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 to 13.4%.

• 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 in debt repaid, reducing the total leverage ratio to 3.3x as of September 30, 2024.

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

• Major restructuring and transformation programs are underway, targeting $80 million in annual savings from 2025 and $50 million in 2024.

Financial highlights

• Gross profit margin improved to 78.3%, up 200 basis points year-over-year, driven by pricing actions and lower input costs.

• Adjusted EBITDA of $167 million (+2.0% YoY) surpassed guidance; adjusted diluted EPS was $0.57, including a $0.10 FX headwind.

• Q3 2024 net income margin was 3.8%; adjusted EBITDA margin was 13.4%.

• Net cash from operating activities was $100 million for Q3; capital expenditures were $27 million.

• Interest expense increased to $59.4 million in Q3 2024 due to higher rates from recent debt refinancing.

Outlook and guidance

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

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

• Targeting total leverage ratio of 3.0x by end of 2025 and $1 billion debt reduction by 2028.

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

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