Herbalife: Herbalife Reports Q1 Net Sales at Midpoint of Guidance Range, Net Sales Growth Excluding FX Headwinds1; Q1 Adjusted EBITDA2 Exceeds Guidance; Updates Full-Year Guidance

Herbalife Ltd. (NYSE: HLF) today reported financial results for the first quarter ended March 31, 2025: This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250430667438/en/ "Our first quarter results were strong, and we raised our full-year 2025 Adjusted EBITDA 2 expectations. Our recent acquisitions strengthen our position and support our commitment to transformative growth," Stephan Gratziani, President and incoming CEO (effective May 1 '25). Highlights First Quarter 2025 Net sales of $1.2 billion at midpoint of guidance range Down 3.4% vs. Q1 '24 Includes 480 basis points of FX headwinds Up 1.4% year-over-year on constant currency basis 1 ; at low end of guidance range Net income of $50.4 million; adjusted net income 2 $59.9 million Adjusted EBITDA 1 of $164.9 million exceeds guidance Adjusted EBITDA 2 at constant currency 1 of $181.5 million exceeds guidance Adjusted EBITDA 2 margin up 260 basis points vs. Q1 '24 Credit Agreement EBITDA 2 of $192.0 million Total leverage ratio reduced to 3.0x at March 31 Diluted EPS of $0.49; adjusted diluted EPS 2 $0.59 Recent Developments Completed acquisitions of certain assets of Pro2col Health LLC and Pruvit Ventures, Inc. Formed and obtained a 51% ownership interest in HBL Link Bioscience LLC, which acquired assets of Link BioSciences Inc. Outlook Second quarter 2025 guidance provided Full-year 2025 guidance revised: net sales range narrowed, adjusted EBITDA 2 raised, capital expenditures reduced Management Commentary Herbalife reported first quarter 2025 net sales of $1.2 billion, down 3.4% year-over-year, including 480 basis points of foreign currency headwinds. On a constant currency basis 1 , net sales increased 1.4% year-over-year, marking the second consecutive quarter of year-over-year net sales growth excluding FX headwinds. First quarter gross profit margin improved to 78.3% compared to 77.5% in the first quarter of 2024. On a year-over-year basis, gross profit margin primarily benefited from approximately 80 basis points of pricing and approximately 50 basis points of favorable input costs, mainly related to lower raw material costs, partially offset by approximately 50 basis points of unfavorable impact related to higher inventory write-downs. Net income was $50.4 million, with net income margin of 4.1% and adjusted net income 2 of $59.9 million. Adjusted EBITDA 2 of $164.9 million includes approximately $17 million of foreign currency headwinds year-over-year, with adjusted EBITDA 2 margin of 13.5%, up 260 basis points versus the first quarter of 2024. Diluted EPS was $0.49, with adjusted diluted EPS 2 of $0.59, which includes a $0.13 year-over-year foreign currency headwind. For the first quarter, net cash provided by operating activities was better than expected at $0.2 million. As the Company previously communicated, the first quarter tends to be the lowest cash flow quarter of the year due to payments of the annual Mark Hughes distributor bonuses and employee performance bonuses during the quarter. For the first quarter, capital expenditures and capitalized SaaS implementation costs were $18.3 million and approximately $5 million, respectively. The Company expects to incur total capitalized SaaS implementation costs of approximately $25 million to $30 million for the full year of 2025, which are not included in capital expenditures. As previously disclosed, in February 2025 the Company redeemed $65.0 million aggregate principal amount of the 7.875% Senior Notes due 2025 ("2025 Notes") for an aggregate purchase price of $67.3 million, which included $2.3 million of accrued and unpaid interest. As of March 31, the outstanding principal balance of the 2025 Notes was $197.3 million and is due in September 2025. In addition, the Company's revolving credit facility was undrawn as of March 31. "2025 is off to a strong start," said John DeSimone, Chief Financial Officer. "We delivered net sales growth on a constant currency basis 1 for the second consecutive quarter, adjusted EBITDA 2 exceeded guidance, and we reduced our total leverage ratio to 3.0x, a target achieved ahead of plan." The first quarter of 2025 marked the Company's fourth consecutive quarter of year-over-year growth in the number of new distributors joining Herbalife worldwide, up 16% year-over-year, reflecting continued strength in distributor trends and engagement globally. Positive momentum continued to build throughout the quarter as approximately 2,600 distributors convened in Los Angeles, California for Herbalife Honors, the Company's annual global leadership development and recognition event. Strategic and transformative business initiatives were unveiled, including the planned asset acquisitions of Pro2col Health LLC ("Pro2col LLC"), Pruvit Ventures, Inc. ("Pruvit") and Link BioSciences Inc. ("Link BioSciences") as described below. Also at Honors, the Company, in collaboration with network marketing industry leader and coach, Eric Worre, introduced the all-new Herbalife Flex45 Challenge, which is a distributor engagement program centered on health, product use, personal development and business fundamentals. It builds upon the leadership development and engagement initiatives introduced in 2024, which included the Diamond Development Mastermind Program, an ongoing training and accountability program led by President and incoming CEO Stephan Gratziani and supported by Eric Worre. In April, the program expanded to the China market with approximately 1,300 service providers committing to the program. Since the launch of the program in the U.S. in August 2024, followed by rollouts to the Asia Pacific region, Mexico and China in 2025, approximately 7,100 distributors and service providers have committed to the program, with continued expansion into additional markets planned for the remainder of 2025. Also in April, the Company kicked off its first Extravaganza training events of 2025. Approximately 12,200 attendees convened in Shanghai for China's event, while India hosted its first of two multi-city Extravaganza events planned for 2025, with events in both Bengaluru and Delhi collectively drawing approximately 34,800 attendees. Distributors' response to the Company's new business initiatives has been overwhelmingly positive and strong demand is expected to continue for these training and business development opportunities. Recent Developments In April, and in connection with the binding memorandum of understanding announced on March 12, 2025, the Company acquired certain assets of Pro2col LLC and Pruvit, which primarily consist of software and intangible assets. Additionally, the Company formed and obtained a 51% ownership interest in HBL Link Bioscience LLC. Concurrently, HBL Link Bioscience LLC acquired the assets of Link BioSciences. Pro2col LLC is a health and wellness digital application company. The Pro2col technology platform acquired is designed to deliver tailored health and longevity protocols by using individual biometrics to provide personalized nutrition recommendations in support of a healthy, active lifestyle. Combined with ongoing support and guidance from Herbalife distributors, artificial intelligence ("AI") health assistants and on-line and in-person community connections, the Pro2col platform will provide distributors with new tools and resources, the Company believes will better serve existing customers, appeal to potential new customers and bring in new distributors. A beta version of the platform is expected to be launched at the Herbalife North America Extravaganza at the end of July 2025 and be available to select Herbalife independent distributors in the U.S. The commercial release of the Pro2col technology platform in the U.S. is planned for the fourth quarter of 2025, with additional markets to follow beginning in 2026. Link BioSciences is an established, Texas-based, manufacturing company that uses proprietary technology to analyze biometrics, biomarkers, lifestyle, and genetic input data. The acquired assets will enable Herbalife to leverage the Pro2col technology platform to formulate personalized nutritional supplements for its customers. Pruvit is a direct-seller of patented ketone supplements. The acquired assets expand Herbalife's health and wellness offerings with an attractive, channel-exclusive, new product category. Pruvit will continue to operate independently under its current ownership for up to two years. During the transition period, Herbalife can launch ketone products as the companies come together. Total cash consideration for these asset acquisitions paid in April was $25.5 million, with additional cash contingent payments possible based on future performance. In addition, as part of these acquisitions, three key, strategic employees joined Herbalife to support the continued development of the Pro2col technology platform. As a material inducement for these individuals agreeing to become employed by the Company, they will be granted stock appreciation rights ("SARs") on May 2, 2025 ("Grant Date"). Blake Mallen and Jacob Nelan will be granted 500,000 and 200,000 time-based SARs, respectively, which will vest in three equal installments on the first, second and third anniversaries of the Grant Date. Additionally, Aldo Moreno will be granted 50,000 performance-based SARs on the Grant Date, which will vest upon achievement of the performance criteria. All of the foregoing SARs awards will be granted at a base share price as of market close on the Grant Date. The awards, which were granted outside of the Company's Amended and Restated 2023 Stock Incentive Plan, were approved by the Compensation Committee of the Company's Board of Directors and will be made pursuant to the terms of a SARs award agreement entered into with each individual, respectively. The grants will be awarded without shareholder approval as an "employment inducement award" under Section 303A.08 of the New York Stock Excha