LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE: HLF) today reported financial results for the first quarter ended March 31, 2024.
'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 Michael Johnson, Chairman and CEO.
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 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
Rolled out all-new distributor e-commerce platform, built on Herbalife One, to distributors in UK and Spain
Recent Developments
Completed $1.6 billion senior secured refinancing on April 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 U.S. GAAP measure for historical periods, as applicable, and a discussion of why the Company believes these non-GAAP measures are useful and certain information regarding non-GAAP guidance.
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 $1.3 billion, up 1.0% year-over-year. On a constant currency basis2, net sales increased 2.4% year-over-year.
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 $24.3 million, with net income margin of 1.9%. Net cash provided by operating activities was $13.8 million. Adjusted EBITDA1 of $138.3 million includes approximately $4 million of foreign currency headwinds year-over-year, with adjusted EBITDA1 margin of 10.9%, up 60 basis points year-over-year. Diluted EPS was $0.24, with adjusted diluted EPS1 of $0.49, which includes a $0.03 year-over-year foreign currency headwind.
For the three months ended March 31, 2024, capital expenditures and capitalized SaaS implementation costs were approximately $33 million and $5 million, respectively. The Company expects to incur total capital expenditures of approximately $120 million to $150 million and total capitalized SaaS implementation costs of approximately $20 million to $25 million for the full year of 2024.
On March 20, the Company announced a new organizational restructuring plan designed to bring leadership closer to its markets, streamline the employee structure and accelerate productivity ('Restructuring Program'). The Restructuring Program is expected to deliver annual savings of at least $80 million beginning in 2025, with approximately $40 million expected to be achieved in 2024. The Company expects to incur total program pre-tax expenses of at least $60 million related to the program, which are primarily related to severance costs and will be excluded from adjusted results. The Company began implementing actions related to the program during the first quarter and expects a majority of all actions to be completed by the end of June 2024. For the three months ended March 31, 2024, approximately $17 million of pre-tax expenses were recognized in SG&A related to the restructuring. The Restructuring Program is separate from Herbalife's Transformation Program.
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 $108.6 million in cash and $91.0 million in borrowings under its revolving credit facility.
On April 12, the Company completed a $1.6 billion senior secured refinancing, which included:
$800 million aggregate principal amount of 12.250% senior secured notes due April 2029
$400 million senior secured Term Loan B facility due April 2029
$400 million senior secured revolving credit facility due April 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 $300 million of the $600 million aggregate principal amount of the 7.875% Senior Notes due 2025 ('2025 Senior Notes') at a price of 101.969% of the principal amount plus accrued and unpaid interest and pay related fees and expenses.
In addition, the Company separately repurchased approximately $38 million of the 2025 Senior Notes in a private transaction at the same redemption price as the $300 million described above. Following the repurchase, approximately $262 million remains outstanding on the 2025 Senior Notes. Upon completion of the refinancing transactions, approximately $170 million was outstanding under the Amended Revolving Credit Facility as of April 26.
'The business continues to strengthen,' said John DeSimone, Chief Financial Officer. 'We are taking swift actions to expand margins, maximize shareholder value and reduce our total leverage ratio to 3.0x by the end of 2025.'
The Company recently rolled out its all-new distributor e-commerce platform, built on Herbalife One, to its distributors in the UK and Spain. The distributor platform continues to build upon the foundational capabilities launched with the all-new Herbalife.com websites and supports personalized commerce websites that enable distributors to offer a seamless online shopping experience. The new distributor sites place a strong emphasis on strengthening the customer-distributor connection, providing faster order fulfillment and checkout for customers, and various other feature enhancements. In 2024, development will continue on offerings to elevate the digital platform capabilities provided to its distributors and customers.
In March, approximately 4,300 distributor leaders from 80 countries came together in Lisbon, Portugal for Summit 2024, the Company's annual leadership training and recognition event. During the five-day event, several new initiatives were unveiled to help distributors sustainably grow their businesses, including enhanced leadership development opportunities, elevated entrepreneurial skills training, and a program to drive increased recruitment globally. In April, approximately 14,000 attendees gathered at China's Extravaganza training event in Chengdu, an increase of approximately 25% over the 2023 event.
'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 Michael Johnson.
First Quarter 2024 Key Metrics
Regional Net Sales and Foreign Exchange ('FX') Impact: See full results at:
https://ir.herbalife.com/news-events/press-releases/detail/895/herbalife-reports-year-over-year-net-sales-growth-for
Media Contact:
Thien Ho
Vice President, Global Corporate Communications
thienh@herbalife.com
Investor Contact:
Erin Banyas
Vice President, Head of Investor Relations
erinba@herbalife.com
HERBALIFE LTD. 
