Herbalife Earnings Call Highlights Growth Amid Headwinds

Herbalife Ltd ((HLF)) has held its Q1 earnings call. Read on for the main highlights of the call.

Herbalife’s latest earnings call struck a cautiously optimistic tone as management highlighted another quarter of revenue growth, stronger-than-expected profitability, and healthier cash generation. Executives stressed that refinancing gains, India’s momentum, and a more efficient cost base are building a sturdier foundation, even as specific regions, FX swings, and tax and GST changes temper near‑term margins.

Revenue Growth Above Guidance

Herbalife posted first quarter net sales of $1.3 billion, rising 7.8% year over year and 5.4% on a constant currency basis to beat its own guidance. This marked the third straight quarter of net sales growth, signaling the company is regaining topline momentum after a more challenging period.

Adjusted EBITDA Outperformance

Adjusted EBITDA reached $176 million, topping the high end of the company’s $155 million to $175 million forecast range. While the 13.3% adjusted EBITDA margin slipped 20 basis points versus last year, it expanded by 240 basis points over a two‑year span, underlining structural profit improvements.

Strong India Performance

India stood out as a growth engine, delivering record quarterly net sales of roughly $275 million, up about 32% year over year and 39% in local currency. Volume surged around 37%, showing that demand has held up even after the GST rate cut that initially boosted activity.

Solid Cash Generation

Operating cash flow came in at $114 million for the quarter, a notable improvement over the near‑flat cash performance a year earlier in what is typically a seasonally weaker period. The company ended the quarter with $451 million of cash, nearly $100 million higher than the prior year level, giving it more flexibility.

Successful Debt Refinancing and Deleveraging

Herbalife completed a $1.45 billion senior secured refinancing in April that lowered coupons, including a 450 basis point cut on senior secured notes, and pushed maturities beyond seven years. Management expects about $45 million in annual cash interest savings, while leverage dropped to 2.7 times total and 2.1 times net, with a target of below 2 times by year‑end.

Strategic Acquisitions to Accelerate Personalization

The company closed four deals, including Vionic, Link Biosciences, Prüvit, and Protocol, aimed at enabling more personalized nutrition and digital solutions. Vionic’s rollout will start in 11 EMEA countries in June and in the U.S. in July, underpinning a broader strategy to tie customized products to technology‑driven engagement.

Volume and Pricing Contributions

Worldwide volume grew 4.1% year over year, showing that unit demand is rising alongside pricing. Price increases added roughly $40 million to quarterly net sales, while foreign exchange gave about a $29 million benefit, representing an estimated 240 basis point tailwind.

Operational and Margin Progress Since 2024

Compared with 2024 levels, Herbalife expanded its first quarter adjusted EBITDA margin by roughly 240 basis points, reflecting better operating discipline and cost control. Since 2024, the company has also repaid nearly $540 million of debt, improving balance sheet resilience for the medium term.

EMEA Weakness

In EMEA, reported net sales increased 1% year over year, but constant currency sales fell 6%, revealing the drag from local demand. Volume in the region dropped 11%, more than offsetting favorable pricing and FX, and signaling that the distributor network still faces pockets of weakness.

North America Softness

North American net sales slipped 3% from a year ago, with volume down 5%, as the region dealt with external disruptions. Management pointed to unusually severe winter weather and higher shipments still in transit, which shifted some revenue recognition into the second quarter rather than reflecting underlying demand deterioration.

China Decline

China remained a pressure point, with net sales down 12% and local currency revenue off 16%, driven by an 18% volume decline. Although China accounts for only about 4% of total sales, management is not counting on a near‑term rebound and assumes no material contribution in its outlook.

Gross Profit Margin Pressure

Gross profit margin eased to 77.9%, a 40 basis point decline versus last year as several cost and mix factors weighed on results. Input cost inflation and lower absorption, unfavorable product mix, other cost increases, and FX headwinds together more than offset pricing gains and lower inventory write‑downs.

India GST and G&A Impact

The September 2025 GST rate change in India created a mismatch between taxes collected and those paid on services, increasing general and administrative expenses. The company now expects this GST issue to weigh on full‑year adjusted EBITDA by about $20 million to $25 million, translating to roughly a 40 to 50 basis point margin headwind.

Higher Tax Rate Year over Year

Herbalife’s adjusted effective tax rate rose to 27.3% in the first quarter from 21.8% in 2025, trimming adjusted diluted EPS by around $0.04. For 2026, management is guiding to an adjusted tax rate of about 30%, suggesting a structurally higher tax burden going forward.

FX and Guidance Sensitivity

Foreign exchange moved against the company since its February guidance, shrinking the expected full‑year FX tailwind to about 50 basis points from roughly 100. The second quarter outlook also includes around $10 million of year‑over‑year adjusted EBITDA pressure from the timing of a China grant and the India GST mismatch, underscoring how external factors can still sway results.

Forward-Looking Guidance and Outlook

Management reaffirmed a disciplined outlook, guiding second quarter net sales growth of 1.5% to 5.5% reported and adjusted EBITDA of $150 million to $170 million. For the full year 2026, they see net sales up 1.5% to 5.5% and adjusted EBITDA between $675 million and $705 million, while holding capex and capitalized SaaS spending in check, targeting net leverage below 2 times, and aiming to pare gross debt to around $1.4 billion by 2028.

Herbalife’s earnings call painted a picture of a company regaining its footing, with revenue growth, stronger cash flow, and sizeable interest savings offsetting localized demand and cost pressures. Investors will watch whether India’s surge, ongoing margin work, and new personalization initiatives can balance EMEA, North America, and China headwinds, but for now the trajectory appears cautiously positive.