Herbalife Reports Year-Over-Year Net Sales Growth for Second Consecutive Quarter; Raises Full-Year 2024 Adjusted EBITDA¹ Guidance
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“We achieved our second consecutive quarter of year-over-year net sales growth. We are laser focused on cost reductions, which drove outperformance of our Adjusted EBITDA1 guidance,” said
Highlights
First Quarter 2024
-
Achieved year-over-year net sales growth on both reported and constant currency basis2
-
Net sales of
$1.3 billion , up 1.0% vs. 1Q ’23, in-line with guidance; on constant currency basis2 up 2.4%
-
Net sales of
-
Net income of
$24.3 million -
Adjusted EBITDA1 of
$138.3 million exceeds guidance; adjusted EBITDA1 margin up 60 basis points year-over-year -
Diluted EPS of
$0.24 and adjusted diluted EPS1 of$0.49 -
Announced new restructuring plan to streamline organizational structure
-
Annual cost savings of at least
$80 million expected beginning in 2025, with approximately$40 million expected in 2024 -
Recognized pre-tax expenses of approximately
$17 million in SG&A
-
Annual cost savings of at least
-
Rolled out all-new distributor e-commerce platform, built on
Herbalife One , to distributors inUK andSpain
Recent Developments
-
Completed
$1.6 billion senior secured refinancing onApril 12
Outlook
- Second quarter 2024 guidance provided
- Full-year 2024 guidance revised: adjusted EBITDA1 raised, capital expenditures reduced, net sales reaffirmed
_____________________________
1 Non-GAAP measure. Refer to Schedule A – “Reconciliation of Non-GAAP Financial Measures” for a detailed reconciliation of these measures to the most directly comparable
2 Growth/decline in net sales excluding the effects of foreign exchange is based on “net sales in local currency,” a non-GAAP financial measure. Refer to Schedule A – “Reconciliation of Non-GAAP Financial Measures” for a discussion of why the Company believes adjusting for the effects of foreign exchange is useful.
Management Commentary
Herbalife reported first quarter 2024 net sales of
First quarter gross profit margin improved to 77.5% compared to 76.2% in first quarter 2023. On a year-over-year basis, gross profit margin benefited from approximately 150 basis points of pricing, approximately 60 basis points of lower inventory write-downs and approximately 10 basis points each from favorable sales mix and foreign currency, partially offset by approximately 110 basis points of input cost inflation, primarily related to increased raw material costs.
Net income was
For the three months ended
On
In March, and consistent with its capital allocation priorities, the Company repaid in full, the outstanding principal and accrued interest on the 2024 Convertible Notes at maturity with a combination of
On
-
$800 million aggregate principal amount of 12.250% senior secured notes dueApril 2029 -
$400 million senior secured Term Loan B facility dueApril 2029 -
$400 million senior secured revolving credit facility dueApril 2028 (“Amended Revolving Credit Facility”)
Proceeds from the transactions were used to repay all amounts outstanding under the 2018 Term Loan A, 2018 Term Loan B and 2018 Revolving Credit Facility, which were scheduled to mature in 2025, redeem
In addition, the Company separately repurchased approximately
“The business continues to strengthen,” said
The Company recently rolled out its all-new distributor e-commerce platform, built on
In March, approximately 4,300 distributor leaders from 80 countries came together in
“Economic opportunities built around selling diversified nutrition and wellness offerings, including through approximately 67,000 fixed location nutrition clubs worldwide, differentiates us from others in our industry,” said
First Quarter 2024 Key Metrics
Regional
$ million |
Reported
1Q ‘24 |
Growth/Decline including FX vs. 1Q ‘23 |
Growth/Decline excluding FX vs. 1Q ‘23 1 |
|
|
$ |
265.8 |
(10.6)% |
(10.6)% |
|
|
214.2 |
4.2% |
2.0% |
EMEA |
|
277.9 |
3.7% |
6.5% |
|
|
431.2 |
4.3% |
6.9% |
|
|
75.2 |
11.1% |
16.7% |
Worldwide |
$ |
1,264.3 |
1.0% |
2.4% |
Regional Volume Point Metrics
|
Volume Points |
|
in millions |
1Q ‘24 |
YoY % Chg. |
|
264.2 |
(16.0)% |
|
255.3 |
(5.9)% |
EMEA |
298.7 |
(5.0)% |
|
528.4 |
4.6% |
|
54.8 |
12.8% |
Worldwide |
1,401.4 |
(3.6)% |
Outlook
Second Quarter 2024 Guidance
$ million |
Q2 ‘24 Guidance |
Q2 ‘23 Results |
|
0% to +3% YoY |
1,314.0 |
Adjusted EBITDA1 |
140 – 160 |
169.6 |
Capital Expenditures |
30 – 40 |
38.3 |
Full-Year 2024 Guidance – Revised
$ million |
FY ‘24 Guidance REVISED |
|
FY ‘24 Guidance
(as of |
FY ‘23 Results |
|
0% to +5% YoY |
Reaffirmed |
0% to +5% YoY |
5,062.4 |
Adjusted EBITDA1 |
550 – 590 |
Raised |
540 – 580 |
570.6 |
Capital Expenditures |
120 – 150 |
Reduced |
125 – 175 |
135.0 |
Earnings Webcast and Conference Call
Herbalife’s senior management team will host a live audio webcast and conference call to discuss its first quarter 2024 financial results and provide an update on current business trends on
The live audio webcast will be available at https://edge.media-server.com/mmc/p/8s4dwfp6/.
Participants joining via the conference call will need to register to receive the dial-in information and personal PIN to access the call, and may do so by visiting the Investor Relations section of the Company’s website at https://ir.herbalife.com. Senior management also plans to reference slides during the call, which will also be available on the Investor Relations section of the Company’s website, where financial and other information is posted from time to time.
A replay of the event will be available following the completion of the live audio webcast and conference call, and for 12 months thereafter, under the Investor Relations section of the Company's website at https://ir.herbalife.com.
About
Herbalife (NYSE: HLF) is a premier health and wellness company, community and platform that has been changing people's lives with great nutrition products and a business opportunity for its independent distributors since 1980. The Company offers science-backed products to consumers in more than 90 markets through entrepreneurial distributors who provide one-on-one coaching and a supportive community that inspires their customers to embrace a healthier, more active lifestyle to live their best life.
For more information, visit https://ir.herbalife.com.
Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management, including for future operations, capital expenditures, or share repurchases; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief or expectation; and any statements of assumptions underlying any of the foregoing or other future events. Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “anticipate” or any other similar words.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results or outcomes could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include the following:
- the potential impacts of current global economic conditions, including inflation, on us; our Members, customers, and supply chain; and the world economy;
- our ability to attract and retain Members;
- our relationship with, and our ability to influence the actions of, our Members;
-
our noncompliance with, or improper action by our employees or Members in violation of, applicable
U.S. and foreign laws, rules, and regulations; - adverse publicity associated with our Company or the direct-selling industry, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;
- changing consumer preferences and demands and evolving industry standards, including with respect to climate change, sustainability, and other environmental, social, and governance, or ESG, matters;
- the competitive nature of our business and industry;
- legal and regulatory matters, including regulatory actions concerning, or legal challenges to, our products or network marketing program and product liability claims;
-
the Consent Order entered into with the
Federal Trade Commission , orFTC , the effects thereof and any failure to comply therewith; -
risks associated with operating internationally and in
China ; - our ability to execute our growth and other strategic initiatives, including implementation of our restructuring initiatives, and increased penetration of our existing markets;
-
any material disruption to our business caused by natural disasters, other catastrophic events, acts of war or terrorism, including the war in
Ukraine , cybersecurity incidents, pandemics, and/or other acts by third parties; - our ability to adequately source ingredients, packaging materials, and other raw materials and manufacture and distribute our products;
- our reliance on our information technology infrastructure;
- noncompliance by us or our Members with any privacy laws, rules, or regulations or any security breach involving the misappropriation, loss, or other unauthorized use or disclosure of confidential information;
- contractual limitations on our ability to expand or change our direct-selling business model;
- the sufficiency of our trademarks and other intellectual property;
- product concentration;
- our reliance upon, or the loss or departure of any member of, our senior management team;
- restrictions imposed by covenants in the agreements governing our indebtedness;
- risks related to our convertible notes;
- changes in, and uncertainties relating to, the application of transfer pricing, income tax, customs duties, value added taxes, and other tax laws, treaties, and regulations, or their interpretation;
-
our incorporation under the laws of the
Cayman Islands ; and - share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.
Additional factors and uncertainties that could cause actual results or outcomes to differ materially from our forward-looking statements are set forth in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
Forward-looking statements made in this release speak only as of the date hereof. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
Results of Operations
|
|||||||
Condensed Consolidated Statements of Income | |||||||
(in millions, except per share amounts) | |||||||
Three Months Ended |
|||||||
2024 |
2023 |
||||||
(unaudited) | |||||||
|
$ |
265.8 |
$ |
297.2 |
|
||
|
|
214.2 |
|
205.5 |
|
||
EMEA |
|
277.9 |
|
268.1 |
|
||
|
|
431.2 |
|
413.6 |
|
||
|
|
75.2 |
|
67.7 |
|
||
Worldwide Net sales |
|
1,264.3 |
|
1,252.1 |
|
||
Cost of sales |
|
285.0 |
|
298.6 |
|
||
Gross profit |
|
979.3 |
|
953.5 |
|
||
Royalty overrides |
|
415.2 |
|
416.0 |
|
||
Selling, general, and administrative expenses |
|
492.2 |
|
475.9 |
|
||
Other operating income (1) |
|
- |
|
(8.9 |
) |
||
Operating income |
|
71.9 |
|
70.5 |
|
||
Interest expense, net |
|
37.9 |
|
39.4 |
|
||
Income before income taxes |
|
34.0 |
|
31.1 |
|
||
Income taxes |
|
9.7 |
|
1.8 |
|
||
Net income |
$ |
24.3 |
$ |
29.3 |
|
||
Weighted-average shares outstanding: | |||||||
Basic |
|
99.7 |
|
98.5 |
|
||
Diluted |
|
100.7 |
|
100.2 |
|
||
Earnings per share: | |||||||
Basic |
$ |
0.24 |
$ |
0.30 |
|
||
Diluted |
$ |
0.24 |
$ |
0.29 |
|
||
(1) Other operating income for the three months ended |
|
||||||||
Condensed Consolidated Balance Sheets | ||||||||
(in millions) | ||||||||
|
|
|
||||||
2024 |
|
2023 |
||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents |
$ |
398.3 |
|
$ |
575.2 |
|
||
Receivables, net |
|
87.9 |
|
|
81.2 |
|
||
Inventories |
|
501.9 |
|
|
505.2 |
|
||
Prepaid expenses and other current assets |
|
238.1 |
|
|
237.7 |
|
||
Total Current Assets |
|
1,226.2 |
|
|
1,399.3 |
|
||
Property, plant and equipment, net |
|
510.9 |
|
|
506.5 |
|
||
Operating lease right-of-use assets |
|
179.1 |
|
|
185.8 |
|
||
Marketing-related intangibles and other intangible assets, net |
|
313.6 |
|
|
314.0 |
|
||
|
|
93.9 |
|
|
95.4 |
|
||
Other assets |
|
323.3 |
|
|
308.4 |
|
||
Total Assets |
$ |
2,647.0 |
|
$ |
2,809.4 |
|
||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable |
$ |
89.9 |
|
$ |
84.0 |
|
||
Royalty overrides |
|
313.3 |
|
|
343.4 |
|
||
Current portion of long-term debt |
|
2.9 |
|
|
309.5 |
|
||
Other current liabilities |
|
538.6 |
|
|
540.7 |
|
||
Total Current Liabilities |
|
944.7 |
|
|
1,277.6 |
|
||
Non-current liabilities: | ||||||||
Long-term debt, net of current portion |
|
2,405.0 |
|
|
2,252.9 |
|
||
Non-current operating lease liabilities |
|
163.9 |
|
|
167.6 |
|
||
Other non-current liabilities |
|
170.0 |
|
|
171.6 |
|
||
Total Liabilities |
|
3,683.6 |
|
|
3,869.7 |
|
||
Commitments and Contingencies | ||||||||
Shareholders' deficit: | ||||||||
Common shares |
|
0.1 |
|
|
0.1 |
|
||
Paid-in capital in excess of par value |
|
244.2 |
|
|
233.9 |
|
||
Accumulated other comprehensive loss |
|
(242.9 |
) |
|
(232.0 |
) |
||
Accumulated deficit |
|
(1,038.0 |
) |
|
(1,062.3 |
) |
||
Total Shareholders' Deficit |
|
(1,036.6 |
) |
|
(1,060.3 |
) |
||
Total Liabilities and Shareholders' Deficit |
$ |
2,647.0 |
|
$ |
2,809.4 |
|
||
|
||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(in millions) | ||||||||
Three Months Ended |
||||||||
2024 |
|
2023 |
||||||
(unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net income |
$ |
24.3 |
|
$ |
29.3 |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization |
|
29.2 |
|
|
27.6 |
|
||
Share-based compensation expenses |
|
11.9 |
|
|
10.8 |
|
||
Non-cash interest expense |
|
2.1 |
|
|
1.7 |
|
||
Deferred income taxes |
|
(12.1 |
) |
|
8.8 |
|
||
Inventory write-downs |
|
4.7 |
|
|
11.5 |
|
||
Foreign exchange transaction loss (gain) |
|
(1.4 |
) |
|
3.2 |
|
||
Other |
|
1.3 |
|
|
2.4 |
|
||
Changes in operating assets and liabilities: | ||||||||
Receivables |
|
(7.7 |
) |
|
(13.8 |
) |
||
Inventories |
|
(6.7 |
) |
|
35.8 |
|
||
Prepaid expenses and other current assets |
|
(7.6 |
) |
|
(35.7 |
) |
||
Accounts payable |
|
1.3 |
|
|
(24.1 |
) |
||
Royalty overrides |
|
(27.7 |
) |
|
(31.7 |
) |
||
Other current liabilities |
|
8.9 |
|
|
28.9 |
|
||
Other |
|
(6.7 |
) |
|
(8.5 |
) |
||
Net cash provided by operating activities |
|
13.8 |
|
|
46.2 |
|
||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment |
|
(32.9 |
) |
|
(30.3 |
) |
||
Other |
|
0.1 |
|
|
0.1 |
|
||
Net cash used in investing activities |
|
(32.8 |
) |
|
(30.2 |
) |
||
Cash flows from financing activities: | ||||||||
Borrowings from senior secured credit facility and other debt |
|
161.2 |
|
|
71.0 |
|
||
Principal payments on senior secured credit facility and other debt |
|
(120.7 |
) |
|
(138.4 |
) |
||
Repayment of convertible senior notes |
|
(197.0 |
) |
|
- |
|
||
Debt issuance costs |
|
- |
|
|
(0.3 |
) |
||
Share repurchases |
|
(2.3 |
) |
|
(8.7 |
) |
||
Other |
|
0.6 |
|
|
0.4 |
|
||
Net cash used in financing activities |
|
(158.2 |
) |
|
(76.0 |
) |
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
(5.8 |
) |
|
5.5 |
|
||
Net change in cash, cash equivalents, and restricted cash |
|
(183.0 |
) |
|
(54.5 |
) |
||
Cash, cash equivalents, and restricted cash, beginning of period |
|
595.5 |
|
|
516.3 |
|
||
Cash, cash equivalents, and restricted cash, end of period |
$ |
412.5 |
|
$ |
461.8 |
|
||
Supplemental Information
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA
In addition to its reported results calculated in accordance with
Management believes that such non-GAAP performance measures, when read in conjunction with the Company’s reported results, calculated in accordance with
The Company’s definitions and calculations as set forth in the tables below of adjusted net income, adjusted diluted EPS and adjusted EBITDA may not be comparable to similarly titled measures used by other companies because other companies may not calculate them in the same manner as the Company does and should not be viewed in isolation from, nor as alternatives to, net income or diluted EPS calculated in accordance with
The Company does not provide a reconciliation of forward-looking adjusted EBITDA guidance to net income, the comparable
Currency Fluctuation
Our international operations have provided and will continue to provide a significant portion of our total net sales. As a result, total net sales will continue to be affected by fluctuations in the
The following is a reconciliation of net income to adjusted net income: | |||||||||
Three Months Ended |
|||||||||
$ million |
2024 |
2023 |
|||||||
Net income |
$ |
24.3 |
|
$ |
29.3 |
|
|||
Expenses related to Restructuring Program (1) (2) |
|
16.7 |
|
|
- |
|
|||
Expenses related to Transformation Program (1) (2) |
|
5.9 |
|
|
27.3 |
|
|||
Digital technology program costs (1) (2) |
|
11.0 |
|
|
3.5 |
|
|||
Income tax adjustments for above items (1) (2) |
|
(8.6 |
) |
|
(6.2 |
) |
|||
Adjusted net income |
$ |
49.3 |
|
$ |
53.9 |
|
|||
The following is a reconciliation of diluted earnings per share to adjusted diluted earnings per share: | |||||||||
Three Months Ended |
|||||||||
$ per share |
2024 |
2023 |
|||||||
Diluted earnings per share |
$ |
0.24 |
|
$ |
0.29 |
|
|||
Expenses related to Restructuring Program (1) (2) |
|
0.17 |
|
|
- |
|
|||
Expenses related to Transformation Program (1) (2) |
|
0.06 |
|
|
0.27 |
|
|||
Digital technology program costs (1) (2) |
|
0.11 |
|
|
0.03 |
|
|||
Income tax adjustments for above items (1) (2) |
|
(0.09 |
) |
|
(0.06 |
) |
|||
Adjusted diluted earnings per share (3) |
$ |
0.49 |
|
$ |
0.54 |
|
|||
The following is a reconciliation of net income to EBITDA and adjusted EBITDA: | ||||||||||||||||||
Three Months Ended |
Three Months Ended | Year Ended | ||||||||||||||||
$ million |
2024 |
2023 |
|
|
||||||||||||||
Net sales |
$ |
1,264.3 |
|
$ |
1,252.1 |
|
$ |
1,314.0 |
|
$ |
5,062.4 |
|
||||||
Net income |
$ |
24.3 |
|
$ |
29.3 |
|
$ |
59.9 |
|
$ |
142.2 |
|
||||||
Interest expense, net |
|
37.9 |
|
|
39.4 |
|
|
38.4 |
|
|
154.4 |
|
||||||
Income taxes |
|
9.7 |
|
|
1.8 |
|
|
25.1 |
|
|
60.8 |
|
||||||
Depreciation and amortization |
|
29.2 |
|
|
27.6 |
|
|
29.1 |
|
|
113.3 |
|
||||||
EBITDA |
|
101.1 |
|
|
98.1 |
|
|
152.5 |
|
|
470.7 |
|
||||||
Amortization of SaaS implementation costs |
|
3.6 |
|
|
- |
|
|
- |
|
|
6.0 |
|
||||||
Expenses related to Restructuring Program (1) (2) |
|
16.7 |
|
|
- |
|
|
- |
|
|
- |
|
||||||
Expenses related to Transformation Program (1) (2) |
|
5.9 |
|
|
27.3 |
|
|
10.1 |
|
|
54.2 |
|
||||||
Digital technology program costs (1) (2) |
|
11.0 |
|
|
3.5 |
|
|
7.0 |
|
|
32.1 |
|
||||||
Gain on extinguishment of debt (1) (2) |
|
- |
|
|
- |
|
|
- |
|
|
(1.0 |
) |
||||||
|
|
- |
|
|
- |
|
|
- |
|
|
8.6 |
|
||||||
Adjusted EBITDA |
$ |
138.3 |
|
$ |
128.9 |
|
$ |
169.6 |
|
$ |
570.6 |
|
||||||
Adjusted EBITDA margin |
|
10.9 |
% |
|
10.3 |
% |
|
12.9 |
% |
|
11.3 |
% |
||||||
(1) Based on interim income tax reporting rules, these expenses are not considered discrete items. The tax effect of the adjustments between our |
|||||||
(2) Excludes tax (benefit)/expense as follows: | |||||||
Three Months Ended |
|||||||
$ million |
2024 |
2023 |
|||||
Expenses related to Restructuring Program |
$ |
(4.5 |
) |
$ |
- |
|
|
Expenses related to Transformation Program |
|
(2.0 |
) |
|
(6.0 |
) |
|
Digital technology program costs |
|
(2.1 |
) |
|
(0.2 |
) |
|
Total income tax adjustments |
$ |
(8.6 |
) |
$ |
(6.2 |
) |
|
Three Months Ended |
|||||||
$ per share |
2024 |
2023 |
|||||
Expenses related to Restructuring Program |
$ |
(0.05 |
) |
$ |
- |
|
|
Expenses related to Transformation Program |
|
(0.02 |
) |
|
(0.06 |
) |
|
Digital technology program costs |
|
(0.02 |
) |
|
- |
|
|
Total income tax adjustments |
$ |
(0.09 |
) |
$ |
(0.06 |
) |
|
(3) Amounts may not total due to rounding |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240430842240/en/
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Vice President,
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