Herbalife Ltd. (NYSE: HLF) today reported financial results for
the first quarter ended March 31, 2023:
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20230501005791/en/
“We have accomplished a lot this quarter and are on the right
trajectory to see growth by the end of the year,” said Michael
Johnson, Chairman and CEO of Herbalife.
Highlights
- First quarter 2023 net sales of $1.3 billion, down 6.3%
compared to first quarter 2022; on a constant currency basis1, net
sales declined 2.6% compared to the prior year period
- First quarter 2023 reported net income of $29.3 million and
Adjusted EBITDA2 of $128.9 million
- First quarter 2023 reported diluted EPS of $0.29 and adjusted
diluted EPS2 of $0.54
- Significant progress with the Company’s Transformation Program,
actions to date result in approximately $35 million of savings in
2023; on track to exceed $70 million of total program run rate
savings in 2024 and beyond
- One-time pre-tax expenses of approximately $27 million
recognized during first quarter related to the Company’s
Transformation Program impacted reported financial results
- In April, the Company amended its Senior Secured Credit
Facility to increase the gross leverage ratio covenant, which
provides greater financial flexibility to make investments in key
initiatives; the Company was compliant with all debt covenants as
of March 31, 2023
- Given the continued dynamic macroeconomic backdrop, the Company
is not providing guidance
1 Growth/decline in net sales excluding the effects of foreign
exchange is based on “net sales in local currency,” a non-GAAP
financial measure. See Schedule A – “Reconciliation of Non-GAAP
Financial Measures” for a discussion of why we believe adjusting
for the effects of foreign exchange is useful.
2 Adjusted diluted EPS and adjusted EBITDA are non-GAAP
measures. See Schedule A – “Reconciliation of Non-GAAP Financial
Measures” for a detailed reconciliation of these measures to the
most directly comparable GAAP measure, and a discussion of why we
believe these non-GAAP measures are useful.
Management Commentary
Herbalife reported first quarter 2023 net sales of $1.3 billion,
down 6.3% year-over-year, or a 2.6% decline on a constant currency
basis1. First quarter net income of $29.3 million and adjusted
EBITDA2 of $128.9 million was negatively impacted by lower sales,
continued input cost inflation and the timing of distributor event
spending, partially offset by improved pricing. In addition, first
quarter gross profit margin of 76.2% was negatively impacted by
currency headwinds of approximately 150 bps year-over-year. Diluted
EPS was $0.29 for the first quarter, with adjusted diluted EPS1 of
$0.54, which included a $0.32 year-over-year currency headwind.
Engagement with distributors remained strong, as more than 700
in-person events worldwide attracted more than 400,000 attendees,
year-to-date through April 30. For the first time in three years,
approximately 2,700 of the Company’s independent distributor
leaders from around the world gathered in Los Angeles and were
given a preview of the Company’s modernized branding and plans for
expanding product offerings. The Company’s digital transformation
initiative remains on track, as launch plans were solidified for
modernized websites and a new e-commerce platform.
“The return of in-person events have engaged more than 400,000
attendees this year, building strong momentum and driving increased
engagement in our business,” said Chairman and CEO, Michael
Johnson. “We expect this energy to drive continued
improvement in our top line, resulting in growth by the end of the
year.”
The Company continues to make significant progress in
productivity through its Transformation Program, which was
initiated in 2021 to strategically optimize global business
processes. The Company’s actions to date result in approximately
$35 million of savings in 2023 and it is on track to exceed $70
million of total program run rate savings in 2024 and beyond.
In April, the Company amended its Senior Secured Credit
Facility, which among other things, increased the gross leverage
ratio covenant from 3.75 to 4.50 effective through December 31,
2023, stepping down to 4.25 as of March 31, 2024 and 4.00
thereafter. This will provide greater financial flexibility to make
investments in key initiatives. As of March 31, 2023, the related
gross leverage ratio was approximately 3.6. The Company was
compliant with all debt covenants as of March 31, 2023.
“We have taken steps to protect profitability and secure our
balance sheet in order to provide flexibility to execute on our
strategic plan and return to growth,” said Chief Financial Officer,
Alex Amezquita. “Our capital allocation priorities remain unchanged
as we take steps to achieve a long-term target gross leverage ratio
of 3.0x.”
In a separate announcement today, the Company announced updates
to its leadership succession plan. The Company is announcing the
retirement of Chief Operating Officer, Mark Schissel following 16
years of dedicated service. Frank Lamberti will be appointed to
Chief Operating Officer, Ibi Montesino, EVP and Chief of Staff,
will have increased management authority and Rob Levy, will be
appointed Regional President Americas. These changes are all
effective as of July 1, 2023 and will report to Michael
Johnson.
First Quarter 2023 Key Metrics
Regional Net Sales and Foreign Exchange (“FX”) Impact
Region
Reported Net Sales 1Q’23
(mil)
Growth/Decline
including FX vs. 1Q’22
Growth/Decline
excluding FX vs. 1Q’22 1
Asia Pacific
$
413.6
1.4%
8.5%
North America
297.2
(8.9%)
(8.7%)
EMEA
268.1
(9.1%)
(2.8%)
Latin America(a)
205.5
2.1%
0.1%
China
67.7
(35.9%)
(30.8%)
Worldwide Total
$
1,252.1
(6.3%)
(2.6%)
(a) During the third quarter of 2022, the
Company combined its Mexico and South and Central America regions
into one geographic region now named Latin America. Historical
information has been reclassified to conform with the current
period geographic presentation.
Regional Volume Point Metrics
Volume Points
Region
1Q'23 (mil)
YoY % Chg.
Asia Pacific
505.2
(2.6%)
North America
314.5
(22.0%)
EMEA
314.3
(19.8%)
Latin America(a)
271.4
(15.1%)
China
48.6
(27.4%)
Worldwide Total
1,454.0
(14.5%)
Outlook
Given the continued dynamic macroeconomic backdrop, the Company
is not providing guidance. The Company will periodically reassess
its ability to provide guidance when we believe future performance
can be reasonably estimated.
Earnings Conference Call
Herbalife senior management will host an investor conference
call to discuss its recent financial results and provide an update
on current business trends on Tuesday, May 2, 2023, at 2:30 p.m. PT
(5:30 p.m. ET).
Participants will need to register to receive dial-in
information to the call, and may do so by visiting the investor
relations section of the Company’s website at
http://ir.herbalife.com. Additionally, live audio of the conference
call will be simultaneously webcast at
https://edge.media-server.com/mmc/p/hkz6x6y6. Senior management
also plans to reference slides during the call, which will also be
available on the investor relation’s section of the Company’s
website.
An audio replay will be available following the completion of
the conference call, and the webcast of the teleconference will be
archived and available on the Company’s investor relations
site.
About Herbalife Ltd.
Herbalife (NYSE: HLF) is a premier health and wellness company
and community 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 in order to live their best life.
Herbalife encourages investors to visit its investor relations
website at ir.herbalife.com as financial and other information is
posted.
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 other, 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 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 Transformation Program
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
such as the COVID-19 pandemic, 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 March 31, 2023, filed with the
Securities and Exchange Commission on May 2, 2023, 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, and in
Part I, Item 1A, Risk Factors, of the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2022 filed with
the Securities and Exchange Commission on February 14, 2023. 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
3/31/2023 3/31/2022 (unaudited)
North America
$
297.2
$
326.2
EMEA
268.1
295.0
Asia Pacific
413.6
407.7
Latin America
205.5
201.3
China
67.7
105.6
Worldwide Net Sales
1,252.1
1,335.8
Cost of Sales
298.6
307.1
Gross Profit
953.5
1,028.7
Royalty Overrides
416.0
433.8
Selling, General, and Administrative Expenses
475.9
454.9
Other Operating Income (1)
(8.9
)
(13.1
)
Operating Income
70.5
153.1
Interest Expense, net
39.4
29.7
Income Before Income Taxes
31.1
123.4
Income Taxes
1.8
25.2
Net Income
$
29.3
$
98.2
Weighted-Average Shares Outstanding: Basic
98.5
99.9
Diluted
100.2
101.7
Earnings Per Share: Basic
$
0.30
$
0.98
Diluted
$
0.29
$
0.96
(1) Other Operating Income for the three
months ended March 31, 2023 and March 31, 2022 relates to certain
China government grant income. Herbalife Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (In millions) Mar 31, Dec 31,
2023
2022
(unaudited) ASSETS Current Assets:
Cash and cash equivalents
$
454.2
$
508.0
Receivables, net
85.1
70.6
Inventories
545.1
580.7
Prepaid expenses and other current assets
237.8
196.8
Total Current Assets
1,322.2
1,356.1
Property, plant and equipment, net
479.9
486.3
Operating lease right-of-use assets
202.0
207.1
Marketing-related intangibles and other intangible assets, net
315.2
315.7
Goodwill
94.0
93.2
Other assets
274.3
273.6
Total Assets
$
2,687.6
$
2,732.0
LIABILITIES AND SHAREHOLDERS' DEFICIT Current
Liabilities: Accounts payable
$
67.9
$
89.8
Royalty overrides
317.4
343.3
Current portion of long-term debt
293.7
29.5
Other current liabilities
548.2
514.0
Total Current Liabilities
1,227.2
976.6
Non-current liabilities: Long-term debt, net of current
portion
2,335.4
2,662.5
Non-current operating lease liabilities
186.5
192.4
Other non-current liabilities
161.3
166.4
Total Liabilities
3,910.4
3,997.9
Commitments and Contingencies Shareholders' deficit:
Common shares
0.1
0.1
Paid-in capital in excess of par value
191.3
188.7
Accumulated other comprehensive loss
(239.0
)
(250.2
)
Accumulated deficit
(1,175.2
)
(1,204.5
)
Total Shareholders' Deficit
(1,222.8
)
(1,265.9
)
Total Liabilities and Shareholders' Deficit
$
2,687.6
$
2,732.0
Herbalife Ltd. and Subsidiaries Condensed Consolidated
Statements of Cash Flows (In millions) Three Months Ended
3/31/2023 3/31/2022 CASH FLOWS FROM OPERATING ACTIVITIES:
(unaudited) Net income
$
29.3
$
98.2
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
27.6
29.2
Share-based compensation expenses
10.8
12.4
Non-cash interest expense
1.7
1.7
Deferred income taxes
8.8
5.9
Inventory write-downs
11.5
10.9
Foreign exchange transaction loss
3.2
2.4
Other
2.4
(3.8)
Changes in operating assets and liabilities: Receivables
(13.8)
(16.7)
Inventories
35.8
(7.9)
Prepaid expenses and other current assets
(35.7)
(28.8)
Accounts payable
(24.1)
(2.3)
Royalty overrides
(31.7)
42.8
Other current liabilities
28.9
(22.3)
Other
(8.5)
8.8
NET CASH PROVIDED BY OPERATING ACTIVITIES
46.2
130.5
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property,
plant and equipment
(30.3)
(41.3)
Other
0.1
0.1
NET CASH USED IN INVESTING ACTIVITIES
(30.2)
(41.2)
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from senior
secured credit facility
71.0
82.0
Principal payments on senior secured credit facility and other debt
(138.4)
(89.3)
Debt issuance costs
(0.3)
-
Share repurchases
(8.7)
(116.2)
Other
0.4
1.1
NET CASH USED IN FINANCING ACTIVITIES
(76.0)
(122.4)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
5.5
1.3
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(54.5)
(31.8)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD
516.3
610.4
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD
$
461.8
$
578.6
Supplemental Information
SCHEDULE A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited and unreviewed), (All tables provide Dollars in
millions, except per Share Data)
Adjusted Net Income, Adjusted Diluted EPS and Adjusted
EBITDA
In addition to its reported results calculated in accordance
with GAAP, the Company has included in this release adjusted net
income, adjusted diluted EPS and adjusted EBITDA, performance
measures that the Securities and Exchange Commission defines as
“non-GAAP financial measures.” Adjusted net income, adjusted
diluted EPS and adjusted EBITDA exclude the impact of certain
unusual or non-recurring items such as net expenses related to
COVID-19 pandemic, expenses related to Transformation Program and
expenses related to digital technology program, as further detailed
in the reconciliations below.
Management believes that such non-GAAP financial measures, when
read in conjunction with the Company’s reported results, calculated
in accordance with 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 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 definition and calculation as set forth
in the tables below of adjusted net income, adjusted diluted EPS
and adjusted 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 GAAP.
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, presented and
reported in accordance with U.S. generally accepted
accounting principles, to net income adjusted for certain
items:
Three Months Ended 3/31/2023
3/31/2022 (in millions)
Net income, as reported
$
29.3
$
98.2
Net expenses related to COVID-19 pandemic (1) (2)
-
1.7
Expenses related to Transformation Program (1) (2)
27.3
1.6
Digital technology program costs (1) (2)
3.5
-
Income tax adjustments for above items (1) (2)
(6.2
)
(0.6
)
Net income, as adjusted (3)
$
53.9
$
101.0
The following is a
reconciliation of diluted earnings per share, presented and
reported in accordance with U.S. generally accepted accounting
principles, to diluted earnings per share adjusted for certain
items.
Three Months Ended
3/31/2023 3/31/2022 (per share)
Diluted earnings per share, as reported
$
0.29
$
0.96
Net expenses related to COVID-19 pandemic (1) (2)
-
0.02
Expenses related to Transformation Program (1) (2)
0.27
0.02
Digital technology program costs (1) (2)
0.03
-
Income tax adjustments for above items (1) (2)
(0.06
)
(0.01
)
Adjusted diluted earnings per share (3)
$
0.54
$
0.99
The
following is a reconciliation of net income, presented and reported
in accordance with U.S. generally accepted accounting
principles, to EBITDA and adjusted EBITDA:
Three Months Ended
3/31/2023 3/31/2022 (in
millions) Net income, as reported
$
29.3
$
98.2
Interest expense, net
39.4
29.7
Income taxes
1.8
25.2
Depreciation and amortization
27.6
29.2
EBITDA
$
98.1
$
182.3
Net expenses related to COVID-19 pandemic (1) (2)
-
1.7
Expenses related to Transformation Program (1) (2)
27.3
1.6
Digital technology program costs (1) (2)
3.5
-
Adjusted EBITDA
$
128.9
$
185.6
(1) Based on
interim income tax reporting rules, these expenses are not
considered discrete items. The tax effect of
the adjustments between our 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 3/31/2023 3/31/2022 (in millions)
Net expenses related to COVID-19 pandemic
-
(0.3
)
Expenses related to Transformation Program
(6.0
)
(0.2
)
Digital technology program costs
(0.2
)
-
Total income tax adjustments (3)
$
(6.2
)
$
(0.6
)
Three Months Ended 3/31/2023 3/31/2022
(per share) Net expenses related to COVID-19 pandemic
-
(0.01
)
Expenses related to Transformation Program
(0.06
)
-
Digital technology program costs
-
-
Total income tax adjustments (3)
$
(0.06
)
$
(0.01
)
(3) Amounts may not total due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005791/en/
Media Contact: Gary Kishner Senior Director, Media
Relations 213.745.0456
Investor Contact: Erin Banyas Vice President, Investor
Relations 213.745.0433
Herbalife (NYSE:HLF)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
Herbalife (NYSE:HLF)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024