Herbalife Q3 Revenue Down 1.5% To $1.3 Billion

Herbalife Ltd. (NYSE: HLF) today reported financial results for the third quarter ended September 30, 2023.

“We remain on track to achieve year-over-year net sales growth in the fourth quarter as our trends continue to improve,”

said Michael Johnson, Chairman and CEO of Herbalife.

Highlights

• Third quarter 2023 net sales of $1.3 billion, down 1.1% compared to third quarter 2022; on a constant currency basis¹, net sales declined 1.5% compared to the prior year period
• Year-over-year reported net sales trends improved for three sequential quarters
• Third quarter 2023 reported net income of $42.8 million and adjusted EBITDA² of $163.3 million
• Third quarter 2023 reported diluted EPS of $0.43 and adjusted diluted EPS² of $0.65
• Recognized pre-tax expenses of approximately $5 million in third quarter related to Company’s Transformation Program
• Cost savings of at least $60 million now expected in 2023 related to Company’s Transformation Program, approximately $20 million realized in third quarter
• Repurchased $65.5 million of 2024 Convertible Notes during third quarter
• All-new Herbalife.com website, built on Herbalife One platform, launched in Singapore; planned rollout to other markets remains on track

Management Commentary

Herbalife reported third quarter 2023 net sales of $1.3 billion, down 1.1% year-over-year, marking the third consecutive quarter of improved year-over-year net sales trends. On a constant currency basis¹, net sales declined 1.5% year-over-year.

Third quarter gross profit margin was 76.3%, down 170 basis points year-over-year, primarily due to the benefit of approximately 160 basis points of pricing and approximately 40 basis points for lower inventory write-downs more than offset by continued headwinds from input cost inflation of approximately 290 basis points, unfavorable sales mix of approximately 30 basis points and unfavorable foreign currency of approximately 30 basis points.

Third quarter net income was $42.8 million. Adjusted EBITDA² of $163.3 million includes approximately $2 million of foreign currency headwinds year-over-year, with adjusted EBITDA margin of 12.7%. Diluted EPS was $0.43, with adjusted diluted EPS² of $0.65, which includes a $0.02 year-over-year foreign currency headwind.

Company and distributor-led events continued to gain momentum during the third quarter, with approximately 50,000 distributors attending Extravaganza training events in the U.S., Kazakhstan, Poland, Mexico and Brazil. Initiatives that promote a healthy active lifestyle continue to be the driver behind many distributor-led events, as well as the Company’s new year-long global #ImWithYou campaign, which launched in mid-September. The goal of the campaign is to bring more people together through mega workouts to raise product awareness, attract more customers, build bigger communities and help distributors grow their businesses.

During September and October, the Company continued to deliver on its growth strategy, launching four innovative products that it believes will resonate in local markets and align with consumer trends and preferences:

• Night Mode – a night-time product promoting sleep quality; available in select markets in EMEA
• OnActive^® Drink – a product developed specifically for adults over the age of 40 to support vision, muscle, bone and immune health; available in Brazil
• Beverage Enhancers – powder drink mixes popular in U.S. nutrition clubs; launched for use in Mexico
• Golden Beverage – a turmeric drink that supports muscle recovery and joint health; available in Bolivia, Ecuador and Colombia.

Herbalife One, the Company’s new, fully integrated, modernized digital technology platform, achieved a key milestone during the quarter with the launch of the all-new Herbalife.com website in Singapore, incorporating the new brand image. The Company remains on track to launch the new website in approximately 40 additional markets that represent approximately 80% of the Company’s sales, by the end of 2023.

“We are seeing signs of success and we are delivering on our commitments – from Herbalife One and product innovation to how we support our distributors’ businesses,”

said Chairman and CEO, Michael Johnson.

“Our momentum is building steadily as we continue to evolve and transform Herbalife. More work is ahead of us, and we believe we are on a path to achieve sustainable growth.”

The Company implemented further actions related to its Transformation Program, which was initiated in 2021 to strategically optimize global business processes. For the three months ended September 30, 2023, the Company recognized pre-tax expenses of approximately $5 million in SG&A related to the program, which are excluded from the adjusted results.

The Company expects to incur total program pre-tax expenses of at least $75 million, of which $67 million has been incurred to date. Based on the Company’s actions to date, it expects to deliver total program run rate savings of at least $90 million in 2024 and beyond.

The Company now anticipates at least $60 million of these cost savings will be realized in 2023 (up from more than $45 million), of which approximately $20 million and $43 million was realized during the three and nine months ended September 30, 2023.