Herbalife Ltd ((HLF)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Herbalife Ltd’s recent earnings call conveyed a generally positive sentiment, highlighting a return to net sales growth, robust financial performance, and successful product innovations. Despite these achievements, the company faces challenges in the Chinese market and exhibits mixed regional performances. Nonetheless, Herbalife’s strategic initiatives and engagement efforts are gaining positive traction.
Return to Net Sales Growth
Herbalife reported net sales growth in North America for the first time since Q2 2021 and worldwide growth for the first time since Q1 2024. The company’s Q3 net sales reached $1.3 billion, marking a 2.7% increase year-over-year. This growth signifies a significant milestone for Herbalife, indicating a positive shift in sales momentum.
Strong Financial Performance
The company demonstrated strong financial performance with an adjusted EBITDA of $163 million, surpassing guidance expectations. Additionally, Herbalife fully repaid its 2025 notes, effectively reducing the total leverage ratio to 2.8x, showcasing its commitment to financial stability and debt reduction.
Product Innovation and Technology
Herbalife’s introduction of Pro2col, a digital personalized health operating system, has garnered strong engagement from 7,900 distributors. The launch of new products such as Multiburn and HL/Skin has been successful, reflecting the company’s focus on innovation and technology-driven solutions.
Distributor Engagement and Growth
North America experienced a 17% increase in new distributors, while global distributor events saw robust participation. This high level of engagement and enthusiasm among distributors underscores the effectiveness of Herbalife’s engagement strategies.
Operational Achievements
The opening of new state-of-the-art R&D labs in Torrance, California, supports Herbalife’s rapid product innovation and commitment to maintaining high product quality standards.
Decline in China
Despite global gains, China’s net sales declined by 5% year-over-year, primarily due to a 12% drop in volumes. This decline highlights the challenges Herbalife faces in the Chinese market.
Mixed Regional Performance
While regions such as North America, EMEA, Asia-Pacific, and Latin America showed growth, the decline in China offset some of these global gains, resulting in mixed regional performance.
Higher Adjusted Effective Tax Rate
The adjusted effective tax rate increased to 32.7% from 22.3% in Q3 2024, impacting the adjusted diluted EPS. This rise in tax rate presents a financial challenge for the company.
Forward-Looking Guidance
Looking ahead, Herbalife plans to expand its personalized wellness solutions and introduce new products leveraging AI technology. The company aims to reduce its gross debt by $1 billion by 2028, having already repaid over $500 million since last year. For Q4 2025, Herbalife anticipates reported net sales growth of 1.5% to 5.5% year-over-year and adjusted EBITDA in the range of $144 million to $154 million.
In summary, Herbalife’s earnings call reflects a positive sentiment with notable achievements in sales growth and financial performance. The company’s focus on innovation and strategic initiatives is evident, though challenges in the Chinese market and a higher tax rate pose hurdles. Overall, Herbalife’s forward-looking guidance suggests continued growth and financial prudence.