Health and wellness products company Herbalife (NYSE:HLF) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 3.4% year on year to $1.22 billion. On the other hand, the company expects next quarter’s revenue to be around $1.26 billion, close to analysts’ estimates. Its non-GAAP profit of $0.59 per share was 43.9% above analysts’ consensus estimates.
Revenue: $1.22 billion vs analyst estimates of $1.23 billion (3.4% year-on-year decline, 0.5% miss)
Adjusted EPS: $0.59 vs analyst estimates of $0.41 (43.9% beat)
Adjusted EBITDA: $164.9 million vs analyst estimates of $147.2 million (13.5% margin, 12% beat)
Revenue Guidance for Q2 CY2025 is $1.26 billion at the midpoint, roughly in line with what analysts were expecting
EBITDA guidance for the full year is $640 million at the midpoint, above analyst estimates of $633.6 million
Operating Margin: 10.1%, up from 5.7% in the same quarter last year
Free Cash Flow was -$18.1 million compared to -$19.1 million in the same quarter last year
Organic Revenue rose 1.4% year on year (2.4% in the same quarter last year)
Market Capitalization: $693.6 million
StockStory’s Take
Herbalife’s first quarter results reflected ongoing transformation efforts, as management highlighted the company’s shift toward technology-driven personalization and new product offerings. President and incoming CEO Stephan Gratziani emphasized recent acquisitions—especially the launch of the Pro2col digital platform and Link BioSciences’ personalized supplement manufacturing—as foundational to Herbalife’s strategy. Management attributed Q1’s results primarily to cost-saving initiatives and continued distributor engagement, noting, “Our new distributor growth was up 16% year over year, marking the fourth consecutive quarter of growth.”
Looking ahead, Herbalife’s forward guidance is shaped by investments in digital platforms, expanded product portfolios, and a focus on operational efficiency. CFO John DeSimone explained that while macroeconomic and foreign exchange headwinds persist, cost controls and the expected rollout of Pro2col should support margin improvement and incremental growth. Management remains cautious on China, with DeSimone stating, “We’re going to wait and see on China before we roll any meaningful upside into our projections.”
Key Insights from Management’s Remarks
Herbalife’s management underscored several strategic initiatives and market dynamics behind the quarter’s financial performance, with a focus on technology integration and distributor engagement. Deviations from Wall Street expectations were mainly due to foreign exchange headwinds and mixed regional volume trends.
Acquisitions and Platform Launch: Management completed acquisitions of Pro2col (a digital health platform), Pruvit (ketone supplement IP), and Link BioSciences (personalized supplement manufacturing). The Pro2col platform aims to integrate AI-driven nutrition tracking and personalized health recommendations for distributors and customers.
Distributor Engagement Initiatives: Herbalife reported a 16% year-over-year increase in new distributors, attributing this to enhanced training programs and engagement events like the Flex45 Challenge and regional Extravaganzas.
Regional Performance Variability: While Latin America, EMEA (Europe, Middle East, and Africa), and Asia Pacific saw local currency sales growth, reported revenues were constrained by currency headwinds. North America experienced lower volumes, partly offset by price increases, while China faced a 14% volume decline.
Cost Savings and Margin Expansion: Adjusted EBITDA margin improved due to pricing actions and reduced raw material costs, as well as restructuring and operational efficiency measures taken in 2024.
Product Portfolio Diversification: Management highlighted the rollout of new product categories, particularly through Pruvit’s ketone supplements and future Pro2col-branded offerings, as key to expanding Herbalife’s customer base and increasing engagement.
Drivers of Future Performance
Management’s outlook for the coming quarters centers on leveraging digital health platforms, expanding the product portfolio, and sustaining operational efficiency, while remaining mindful of macroeconomic risks and regional market uncertainties.
Digital Platform Expansion: The upcoming launch of the Pro2col digital health platform is expected to drive incremental product sales, deepen customer engagement, and enhance distributor recruitment, though management noted revenue contribution will be limited in early phases.
Personalization and Premium Offerings: The integration of Link BioSciences’ personalized supplement technology targets a more sophisticated customer segment, including athletes, and is expected to differentiate Herbalife in mature markets over time.
Regional Growth Strategy: Management projects continued distributor growth and local currency momentum outside China, but remains cautious on China’s recovery and anticipates ongoing foreign exchange volatility as a headwind to reported results.
Top Analyst Questions
Chasen Bender (Citi): Asked about the monetization strategy and ROI for the Pro2col platform; management replied that while early-stage, revenue streams will include app fees, incremental product sales, and new distributor acquisition, with more detailed modeling expected after commercial launch.
Chasen Bender (Citi): Inquired about weaker distributor and volume trends in North America; management attributed this to temporary disruptions from technology launches and expects sequential improvement through the year.
John Baumgartner (Mizuho Securities): Questioned the target audience for Link BioSciences; CEO Gratziani explained it will initially serve premium customers and athletes, but expects broader adoption of personalized nutrition over time.
Rob Rigby (Bank of America): Asked about tariff impacts and sourcing from China; CFO DeSimone stated tariffs will have a limited financial effect due to U.S.-based manufacturing and duty drawbacks.
Doug Lane (Water Tower Research): Queried on capital spending for Pro2col and overall CapEx; management clarified that spending is reprioritized from other projects and fully included in updated guidance, with no permanent elevation in capital expenditures anticipated.
Catalysts in Upcoming Quarters
In the upcoming quarters, the StockStory team will monitor (1) the rollout and adoption rates of the Pro2col digital platform in the U.S. and subsequent markets, (2) improvements in North American distributor activity and volume trends following recent technology integrations, and (3) signs of stabilization or recovery in China’s sales volumes. Progress on personalized supplement offerings and the effectiveness of engagement initiatives like the Flex45 Challenge will also be important indicators of execution.
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