Herbalife Ltd. (NYSE: HLF) today reported financial results for
the third quarter ended September 30, 2024:
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“Our financial foundation is strong. Third quarter net sales
were in line with our expectations, adjusted EBITDA1 exceeded
guidance and distributor recruiting is up worldwide year-over-year.
Our new business initiatives are taking root as we continue on our
path to sustainable top-line growth.” - Michael Johnson, Chairman
and CEO
Highlights
Third Quarter 2024
- Net sales of $1.2 billion, down 3.2% vs. Q3 ’23 including 290
basis points of FX headwinds
- Net sales nearly flat year-over-year on constant currency
basis2
- Net income of $47.4 million; adjusted net income1 of $58.0
million
- Adjusted EBITDA1 of $166.5 million exceeds guidance; adjusted
EBITDA1 margin up 70 basis points year-over-year
- Recognized pre-tax gain on sale of property of approximately $4
million; excluded from adjusted results
- Diluted EPS of $0.46; adjusted diluted EPS1 of $0.57
- Net cash provided by operating activities of $99.5 million;
capital expenditures of approximately $27 million
- Credit Agreement EBITDA1 $197.2 million; total leverage ratio
reduced to 3.3x at September 30
Outlook
- Fourth quarter 2024 guidance provided
- Full-year 2024 guidance revised: net sales range narrowed,
adjusted EBITDA1 raised, capital expenditures top end of range
reduced
_________________________ 1 Non-GAAP measure. Refer to
Schedule A – “Reconciliation of Non-GAAP Financial Measures” for a
detailed reconciliation of these measures to the most directly
comparable U.S. GAAP measure for historical periods, as applicable,
and a discussion of why the Company believes these non-GAAP
measures are useful and certain information regarding non-GAAP
guidance.
2 Growth/decline in net sales excluding the effects of foreign
exchange is based on “net sales in local currency,” a non-GAAP
financial measure. Refer to Schedule A – “Reconciliation of
Non-GAAP Financial Measures” for a discussion of why the Company
believes adjusting for the effects of foreign exchange is
useful.
Management Commentary
Herbalife reported third quarter 2024 net sales of $1.2 billion,
down 3.2% year-over-year, including 290 basis points of foreign
currency headwinds. On a constant currency basis2, net sales
decreased 0.3% year-over-year.
Third quarter gross profit margin improved to 78.3% compared to
76.3% in the third quarter of 2023. On a year-over-year basis,
gross profit margin primarily benefited from approximately 110
basis points of pricing and approximately 110 basis points of
favorable input costs, mainly related to manufacturing efficiencies
and lower raw material costs, partially offset by approximately 30
basis points of unfavorable sales mix.
Net income was $47.4 million, with net income margin of 3.8% and
adjusted net income1 of $58.0 million. Adjusted EBITDA1 of $166.5
million includes approximately $14 million of foreign currency
headwinds year-over-year, with adjusted EBITDA1 margin of 13.4%, up
70 basis points year-over-year. Diluted EPS was $0.46, with
adjusted diluted EPS1 of $0.57, which includes a $0.10
year-over-year foreign currency headwind.
Net cash provided by operating activities was $99.5 million and
$215.8 million for the three and nine months ended September 30,
2024, respectively. Capital expenditures were approximately $27
million and $96 million for the three and nine months ended
September 30, 2024, respectively, and capitalized SaaS
implementation costs were approximately $3 million and $13 million,
respectively. The Company expects to incur total capital
expenditures of approximately $120 million to $140 million (reduced
from $120 million to $150 million) and total capitalized SaaS
implementation costs of approximately $20 million (reduced from
approximately $20 million to $25 million) for the full year of
2024.
During the first quarter of 2024, the Company initiated a
Restructuring Program designed to bring leadership closer to its
markets, streamline the employee structure and accelerate
productivity. Substantially all actions related to the program were
completed as of June 30, with the remainder to be completed by the
end of 2024. The Restructuring Program is expected to deliver
annual savings of at least $80 million beginning in 2025, with at
least $50 million expected to be achieved in 2024. Based on actions
through September 30, at least $20 million and at least $30 million
of savings were realized during the three and nine months ended
September 30, 2024, respectively. The Company expects to incur
total program pre-tax expenses of approximately $70 million related
to the program in 2024, which are primarily related to severance
costs and will be excluded from adjusted results. For the three and
nine months ended September 30, 2024, approximately $3 million and
$68 million, respectively, of pre-tax expenses were recognized in
SG&A related to the restructuring.
In July, the Company completed the sale and a sixteen-month
leaseback transaction of its office building in Torrance,
California. The short-term lease will provide adequate time to
relocate employees, as well as research and development and quality
laboratories to other office locations in Southern California. The
net proceeds from the sale transaction were approximately $38
million. The Company recognized a pre-tax gain of approximately $4
million related to the sale in SG&A in the third quarter of
2024, which is excluded from adjusted results.
“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.”
For the third quarter of 2024, the number of new distributors
joining Herbalife worldwide increased 14% year-over-year,
representing the second consecutive quarter of year-over-year
improvement. Distributor engagement remains strong with enhanced
training opportunities and community-building initiatives.
In August, the Company launched its all-new Diamond Development
Mastermind Program in the U.S., an ongoing training and
accountability program led by President Stephan Gratziani and
supported by network marketing industry leader and coach, Eric
Worre. Approximately 800 distributor leaders received interactive,
hands-on mentoring that leverages Mr. Gratziani’s previous
experience as an Herbalife independent distributor, combined with
Mr. Worre’s deep knowledge of the direct selling business. Content
presented included core business principles to further optimize and
scale their Herbalife business, leadership concepts to support
their organization’s development, and the introduction of a key
account management model that analyzes distributor performance
metrics and identifies potential new business opportunities.
Extravaganza training events also continued in September and
October. Approximately 37,300 attendees convened at events in
Mexico, the UK and Uzbekistan to learn best practices, trends and
new business insights. The Mexico event was highly anticipated
among attendees and sold out in five weeks, three and a half months
in advance of the training. A virtual attendance option was later
added to accommodate the demand. To date, the Company’s 2024
Extravaganza training events have attracted approximately 134,600
attendees.
On September 21, independent distributors, fitness enthusiasts
and employees participated in the Herbalife 2024 Worldwide Workout,
demonstrating their unique ability to activate their communities
through a healthy active lifestyle. During the event, the Company
set a new GUINNESS WORLD RECORDS™ title for the Largest
High-Intensity Interval Training Class across multiple venues. Over
4,900 individuals took part in workouts at host sites in Las Vegas,
Nevada, Los Angeles, California, Mexico City, Mexico and Mumbai,
India, among others. More than 11,000 participants from all over
the world also joined the workout virtually via Herbalife’s YouTube
livestream.
“We see a new and exciting energy all across Herbalife,” said
Michael Johnson. “We are providing opportunities for our
distributors to enhance their skills and create a community for
their customers through good nutrition and health and wellness. In
our 44 years as a company, our impact continues to stand on its own
merit.”
Third Quarter and Year to Date 2024 Key Metrics
Regional Net Sales and Foreign Exchange (“FX”) Impact
Reported Net Sales
YoY Growth (Decline)
$ million
Q3 ‘24
Q3 ‘23
including FX
excluding
FX2
North America
$
260.4
$
277.8
(6.3
)%
(6.2
)%
Latin America
207.1
212.0
(2.3
)%
9.4
%
EMEA
261.9
261.0
0.3
%
2.2
%
Asia Pacific
436.1
441.0
(1.1
)%
0.8
%
China
74.8
89.5
(16.4
)%
(17.3
)%
Worldwide
$
1,240.3
$
1,281.3
(3.2
)%
(0.3
)%
Reported Net Sales
YoY Growth (Decline)
$ million
YTD ‘24
YTD ‘23
including FX
excluding
FX2
North America
$
809.4
$
878.6
(7.9
)%
(7.9
)%
Latin America
633.0
624.5
1.4
%
5.4
%
EMEA
827.6
818.7
1.1
%
4.1
%
Asia Pacific
1,284.0
1,280.4
0.3
%
3.0
%
China
231.7
245.2
(5.5
)%
(3.1
)%
Worldwide
$
3,785.7
$
3,847.4
(1.6
)%
0.8
%
Regional Volume Point Metrics
Volume Points
in millions
Q3 ‘24
Q3 ‘23
YoY % Chg.
YTD ‘24
YTD ‘23
YoY % Chg.
North America
253.3
282.4
(10.3
)%
790.0
910.3
(13.2
)%
Latin America(a)
262.5
258.7
1.5
%
771.0
788.6
(2.2
)%
EMEA
269.1
297.9
(9.7
)%
867.0
943.4
(8.1
)%
Asia Pacific
547.8
563.5
(2.8
)%
1,596.4
1,599.2
(0.2
)%
China
56.4
66.3
(14.9
)%
172.7
177.5
(2.7
)%
Worldwide(b)
1,389.1
1,468.8
(5.4
)%
4,197.1
4,419.0
(5.0
)%
Note: During Q2 ‘24, most markets within the Latin America
region, excluding Mexico, implemented a 5% price reduction and
Volume Point adjustments to enhance the competitiveness of product
pricing, aiming to stimulate incremental volume growth and increase
Members’ ability to promote business opportunities. Refer to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2024, for additional details.
(a)
Excluding the Volume Point adjustments noted above, the
year-over-year percentage change for Q3 ’24 and YTD ‘24 would have
been a decrease of 0.4% and 3.4%, respectively.
(b)
Excluding the Volume Point adjustments noted above, the
year-over-year percentage change for Q3 ’24 and YTD ‘24 would have
been a decrease of 5.8% and 5.2%, respectively.
Outlook
Fourth Quarter 2024 Guidance
$ million
Q4 ‘24 Guidance
Q4 ‘23 Results
Net sales
(3.0)% to +1.0% YoY
1,215.0
Adjusted EBITDA1
105 – 135
108.8
Capital expenditures
25 – 45
35.3
Full-Year 2024 Guidance – Revised
$ million
FY ‘24 Guidance
REVISED
FY ‘24 Guidance
(as of Jul 31 ’24)
FY ‘23 Results
Net sales
(2.0)% to (1.0)% YoY
Narrowed Range
(3.5)% to +1.5% YoY
5,062.4
Adjusted EBITDA1
590 – 620
Raised
560 – 600
570.6
Capital expenditures
120 – 140
Reduced
120 – 150
135.0
Earnings Webcast and Conference Call
Herbalife’s senior management team will host a live audio
webcast and conference call to discuss its third quarter 2024
financial results on Wednesday, October 30, 2024, at 5:30 p.m. ET
(2:30 p.m. PT).
The live audio webcast will be available at the following link:
https://edge.media-server.com/mmc/p/i5tx7naj.
Participants joining via the conference call may obtain the
dial-in information and personal PIN to access the call by
registering at the following link:
https://register.vevent.com/register/BIe4627c57c8fd4c99b8cda37657987d7c.
Senior management also plans to reference slides during the
webcast and call, which will be available under the Investor
Relations section of Herbalife’s website at
https://ir.herbalife.com, where financial and other information is
posted from time to time. The live webcast will also be available
at the same website, along with a replay of the webcast following
the completion of the event and for 12 months thereafter.
About Herbalife Ltd.
Herbalife (NYSE: HLF) is a premier health and wellness company,
community and platform that has been changing people's lives with
great nutrition products and a business opportunity for its
independent distributors since 1980. The Company offers
science-backed products to consumers in more than 90 markets
through entrepreneurial distributors who provide one-on-one
coaching and a supportive community that inspires their customers
to embrace a healthier, more active lifestyle to live their best
life.
For more information, visit https://ir.herbalife.com.
Forward-Looking Statements
This release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state
securities laws, including any projections of earnings, revenue or
other financial items; any statements of the plans, strategies and
objectives of management, including for future operations, capital
expenditures, or share repurchases; any statements concerning
proposed new products, services, or developments; any statements
regarding future economic conditions or performance; any statements
of belief or expectation; and any statements of assumptions
underlying any of the foregoing or other future events.
Forward-looking statements may include, among others, the words
“may,” “will,” “estimate,” “intend,” “continue,” “believe,”
“expect,” “anticipate” or any other similar words.
Although we believe that the expectations reflected in any of
our forward-looking statements are reasonable, actual results or
outcomes could differ materially from those projected or assumed in
any of our forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking
statements, are subject to change and to inherent risks and
uncertainties, many of which are beyond our control. Important
factors that could cause our actual results, performance and
achievements, or industry results to differ materially from
estimates or projections contained in or implied by our
forward-looking statements include the following:
- the potential impacts of current global economic conditions,
including inflation, on us; our Members, customers, and supply
chain; and the world economy;
- our ability to attract and retain Members;
- our relationship with, and our ability to influence the actions
of, our Members;
- our noncompliance with, or improper action by our employees or
Members in violation of, applicable U.S. and foreign laws, rules,
and regulations;
- adverse publicity associated with our Company or the
direct-selling industry, including our ability to comfort the
marketplace and regulators regarding our compliance with applicable
laws;
- changing consumer preferences and demands and evolving industry
standards, including with respect to climate change,
sustainability, and other environmental, social, and governance, or
ESG, matters;
- the competitive nature of our business and industry;
- legal and regulatory matters, including regulatory actions
concerning, or legal challenges to, our products or network
marketing program and product liability claims;
- the Consent Order entered into with the Federal Trade
Commission, or FTC, the effects thereof and any failure to comply
therewith;
- risks associated with operating internationally and in
China;
- our ability to execute our growth and other strategic
initiatives, including implementation of our restructuring
initiatives, and increased penetration of our existing
markets;
- any material disruption to our business caused by natural
disasters, other catastrophic events, acts of war or terrorism,
including the war in Ukraine, cybersecurity incidents, pandemics,
and/or other acts by third parties;
- our ability to adequately source ingredients, packaging
materials, and other raw materials and manufacture and distribute
our products;
- our reliance on our information technology infrastructure;
- noncompliance by us or our Members with any privacy laws,
rules, or regulations or any security breach involving the
misappropriation, loss, or other unauthorized use or disclosure of
confidential information;
- contractual limitations on our ability to expand or change our
direct-selling business model;
- the sufficiency of our trademarks and other intellectual
property;
- product concentration;
- our reliance upon, or the loss or departure of any member of,
our senior management team;
- restrictions imposed by covenants in the agreements governing
our indebtedness;
- risks related to our convertible notes;
- changes in, and uncertainties relating to, the application of
transfer pricing, income tax, customs duties, value added taxes,
and other tax laws, treaties, and regulations, or their
interpretation;
- our incorporation under the laws of the Cayman Islands;
and
- share price volatility related to, among other things,
speculative trading and certain traders shorting our common
shares.
Additional factors and uncertainties that could cause actual
results or outcomes to differ materially from our forward-looking
statements are set forth in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2024, filed with
the Securities and Exchange Commission on October 30, 2024,
including under the heading “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and in our
Condensed Consolidated Financial Statements and the related Notes
included therein, and Annual Report on Form 10-K for the fiscal
year ended December 31, 2023, filed with the Securities and
Exchange Commission on February 14, 2024, including under the
headings “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and in our
Consolidated Financial Statements and the related Notes included
therein. In addition, historical, current, and forward-looking
sustainability-related statements may be based on standards for
measuring progress that are still developing, internal controls and
processes that continue to evolve, and assumptions that are subject
to change in the future.
Forward-looking statements made in this release speak only as of
the date hereof. We do not undertake any obligation to update or
release any revisions to any forward-looking statement or to report
any events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as required by law.
Results of Operations
Herbalife Ltd. and Subsidiaries Condensed Consolidated
Statements of Income (in millions, except per share amounts)
Three Months Ended September 30, Nine
Months Ended September 30,
2024
2023
2024
2023
(unaudited)
North America
$
260.4
$
277.8
$
809.4
$
878.6
Latin America
207.1
212.0
633.0
624.5
EMEA
261.9
261.0
827.6
818.7
Asia Pacific
436.1
441.0
1,284.0
1,280.4
China
74.8
89.5
231.7
245.2
Worldwide Net sales
1,240.3
1,281.3
3,785.7
3,847.4
Cost of sales
268.7
303.2
836.8
903.4
Gross profit
971.6
978.1
2,948.9
2,944.0
Royalty overrides
405.5
416.1
1,236.0
1,261.8
Selling, general, and administrative expenses
444.0
455.3
1,438.5
1,391.7
Other operating income (1)
(5.0
)
-
(5.0
)
(10.1
)
Operating income
127.1
106.7
279.4
300.6
Interest expense, net
56.5
38.5
152.1
116.3
Other expense (income), net (2)
-
(1.0
)
10.5
(1.0
)
Income before income taxes
70.6
69.2
116.8
185.3
Income taxes
23.2
26.4
40.4
53.3
Net income
$
47.4
$
42.8
$
76.4
$
132.0
Weighted-average shares outstanding: Basic
100.9
99.2
100.4
98.9
Diluted
101.9
100.4
101.4
100.0
Earnings per share: Basic
$
0.47
$
0.43
$
0.76
$
1.33
Diluted
$
0.46
$
0.43
$
0.75
$
1.32
(1) Other operating income for the three and nine months
ended September 30, 2024 and nine months ended September 30, 2023
relates to certain China government grant income (2) Other expense,
net for the nine months ended September 30, 2024 relates to loss on
extinguishment of 2018 Credit Facility, as well as partial
redemption and private repurchase of 2025 Notes. Other income, net
for the three and nine months ended September 30, 2023 relates to
gain on extinguishment of a portion of 2024 Convertible Notes.
Herbalife Ltd. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in millions)
September 30, December 31,
2024
2023
(unaudited) ASSETS Current Assets: Cash and cash equivalents
$
402.5
$
575.2
Receivables, net
82.0
81.2
Inventories
515.3
505.2
Prepaid expenses and other current assets
244.8
237.7
Total Current Assets
1,244.6
1,399.3
Property, plant and equipment, net
463.3
506.5
Operating lease right-of-use assets
187.7
185.8
Marketing-related intangibles and other intangible assets, net
312.7
314.0
Goodwill
93.1
95.4
Other assets
352.1
308.4
Total Assets
$
2,653.5
$
2,809.4
LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities:
Accounts payable
$
86.6
$
84.0
Royalty overrides
332.1
343.4
Current portion of long-term debt
283.3
309.5
Other current liabilities
583.0
540.7
Total Current Liabilities
1,285.0
1,277.6
Non-current liabilities: Long-term debt, net of current
portion
1,977.9
2,252.9
Non-current operating lease liabilities
167.3
167.6
Other non-current liabilities
177.5
171.6
Total Liabilities
3,607.7
3,869.7
Commitments and Contingencies Shareholders' deficit:
Common shares
0.1
0.1
Paid-in capital in excess of par value
267.0
233.9
Accumulated other comprehensive loss
(235.4
)
(232.0
)
Accumulated deficit
(985.9
)
(1,062.3
)
Total Shareholders' Deficit
(954.2
)
(1,060.3
)
Total Liabilities and Shareholders' Deficit
$
2,653.5
$
2,809.4
Herbalife Ltd. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (in millions)
Nine
Months Ended September 30,
2024
2023
(unaudited) Cash flows from operating activities: Net income
$
76.4
$
132.0
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
92.4
85.1
Share-based compensation expenses
36.7
35.7
Non-cash interest expense
9.4
5.5
Deferred income taxes
(52.7
)
(25.9
)
Inventory write-downs
17.0
21.9
Foreign exchange transaction (gain) loss
11.9
(2.7
)
Loss (gain) on extinguishment of debt
10.5
(1.0
)
Other
3.8
2.9
Changes in operating assets and liabilities: Receivables
(3.6
)
(11.8
)
Inventories
(41.7
)
62.9
Prepaid expenses and other current assets
(3.7
)
(24.5
)
Accounts payable
0.9
(12.1
)
Royalty overrides
(2.3
)
(8.8
)
Other current liabilities
62.1
13.6
Other
(1.3
)
(11.4
)
Net cash provided by operating activities
215.8
261.4
Cash flows from investing activities: Purchases of property,
plant and equipment
(96.3
)
(99.7
)
Proceeds from sale and leaseback transaction, net of related
expenses
37.9
-
Other
(0.6
)
0.1
Net cash used in investing activities
(59.0
)
(99.6
)
Cash flows from financing activities: Borrowings from senior
secured credit facility and other debt, net of discount
1,117.7
195.0
Principal payments on senior secured credit facility and other debt
(1,655.0
)
(278.1
)
Repayment of convertible senior notes
(197.0
)
(64.3
)
Proceeds from senior secured notes, net of discount
778.4
-
Repayment of senior notes
(344.3
)
-
Debt issuance costs
(22.4
)
(1.8
)
Share repurchases
(5.7
)
(9.7
)
Other
2.0
2.3
Net cash used in financing activities
(326.3
)
(156.6
)
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
(8.1
)
(5.5
)
Net change in cash, cash equivalents, and restricted cash
(177.6
)
(0.3
)
Cash, cash equivalents, and restricted cash, beginning of period
595.5
516.3
Cash, cash equivalents, and restricted cash, end of period
$
417.9
$
516.0
Supplemental Information
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)
Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and
Credit Agreement EBITDA
In addition to its reported results calculated in accordance
with U.S. GAAP, the Company has included in this release adjusted
net income, adjusted diluted EPS, adjusted EBITDA and credit
agreement EBITDA, performance measures that the Securities and
Exchange Commission defines as “non-GAAP financial measures.”
Adjusted net income, adjusted diluted EPS, adjusted EBITDA and
credit agreement EBITDA exclude the impact of certain unusual or
non-recurring items such as expenses related to restructuring
initiatives, expenses related to the digital technology program,
gains or losses from sale of property, gains or losses from
extinguishment of debt and Korea tax settlement, as further
detailed in the reconciliations below. Adjusted EBITDA margin
represents adjusted EBITDA divided by net sales. Credit agreement
EBITDA represents EBITDA adjusted for items permitted under our
senior secured credit facilities.
Management believes that such non-GAAP performance measures,
when read in conjunction with the Company’s reported results,
calculated in accordance with U.S. GAAP, can provide useful
supplemental information for investors because they facilitate a
period to period comparative assessment of the Company’s operating
performance relative to its performance based on reported results
under U.S. GAAP, while isolating the effects of some items that
vary from period to period without any correlation to core
operating performance and eliminate certain charges that management
believes do not reflect the Company’s operations and underlying
operational performance.
The Company’s definitions and calculations as set forth in the
tables below of adjusted net income, adjusted diluted EPS, adjusted
EBITDA and credit agreement EBITDA may not be comparable to
similarly titled measures used by other companies because other
companies may not calculate them in the same manner as the Company
does and should not be viewed in isolation from, nor as
alternatives to, net income or diluted EPS calculated in accordance
with U.S. GAAP.
The Company does not provide a reconciliation of forward-looking
adjusted EBITDA guidance to net income, the comparable U.S. GAAP
measure, because, due to the unpredictable or unknown nature of
certain significant items, such as income tax expenses or benefits,
loss contingencies, and any gains or losses in connection with
refinancing transactions, we cannot reconcile this non-GAAP
projection without unreasonable efforts. We expect the variability
of these items, which are necessary for a presentation of the
reconciliation, could have a significant impact on our reported
U.S. GAAP financial results.
Currency Fluctuation
Our international operations have provided and will continue to
provide a significant portion of our total net sales. As a result,
total net sales will continue to be affected by fluctuations in the
U.S. dollar against foreign currencies. In order to provide a
framework for assessing how our underlying businesses performed
excluding the effect of foreign currency fluctuations, in addition
to comparing the percent change in net sales from one period to
another in U.S. dollars, we also compare the percent change in net
sales from one period to another period using “net sales in local
currency.” Net sales in local currency is not a measure presented
in accordance with U.S. GAAP. Net sales in local currency removes
from net sales in U.S. dollars the impact of changes in exchange
rates between the U.S. dollar and the local currencies of our
foreign subsidiaries, by translating the current period net sales
into U.S. dollars using the same foreign currency exchange rates
that were used to translate the net sales for the previous
comparable period. We believe presenting net sales in local
currency is useful to investors because it allows a meaningful
comparison of net sales of our foreign operations from period to
period. However, net sales in local currency should not be
considered in isolation or as an alternative to net sales in U.S.
dollar measures that reflect current period exchange rates, or to
other financial measures calculated and presented in accordance
with U.S. GAAP.
The following is a reconciliation of net income to adjusted net
income:
Three Months Ended September 30, Nine Months Ended
September 30, $ million
2024
2023
2024
2023
Net income
$
47.4
$
42.8
$
76.4
$
132.0
Expenses related to Restructuring Program (1) (2)
2.7
-
68.2
-
Expenses related to Transformation Program (1) (2)
-
4.6
9.4
42.0
Digital technology program costs (1) (2)
5.1
12.1
22.1
22.6
Gain on sale of property (1) (2)
(4.0
)
-
(4.0
)
-
Korea tax settlement (1) (2)
-
8.6
-
8.6
Loss (gain) on extinguishment of debt (1) (2)
-
(1.0
)
10.5
(1.0
)
Income tax adjustments for above items (1) (2)
6.8
(1.8
)
(20.5
)
(11.0
)
Adjusted net income
$
58.0
$
65.3
$
162.1
$
193.2
The following is a reconciliation of diluted earnings per share
to adjusted diluted earnings per share:
Three Months Ended September 30, Nine Months Ended
September 30, $ per share
2024
2023
2024
2023
Diluted earnings per share
$
0.46
$
0.43
$
0.75
$
1.32
Expenses related to Restructuring Program (1) (2)
0.03
-
0.68
-
Expenses related to Transformation Program (1) (2)
-
0.05
0.10
0.42
Digital technology program costs (1) (2)
0.05
0.12
0.22
0.23
Gain on sale of property (1) (2)
(0.04
)
-
(0.04
)
-
Korea tax settlement (1) (2)
-
0.09
-
0.09
Loss (gain) on extinguishment of debt (1) (2)
-
(0.01
)
0.10
(0.01
)
Income tax adjustments for above items (1) (2)
0.07
(0.02
)
(0.20
)
(0.11
)
Adjusted diluted earnings per share (5)
$
0.57
$
0.65
$
1.61
$
1.93
The following is a reconciliation of net income to EBITDA,
adjusted EBITDA and Credit Agreement EBITDA and Credit Agreement
total leverage ratio:
Three Months Ended TTM $ million
Sep 30 '23
Dec 31 '23 Mar 31 '24 Jun 30 '24 Sep 30
'24 Sep 30 '24 Net sales
$
1,281.3
$
1,215.0
$
1,264.3
$
1,281.1
$
1,240.3
$
5,000.7
Net income
$
42.8
$
10.2
$
24.3
$
4.7
$
47.4
$
86.6
Interest expense, net
38.5
38.1
37.9
57.7
56.5
190.2
Income taxes
26.4
7.5
9.7
7.5
23.2
47.9
Depreciation and amortization
28.4
28.2
29.2
32.6
30.6
120.6
EBITDA
136.1
84.0
101.1
102.5
157.7
445.3
Amortization of SaaS implementation costs
2.9
3.1
3.6
8.7
5.0
20.4
Expenses related to Restructuring Program
-
-
16.7
48.8
2.7
68.2
Expenses related to Transformation Program
4.6
12.2
5.9
3.5
-
21.6
Digital technology program costs
12.1
9.5
11.0
6.0
5.1
31.6
Gain on sale of property
-
-
-
-
(4.0
)
(4.0
)
Korea tax settlement
8.6
-
-
-
-
-
Loss (gain) on extinguishment of debt
(1.0
)
-
-
10.5
-
10.5
Adjusted EBITDA
163.3
108.8
138.3
180.0
166.5
593.6
Interest income
3.2
3.2
3.7
2.8
2.8
12.5
Inventory write-downs
5.0
6.6
4.7
6.7
5.6
23.6
Share-based compensation expenses
13.7
12.3
11.9
11.8
13.0
49.0
Other expenses (3)
(3.8
)
11.8
0.9
6.7
9.3
28.7
Credit Agreement EBITDA
$
181.4
$
142.7
$
159.5
$
208.0
$
197.2
$
707.4
Credit Agreement Total Debt (4)
$
2,337.5
Credit Agreement Total Leverage Ratio 3.3x Net income margin
3.3
%
0.8
%
1.9
%
0.4
%
3.8
%
1.7
%
Adjusted EBITDA margin
12.7
%
9.0
%
10.9
%
14.1
%
13.4
%
11.9
%
The following is a reconciliation of net income to EBITDA,
adjusted EBITDA and Credit Agreement EBITDA and Credit Agreement
total leverage ratio:
Nine Months Ended September 30, Year Ended Dec 31, $
million
2024
2023
2023
Net sales
$
3,785.7
$
3,847.4
$
5,062.4
Net income
$
76.4
$
132.0
$
142.2
Interest expense, net
152.1
116.3
154.4
Income taxes
40.4
53.3
60.8
Depreciation and amortization
92.4
85.1
113.3
EBITDA
361.3
386.7
470.7
Amortization of SaaS implementation costs
17.3
2.9
6.0
Expenses related to Restructuring Program
68.2
-
-
Expenses related to Transformation Program
9.4
42.0
54.2
Digital technology program costs
22.1
22.6
32.1
Gain on sale of property
(4.0
)
-
-
Korea tax settlement
-
8.6
8.6
Loss (gain) on extinguishment of debt
10.5
(1.0
)
(1.0
)
Adjusted EBITDA
484.8
461.8
570.6
Interest income
9.3
8.3
11.5
Inventory write-downs
17.0
21.9
28.5
Share-based compensation expenses
36.7
35.7
48.0
Other expenses (3)
16.9
(0.3
)
11.5
Credit Agreement EBITDA
$
564.7
$
527.4
$
670.1
Credit Agreement Total Debt (4)
$
2,581.1
Credit Agreement Total Leverage Ratio 3.9x Net income margin
2.0
%
3.4
%
2.8
%
Adjusted EBITDA margin
12.8
%
12.0
%
11.3
%
(1) Based on interim income tax reporting rules, these
(income)/expense items are not considered discrete items. The tax
effect of the adjustments between our U.S. GAAP and non-GAAP
results takes into account the tax treatment and related tax
rate(s) that apply to each adjustment in the applicable tax
jurisdiction(s). (2) Excludes tax (benefit)/expense as
follows:
Three Months Ended September 30, Nine Months
Ended September 30, $ million
2024
2023
2024
2023
Expenses related to Restructuring Program
$
5.3
$
-
$
(14.9
)
$
-
Expenses related to Transformation Program
0.6
0.2
(1.9
)
(8.3
)
Digital technology program costs
(0.5
)
(0.7
)
(2.5
)
(1.4
)
Gain on sale of property
0.9
-
0.9
-
Korea tax settlement
-
(1.4
)
-
(1.4
)
Loss (gain) on extinguishment of debt
0.5
0.1
(2.1
)
0.1
Total income tax adjustments
$
6.8
$
(1.8
)
$
(20.5
)
$
(11.0
)
Three Months Ended September 30,
Nine Months Ended September 30, $ per share
2024
2023
2024
2023
Expenses related to Restructuring Program
$
0.05
$
-
$
(0.15
)
$
-
Expenses related to Transformation Program
-
-
(0.02
)
(0.08
)
Digital technology program costs
(0.01
)
(0.01
)
(0.02
)
(0.01
)
Gain on sale of property
0.01
-
0.01
-
Korea tax settlement
-
(0.01
)
-
(0.01
)
Loss (gain) on extinguishment of debt
0.01
-
(0.02
)
-
Total income tax adjustments (5)
$
0.07
$
(0.02
)
$
(0.20
)
$
(0.11
)
(3) Other expenses include certain non-cash items such as
bad debt expense, unrealized foreign currency gains and losses, and
other gains and losses (4) Represents the outstanding
principal amount of total debt as of the respective period end
(5) Amounts may not total due to rounding
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241030736401/en/
Media Contact: Thien Ho Vice President, Global Corporate
Communications thienh@herbalife.com
Investor Contact: Erin Banyas Vice President, Head of
Investor Relations erinba@herbalife.com
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