143&type=chunk) [11. Earnings Per Share](index=41&type=section&id=11.%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per share, including weighted-average shares Earnings Per Share Computations (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Weighted-average shares used in basic computations | 102.7 | 100.6 | 102.2 | 100.1 | | Dilutive effect of exercise of equity grants outstanding | 0.6 | 1.1 | 0.6 | 1.1 | | **Weighted-average shares used in diluted computations** | **103.3** | **101.7** | **102.8** | **101.2** | - The 2028 Convertible Notes were excluded from diluted EPS computation for both periods as their effect would be anti-dilutive[151](index=151&type=chunk) [12. Fair Value Measurements](index=42&type=section&id=12.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurement of financial instruments, particularly derivatives - The Company uses a fair value hierarchy (Level 1, 2, 3 inputs) for financial and non-financial assets and liabilities. Derivatives are measured at fair value using Level 2 inputs[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) Fair Value of Derivatives (in millions) | Fair Value of Derivatives (in millions) | June 30, 2025 | December 31, 2024 | Balance Sheet Location | | :-------------------------------------- | :------------ | :---------------- | :--------------------- | | **ASSETS:** | | | | | Derivatives designated as hedging instruments: Foreign exchange currency contracts | $0.2 | $4.1 | Prepaid expenses and other current assets | | Derivatives not designated as hedging instruments: Foreign exchange currency contracts | 4.3 | 4.0 | Prepaid expenses and other current assets | | **Total Assets** | **$4.5** | **$8.1** | | | **LIABILITIES:** | | | | | Derivatives designated as hedging instruments: Foreign exchange currency contracts | $2.3 | $— | Other current liabilities | | Derivatives not designated as hedging instruments: Foreign exchange currency contracts | 5.3 | 4.2 | Other current liabilities | | **Total Liabilities** | **$7.6** | **$4.2** | | - Cash and cash equivalents are valued based on Level 1 inputs (quoted prices in active markets)[155](index=155&type=chunk) [13. Restructuring Activities](index=44&type=section&id=13.%20Restructuring%20Activities) This note outlines the costs and progress of the Transformation, Restructuring, and Technology Realignment Programs - The global Transformation Program, initiated in 2021, was completed as of December 31, 2024, incurring **$92.5 million** in pre-tax expenses through June 30, 2025[158](index=158&type=chunk)[159](index=159&type=chunk) - The Restructuring Program, initiated in Q1 2024 to streamline organizational structure, was substantially completed by December 31, 2024, with **$73.1 million** in pre-tax expenses incurred through June 30, 2025[159](index=159&type=chunk)[160](index=160&type=chunk) - The Technology Realignment Program, initiated in April 2025, incurred **$3.6 million** in pre-tax expenses for Q2 2025, with the first phase expected to complete in 2025 and deliver **$9 million** in annual savings starting 2026[161](index=161&type=chunk)[162](index=162&type=chunk) [14. Detail of Certain Balance Sheet Accounts](index=46&type=section&id=14.%20Detail%20of%20Certain%20Balance%20Sheet%20Accounts) This note provides further breakdown of specific balance sheet accounts, including other current and non-current liabilities - Other assets included deferred compensation plan assets of **$50.1 million** as of June 30, 2025[163](index=163&type=chunk) Other Current Liabilities (in millions) | Other Current Liabilities (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Accrued compensation | $113.6 | $148.1 | | Accrued service fees to China independent service providers | 25.8 | 25.8 | | Accrued advertising, events, and promotion expenses | 44.9 | 52.0 | | Accrued interest | 28.7 | 31.8 | | Current operating lease liabilities | 38.9 | 39.7 | | Advance sales deposits | 81.8 | 75.0 | | Income taxes payable | 17.5 | 12.6 | | Other accrued liabilities | 154.5 | 157.8 | | **Total** | **$505.7** | **$542.8** | - Other non-current liabilities included deferred compensation plan liabilities of **$68.7 million** and deferred income tax liabilities of **$17.8 million** as of June 30, 2025[165](index=165&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Herbalife's financial condition, operations, and liquidity, analyzing key performance indicators [Overview](index=48&type=section&id=Overview) This section provides a general description of Herbalife's business, products, and global operating regions - Herbalife is a global nutrition company selling weight management, targeted nutrition, energy, sports, fitness, and outer nutrition products through independent Members, including sales leaders and independent service providers in China[167](index=167&type=chunk) - The Company's products are grouped into four principal categories: weight management, targeted nutrition, energy/sports/fitness, and outer nutrition[168](index=168&type=chunk) - Herbalife sells products in five geographic regions: North America, Latin America, EMEA, Asia Pacific (excluding China), and China[171](index=171&type=chunk) [Certain Factors Impacting Results](index=49&type=section&id=Certain%20Factors%20Impacting%20Results) This section discusses external factors like inflation, foreign exchange, and geopolitical conflicts affecting financial results - Global inflationary pressures, foreign exchange rate fluctuations, and geopolitical conflicts (e.g., wars in Ukraine and the Middle East) continue to impact the Company's financial condition and results[172](index=172&type=chunk)[173](index=173&type=chunk) - The Company instituted pricing actions in certain markets during the six months ended June 30, 2025, and in 2024, to address inflationary pressures[172](index=172&type=chunk) [Volume Points by Geographic Region](index=49&type=section&id=Volume%20Points%20by%20Geographic%20Region) This section explains the discontinuation of Volume Points disclosure due to changes in usefulness assessment - Management has decided to no longer disclose Volume Points by Geographic Region due to recent changes in Volume Point values and an assessment of its continued usefulness[175](index=175&type=chunk) [Presentation](index=49&type=section&id=Presentation) This section defines key financial metrics and non-GAAP measures used in the management discussion and analysis - Net sales represent product sales to Members, net of distributor allowances, and include shipping and handling revenues[176](index=176&type=chunk)[178](index=178&type=chunk) - Royalty overrides are compensation to Members for developing, retaining, and managing sales organizations, recorded as an operating expense[182](index=182&type=chunk) - In China, independent service providers receive service fees for marketing and sales support, with the majority included in selling, general, and administrative expenses[183](index=183&type=chunk) - Contribution margins are defined as net sales less cost of sales, Royalty overrides, and service fees to China independent service providers[184](index=184&type=chunk) - The Company uses 'net sales in local currency' as a non-GAAP measure to assess underlying business performance, excluding foreign currency fluctuations[180](index=180&type=chunk) [Summary Financial Results](index=51&type=section&id=Summary%20Financial%20Results) This section provides a high-level overview of net sales, net income, and diluted EPS performance Summary Financial Results (in millions) | Financial Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net sales | $1,259.1 | $1,281.1 | (1.7)% | $2,480.8 | $2,545.4 | (2.5)% | | Net sales (local currency) | Flat | N/A | N/A | 0.7% increase | N/A | N/A | | Net income attributable to Herbalife | $49.3 | $4.7 | 948.9% | $99.7 | $29.0 | 243.8% | | Diluted EPS | $0.48 | $0.05 | 860.0% | $0.97 | $0.29 | 234.5% | - The decrease in net sales for Q2 2025 was driven by a **3.1% decrease** in sales volume and a **1.7% unfavorable foreign currency impact**, partially offset by a **3.0% favorable impact** from price increases[188](index=188&type=chunk) - The increase in net income for Q2 2025 was mainly due to **$54.4 million lower** selling, general, and administrative expenses, a **$10.5 million loss** on debt extinguishment in 2024, and **$8.8 million lower** royalty overrides, partially offset by lower gross profit and higher income taxes[190](index=190&type=chunk) - Net income for H1 2025 included **$12.9 million favorable** deferred income tax impacts from corporate entity structure changes, partially offset by unfavorable impacts from Restructuring Program, Technology Realignment Program, and Digital Technology Program expenses[192](index=192&type=chunk) [Results of Operations](index=52&type=section&id=Results%20of%20Operations) This section analyzes the company's operational performance, including gross profit, royalty overrides, and SG&A expenses Results of Operations (% of Net Sales) | Operations (% of Net Sales) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of sales | 22.0% | 22.1% | 21.9% | 22.3% | | Gross profit | 78.0% | 77.9% | 78.1% | 77.7% | | Royalty overrides | 32.3% | 32.4% | 32.5% | 32.6% | | Selling, general, and administrative expenses | 35.6% | 39.2% | 35.5% | 39.1% | | Other operating income | (0.4)% | —% | (0.2)% | —% | | Operating income | 10.5% | 6.3% | 10.3% | 6.0% | | Interest expense, net | 4.2% | 4.5% | 4.3% | 3.8% | | Other expense, net | —% | 0.8% | —% | 0.4% | | Income before income taxes | 6.3% | 1.0% | 6.0% | 1.8% | | Income taxes | 2.4% | 0.6% | 2.0% | 0.7% | | Net income | 3.9% | 0.4% | 4.0% | 1.1% | [Reporting Segment Results](index=53&type=section&id=Reporting%20Segment%20Results) This section details the financial performance of the Primary Reporting Segment and China, including net sales and contribution margin - The Primary Reporting Segment's net sales decreased **1.7%** for Q2 2025 and **2.2%** for H1 2025, but increased **0.1%** and **1.2%** in local currency, respectively, driven by sales volume decreases and unfavorable foreign currency, partially offset by price increases[199](index=199&type=chunk) - Primary Reporting Segment contribution margin decreased **1.2%** for Q2 2025 and **0.7%** for H1 2025, primarily due to unfavorable foreign currency fluctuations and sales volume decreases, partially offset by price increases[202](index=202&type=chunk) - China's contribution margin increased **2.5%** for Q2 2025 due to favorable sales mix and foreign currency, despite sales volume decreases. For H1 2025, it decreased **3.9%** due to sales volume decreases, partially offset by favorable sales mix and cost changes[203](index=203&type=chunk) [Sales by Geographic Region](index=54&type=section&id=Sales%20by%20Geographic%20Region) This section breaks down net sales performance across North America, Latin America, EMEA, Asia Pacific, and China Net Sales by Geographic Region (in millions) | Net Sales by Geographic Region (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | North America | $272.4 | $283.2 | (3.8)% | $526.8 | $549.0 | (4.0)% | | Latin America | 210.2 | 211.7 | (0.7)% | 416.9 | 425.9 | (2.1)% | | EMEA | 287.9 | 287.8 | —% | 561.2 | 565.7 | (0.8)% | | Asia Pacific | 408.6 | 416.7 | (1.9)% | 831.1 | 847.9 | (2.0)% | | China | 80.0 | 81.7 | (2.1)% | 144.8 | 156.9 | (7.7)% | | **Worldwide** | **$1,259.1** | **$1,281.1** | **(1.7)%** | **$2,480.8** | **$2,545.4** | **(2.5)%** | - North America net sales decreased **3.8%** (Q2 2025) and **4.0%** (H1 2025) due to sales volume decreases, partially offset by price increases. The beta version of the new Pro2col digital platform was unveiled in July 2025, with commercial release planned for Q4 2025[209](index=209&type=chunk)[212](index=212&type=chunk) - Latin America net sales decreased **0.7%** (Q2 2025) and **2.1%** (H1 2025), but increased **9.5%** and **10.1%** in local currency, respectively, driven by sales volume increases and price increases, despite unfavorable foreign currency impacts[213](index=213&type=chunk) - EMEA net sales were flat (Q2 2025) and decreased **0.8%** (H1 2025), but increased **1.1%** in local currency for H1 2025. Sales in Russia were suspended, leading to no sales in H1 2025, while Russian Members purchasing from neighboring markets like Kazakhstan impacted local currency sales there[217](index=217&type=chunk)[218](index=218&type=chunk) - Asia Pacific net sales decreased **1.9%** (Q2 2025) and **2.0%** (H1 2025), with India's sales volume decreasing **0.7%** (Q2 2025) but increasing **1.8%** (H1 2025). Vietnam's direct selling license was renewed until January 2030[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - China net sales decreased **2.1%** (Q2 2025) and **7.7%** (H1 2025), primarily due to sales volume decreases, partially offset by favorable sales mix. The Company continues to enhance digital capabilities and customer loyalty programs in China[224](index=224&type=chunk)[225](index=225&type=chunk) [Sales by Product Category](index=59&type=section&id=Sales%20by%20Product%20Category) This section presents net sales categorized by weight management, targeted nutrition, energy/sports/fitness, and outer nutrition Net Sales by Product Category (in millions) | Net Sales by Product Category (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Weight Management | $690.9 | $710.7 | (2.8)% | $1,362.1 | $1,415.4 | (3.8)% | | Targeted Nutrition | 374.2 | 378.5 | (1.1)% | 740.5 | 756.3 | (2.1)% | | Energy, Sports, and Fitness | 154.6 | 148.1 | 4.4% | 299.0 | 287.9 | 3.9% | | Outer Nutrition | 19.0 | 20.5 | (7.3)% | 38.6 | 40.9 | (5.6)% | | Literature, Promotional, and Other | 20.4 | 23.3 | (12.4)% | 40.6 | 44.9 | (9.6)% | | **Total** | **$1,259.1** | **$1,281.1** | **(1.7)%** | **$2,480.8** | **$2,545.4** | **(2.5)%** | [Gross Profit](index=59&type=section&id=Gross%20Profit) This section analyzes changes in gross profit and its percentage of net sales, highlighting contributing factors - Gross profit as a percentage of net sales increased by **11 basis points** to **78.0%** for Q2 2025 and by **47 basis points** to **78.1%** for H1 2025, primarily due to favorable price increases and lower inventory write-downs, partially offset by unfavorable foreign currency fluctuations and cost changes[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) [Royalty Overrides](index=59&type=section&id=Royalty%20Overrides) This section discusses the trends and factors influencing royalty overrides as a percentage of net sales - Royalty overrides as a percentage of net sales slightly decreased to **32.3%** for Q2 2025 (from **32.4%**) and to **32.5%** for H1 2025 (from **32.6%**), mainly due to favorable changes in the mix of products and countries[231](index=231&type=chunk)[232](index=232&type=chunk) [Selling, General, and Administrative Expenses](index=61&type=section&id=Selling%20General%20and%20Administrative%20Expenses) This section examines the drivers behind changes in selling, general, and administrative expenses - Selling, general, and administrative (SG&A) expenses decreased by **$54.4 million** to **$447.9 million** for Q2 2025 and by **$114.7 million** to **$879.8 million** for H1 2025[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) - The decrease in SG&A was primarily driven by lower labor and benefits costs (including employee retention/separation costs and bonus accruals) and lower professional fees related to the Digital Transformation Program[234](index=234&type=chunk)[235](index=235&type=chunk) [Other Operating Income](index=61&type=section&id=Other%20Operating%20Income) This section details the sources and amounts of other operating income, such as government grants - Other operating income of **$4.8 million** for both Q2 and H1 2025 consisted entirely of government grant income from China, with no such income in the prior year periods[237](index=237&type=chunk)[238](index=238&type=chunk) [Interest Expense, Net](index=61&type=section&id=Interest%20Expense%20Net) This section analyzes the components and changes in net interest expense, including interest income and expense Interest Expense, Net (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense | $55.4 | $60.4 | $110.0 | $102.0 | | Interest income | (1.8) | (2.7) | (4.4) | (6.4) | | **Interest expense, net** | **$53.6** | **$57.7** | **$105.6** | **$95.6** | - The decrease in net interest expense for Q2 2025 was due to lower overall weighted-average borrowings. The increase for H1 2025 was due to a higher weighted-average interest rate from the April 2024 debt refinancing, partially offset by lower borrowings[239](index=239&type=chunk) [Other Expense, Net](index=61&type=section&id=Other%20Expense%20Net) This section explains significant non-operating expenses, such as losses on debt extinguishment - Other expense, net, for Q2 and H1 2024 included a **$10.5 million** loss on the extinguishment of the 2018 Credit Facility and partial redemption of the 2025 Notes[240](index=240&type=chunk) [Income Taxes](index=63&type=section&id=Income%20Taxes) This section discusses income tax expense and effective tax rates, including factors influencing changes - Income taxes were **$29.8 million** (Q2 2025) and **$50.2 million** (H1 2025), with effective tax rates of **37.7%** and **33.5%**, respectively. The decrease in effective tax rates compared to 2024 was primarily due to changes in geographic income mix and discrete tax events[241](index=241&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash flow, debt, and working capital, and its ability to meet financial obligations - Operating cash flow for H1 2025 was **$96.2 million**, a decrease from **$116.3 million** in H1 2024, primarily due to unfavorable changes in operating assets and liabilities, partially offset by higher net income[244](index=244&type=chunk) - Capital expenditures for H1 2025 were **$39.8 million**, mainly for management information systems and the multi-year Digital Technology Program (Herbalife One), with full-year 2025 capital expenditures expected to be **$75 million to $95 million**[245](index=245&type=chunk) - The Company incurred **$25.5 million** for asset acquisitions of Pruvit and Pro2col LLC, and a business acquisition of Link BioSciences Inc. in 2025[246](index=246&type=chunk) - The Transformation Program was completed as of December 31, 2024, incurring **$92.5 million** in pre-tax expenses. The Restructuring Program was substantially completed by December 31, 2024, with **$73.1 million** in pre-tax expenses incurred[248](index=248&type=chunk)[249](index=249&type=chunk) - The 2024 Credit Facility had **$380.0 million** outstanding under the Term Loan B as of June 30, 2025, and **$355 million** in remaining available borrowing capacity under the Revolving Credit Facility[261](index=261&type=chunk) - As of June 30, 2025, the outstanding principal on the 2029 Secured Notes was **$800.0 million**, the 2028 Convertible Notes was **$277.5 million**, the 2025 Notes was **$147.3 million**, and the 2029 Notes was **$600.0 million**[263](index=263&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) - Working capital increased by **$95.3 million** to **$8.6 million** as of June 30, 2025, primarily due to decreases in current portion of long-term debt and other current liabilities[277](index=277&type=chunk) [Critical Accounting Policies and Estimates](index=73&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights key accounting policies and estimates requiring significant management judgment - Key accounting policies and estimates include revenue recognition, allowance for product returns, inventory valuation, goodwill and purchased intangible asset valuations, deferred income tax asset valuation allowances, uncertain tax positions, tax contingencies, and other loss contingencies[281](index=281&type=chunk) - Goodwill and marketing-related intangible assets are tested annually for impairment using quantitative methods, primarily an income approach, which involves significant estimates and assumptions[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - As of June 30, 2025, goodwill increased by **$13.3 million** to **$101.0 million**, primarily due to the Link BioSciences Inc. acquisition and foreign currency translation adjustments[289](index=289&type=chunk) - The Company evaluates the realizability of deferred income tax assets and accounts for uncertain tax positions based on the 'more likely than not' threshold[292](index=292&type=chunk)[293](index=293&type=chunk) [New Accounting Pronouncements](index=75&type=section&id=New%20Accounting%20Pronouncements) This section refers to disclosures regarding recently adopted and future accounting pronouncements - Refer to Note 2, Significant Accounting Policies, for information on new accounting pronouncements[296](index=296&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Herbalife's exposure to foreign exchange and interest rate risks, and strategies to manage them [Foreign Exchange Risk](index=76&type=section&id=Foreign%20Exchange%20Risk) This section describes the company's exposure to foreign currency fluctuations and its hedging strategies - The Company uses foreign exchange derivatives (forward and option contracts) to hedge foreign currency-denominated intercompany transactions, forecasted inventory purchases, and intercompany management fees, with a short-term hedging strategy due to market volatility[301](index=301&type=chunk)[303](index=303&type=chunk) - As of June 30, 2025, the aggregate notional amounts of all foreign currency contracts outstanding were approximately **$846.7 million**[305](index=305&type=chunk) Foreign Currency Forward Contracts (as of June 30, 2025) | Foreign Currency Forward Contracts (as of June 30, 2025) | Notional Amount (in millions) | Fair Value Gain (Loss) (in millions) | | :------------------------------------------------------- | :---------------------------- | :----------------------------------- | | Buy Euro sell Mexican peso | $134.6 | $(1.1) | | Buy Euro sell U.S. dollar | 97.1 | 1.3 | | Buy U.S. dollar sell Euro | 235.3 | (4.7) | | Buy Swiss franc sell U.S. dollar | 38.2 | 0.9 | | Buy British pound sell Euro | 20.5 | — | | **Total forward contracts** | **$846.7** | **$(3.1)** | [Interest Rate Risk](index=80&type=section&id=Interest%20Rate%20Risk) This section analyzes the impact of interest rate changes on the company's variable and fixed-rate debt - The 2024 Credit Facility bears variable interest rates (weighted-average **11.49%** as of June 30, 2025). A **1%** change in interest rates would impact annual interest expense by approximately **$3.8 million**[307](index=307&type=chunk)[308](index=308&type=chunk) - The 2029 Secured Notes (**12.250% fixed rate**) had a fair value of approximately **$877.2 million** (carrying value **$771.0 million**) as of June 30, 2025. A **1%** change in interest rates would change its fair value by approximately **$6.4 million** (decrease) or **$6.5 million** (increase)[309](index=309&type=chunk) - The 2028 Convertible Notes (**4.25% fixed rate**) had a fair value of approximately **$253.6 million** (carrying value **$272.7 million**) as of June 30, 2025[310](index=310&type=chunk) - The 2025 Notes (**7.875% fixed rate**) had a fair value of approximately **$147.8 million** (carrying value **$147.3 million**) as of June 30, 2025. A **1%** change in interest rates would change its fair value by approximately **$0.2 million** (decrease) or **$0.2 million** (increase)[311](index=311&type=chunk) - The 2029 Notes (**4.875% fixed rate**) had a fair value of approximately **$511.3 million** (carrying value **$595.8 million**) as of June 30, 2025. A **1%** change in interest rates would change its fair value by approximately **$16.6 million** (decrease) or **$17.3 million** (increase)[312](index=312&type=chunk) [Item 4. Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of disclosure controls and procedures and changes in internal control [Evaluation of Disclosure Controls and Procedures](index=81&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms management's assessment of the effectiveness of disclosure controls and procedures - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[313](index=313&type=chunk) [Changes in Internal Control over Financial Reporting](index=81&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in internal control over financial reporting during the period - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[314](index=314&type=chunk) PART II. OTHER INFORMATION This section includes forward-looking statements, legal proceedings, risk factors, and other required disclosures [FORWARD-LOOKING STATEMENTS](index=82&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions on forward-looking statements, detailing factors that could cause actual results to differ materially - Forward-looking statements are subject to inherent risks and uncertainties, many beyond the Company's control, which could cause actual results to differ materially from expectations[318](index=318&type=chunk) - Key risk factors include global economic conditions (inflation, foreign exchange, tariffs), ability to attract and retain Members, regulatory compliance, adverse publicity, competition, legal and regulatory matters (including FTC Consent Order), international operations, strategic initiatives, technology effectiveness, supply chain disruptions, IT infrastructure reliance, data privacy, contractual limitations, intellectual property, product concentration, management reliance, acquisition integration, debt restrictions, tax laws, and share price volatility[318](index=318&type=chunk)[320](index=320&type=chunk) [Item 1. Legal Proceedings](index=85&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 5 for detailed informa

Core Insights - The analyst has a strong background in equity research and investment analysis, with a focus on the U.S. equity market and consumer staples sector, indicating a belief in the resilience of defensive stocks for long-term investment opportunities [1] - The analyst holds certifications such as FMVA and FPWMP, which enhance their ability to analyze financial statements and build valuation models [1] - Participation in the CFA Research Challenge provided practical experience in equity analysis and industry research, showcasing the analyst's capability to present investment recommendations [1] Company and Industry Focus - The analyst has worked with a confidential client, preparing investment reports across various sectors including healthcare, consumer staples, and industrials, demonstrating versatility in evaluating companies across different industries [1] - The analyst's educational background includes a degree in Finance from Alexandria University, graduating with a CGPA of 3.6, which supports their analytical skills in the finance domain [1] - The analyst is currently seeking to publish articles that provide valuable insights to investors, indicating an intention to contribute to the investment community [1]

Core Insights - The event "Boosting Consumption and Protecting Rights" focused on the theme of "New Silver Economy Driving Consumption Upgrade" and gathered over 170 representatives from well-known companies and media [1][3] - A report indicated that the consumption needs of the new silver group have shifted from traditional "low-price and practical" to "quality, functionality, and experience," suggesting a significant market potential in the trillion-yuan range across various sectors [3][4] Company Strategies - Herbalife is addressing the health management needs of the new silver group by launching innovative products such as protein nutrition powder and other supplements aimed at enhancing nutrition and immune support [6][7] - The company emphasizes a "Nutrition + Exercise" health lifestyle, aiming to provide personalized health support for the elderly [6][10] Innovation Areas - Herbalife is innovating in three main areas: product innovation, solution innovation, and business model innovation [7] - In product innovation, Herbalife has developed unique combinations of amino acids to support elderly vitality and is integrating modern Western concepts with traditional Chinese health practices [7] - For solution innovation, Herbalife has acquired high-tech companies to create a personalized nutrition advice platform based on individual biological data [7] - In business model innovation, Herbalife operates over 3,000 nutrition clubs across the country, providing personalized health management support and community health activities for the elderly [7] Future Outlook - Herbalife plans to leverage over 40 years of expertise to promote the "Nutrition + Exercise" concept and cater to the growing health consumption needs of various demographics, including the silver population [10]

Herbalife (HLF) Conference Summary - June 04, 2025 Company Overview - Herbalife is a global health and wellness company and the largest publicly traded direct seller in the world with approximately $5 billion in net revenue [8] - The company operates in over 90 countries and has more than 2 million distributors globally [9] - Herbalife is recognized as the number one protein shake, weight management brand, and active lifestyle nutrition brand in the world [9] Key Business Model Insights - Herbalife's nutrition clubs, which originated in Mexico, have expanded globally with around 65,000 locations, surpassing the number of Subway and Starbucks outlets [12] - Nutrition clubs allow consumers to purchase individual servings of Herbalife products, fostering frequent interactions between distributors and customers, which enhances community engagement [16][18] - Approximately 40% of sales in the U.S. come from these nutrition clubs, with two-thirds of U.S. sales attributed to club owners who also sell take-home products [19] Regulatory and Business Model Changes - Following a 2016 settlement with the U.S. Federal Trade Commission (FTC), Herbalife changed its commission structure to only pay distributors after products are sold to end users, enhancing data collection capabilities [24][26] - The settlement led to the introduction of preferred customers, allowing distributors to register customers who buy directly from Herbalife, which was not previously possible [28] Pandemic Impact and Recovery - During the pandemic, Herbalife saw an increase in distributor sign-ups and club operations as their products were classified as essential [30] - Post-pandemic, the company faced challenges as many new distributors left after COVID-19 restrictions eased, leading to a need to rebuild the distributor base [32][33] - By late 2023, Herbalife began to stabilize and grow its distributor base again, with consistent growth observed in 2024 [33] Leadership and Strategic Direction - The return of former CEO and the appointment of a top distributor as CEO has brought stability and strategic focus to the company [35][40] - The new leadership is focused on leveraging the distributor base to introduce innovative product ideas and enhance growth [43] Recent Acquisitions and Innovations - Herbalife announced acquisitions aimed at enhancing its product offerings, including a health and wellness app (Protocol) and a personalized nutrition company (Link Bioscience) [42][44] - The acquisitions are intended to provide personalized nutrition solutions based on consumer data, which is expected to be a significant growth area [46][48] Financial Performance and Capital Allocation - Herbalife generates substantial cash flow and has a negative working capital position, allowing for strategic capital allocation [56] - The company has focused on paying down debt, achieving a leverage ratio of 2.97, with plans to reduce it further [58] - Over $6 billion in stock has been repurchased since the CFO's return, with a focus on returning value to shareholders [57] Market Outlook and Investment Thesis - The stock is considered undervalued, with opportunities for margin improvement, sales growth, and increased enterprise value [66] - The company is positioned to leverage unique consumer data and enhance its direct selling model through technology and community engagement [66] Conclusion - Herbalife's strategic initiatives, including the expansion of nutrition clubs, regulatory adaptations, and recent acquisitions, position the company for future growth and recovery in the direct selling market [66]