• Net Sales: $1.2 billion for Q4 2024, down 0.6% year-over-year; $5 billion for full year 2024, down 1.4% year-over-year on a reported basis.
• Constant Currency Net Sales Growth: Up 2.7% for Q4 2024; up 1.2% for full year 2024.
• Adjusted EBITDA: $150 million for Q4 2024, exceeding guidance; $635 million for full year 2024, up from $571 million in 2023.
• Adjusted EBITDA Margin: 12.4% for Q4 2024, up 340 basis points year-over-year; 12.7% for full year 2024, up 140 basis points from 2023.
• Gross Profit Margin: 77.8% for Q4 2024, up 150 basis points year-over-year.
• Net Income: $178 million for Q4 2024, including $147 million of non-cash net deferred income tax benefits.
• Adjusted Diluted EPS: $0.36 for Q4 2024, includes a $0.07 FX headwind.
• Operating Cash Flows: $70 million for Q4 2024, down $27 million from Q4 2023.
• Total Leverage Ratio: Reduced to 3.2 times as of December 31, 2024, from 3.9 times at the end of 2023.
• Debt Reduction: $250 million paid down in 2024.
• Regional Performance: Latin America, EMEA, and Asia Pacific reported net sales growth in Q4 2024; China net sales decreased 20% year-over-year.
• Distributor Growth: New distributor growth up 22% year-over-year in Q4 2024; sales leader retention increased from 68.3% to 70.3%.

• Warning! GuruFocus has detected 4 Warning Signs with HLF.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Herbalife Ltd (NYSE:HLF) reported net sales growth on a constant currency basis for both the fourth quarter and the full year 2024.
• The company delivered strong adjusted EBITDA results, significantly exceeding guidance and prior year figures.
• Herbalife Ltd (NYSE:HLF) successfully paid down $250 million in debt, reducing its total leverage ratio from 3.9 times to 3.2 times.
• The company experienced a 22% year-over-year increase in new distributor growth in Q4, marking the third consecutive quarter of growth.
• Herbalife Ltd (NYSE:HLF) is implementing a robust transformative digital strategy to enhance distributor engagement and business operations.

Negative Points

• Net sales for the fourth quarter were slightly below the fourth quarter of 2023 on a reported basis due to unfavorable foreign exchange rates.
• North American net sales were down 3% year-over-year, with continued challenges in volume trends.
• China's net sales decreased by 20% year-over-year, driven by volume declines and strategic shifts in business focus.
• The company faces a significant currency headwind in 2025, with an expected $200 million negative impact on net sales and $70 million on adjusted EBITDA.
• Herbalife Ltd (NYSE:HLF) anticipates potential exposure to retaliatory tariffs from Mexico, which could impact financial results later in the year.

Q & A Highlights

Q: What needs to happen to turn around North American volume trends, and how long do you expect this to take? A: Stephan Gratziani, President, explained that rebuilding the distributor base and supervisor base is crucial. After 14 quarters of decline, they finally saw growth in the active supervisor base, following three quarters of new distributor growth. It's a gradual process, but they are positive about the progress and believe the U.S. is on track for improvement.

Q: Regarding debt repayment, is the plan to repay the 2025 maturity when it comes due in September, and is that the only debt repayment targeted for 2025? A: John DeSimone, CFO, confirmed that they plan to repay the 2025 notes due in September. The revolving credit facility is currently undrawn, and they anticipate drawing it slightly to help pay down the 2025 notes. There is potential to pay down the revolver post-2025 repayment, allowing for further debt reduction.

Q: Can you discuss the constant currency sales guidance range for 2025 of 1% to 7% and what factors could lead to the high or low end of this range? A: John DeSimone, CFO, noted that the range is not unusually wide given the current environment. Upside potential exists in China and the U.S., while downside risks are in markets not performing as expected in 2024. Despite the range, they are projecting positive constant currency net sales growth in 2025.

Q: What is happening in China, and how much of the decline is due to macro factors versus company control? A: Stephan Gratziani, President, explained that a strategic shift towards a customer-focused model, including a new customer loyalty program, has been implemented. While the transition was weaker than expected, they are seeing positive results in building a stronger customer base. Efforts continue to optimize growth in China.

Q: How do you view the continued declines in preferred customers in North America, and what does it indicate about the business model? A: Stephan Gratziani, President, acknowledged the shift towards a food service transactional business and emphasized the need to balance this with transformational product results. Efforts are focused on supporting clubs to enhance customer value and increase conversion rates to preferred customers.

Q: With FX being a significant drag on EBITDA, how do you consider the underlying economics and potential supply chain adjustments? A: John DeSimone, CFO, stated that most FX impact is from translation rather than transaction. While local production opportunities are limited, price adjustments in response to local inflationary changes are a more viable strategy to mitigate currency impacts.

Q: Is there an impact from U.S. immigration policies on the distributor base? A: Stephan Gratziani, President, mentioned that while headlines are prevalent, it's too early to determine any real impact on the distributor base from immigration policies.

Q: What is driving the strong distributor growth in Latin America, and can these changes be replicated in other markets? A: Stephan Gratziani, President, attributed the growth to market-specific optimizations and support for distributors. John DeSimone, CFO, added that tailoring incentive programs to individual markets has been successful and could be applied to other regions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.