Herbalife Ltd ((HLF)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Herbalife Ltd presented a balanced sentiment, highlighting both strategic initiatives and challenges. The company emphasized its focus on strategic acquisitions and product innovation as key drivers for future growth. However, the call also acknowledged hurdles such as declining net sales, significant foreign exchange impacts, and volume declines in major markets like North America and China. Despite these challenges, positive developments were noted in distributor growth and debt reduction, leading to a mixed regional performance and a balanced outlook overall.
Net Sales and Constant Currency Growth
Herbalife reported net sales of $1.2 billion, reflecting a 3.4% decline compared to Q1 2024. However, when excluding foreign exchange headwinds, the company achieved a constant currency growth of 1.4% year-over-year. This marks the second consecutive quarter of year-over-year growth, indicating resilience in the face of currency fluctuations.
Debt Reduction Milestone Achieved
A significant highlight from the earnings call was Herbalife’s achievement in reducing its total leverage ratio to three times as of March 31st. This milestone was reached nine months ahead of the planned target, showcasing the company’s commitment to strengthening its financial position.
New Distributor Growth
The number of new distributors joining Herbalife worldwide increased by 16% year-over-year. This marks the fourth consecutive quarter of new distributor growth, reflecting the company’s successful efforts in expanding its distributor base and enhancing its market reach.
Pro2col Platform and Acquisitions
Herbalife announced planned asset acquisitions of Pro2col Health, Pruvit Ventures, and Link BioSciences. These acquisitions are aimed at expanding product offerings in the health and wellness sector, with a focus on personalized health solutions. The company plans to launch a beta version of the Pro2col platform by the end of July, with a commercial release in the U.S. in the fourth quarter.
Strong Adjusted EBITDA
Herbalife reported a first quarter adjusted EBITDA of $165 million, surpassing the guidance range of $140 million to $150 million. The adjusted EBITDA margins improved by 260 basis points to 13.5% compared to Q1 of last year, highlighting the company’s operational efficiency.
Net Sales Decline
Despite the positive aspects, Herbalife faced a 3.4% decline in net sales versus Q1 2024. A significant negative impact from foreign exchange rates contributed to a 480 basis point headwind, affecting the overall sales performance.
Volume Decline in Key Markets
The earnings call highlighted volume declines in key markets, with North America experiencing a 4% year-over-year decline in net sales due to an 8% reduction in volumes. Similarly, China saw a 14% year-over-year decrease in net sales, driven by a comparable decline in volumes.
Mixed Regional Performance
Herbalife’s regional performance was mixed, with Latin America, EMEA, and Asia Pacific experiencing varied results. While some regions saw local currency growth, foreign exchange impacts negatively affected reported net sales.
Forward-Looking Guidance
Looking ahead, Herbalife has raised its full-year adjusted EBITDA guidance, now expecting a range of $625 million to $655 million. The company also adjusted its capital expenditures to $90 million to $120 million. These adjustments reflect Herbalife’s strategic focus on growth and operational efficiency, as well as its commitment to expanding its health and wellness offerings.
In conclusion, Herbalife’s earnings call presented a balanced view of the company’s current standing and future prospects. While challenges persist in the form of declining net sales and volume reductions in key markets, the company’s strategic acquisitions, distributor growth, and debt reduction efforts paint a positive picture for future growth. Investors and stakeholders will be keenly watching how Herbalife navigates these challenges and capitalizes on its growth initiatives.