Herbalife(US:HLF)2025-11-05 21:18Financial Performance - Net sales for the three and nine months ended September 30, 2025, were $1,273.7 million and $3,754.5 million, respectively, with a 2.7% increase and a 0.8% decrease compared to the same periods in 2024[193]. - In local currency, net sales increased by 3.2% and 1.5% for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024[193]. - Net income attributable to Herbalife for the three months ended September 30, 2025, was $43.2 million, or $0.42 per diluted share, reflecting an 8.9% decrease compared to the same period in 2024[195]. - For the nine months ended September 30, 2025, net income attributable to Herbalife was $142.9 million, or $1.38 per diluted share, representing an 87.0% increase compared to the same period in 2024[195]. - The 2.7% increase in net sales for the three months ended September 30, 2025, was primarily driven by a 3.5% favorable impact of price increases[193]. - The decrease in net income for the three months ended September 30, 2025, was mainly due to $10.6 million higher royalty overrides and $8.5 million higher income taxes[195]. - The increase in net income for the nine months ended September 30, 2025, was mainly due to $111.1 million lower selling, general, and administrative expenses[195]. Regional Performance - North America reported net sales of $263.1 million for the three months ended September 30, 2025, an increase of $2.7 million, or 1.0%, compared to the same period in 2024[214]. - Latin America experienced a 10.9% increase in net sales for the three months ended September 30, 2025, totaling $229.6 million compared to $207.1 million in 2024[209]. - Net sales in Mexico were $146.8 million for Q3 2025, reflecting an increase of $15.3 million or 11.6% compared to Q3 2024[219]. - EMEA region net sales reached $272.3 million for Q3 2025, an increase of $10.4 million or 4.0% compared to Q3 2024[222]. - Asia Pacific region (excluding China) reported net sales of $437.4 million for Q3 2025, a slight increase of $1.3 million or 0.3% compared to Q3 2024[225]. - India market net sales were $226.4 million for Q3 2025, an increase of $8.1 million or 3.7% compared to Q3 2024[226]. - Vietnam market net sales reached $71.5 million for Q3 2025, an increase of $1.8 million or 2.6% compared to Q3 2024[227]. - China region reported net sales of $71.3 million for Q3 2025, a decrease of $3.5 million or 4.7% compared to Q3 2024[229]. Cost and Expenses - Gross profit for the three months ended September 30, 2025, was $989.5 million, representing 77.7% of net sales, down from 78.3% in 2024[232]. - Selling, general, and administrative expenses for the three months ended September 30, 2025, were $447.6 million, or 35.1% of net sales, down from 35.8% in 2024[238]. - Income taxes for the three months ended September 30, 2025, were $31.7 million, with an effective tax rate of 42.4%, up from 32.9% in 2024[246]. - The gross profit margin for the three months ended September 30, 2025, was 77.7%, down from 78.3% in 2024, while for the nine months it was 78.0%, slightly up from 77.9% in 2024[202]. - Royalty overrides for the three months ended September 30, 2025, were $416.1 million, maintaining 32.7% of net sales, and for the nine months, they were $1,224.4 million, at 32.6% of net sales, consistent with 2024[236]. Strategic Initiatives - The company continues to focus on enhancing customer experience and expanding market penetration through initiatives like Nutrition Clubs and Fit Clubs[174]. - The company is focusing on enhancing technology tools, including digital start-up kits and E-commerce tools, to support Members in marketing and selling products[216]. - The company implemented a 2.3% price increase in January 2025 across most regions to support sales[216]. - The majority of markets in Latin America instituted price increases to address market-specific conditions during the nine months ended September 30, 2025[220]. - The beta version of the Pro2col health and wellness digital platform was unveiled in July 2025, with a commercial release planned for Q4 2025 in the U.S. and Puerto Rico[217]. Financial Management and Capital Expenditures - Operating cash flow for the nine months ended September 30, 2025, was $235.0 million, an increase from $215.8 million in 2024, driven by $101.8 million higher net income excluding non-cash items[249]. - Capital expenditures for the nine months ended September 30, 2025, were $61.0 million, down from $83.6 million in 2024, with a focus on management information systems and the $400 million Digital Technology Program[250]. - The company expects total capital expenditures of approximately $80 million to $90 million for the full year 2025, including investments in the Herbalife One initiative[250]. - The company acquired assets from Pruvit, Pro2col LLC, and Link BioSciences Inc. for approximately $25.5 million in 2025, with potential additional payments based on performance targets[251]. Debt and Financing - The company issued $800.0 million of senior secured notes due 2029 with an interest rate of 12.250% per annum, maturing on April 15, 2029[268]. - As of September 30, 2025, the outstanding principal on the 2029 Secured Notes was $800.0 million[268]. - The company repurchased $287.5 million and $65.5 million of its 2024 Convertible Notes in December 2022 and August 2023, respectively[270]. - The company repaid a total of $197.0 million on the 2024 Convertible Notes upon maturity in March 2024[270]. - The company issued $277.5 million of convertible senior notes due 2028, paying interest at 4.25% per annum, maturing on June 15, 2028[272]. - The company redeemed $300.0 million of the 2025 Notes for an aggregate purchase price of $309.1 million in April 2024[273]. - As of September 30, 2025, the company had working capital of $106.3 million, an increase of $193.0 million from negative working capital of $86.7 million as of December 31, 2024[282]. Tax and Regulatory Matters - The company accounted for uncertain tax positions under ASC 740, recognizing tax benefits only if it is more likely than not that the position will be sustained upon examination[298]. - The company has initiated changes to its corporate entity structure, including intra-entity transfers of intellectual property, which may affect future taxable income estimates[297]. - The company recognized a step-up in tax basis on the fair value of intellectual property due to changes in its corporate entity structure, requiring significant estimates and assumptions for valuation[297].