Herbalife beats earnings and shares are surging

Controversial nutritional supplements seller Herbalife reported fourth quarter earnings results that beat analysts’ expectations.

For the fourth quarter, adjusted earnings per share came in at $US1.41 versus analysts’ estimates of $US1.22.

Revenue for Q4 came in at $US1.13 billion.

The stock was last trading up more than 6.2% in the after-hours session.

In the earnings release, Herbalife lowered guidance. The company that it sees 2015 EPS in a range of $US4.10 to $US4.50. It previously saw a range of $US6.10 to $US6.40, Bloomberg pointed out.

Herbalife is the company that hedge fund manager Bill Ackman is infamously short. For more than two years, Ackman has been on a crusade against Herbalife — a maker of nutritional shakes he believes is operating as a “pyramid scheme” that targets poor people. It’s his contention that regulators, specifically the Federal Trade Commission, will shut the company down. The FTC opened an investigation into Herbalife in March 2014.

Herbalife has denied and continues to deny Ackman’s allegations.

A number of fund managers, most notably Carl Icahn, are long Herbalife’s stock.

Here’s the earnings release:

Herbalife Ltd. Announces Fourth Quarter and Full Year 2014 Results, and 2015 Earnings Guidance

  • Fourth quarter adjusted1 EPS increased 10% to $US1.41 per diluted share compared to $US1.28 per diluted share for the prior year comparable quarter. Reported EPS increased 5% to $US1.21 per diluted share compared to $US1.15 per diluted share in the prior year.
  • Fourth quarter worldwide net sales of $US1.1 billion, down 11% due to an unfavorable impact from currency; net sales excluding currency impact were flat compared to the prior year period.
  • Annual sales leader retention of approximately 54.2% per cent.
  • FY’15 adjusted EPS guidance to a range of $US4.10 to $US4.50.


Herbalife Ltd. (HLF) today reported fourth quarter net sales of $US1.1 billion, reflecting a decline of 11 per cent, primarily due to the unfavorable impact of currency fluctuations. Net sales, excluding currency impact, were flat compared to the prior year. Adjusted net income for the quarter was $US121.0 million, or $US1.41 per diluted share, compared to $US137.2 million, or $US1.28 per diluted share for the same period in 2013. On a reported basis, the company announced fourth quarter net income of $US103.3 million, or $US1.21 per diluted share, compared to $US123.5 million, or $US1.15 per diluted share for the same period in 2013. Fourth quarter 2014 EPS was negatively impacted by a $US0.31 currency headwind.

For the twelve months ended December 31, 2014, the company reported net sales of $US5.0 billion, a 3 per cent increase compared to 2013. Net sales, excluding currency impact, increased 8 per cent compared to 2013. For the twelve months ended December 31, 2014, the company reported net income of $US308.7 million, or $US3.40 per diluted share. On an adjusted basis, net income of $US538.5 million decreased 7 per cent versus adjusted net income of $US577.4 million for the same period in 2013. Adjusted EPS for full year 2014 of $US5.93 increased by 10 per cent versus adjusted EPS of $US5.37 for full year 2013.

Michael Johnson, chairman and CEO stated, “2014 was a record year in terms of net sales, volume and sales leader retention. It was also a year of transition, as we continue to implement changes that we believe will create a stronger company with the ideal combination of growth and sustainability. We have seen the success of these changes in early adopter markets and remain confident that our other markets will follow a similar pattern through 2015 and beyond.”

Johnson continued, “Our revised guidance reflects the currency landscape faced by all global companies and the short-term volume impact of the enhancements we are making. We believe we are executing the right long-term strategy and are confident in our ability to create sustainable value for our shareholders and the millions of Herbalife members and their customers worldwide.”

For the year ended December 31, 2014, the company generated cash flow from operations of $US511.4 million, invested $US156.7 million in capital expenditures, and repurchased approximately $US1.3 billion in common shares outstanding under the approved share repurchase program.

1 See Schedule A — “Reconciliation of Non-GAAP Financial Measures” for more detail.

Fourth Quarter and Fiscal 2014 Key Metrics2,3

Regional Volume Point and Average Active Sales Leader Metrics

Volume Points (Mil) Average Active Sales Leaders
Region 4Q’14 Yr/Yr % Chg 4Q’14 Yr/Yr % Chg
North America 268.6 -6% 77,490 5%
Asia Pacific 263.0 -10% 78,211 6%
EMEA 215.5 17% 66,422 24%
Mexico 204.9 -6% 68,242 3%
South & Central America 211.6 -24% 66,534 1%
China 118.2 15% 20,528 18%
Worldwide Total 1,281.8 -6% 366,489 8%
Venezuela 20.2 -68% 8,146 -32%
Worldwide Total excl Venezuela 1,261.6 -3% 358,963 9%
Volume Points (Mil) Average Active Sales Leaders
Region FY 2014 Yr/Yr % Chg FY 2014 Yr/Yr % Chg
North America 1,244.0 0% 76,180 6%
Asia Pacific 1,189.8 -3% 75,351 5%
EMEA 835.4 20% 59,224 19%
Mexico 875.2 1% 65,861 4%
South & Central America 850.1 -12% 63,712 10%
China 448.5 34% 18,857 27%
Worldwide Total 5,443.0 2% 347,321 9%
Venezuela 91.1 -57% 8,593 -18%
Worldwide Total excl Venezuela 5,351.9 4% 339,395 10%

2 Supplemental tables that include additional business metrics can be found athttp://www.ir.herbalife.com.
3 Worldwide Average Active Sales Leaders may not equal the sum of the Average Active Sales Leaders in each region due to the calculation being an average of Sales Leaders active in a period, not a summation, and the fact that some sales leaders are active in more than one region but are counted only once in the worldwide amount.

Regional Net Sales and FX Impact

Region Reported Net Sales

4Q ’14 (mil)


including FX


excluding FX

North America $US 204.8 -3 % -3 %
Asia Pacific (ex. China) $US 245.6 -12 % -10 %
EMEA $US 200.2 1 % 17 %
Mexico $US 132.7 -7 % -1 %
South & Central America $US 173.2 -40 % -12 %
China $US 177.1 19 % 20 %
Worldwide Total $US 1,133.6 -11 % 0 %
Venezuela $US 9.5 -90 % -19 %
Worldwide Total excl Venezuela $US 1,124.1 -4 % 1 %
Region Reported Net Sales

FY 2014 (mil)


including FX


excluding FX

North America $US 926.8 2 % 2 %
Asia Pacific (ex. China) $US 1,130.1 -4 % -2 %
EMEA $US 843.1 15 % 20 %
Mexico $US 567.9 1 % 5 %
South & Central America $US 826.4 -15 % 4 %
China $US 664.3 41 % 41 %
Worldwide Total $US 4,958.6 3 % 8 %
Venezuela $US 140.3 -47 % -1 %
Worldwide Total excl Venezuela $US 4,818.3 6 % 9 %

2015 Annual Sales Leader Requalification 4

Each year, by the end of January, sales leaders are required to re-qualify to retain their sales leader status. A record number of sales leaders were retained in 2015. The pool of sales leaders needing to re-qualify increased by approximately 2% compared to the prior year, and we retained 7% more of them than in the prior year. Our overall retention rate increased to 54.2% compared to 51.8% from the prior year.

2015 First Quarter and Full Year Guidance

Guidance includes an unfavorable impact from currency rates. For the first quarter, we expect an approximately $US0.28 impact, inclusive of approximately $US0.10 resulting from Venezuela. Full year guidance includes a currency headwind of approximately $US1.19, including approximately $US0.45 from Venezuela.

Based on current business trends the company’s first quarter fiscal 2015 and full year fiscal 2015 guidance is as follows:

Three Months Ending Twelve Months Ending
March 31, 2015 December 31, 2015
Low High Low High
Volume Point Growth vs 2014 (8.0%) (5.0%) (4.5%) (1.5%)
Net Sales Growth vs 2014 (15.5%) (12.5%) (9.0%) (6.0%)
Currency Adjusted Net Sales Growth vs 2014 (7.5%) (4.5%) (1.0%) 2.0%
Diluted EPS $US1.00 $US1.10 $US4.10 $US4.50
Currency Adjusted EPS $US1.30 $US1.40 $US5.30 $US5.70
Cap Ex ($US millions) $US30.0 $US40.0 $US120.0 $US140.0
Effective Tax Rate 27.0% 29.0% 27.0% 29.0%
Free Cash Flow ($US millions) $US430.0 $US460.0

Guidance excludes the impact of expenses primarily related to legal and advisory services relating to the company’s ongoing business matters, expenses related to an FTC Civil Investigative Demand or CID, and the impact of non-cash interest costs associated with the company’s Convertible Notes and the expenses incurred related to the effort to recover costs related to the re-audits that occurred in 2013. Forward guidance is based on the average daily exchange rates of the first three weeks of January. With respect to Venezuela, the guidance assumes a rate of 50 to 1 for all of 2015 and excludes the potential impact of the recent and any future devaluation of the Venezuelan Bolivar and future repatriation, if any, of existing cash balances in Venezuela.

4 Results exclude China, Venezuela and Argentina

Fourth Quarter and Fiscal 2014 Earnings Conference Call

Herbalife senior management will host an investor conference call to discuss its recent financial results and provide an update on current business trends on Thursday, February 26, 2015 at 2:30 p.m. PST (5:30 p.m. EST).

The dial-in number for this conference call for domestic callers is (877) 317-1296 and (706) 634-5671 for international callers (conference ID 67375297). Live audio of the conference call will be simultaneously webcast in the investor relations section of the Company’s website athttp://ir.herbalife.com.

An audio replay will be available following the completion of the conference call in MP3 format or by dialling (855) 859-2056 for domestic callers or (404) 537-3406 for international callers (conference ID 67375297). The webcast of the teleconference will be archived and available on Herbalife’s website.

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