Herbalife (HLF) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $1.3 billion, down 2.5% year-over-year, but up slightly on a constant currency basis, with growth in Latin America, EMEA, and Asia Pacific, and significant FX headwinds impacting results.

• Adjusted EBITDA reached $180 million, the highest in seven quarters, exceeding guidance, with a 14.1% margin, up 120 basis points year-over-year.

• Net income was $4.7 million ($0.05/share), down 92% year-over-year, while adjusted net income was $54.8 million ($0.54/share), including a $0.07 FX headwind.

• Distributor recruiting increased 12% year-over-year and 26% sequentially, reversing 12 quarters of declines, with growth in all regions except China.

• Major restructuring and transformation programs are substantially complete, with at least $80 million in annual savings expected in 2025 and $50 million in 2024.

Financial highlights

• Gross profit margin improved to 77.9%, up 90 basis points year-over-year, driven by pricing actions offset by higher input costs.

• Adjusted EBITDA margin was 14.1% in Q2 2024, the highest in seven quarters.

• Adjusted EPS was $0.54, including a $0.07 FX headwind; reported EPS was $0.05 due to restructuring and debt extinguishment costs.

• Operating cash flow was $103 million for Q2, with $36 million in capital expenditures.

• SG&A expenses rose to $502.3 million (39.2% of sales), driven by higher labor, restructuring, and technology costs.

Outlook and guidance

• Q3 2024 net sales guidance: down 4.5% to flat year-over-year, with 300 basis points of FX headwinds; adjusted EBITDA guidance: $125–$155 million.

• Full-year 2024 net sales guidance revised to down 3.5% to up 1.5% year-over-year; adjusted EBITDA guidance raised to $560–$600 million.

• Capital expenditures for 2024 reaffirmed at $120–$150 million, mainly for digital transformation initiatives.

• Restructuring and transformation programs expected to be completed in 2024, with combined pre-tax expenses of ~$160 million.

• FY 2024 adjusted effective tax rate expected at ~30%.