Herbalife(HLF) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights 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 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 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] - Unveiled the beta version of Pro2col™ digital platform and a healthy lifespan supplement at the North America Extravaganza in July[4] Management Commentary & Operational Review 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 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] 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] - Company remains on track to reduce outstanding debt to $1.4 billion by the end of 2028[10] Distributor Engagement and Training Initiatives 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] - 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] - Latin America led new distributor growth, up 16% year-over-year[10] - 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] Detailed Product and Digital Platform Launches 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] - Unveiled the beta version of the new Pro2col™ health and wellness digital platform, with over 7,000 distributors engaged[14][15] - 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][15] - CEO Stephan Gratziani stated these launches reinforce the company's commitment to innovation, transformative growth, and long-term value creation[16] Key Financial Metrics 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 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 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 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) 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 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] - Outlook includes preliminary estimates of the impact of incremental tariffs enacted as of August 5, 2025[21] Company Information & Disclaimers 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 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] - 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] About Herbalife Ltd. 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] - The company offers science-backed nutrition products to consumers in more than 90 markets through independent distributors[23] - Distributors provide one-on-one coaching and a supportive community to inspire healthier, more active lifestyles[23] Forward-Looking Statements and Risk Factors 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][26] - 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][29] - 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] Condensed Consolidated Financial Statements 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 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 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 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] Supplemental Information: Non-GAAP Financial Measures 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 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] - 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][37] Currency Fluctuation Impact 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] - 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] Reconciliation of Adjusted Net Income and EPS 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 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 |