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HL

HERBALIFE LTD. (HLF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 net sales were $1.22B, down 3.4% YoY on reported basis but up 1.4% YoY in constant currency; adjusted EBITDA margin rose 260 bps to 13.5% and credit agreement EBITDA reached $192.0M .
  • EPS beat Street on adjusted basis: Primary EPS consensus was $0.41* vs adjusted diluted EPS of $0.59; revenue was slightly below consensus ($1,225.4M* vs $1,221.7M). Adjusted EBITDA exceeded guidance and consensus ($147.2M* vs $164.9M) .
  • Guidance: FY 2025 net sales range narrowed (reported down 2.5% to up 2.5%) and adjusted EBITDA raised to $625–$655M; FY CapEx reduced to $90–$120M. Q2 2025 adjusted EBITDA guided to $160–$170M (reported) with FX a ~300 bps sales headwind .
  • Strategic catalysts: acquisitions of Pro2col, Pruvit, and Link BioSciences to drive AI-enabled personalization and product expansion; distributor engagement programs continued to scale (Flex45, Extravaganzas). Total leverage ratio reduced to 3.0x ahead of plan, supporting equity story on deleveraging and margin improvement .

Note: Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA of $164.9M beat guidance with margin up 260 bps YoY to 13.5%, driven by pricing actions and cost reductions; adjusted EBITDA at constant currency was $181.5M, also above guidance .
  • Gross margin improved to 78.3% (+80 bps YoY), aided by ~80 bps pricing and ~50 bps lower input costs; inventory write-downs were a 50 bps offset .
  • Engagement and pipeline: new distributors up 16% YoY (fourth consecutive quarter); launch of Flex45 program and sizable training events in China and India; guidance raised for full-year adjusted EBITDA .
  • Management tone: “2025 is off to a strong start… adjusted EBITDA exceeded guidance, and we reduced our total leverage ratio to 3.0x” – CFO John DeSimone .

What Went Wrong

  • Reported net sales declined 3.4% YoY with FX a 480 bps headwind; volumes fell 2.3% YoY and sales mix was unfavorable in some regions .
  • China remained weak (net sales down 13.8% YoY reported; down 12.9% ex-FX), with management cautious on timing of recovery despite initiatives .
  • North America net sales fell 4% YoY (volumes -8%); management cited a soft February and transition to new digital tools delaying some activity .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,264.3 $1,240.3 $1,207.4 $1,221.7
Diluted EPS ($)$0.24 $0.46 $1.74 $0.49
Adjusted Diluted EPS ($)$0.49 $0.57 $0.36 $0.59
Gross Profit Margin %77.5% 78.3% 77.8% 78.3%
Adjusted EBITDA Margin %10.9% 13.4% 12.4% 13.5%
Net Income Margin %1.9% 3.8% 14.7% 4.1%

Q1 2025 vs Wall Street Consensus (S&P Global)

MetricWall St Consensus*ActualSurprise
Revenue ($USD Millions)$1,225.4*$1,221.7 -$3.7*
Primary EPS ($)$0.41*$0.59 +$0.18*
EBITDA ($USD Millions)$147.2*$164.9 (Adjusted) +$17.7*

Note: Values retrieved from S&P Global.

Regional Net Sales (Q1 2025)

RegionQ1 2024 ($M)Q1 2025 ($M)YoY inc. FXYoY ex-FX
North America$265.8 $254.4 (4.3)% (4.2)%
Latin America$214.2 $206.7 (3.5)% +10.6%
EMEA$277.9 $273.3 (1.7)% +3.3%
Asia Pacific$431.2 $422.5 (2.0)% +1.6%
China$75.2 $64.8 (13.8)% (12.9)%
Worldwide$1,264.3 $1,221.7 (3.4)% +1.4%

Key KPIs (Q1 2025)

KPIValue
New distributors YoY+16%
Credit Agreement EBITDA$192.0M
Total leverage ratio3.0x
Cash from operations$0.2M
CapEx$18.3M
Adjusted effective tax rate21.8%
FX headwind on net sales480 bps
Adjusted EBITDA FX headwind YoY~$17M

Guidance Changes

MetricPeriodPrevious Guidance (Feb 19, 2025)Current Guidance (Apr 30, 2025)Change
Net Sales (Reported)FY 2025(3)% to +3% YoY (2.5)% to +2.5% YoY Narrowed
Net Sales (Constant Currency)FY 2025+1% to +7% YoY +0.5% to +5.5% YoY Narrowed
Adjusted EBITDA ($M)FY 2025600–640 625–655 Raised
CapEx ($M)FY 2025100–130 90–120 Reduced
Adjusted Effective Tax Rate (%)FY 2025~30% ~28%–30% Maintained (range refined)
Net Sales (Reported)Q2 2025N/A(3.5)% to +0.5% YoY New
Net Sales (Constant Currency)Q2 2025N/A(0.5)% to +3.5% YoY New
Adjusted EBITDA ($M)Q2 2025N/A160–170 (reported); 177–187 (cc) New
CapEx ($M)Q2 2025N/A25–35 New
FX headwindQ2 2025N/A~300 bps to sales; ~$17M to EBITDA New
Tariffs (enacted as of Apr 29, 2025)FY 2025Excluded Included prelim.; not material Incorporated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/technology & personalizationTech stack investments; margin gains; groundwork for integration Digital strategy emphasized; restructuring savings Pro2col AI-driven platform, Link Bio personalized supplements; beta Q3, U.S. launch Q4 Accelerating
Distributor engagementExtravaganzas, Mastermind rollout; +14% new distributors +22% new distributors; retention improved to 70.3% +16% new distributors; Flex45 tens of thousands participating; large events in China/India Improving
North America trajectoryDown ~6% YoY; pricing offset volumes; model optimization Sequential improvement (double-digit declines to low-single digits); set to turn Q1 softness in February; digital IBP/e-commerce rollouts; expected sequential improvement Stabilizing
China-16% YoY (Q3) -20% YoY; customer focus shift -14% YoY; cautious outlook despite initiatives Challenged
Tariffs/macro & FXFX -290 bps to sales (Q3); pricing offset FX headwinds widening in 2025 FX -480 bps; FY FX impact lowered to ~$150M sales and ~$65M EBITDA; tariffs not material Headwind, slightly easing FX
DeleveragingLeverage 3.3x (Q3) 3.2x; plan to 3.0x by YE 2025 Achieved 3.0x by Mar 31; intent to $1.4B debt by 2028 Ahead of plan

Management Commentary

  • “2025 is off to a strong start… adjusted EBITDA exceeded guidance, and we reduced our total leverage ratio to 3.0x” – John DeSimone, CFO .
  • “We will become a true global platform for optimized health and wellness… you will see us focus on innovation in products, in technology, in AI-powered solutions” – Stephan Gratziani, incoming CEO .
  • “Pro2col… delivers tailored health and longevity protocols using individual data and biometrics… AI, coaching and community… personalized nutrition recommendations” – Stephan Gratziani .
  • “Link BioSciences… analyzes biometrics, biomarkers, lifestyle and genetics to formulate personalized products… a distinct competitive advantage” – Stephan Gratziani .
  • “We reached [3x leverage]… 3 quarters in advance” – John DeSimone .

Q&A Highlights

  • Pro2col monetization and ROI: Revenue may come from app subscriptions and incremental product sales (new Pro2col-specific SKUs, ultra-personalized products, Herbalife portfolio); 2025 guidance includes costs but not revenue until commercialization (Oct) .
  • North America: Weak February amid tech rollouts; sequential improvements expected from Q2 onward .
  • Guidance midpoint shift: Slight reduction mainly rolling forward Q1 realities; cautious on China and some APAC markets .
  • Tariffs and sourcing: Limited U.S. tariff impact; some China-sourced botanicals with duty drawbacks; 2026 annualized impact ~$10–$15M if unchanged .
  • CapEx: Q1 underspend led to lower full-year CapEx guide; Pro2col CapEx captured; reprioritization, leveraging existing integration layers (Oracle, middleware) .
  • Cash conversion: Lower minimum cash needs via in-house bank optimization enabled paydowns despite seasonal cash uses .
  • Flex45 program: >200k preregistrations; tens of thousands participating; designed to drive product use, engagement, and conversion .

Estimates Context

  • Revenue: Actual $1,221.7M vs Street $1,225.4M* (slight miss).
  • EPS: Adjusted diluted EPS $0.59 vs Street Primary EPS $0.41* (beat).
  • EBITDA: Adjusted EBITDA $164.9M vs Street EBITDA $147.2M* (beat).
  • FY 2025: Street focus likely shifts to margin durability (mid-12% reported EBITDA margin) and FX sensitivity given management’s updated FX headwind assumptions .

Note: Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin story intact and improving: pricing and lower input costs plus 2024 restructuring benefits drove 260 bps adjusted EBITDA margin expansion; management raised FY adjusted EBITDA guidance despite FX/tariffs .
  • Deleveraging ahead of plan (3.0x) creates optionality and reduces risk; next material maturity not until 2028 after repaying 2025 notes .
  • Strategic pivot to AI-enabled personalization (Pro2col/Link Bio) is a potential multi-year growth catalyst; near-term revenue contribution modest in 2025, but platform can drive higher customer conversion and lifetime value, especially in clubs .
  • FX remains a significant headwind but has eased from prior assumptions; constant currency growth continues, supporting underlying health of the business .
  • Geographic mix: Latin America/EMEA/APAC show local-currency growth; China remains pressured and North America is stabilizing—watch Q2 sequential trends .
  • Near-term trading setup: Expect focus on Q2 execution vs guidance ranges, club conversion metrics, and beta traction of Pro2col in late July; any tangible KPIs on personalization or new product launches likely stock catalysts .
  • Medium-term thesis: If distributor momentum persists and personalization initiatives scale into 2026, Herbalife could combine mid-teens adjusted EBITDA margins with deleveraging to rerate equity; FX normalization would further amplify reported results .

Appendix: Additional Data Points

  • Q1 2025 operating cash flow neutral ($0.2M); seasonal bonus payments noted .
  • CapEx $18.3M; capitalized SaaS ~$5M; full-year capitalized SaaS $25–$30M (not in CapEx) .
  • Gross margin levers: ~80 bps pricing, ~50 bps input cost tailwinds; ~50 bps inventory write-down headwind .
  • FY FX headwinds reduced vs prior outlook: ~$150M sales (from ~$200M) and ~$65M EBITDA (from ~$70M) .
  • Q2 FX headwind: ~300 bps sales and ~$17M EBITDA .

Sources: Q1 2025 8-K and press release ; Q1 2025 earnings call transcript ; Q4 2024 8-K and call ; Q3 2024 8-K .