Herbalife outlines 2025 net sales growth of up to 0.7% while advancing personalized wellness and debt reduction

Earnings Call Insights: Herbalife Ltd. (HLF) Q3 2025

MANAGEMENT VIEW

* Stephan Gratziani, President & CEO, highlighted that "Herbalife returned to net sales growth in North America and on a worldwide basis," noting this as a significant milestone and the first such increase for North America since Q2 2021. He emphasized the company's "disciplined execution, strong operating fundamentals and aligned leadership" as key factors in accelerating momentum.
* Gratziani detailed the beta progress of Pro2col, Herbalife's next-generation personalized health platform, stating, "Since forming our beta group in July, which has grown to 7,900 distributors, we have seen strong engagement and enthusiasm." He described robust engagement metrics and the expansion of the beta to retail customers.
* The CEO announced the launch of HL/Skin in EMEA, a new skin care line supported by an AI-powered assessment tool, and outlined the rapid market introduction as evidence of "operational agility, product velocity and our unwavering commitment to innovation."
* He reported that "in the third quarter, 3 of our 5 regions reported year-over-year new distributor growth led by North America, up 17%." He also underscored the opening of a new R&D and quality control facility in California to support product innovation.
* Gratziani described the company's efforts to reduce leverage, stating, "We fully repaid the 2025 notes in September, leaving no significant debt maturities until 2028. We ended Q3 with a total leverage ratio of 2.8x, reducing our leverage beyond our 3x commitment."
* CFO John DeSimone stated, "Net sales were $1.3 billion, up 2.7% versus Q3 of 2024 and above the midpoint of our guidance range... Adjusted EBITDA was $163 million, exceeding the high end of our guidance range of $150 million to $160 million."

OUTLOOK

* DeSimone provided guidance for Q4, stating, "We expect net sales growth in the fourth quarter on a reported basis of 1.5% to 5.5% year-over-year... On a constant currency basis, we expect net sales to be up 0.5% to 4.5% year-over-year."
* For the full year 2025, management narrowed its outlook: "We now expect full year net sales to range from a slight decline of 0.3% to growth of 0.7% year-over-year. On a constant currency basis, we anticipate net sales to increase between 1.2% and 2.2% year-over-year."
* Adjusted EBITDA for the full year is projected at "$645 million to $655 million or $700 million to $710 million on a constant currency basis."
* The company continues to expect its adjusted effective tax rate for 2025 to be "between 27% and 28%."

FINANCIAL RESULTS

* Net sales for Q3 2025 were $1.3 billion, reflecting a 2.7% increase year-over-year and surpassing the midpoint of guidance. Constant currency net sales rose 3.2%.
* Adjusted EBITDA was $163 million, with a margin of 12.8% and a noted decline of 60 basis points year-over-year due to factors including the absence of a China government grant recognized last year and FX headwinds.
* Q3 net income attributable to Herbalife was $43 million, while adjusted net income was $52 million. Adjusted diluted EPS for the quarter was $0.50, with an $0.08 FX headwind versus the prior year.
* Operating cash flows reached $139 million, up 40% from Q3 2024. Capital expenditures were $21 million.
* Regional highlights included Latin America net sales up 11% and North America returning to growth with net sales up 1% year-over-year.

Q&A

* William Reuter, BofA Securities: Asked about capital allocation and debt reduction. Gratziani responded, "The longer-term goal is to pay down debt by $1 billion from the time we set it a year ago until the end of 2028... that's our #1 use after our internal investments."
* Song Xue, Mizuho Securities: Inquired about early responses from the Pro2col beta group. Gratziani shared, "The feedback that they're giving, the suggestions. When you aggregate close to 8,000 distributors and their ideas... there's a certain level of richness in the information and the data."
* Karru Martinson, Jefferies: Asked about product categories driving volume growth. DeSimone replied, "There's a little bit of skewing mix toward healthy active lifestyle products, fit products and a little bit toward targeted nutrition and a little less on weight loss."
* Hale Holden, Barclays: Questioned the rollout of the Mastermind program and HL/Skin, with Gratziani noting, "We are going to evolve the program... it's something that's fundamentally and foundationally that's supporting the growth that we're having... this will be something that we will be expanding."
* Douglas Lane, Water Tower Research: Raised subscription revenue opportunities. Gratziani responded, "We believe that there is a big place in the future for subscription revenue... we're building all of the things that are needed for that... it's en route."

SENTIMENT ANALYSIS

* Analysts expressed a positive to neutral tone, with questions focused on capital allocation, new product launches, distributor engagement, and technology integration. There was evident interest in subscription models and innovation, with no significant skepticism or pressing challenges.
* Management maintained a confident and optimistic tone throughout, emphasizing execution, innovation, and financial discipline. Phrases such as "we are confident in the direction we're heading" (CFO DeSimone) and "Herbalife is getting stronger... operating from a position of growing strength and increasing confidence" (CEO Gratziani) reinforced this sentiment.
* Compared to the previous quarter, management appeared slightly more assertive in claiming momentum and foundational progress, while analysts remained engaged but less probing on risk.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full year net sales was narrowed, now ranging from a slight decline of 0.3% to growth of 0.7% versus the prior range of down 1% to up 3%. The midpoint for constant currency adjusted EBITDA was raised.
* Net sales returned to growth in Q3, reversing the prior quarter's decline.
* North America achieved its first quarterly increase in net sales since Q2 2021, compared to persistent declines in previous quarters.
* The tone of management was more upbeat and forward-looking, leveraging recent milestones in product innovation (HL/Skin, Pro2col) and distributor engagement.
* Analysts' focus shifted more toward subscription models, capital allocation, and product innovation than risk or competitive pricing pressure.

RISKS AND CONCERNS

* Management cited foreign currency headwinds and the non-repeat of China government grant income as impacting adjusted EBITDA and gross margin.
* There was acknowledgment of potential headwinds in Q4 related to changes in bonus accruals and normalization of bonus achievement levels compared to 2024.
* Analysts raised questions about potential SG&A increases from new product launches, but management indicated no material increase outside the normal scope.

FINAL TAKEAWAY

Herbalife management underscored a pivotal quarter, with a return to net sales growth in both North America and globally, driven by disciplined execution, innovation, and robust distributor engagement. Advances in personalized nutrition technology, highlighted by the beta progress of Pro2col and the commercial launch of new product lines, are positioning Herbalife for long-term value creation. The company continues its strong cash generation and accelerated debt reduction, while maintaining a confident outlook and commitment to operational agility, innovation, and shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hlf/earnings/transcripts]

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