Herbalife(HLF) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended March 31, 2025, were $1,221.7 million, a decrease of$ 42.6 million, or 3.4%, compared to the same period in 2024[180]. - In local currency, net sales increased by 1.4% for the three months ended March 31, 2025, compared to the same period in 2024[180]. - Net income for the three months ended March 31, 2025, was $50.4 million, or$ 0.49 per diluted share, representing an increase of $26.1 million, or 107.4%, compared to the same period in 2024[181]. - The decrease in net sales was primarily driven by a 4.8% unfavorable impact from foreign currency exchange rate fluctuations and a 2.3% decrease in sales volume, partially offset by a 3.7% favorable impact from price increases[180]. - Total net sales across all product categories were$ 1,221.7 million for the three months ended March 31, 2025, a decrease of $42.6 million or 3.4% compared to the same period in 2024[215]. Segment Performance - The Primary Reporting Segment reported net sales of$ 1,156.9 million for the three months ended March 31, 2025, a decrease of $32.2 million, or 2.7%, compared to the same period in 2024[189]. - Contribution margin for the Primary Reporting Segment was$ 499.8 million, or 43.2% of net sales, representing a decrease of $1.4 million, or 0.3%, compared to the same period in 2024[192]. - Net sales in North America were$ 254.4 million, a decrease of $11.4 million, or 4.3%, for the three months ended March 31, 2025, primarily due to an 8.0% decrease in sales volume[199]. - Latin America reported net sales of$ 206.7 million, a decrease of $7.5 million, or 3.5%, for the three months ended March 31, 2025, impacted by a 14.1% unfavorable impact of foreign currency fluctuations[202]. - EMEA region net sales were$ 273.3 million, a decrease of $4.6 million, or 1.7%, for the three months ended March 31, 2025, primarily due to a 5.0% unfavorable impact of foreign currency fluctuations[206]. - Asia Pacific region reported net sales of$ 422.5 million for the three months ended March 31, 2025, a decrease of $8.7 million or 2.0% compared to the same period in 2024[209]. - The China region reported net sales of$ 64.8 million for the three months ended March 31, 2025, a decrease of $10.4 million or 13.8% compared to the same period in 2024, primarily due to a 13.9% decrease in sales volume[213]. Cost and Expenses - Selling, general, and administrative expenses decreased by$ 60.3 million, primarily due to lower labor and benefits costs[181]. - Gross profit margin improved to 78.3% for the three months ended March 31, 2025, compared to 77.5% for the same period in 2024[187]. - Operating income increased to 10.1% of net sales for the three months ended March 31, 2025, compared to 5.7% for the same period in 2024[187]. - Interest expense, net increased to $52.0 million for the three months ended March 31, 2025, compared to$ 37.9 million for the same period in 2024, primarily due to an increase in the weighted-average interest rate[225]. - Income taxes for the three months ended March 31, 2025, were $20.4 million, with an effective tax rate of 28.8%, up from 28.5% in 2024[226]. Strategic Initiatives - The company continues to focus on enhancing customer experience and expanding market penetration despite global inflationary pressures and geopolitical conflicts[160]. - The company continues to support Members with new product launches and modernizing technological tools to enhance marketing and sales capabilities[201]. - The company is focusing on promotions, events, and launching new products to grow sales in the EMEA region[208]. - The Nutrition Club DMO remains a key focus in several markets, with promotional efforts aimed at increasing in-person activities and supporting Member operations[205]. Capital Expenditures and Savings Programs - Capital expenditures for the three months ended March 31, 2025 were$ 20.0 million, with a focus on enhancing digital capabilities through the $400 million multi-year Digital Technology Program[230]. - The company expects total capital expenditures of approximately$ 90 million to $120 million for the full year 2025, including investments in the Herbalife One initiative[230]. - The Transformation Program initiated in 2021 is expected to deliver annual savings of approximately$ 110 million, with $70 million realized in 2023 and the full amount expected from 2024 onwards[232]. - The Restructuring Program is anticipated to yield annual savings of at least$ 80 million starting in 2025, with $50 million already realized in 2024[233]. - The Technology Realignment Program's first phase is expected to deliver annual savings of approximately$ 9 million beginning in 2026, with $6 million expected in 2025[234]. Debt and Liquidity - The company entered into a$ 1.25 billion senior secured credit facility in August 2018, which was subsequently amended to increase borrowing capacity[235][236]. - As of March 31, 2025, the outstanding principal balance under the 2024 Credit Facility was $385 million, with a weighted-average interest rate of 11.25%[245]. - The company issued$ 800 million in senior secured notes due 2029, with an interest rate of 12.250% per annum, to repay the 2018 Credit Facility and partially redeem the 2025 Notes[247]. - The company had negative working capital of $35.0 million as of March 31, 2025, an improvement from negative working capital of$ 86.7 million as of December 31, 2024[260]. - The company expects cash and funds from operations, available borrowings under the 2024 Credit Facility, and access to capital markets to meet liquidity requirements for the next twelve months[261].