• Net Sales: $1.2 billion, down 3.4% versus Q1 2024; up 1.4% on a constant currency basis.
• Adjusted EBITDA: $165 million, above guidance range of $140 million to $150 million; margin at 13.5%, up 260 basis points year-over-year.
• Gross Profit Margin: 78.3%, up 80 basis points compared to Q1 2024.
• Net Income: $50 million for Q1.
• Adjusted Diluted EPS: $0.59, includes a $0.13 FX headwind versus Q1 2024.
• Total Leverage Ratio: Reduced to 3 times as of March 31, 2025.
• Capital Expenditures: $18 million, below guidance range of $30 million to $40 million.
• Operating Cash Flows: Neutral for the first quarter.
• Debt Repayment: Approximately $70 million repaid during the quarter.
• Regional Performance: Latin America up 11% on a local currency basis; EMEA up 3%; Asia Pacific up 2%; North America down 4%; China down 14% year-over-year.

• Warning! GuruFocus has detected 5 Warning Signs with HLF.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Herbalife Ltd (NYSE:HLF) achieved a significant milestone by reducing its total leverage ratio to 3 times as of March 31, nine months ahead of the planned schedule.
• The company reported a 16% year-over-year increase in new distributors, marking the fourth consecutive quarter of new distributor growth.
• Herbalife Ltd (NYSE:HLF) exceeded its adjusted EBITDA guidance for Q1 2025, demonstrating strong operational performance.
• The company completed strategic asset acquisitions, including Pro2col Health, Pruvit Ventures, and Link BioSciences, to enhance its product offerings and technological capabilities.
• Herbalife Ltd (NYSE:HLF) plans to launch a beta version of the Pro2col platform, which aims to provide personalized nutrition recommendations and lifestyle plans, potentially increasing customer engagement and lifetime value.

Negative Points

• Net sales for Q1 2025 were down 3.4% compared to Q1 2024, with foreign exchange rates negatively impacting sales by 480 basis points.
• The North American market experienced a 4% year-over-year decline in net sales, primarily driven by an 8% reduction in volumes.
• China's net sales decreased by 14% year-over-year, largely due to a 14% drop in volumes.
• Despite growth in new distributors, the conversion rates at US Nutrition Clubs remain low, with only 1% to 2% of unique consumers converting to preferred customers.
• Herbalife Ltd (NYSE:HLF) faces ongoing foreign exchange headwinds, which are expected to continue impacting financial results throughout 2025.

Q & A Highlights

Q: Can you expand on the monetization strategy of Pro2col and its expected ROI through 2025 and 2026? Also, how have conversion rates at US Nutrition Clubs evolved, and how might Pro2col influence these rates? A: Stephan Gratziani, President and Incoming CEO, explained that while it's early to discuss ROI, Pro2col is expected to support business growth through increased product consumption and customer engagement. The beta launch is in July, with commercialization starting in October. John DeSimone, CFO, added that Pro2col could generate revenue through app fees and increased product sales, including personalized products and new offerings. The conversion opportunity at US Nutrition Clubs is significant, with nearly 4 million unique consumers in 2024. Pro2col is expected to enhance conversion rates beyond the current 1-2%.

Q: What are the expectations for North America, given the recent trends in distributor numbers and volumes? A: John DeSimone noted that North America finished the quarter strong despite a weak February, attributed to external noise and anticipation of new technology launches in March. The region is expected to improve sequentially in Q2 and continue to strengthen throughout the year.

Q: Why was there a reduction in the midpoint of constant currency sales guidance for 2025, despite positive distributor growth trends? A: John DeSimone explained that the reduction was primarily due to rolling forward Q1 trends, with some weakness in Asia Pacific and cautious expectations for China. The guidance reflects a conservative approach, given the mixed performance across regions.

Q: What are the intentions for Link BioSciences, and how does it fit into Herbalife's strategy? A: Stephan Gratziani highlighted that Link BioSciences offers unique one-to-one product formulation capabilities, appealing to athletes and sophisticated consumers. The technology positions Herbalife ahead of competitors, with expectations for broader consumer interest in hyper-customization over time.

Q: How is the economic environment affecting Herbalife, and could it be a tailwind for the business? A: John DeSimone noted that historically, direct sellers perform well in countercyclical environments as people seek additional income opportunities. While there is uncertainty, this trend could benefit Herbalife.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.