Herbalife (HLF) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $1.24 billion, down 3.2% year-over-year but nearly flat on a constant currency basis, with adjusted EBITDA of $167 million exceeding guidance and margin up 70 basis points year-over-year.

• Net income was $47.4 million, up 10.7% from Q3 2023; adjusted net income was $58.0 million.

• Operating cash flow was $100 million in Q3, with $85 million of debt repaid, reducing the total leverage ratio to 3.3x and revolving credit facility fully undrawn.

• Distributor recruitment increased 14% year-over-year globally, marking the second consecutive quarter of growth after 12 quarters of decline.

• Strategic focus on rebuilding the distributor base, enhancing training, launching new customer programs, and major restructuring expected to deliver $80 million in annual savings starting 2025.

Financial highlights

• Net sales declined 3.2% year-over-year on a reported basis, but were nearly flat on a constant currency basis due to FX headwinds.

• Adjusted EBITDA margin was 13.4%, up 70 basis points year-over-year; gross profit margin improved to 78.3%, up 200 basis points, driven by pricing actions and lower input costs.

• Adjusted diluted EPS was $0.57, including a $0.10 FX headwind; Q3 2024 EPS was $0.46 (diluted), up from $0.43 in Q3 2023.

• CapEx for Q3 was $27 million, below guidance, with additional $3 million in capitalized SaaS costs; nine-month CapEx was $96 million.

• Net cash from operating activities was $99.5 million for Q3 and $215.8 million for the nine months ended September 30, 2024.

Outlook and guidance

• Q4 2024 net sales guidance: (3.0)% to +1.0% year-over-year; adjusted EBITDA $105–$135 million; capex $25–$45 million.

• Full-year 2024 guidance revised: net sales range narrowed to (2.0)% to (1.0)% year-over-year; adjusted EBITDA raised to $590–$620 million; capex reduced to $120–$140 million.

• FY 2024 adjusted effective tax rate expected at ~30%; targeting total leverage ratio of 3.0x by end of 2025 and $1 billion debt reduction by 2028.

• Management expects continued cost savings from restructuring and transformation programs, with $110 million annual savings from the Transformation Program and at least $80 million from the Restructuring Program starting in 2025.

• Macroeconomic uncertainty, inflation, and geopolitical risks are expected to continue impacting results.