Herbalife’s first quarter results were met with a negative market reaction, as revenue fell short of Wall Street’s expectations and declined year over year. Management cited currency headwinds and lower volumes in key regions as main contributors to the shortfall. CFO John DeSimone pointed out, “FX rates had a negative 480 basis point impact on year-over-year sales.” Despite these challenges, cost control measures and favorable pricing actions supported a notable increase in non-GAAP margins. The company also highlighted continued growth in its distributor base, with President Stephan Gratziani noting a 16% year-over-year rise in new distributors.
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Herbalife (HLF) Q1 CY2025 Highlights:
- 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 (44.9% 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, below analyst estimates of $1.27 billion
- 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
- Organic Revenue rose 1.4% year on year (2.4% in the same quarter last year)
- Market Capitalization: $854.5 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Herbalife’s Q1 Earnings Call
- Chasen Bender (Citi) asked about the monetization and ROI of Pro2col, and CEO Stephan Gratziani and CFO John DeSimone explained revenue could come from app fees, incremental product sales, and new distributor recruitment, but emphasized it is too early for precise forecasts.
- Chasen Bender (Citi) followed up on North America’s performance, and Gratziani noted that despite weak February sales, the region finished strong and is expected to improve sequentially as new technology and platforms launch.
- Chasen Bender (Citi) questioned the reduction in sales guidance midpoint, and DeSimone attributed it mainly to Q1 trends and slight weakness in Asia Pacific, while maintaining a cautious stance on China.
- John Baumgartner (Mizuho Securities) inquired about the target audience for Link BioSciences. Gratziani explained it will initially appeal to athletes and sophisticated consumers but expects broader demand as personalization becomes mainstream.
- Doug Lane (Water Tower Research) asked if capital expenditures would be permanently elevated due to Pro2col. DeSimone clarified that investments are being reprioritized rather than expanded, leveraging existing technology infrastructure for integration.
Catalysts in Upcoming Quarters
Moving forward, our team will be monitoring (1) adoption rates and user engagement metrics for the Pro2col platform as it launches in the U.S., (2) progress in expanding personalized supplement offerings through Link BioSciences, and (3) sequential improvement in North American and Asia Pacific sales volumes. Execution on digital transformation and distributor engagement initiatives will also be important indicators of Herbalife’s ability to drive sustainable growth.
Herbalife currently trades at $8.39, up from $7.18 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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