Herbalife reported first quarter 2024 net sales of $1.3 billion, up 1.0% year-over-year. On a constant currency basis2, net sales increased 2.4% year-over-year.
First quarter gross profit margin improved to 77.5% compared to 76.2% in first quarter 2023. On a year-over-year basis, gross profit margin benefited from approximately 150 basis points of pricing, approximately 60 basis points of lower inventory write-downs and approximately 10 basis points each from favorable sales mix and foreign currency, partially offset by approximately 110 basis points of input cost inflation, primarily related to increased raw material costs.
Net income was $24.3 million, with net income margin of 1.9%. Net cash provided by operating activities was $13.8 million. Adjusted EBITDA1 of $138.3 million includes approximately $4 million of foreign currency headwinds year-over-year, with adjusted EBITDA1 margin of 10.9%, up 60 basis points year-over-year. Diluted EPS was $0.24, with adjusted diluted EPS1 of $0.49, which includes a $0.03 year-over-year foreign currency headwind.
For the three months ended March 31, 2024, capital expenditures and capitalized SaaS implementation costs were approximately $33 million and $5 million, respectively. The Company expects to incur total capital expenditures of approximately $120 million to $150 million and total capitalized SaaS implementation costs of approximately $20 million to $25 million for the full year of 2024.
On March 20, the Company announced a new organizational restructuring plan designed to bring leadership closer to its markets, streamline the employee structure and accelerate productivity (“Restructuring Program”). The Restructuring Program is expected to deliver annual savings of at least $80 million beginning in 2025, with approximately $40 million expected to be achieved in 2024. The Company expects to incur total program pre-tax expenses of at least $60 million related to the program, which are primarily related to severance costs and will be excluded from adjusted results. The Company began implementing actions related to the program during the first quarter and expects a majority of all actions to be completed by the end of June 2024. For the three months ended March 31, 2024, approximately $17 million of pre-tax expenses were recognized in SG&A related to the restructuring. The Restructuring Program is separate from Herbalife’s Transformation Program.
In March, and consistent with its capital allocation priorities, the Company repaid in full, the outstanding principal and accrued interest on the 2024 Convertible Notes at maturity with a combination of $108.6 million in cash and $91.0 million in borrowings under its revolving credit facility.
On April 12, the Company completed a $1.6 billion senior secured refinancing, which included:
| | • | | $800 million aggregate principal amount of 12.250% senior secured notes due April 2029 |
| | • | | $400 million senior secured Term Loan B facility due April 2029 |
| | • | | $400 million senior secured revolving credit facility due April 2028 (“Amended Revolving Credit Facility”) |
Proceeds from the transactions were used to repay all amounts outstanding under the 2018 Term Loan A, 2018 Term Loan B and 2018 Revolving Credit Facility, which were scheduled to mature in 2025, redeem $300 million of the $600 million aggregate principal amount of the 7.875% Senior Notes due 2025 (“2025 Senior Notes”) at a price of 101.969% of the principal amount plus accrued and unpaid interest and pay related fees and expenses.
In addition, the Company separately repurchased approximately $38 million of the 2025 Senior Notes in a private transaction at the same redemption price as the $300 million described above. Following the repurchase, approximately $262 million remains outstanding on the 2025 Senior Notes. Upon completion of the refinancing transactions, approximately $170 million was outstanding under the Amended Revolving Credit Facility as of April 26.
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