Herbalife(HLF) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, reported net sales were $1.2 billion, down 0.6% year-over-year, but up 2.7% on a constant currency basis [39][40] - Full year 2024 net sales were$ 5 billion, down 1.4% year-over-year, but up 1.2% on a constant currency basis [41][42] - Adjusted EBITDA for Q4 was $150 million, exceeding guidance, with a margin of 12.4%, up 340 basis points year-over-year [43][58] - Full year adjusted EBITDA was$ 635 million, significantly up from $571 million in 2023, with a margin of 12.7%, up 140 basis points [44][70] Business Line Data and Key Metrics Changes - New distributor growth was up 22% year-over-year in Q4, marking the third consecutive quarter of growth, and up 11% for the full year compared to 2023 [26][29] - Active non-sales leaders showed year-over-year growth for the third consecutive quarter, indicating a positive trend in distributor engagement [28][31] - Sales leader retention rate improved from 68.3% to 70.3% year-over-year, reflecting better distributor support and training initiatives [31][70] Market Data and Key Metrics Changes - Latin America reported net sales growth of 2% on a reported basis and 15% on a local currency basis [51] - EMEA net sales were up 3% year-over-year on a reported basis and 6% on a local currency basis [53] - Asia-Pacific net sales increased by 1% on a reported basis and 3% on a local currency basis [54] - North America saw a decline of 3% year-over-year in net sales, but trends showed improvement over the last three quarters [55][81] - China experienced a significant decline of 20% year-over-year in net sales, attributed to volume declines and strategic shifts [57][99] Company Strategy and Development Direction - The company aims to become one of the world's most important health and wellness platforms, focusing on digital transformation and distributor engagement [24][34] - Initiatives launched in 2024 to rebuild the distributor base and improve activity levels are yielding positive results [25][31] - The company is addressing market-specific challenges with optimization strategies, particularly in Latin America [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving distributor metrics and the potential for growth in 2025, despite currency headwinds [70][72] - The company is focused on leveraging industry disruptors and adapting to changing consumer trends [33][72] - Management acknowledged the challenges in the North American market but indicated that improvements are on track [80][82] Other Important Information - The company reduced its total leverage ratio to 3.2 times as of December 31, down from 3.9 times at the end of 2023 [48][61] - The company plans to pay down$ 1 billion of debt by the end of 2028, with a target to reduce debt to $1.4 billion [61][62] - The company is experiencing a significant currency headwind, projected to impact 2025 net sales and adjusted EBITDA [63][66] Q&A Session Summary Question: What needs to happen to turn around North American volume trends? - Management indicated the need to rebuild the distributor and supervisor base, with positive signs of improvement after 14 quarters of decline [78][80] Question: Is the plan to repay the 2025 maturity just once it comes due in September? - Management confirmed the plan to repay the 2025 notes in September, with some revolver drawn to assist in the repayment [83][84] Question: Can you discuss the constant currency sales guidance range for 2025? - Management explained that the wide range reflects potential opportunities in China and the US, with more upside than downside risks [89][90] Question: What is the situation in China regarding revenue decline? - Management noted a strategic shift towards a customer-focused approach, which has yielded some positive results but is still in transition [98][100] Question: How do you view the preferred customer declines in North America? - Management acknowledged the need to balance transactional and transformational aspects of the business to improve preferred customer metrics [103][106]