On October 30, 2024, Herbalife Ltd (HLF, Financial) released its 8-K filing detailing the financial results for the third quarter of 2024. Herbalife Ltd, a global nutrition company, operates in 95 markets, offering products in weight management, targeted nutrition, energy, sports, fitness, and more through a direct-selling model.
Performance and Challenges
Herbalife Ltd reported net sales of $1.2 billion for Q3 2024, a decrease of 3.2% compared to the same period last year, primarily due to foreign exchange headwinds. On a constant currency basis, net sales were nearly flat, declining by only 0.3%. The company's performance is crucial as it reflects its ability to navigate currency fluctuations and maintain sales momentum in a competitive market.
Despite the sales decline, Herbalife Ltd's adjusted EBITDA of $166.5 million exceeded guidance, showcasing operational efficiency. However, challenges such as foreign currency impacts and regional sales declines, particularly in China, where sales dropped by 16.4%, pose potential risks to sustained growth.
Financial Achievements and Metrics
Herbalife Ltd's financial achievements in Q3 2024 include an improved gross profit margin of 78.3%, up from 76.3% in Q3 2023. This improvement was driven by favorable pricing and input costs. The adjusted EBITDA margin increased by 70 basis points year-over-year to 13.4%, highlighting the company's focus on cost management and operational efficiency.
Net income for the quarter was $47.4 million, with an adjusted net income of $58.0 million. The diluted EPS stood at $0.46, while the adjusted diluted EPS was $0.57, despite a $0.10 impact from foreign currency headwinds. These metrics are vital as they indicate the company's profitability and ability to generate shareholder value.
Income Statement, Balance Sheet, and Cash Flow Highlights
Herbalife Ltd's net cash provided by operating activities was $99.5 million for Q3 2024, with capital expenditures amounting to approximately $27 million. The company has revised its full-year capital expenditure guidance to $120 million to $140 million, reflecting a reduction from previous estimates.
The restructuring program initiated in early 2024 is expected to deliver annual savings of at least $80 million starting in 2025, with $50 million anticipated in 2024. This program aims to streamline operations and enhance productivity, which is crucial for long-term financial health.
Management Commentary and Strategic Initiatives
“Our margins have improved year-over-year, and we continue to strengthen our financial foundation,” said John DeSimone, Chief Financial Officer. “We paid down debt in the quarter. Our total leverage ratio is down to 3.3x at September 30 and we are on track to reduce our total leverage ratio to 3.0x by the end of 2025, as well as reduce total debt by $1 billion over the next 4 to 5 years."
Herbalife Ltd's strategic initiatives, such as the Diamond Development Mastermind Program and Extravaganza training events, aim to enhance distributor engagement and drive business growth. The company reported a 14% year-over-year increase in new distributors, indicating strong recruitment efforts.
Regional Sales and Outlook
| Region | Q3 2024 Net Sales ($ million) | YoY Growth (Decline) Including FX | YoY Growth (Decline) Excluding FX |
|---|---|---|---|
| North America | 260.4 | (6.3)% | (6.2)% |
| Latin America | 207.1 | (2.3)% | 9.4% |
| EMEA | 261.9 | 0.3% | 2.2% |
| Asia Pacific | 436.1 | (1.1)% | 0.8% |
| China | 74.8 | (16.4)% | (17.3)% |
| Worldwide | 1,240.3 | (3.2)% | (0.3)% |
Herbalife Ltd's regional performance varied, with North America and China experiencing declines, while Latin America showed growth excluding FX impacts. The company's revised full-year guidance reflects a narrowed range for net sales and raised adjusted EBITDA expectations, indicating confidence in its strategic direction.
Herbalife Ltd's Q3 2024 results highlight its resilience in a challenging environment, with strong operational performance and strategic initiatives supporting future growth. Investors and stakeholders will be keen to see how the company navigates ongoing challenges and capitalizes on opportunities in the health and wellness industry.
Explore the complete 8-K earnings release (here) from Herbalife Ltd for further details.
