HERBALIFE LTD

Previous wording

While we continue to monitor the current global financial environment including the impacts of the inflation, foreign exchange rate fluctuations, the war in Ukraine, and lingering COVID-19 pandemic, we remain focused on the opportunities and challenges in retailing our products and enhancing the customer experience, sponsoring and retaining Members, improving Member productivity, further penetrating existing markets, globalizing successful Daily Methods of Operation, or DMOs, such as Nutrition Clubs, Fit Clubs, and Weight Loss Challenges, introducing new products and globalizing existing products, developing niche market segments and further investing in our infrastructure.

Current wording

While we continue to monitor the current global financial environment including the impacts of the inflation, foreign exchange rate fluctuations, and the wars in Ukraine and the Middle East, we remain focused on the opportunities and challenges in retailing our products and enhancing the customer experience, sponsoring and retaining Members, improving Member productivity, further penetrating existing markets, globalizing successful Daily Methods of Operation, or DMOs, such as Nutrition Clubs, Fit Clubs, and Weight Loss Challenges, introducing new products and globalizing existing products, developing niche market segments and further investing in our infrastructure.

Previous wording

Global inflationary pressures, other macroeconomic factors such as foreign exchange rate fluctuations and geopolitical conflicts can impact our financial condition, results of operations and liquidity. Many regions were seeing significant inflation, mainly during 2022, which impacted both our cost structures and our pricing. Effective June 2022 we instituted a 10% price increase to address rising inflation in most of our geographic markets across all product lines, most remaining markets instituted a similar increase effective during the third quarter of 2022. During 2023, we also continued to institute more localized price increases to address region or market-specific conditions. We continue to examine our cost structure and assess additional potential incremental pricing actions in response to ongoing inflationary pressures.

Current wording

Global inflationary pressures and other macroeconomic factors, such as foreign exchange rate fluctuations and geopolitical conflicts, can impact our financial condition, results of operations and liquidity. For example, inflationary pressure impacts both our cost structures and our pricing. During the twelve months ended December 31, 2024, we instituted pricing actions in certain markets to address region or market-specific conditions. We also instituted localized price increases in 2023. These actions are discussed further in the Sales by Geographic Region discussion further below. We continue to examine our cost structure and assess additional potential incremental pricing actions in response to ongoing inflationary pressures and any tariffs and retaliatory tariffs imposed by the U.S. or foreign governments which could have an adverse impact to our business, which includes our Mexico market where our U.S. manufacturing operations provides a significant amount of finished goods inventory to our Mexico operation.

Previous wording

The specific number of Volume Points assigned to a product, which is generally consistent across all markets, is based on a Volume Point to suggested retail price ratio for similar products. If a product is available in different quantities, the various sizes will have different Volume Point values. In general, once assigned, a Volume Point value is consistent in each region and country and does not change from year to year. We use Volume Points for Member qualification and recognition purposes, as well as a proxy for sales trends, and therefore we generally keep Volume Points for a similar or like product consistent on a global basis. However, because Volume Points are a function of value rather than product type or size, they are not a reliable measure for product mix. As an example, an increase in Volume Points in a specific country or region could mean a significant increase in sales of less expensive products or a marginal increase in sales of more expensive products.

Current wording

The specific number of Volume Points assigned to a product, which is generally consistent across all markets, is based on a Volume Point to suggested retail price ratio for similar products. If a product is available in different quantities, the various sizes will have different Volume Point values. In general, once assigned, a Volume Point value historically has been consistent in each region and country and has not changed from year to year. For strategic reasons, we may from time to time adjust Volume Point values in particular markets or regions. For example, certain Volume Point values were adjusted during fiscal year 2024 for the U.S. and Puerto Rico markets within the North American region, and for most markets within the Latin America region, excluding Mexico. We use Volume Points for Member qualification and recognition purposes, as well as a proxy for sales trends, and therefore, generally, we have historically kept Volume Points for a similar or like product consistent on a global basis. However, because Volume Points are a function of value rather than product type or size, they are not a reliable measure for product mix. As an example, an increase in Volume Points in a specific country or region could mean a significant increase in sales of less expensive products or a marginal increase in sales of more expensive products.

Previous wording

Our “contribution margins” consist of net sales less cost of sales and Royalty overrides.

Current wording

Our “contribution margins” consist of net sales less cost of sales, Royalty overrides, and service fees to our independent service providers in China, for the purposes of segment reporting specifically, as discussed further below and described in our Note 10, Segment Information, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K.

Previous wording

Our“other (income) expense, net” consists of non-operating income and expenses such as gains or losses on extinguishment of debt.

Current wording

Our“other expense (income), net” consists of non-operating income and expenses such as gains or losses on extinguishment of debt.

Previous wording

Most of our sales to Members outside the United States are made in the respective local currencies. In preparing our financial statements, we translate revenues into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from our suppliers generally are made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and contribution margins and can generate foreign currency losses on intercompany transactions. Foreign currency exchange rates can fluctuate significantly. From time to time, we enter into foreign currency derivatives to partially mitigate our foreign currency exchange risk as discussed in further detail in Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K.

Current wording

Most of our sales to Members outside the United States are made in the respective local currencies. In preparing our financial statements, we translate revenues into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from our suppliers generally are made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on gross profit and can generate foreign currency losses on intercompany transactions. Foreign currency exchange rates can fluctuate significantly. From time to time, we enter into foreign currency derivatives to partially mitigate our foreign currency exchange risk as discussed in further detail in Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K.

Previous wording

Management’s role, in-country and at the region and corporate level, is to provide Members with a competitive, broad, and innovative product line, offer leading-edge business tools and technology services, and encourage strong teamwork and Member leadership to make doing business with Herbalife simple. We continue to provide our Members with enhanced technology tools for ordering, business performance, and customer retailing to make it easier for them to do business with us and to optimize their customers’ experiences. Management uses the Marketing Plan, which reflects the rules for our global network marketing organization that specify the qualification requirements and general compensation structure for Members, coupled with educational and motivational programs and promotions to encourage Members to increase retailing, retention, and recruiting, which in turn affect net sales. Such programs include sales events such as Extravaganzas, Leadership Development Weekends and World Team Schools where large groups of Members network with other Members, learn retailing, retention, and recruiting techniques from our leading Members, and become more familiar with how to market and sell our products and business opportunities. Accordingly, management believes that these development and motivation programs increase the productivity of the sales leader network. The expenses for such programs are included in selling, general, and administrative expenses. We also use event and non-event product promotions to motivate Members to increase retailing, retention, and recruiting activities. These promotions have prizes ranging from qualifying for events to product prizes and vacations. In a number of markets, we have segmented our Member base into “preferred members” and “distributors” for more targeted and efficient communication and promotions for these two differently motivated types of Members. In certain other markets that have not been segmented, we use Member data to similarly categorize Members for communication and promotion efforts.

Current wording

Management’s role, in-country and at the region and corporate level, is to provide Members with a competitive, broad, and innovative product line, offer leading-edge business tools and technology services, and encourage strong teamwork and Member leadership to make doing business with Herbalife simple. We continue to provide our Members with enhanced technology tools, which includes updated brand sites, for ordering, business performance, and customer retailing to make it easier for them to do business with us and to optimize their customers’ experiences. Management uses the Marketing Plan, which reflects the rules for our global network marketing organization that specify the qualification requirements and general compensation structure for Members, coupled with educational, training, and motivational programs and promotions to encourage Members to increase retailing, retention, and recruiting, which in turn affect net sales. Such programs include sales events such as Extravaganzas, Leadership Development Weekends and World Team Schools where large groups of Members network with other Members, learn retailing, retention, and recruiting techniques from our leading Members, and become more familiar with how to market and sell our products and business opportunities. Accordingly, management believes that these development and motivation programs increase the productivity of the sales leader network. The expenses for such programs are included in selling, general, and administrative expenses. We also use event and non-event product promotions to motivate Members to increase retailing, retention, and recruiting activities. These promotions have prizes ranging from qualifying for events to product prizes and vacations. In a number of markets, we have segmented our Member base into “preferred members” and “distributors” for more targeted and efficient communication and promotions for these two differently motivated types of Members. In certain other markets that have not been segmented, we use Member data to similarly categorize Members for communication and promotion efforts.

Previous wording

Global inflationary pressures, supply chain challenges and other non-pandemic factors such as geopolitical conflict may impact both our cost structures and our pricing, with potential sales volume impact. Lingering impacts from the COVID-19 pandemic may also continue to impact our results of operations in future quarters and their comparability to prior periods, both on a consolidated basis and at the regional level. However, given the unpredictable, unprecedented, and fluid nature of these factors, we are unable to predict the extent to which they will adversely impact our business, financial condition, and results of operations, including the impact it may have on our regions and individual markets. We continue to examine our cost structure and assess potential incremental pricing actions in response to ongoing inflationary pressures which could impact our net sales and sales volumes. See the Sales by Geographic Region below for a more detailed discussion of each geographic region and individual market.

Current wording

Global inflationary pressures, supply chain challenges and other macroeconomic factors such as geopolitical conflict and trade tensions may impact both our cost structures and our pricing, with potential sales volume impact. However, given the unpredictable, unprecedented, and fluid nature of these factors, we are unable to predict the extent to which they will adversely impact our business, financial condition, and results of operations, including the impact it may have on our regions and individual markets. We continue to examine our cost structure and assess potential incremental pricing actions in response to ongoing inflationary pressures which could impact our net sales and sales volumes. See the Sales by Geographic Region below for a more detailed discussion of each geographic region and individual market.

Previous wording

Net income was $142.2 million, or $1.42 per diluted share, for the year ended December 31, 2023. Net income decreased $179.1 million, or 55.7%, for the year ended December 31, 2023 as compared to the same period in 2022. The decrease in net income for the year ended December 31, 2023 was mainly due to $128.5 million lower contribution margin driven by lower net sales, $55.6 million higher selling, general, and administrative expenses and $21.2 million higher net interest expense; partially offset by $42.7 million lower income taxes.

Current wording

Net income was $254.3 million, or $2.50 per diluted share, for the year ended December 31, 2024. Net income increased $112.1 million, or 78.8%, for the year ended December 31, 2024 as compared to the same period in 2023. The increase in net income for the year ended December 31, 2024 was mainly due to $145.7 million lower income taxes primarily due to the deferred income tax impacts from corporate reorganization in 2024 and $26.2 million lower royalty overrides driven by lower net sales, partially offset by $51.6 million higher net interest expense.

Previous wording

Net income for the year ended December 31, 2022 included a $12.8 million favorable impact on the extinguishment of a portion of the 2024 Convertible Notes (See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K); a $12.1 million pre-tax unfavorable impact ($10.5 million post-tax) of Transformation Program expenses, primarily relating to professional fees; an $11.9 million pre-tax unfavorable impact ($11.3 million post-tax) of expenses relating to our new Digital Technology Program focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools; a $5.5 million pre-tax unfavorable impact ($4.4 million post-tax) relating to the Russia-Ukraine conflict, primarily from sales centers termination and other related costs in Russia; and a $4.4 million pre-tax unfavorable impact ($3.6 million post-tax) from expenses related to the COVID-19 pandemic.

Current wording

Net income for the year ended December 31, 2024 included a $147.3 million favorable deferred income tax impacts from corporate reorganization in 2024, a $69.1 million pre-tax unfavorable impact ($51.6 million post-tax) of Restructuring Program expenses, primarily relating to employee retention and separation costs, a $26.7 million pre-tax unfavorable impact ($24.9 million post-tax) of expenses relating to our new Digital Technology Program focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools, a $13.4 million pre-tax unfavorable impact ($10.3 million post-tax) of Transformation Program expenses, primarily relating to employee retention and separation costs, a $10.5 million pre-tax unfavorable impact ($8.2 million post-tax) of loss on extinguishment of debt related to the April 2024 debt refinancing transactions, and a $4.0 million pre-tax favorable impact ($3.1 million post-tax) of gain on sale of the Company’s land, building, and related building improvements of its office building in Torrance, California (See Note 2, Basis of Presentation, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for further discussion).

Previous wording

Net income for the year ended December 31, 2023 included a $54.2 million pre-tax unfavorable impact ($43.6 million post-tax) of Transformation Program expenses, primarily relating to employee retention and separation costs; a $32.1 million pre-tax unfavorable impact ($29.5 million post-tax) of expenses relating to our new Digital Technology Program focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools; an $8.6 million pre-tax unfavorable impact ($7.5 million post-tax) related to the Korea customs duty settlement (See Note 7, Contingencies, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for further discussion); and a $1.0 million favorable impact ($1.0 million post-tax) on the extinguishment of a portion of the 2024 Convertible Notes (See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for further discussion).

Current wording

Net income for the year ended December 31, 2023 included a $54.2 million pre-tax unfavorable impact ($43.6 million post-tax) of Transformation Program expenses, primarily relating to employee retention and separation costs; a $32.1 million pre-tax unfavorable impact ($29.5 million post-tax) of expenses relating to our new Digital Technology Program focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools; an $8.6 million pre-tax unfavorable impact ($7.5 million post-tax) related to the Korea customs duty settlement (See Note 7, Contingencies, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of our 2023 10-K for further discussion); and a $1.0 million favorable impact ($1.0 million post-tax) on the extinguishment of a portion of the 2024 Convertible Notes (See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for further discussion).

Previous wording

As discussed above under “Presentation,” contribution margin consists of net sales less cost of sales and Royalty overrides.

Current wording

As discussed above under “Presentation,” contribution margin consists of net sales less cost of sales, Royalty overrides, and service fees to our independent service providers in China. Also, as discussed in Note 10, Segment Information, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K, in the second quarter of 2024, the Company changed its presentation of this segment reporting measure for its China segment. Historical information discussed below has been adjusted to conform with the current period contribution margin. This change had no impact on the Company's accompanying consolidated statements of income and only impacts the China contribution margin amounts discussed below and the operating information table in Note 10, Segment Information, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K.

Previous wording

The Primary Reporting Segment reported contribution margin of $1,937.8 million, or 40.9% of net sales, for the year ended December 31, 2023, representing a decrease of $67.5 million, or 3.4%, as compared to the same period in 2022. The 3.4% decrease in contribution margin for the year ended December 31, 2023 was primarily the result of a 9.1% unfavorable impact of volume decreases, a 2.4% unfavorable impact of foreign currency fluctuations, a 5.4% unfavorable impact of cost changes related to self-manufacturing and sourcing primarily related to increased raw material and manufacturing labor costs and increased allocated overhead costs due to lower production volume, and a 2.0% unfavorable impact of sales mix, partially offset by a 14.6% favorable impact of price increases.

Current wording

The Primary Reporting Segment reported contribution margin of $2,004.3 million, or 42.7% of net sales, for the year ended December 31, 2024, representing an increase of $66.5 million, or 3.4%, as compared to the same period in 2023. The 3.4% increase in contribution margin for the year ended December 31, 2024 was primarily the result of a 9.5% favorable impact of price increases and a 0.5% favorable impact of lower inventory write-downs, partially offset by unfavorable impact of volume decreases, as indicated by a 3.9% decrease in Volume Points (4.2% decrease excluding the impact of the Volume Point adjustments noted above in the Volume Points by Geographic Region section), and a 2.4% unfavorable impact of foreign currency fluctuations.

Previous wording

China reported contribution margin of $274.4 million for the year ended December 31, 2023, representing a decrease of $61.0 million, or 18.2%, as compared to the same period in 2022. The 18.2% decrease in contribution margin for the year ended December 31, 2023 was primarily the result of a 9.1% unfavorable impact of volume decreases, a 5.3% unfavorable impact of foreign currency fluctuations, and a 3.6% unfavorable impact of sales mix, partially offset by 3.0% favorable impact of price increases.

Current wording

China reported contribution margin of $101.7 million for the year ended December 31, 2024, representing a decrease of $7.7 million, or 7.0%, as compared to the same period in 2023. The 7.0% decrease in contribution margin for the year ended December 31, 2024 was primarily the result of an unfavorable impact of volume decreases, as indicated by a 6.5% decrease in Volume Points, a 2.5% unfavorable impact of sales mix, and a 2.1% unfavorable impact of foreign currency fluctuations, partially offset by a 1.4% favorable impact of cost changes related to self-manufacturing and sourcing.

Previous wording

Net sales in the U.S. were $1,100.5 million for the year ended December 31, 2023. Net sales decreased $125.0 million, or 10.2%, for the year ended December 31, 2023 as compared to the same period in 2022.

Current wording

Net sales in the U.S. were $1,026.0 million for the year ended December 31, 2024. Net sales decreased $74.5 million, or 6.8%, for the year ended December 31, 2024 as compared to the same period in 2023.

Previous wording

Sales volumes declined for 2023 versus 2022. Emerging from pandemic conditions, we have fewer new Members in the region as Members work to re-establish and evolve traditional face-to-face approaches for their businesses. Inflationary pressures, although improving during the second half of 2023, have also challenged some areas of customer demand. We are supporting Members with increased numbers of in-person events, new product launches, targeted communications and sales incentives, as well as modernizing our technological tools in order to enhance our Members’ ability to market and sell our products and promote business opportunities. The region implemented 3.5% price increases during March 2023 and September 2023.

Current wording

Sales volumes continued to decline for the twelve months ended December 31, 2024 compared to the 2023 prior year period. Despite increases in new distributors, we continue to have fewer total number of new Members in the region during the twelve months ended December 31, 2024 compared to the prior year period. We are supporting Members with new product launches, a new training and recognition program, targeted communications and sales incentives, as well as modernizing our technological tools in order to enhance our Members’ ability to market and sell our products and promote business opportunities. The region implemented 3.0% price increases during March 2024. During 2023, the region implemented 3.5% price increases during March 2023 and September 2023.

Previous wording

Net sales in Mexico were $525.0 million for the year ended December 31, 2023. Net sales increased $50.4 million, or 10.6% for the year ended December 31, 2023 as compared to the same periods in 2022. In local currency, net sales decreased 2.5% for the year ended December 31, 2023 as compared to the same periods in 2022. The fluctuation of foreign currency exchange rates had a favorable impact of $62.3 million for the year ended December 31, 2023. A volume decline was seen for 2023 versus the prior year, attributable we believe to the cumulative impact of several years of declines in new Members and Sales Leaders and, the market has continued to face difficult economic conditions. We believe, inflationary conditions, which continued during the first half of 2023, have also created challenges for Members’ Nutrition Club operations, which continue to be an important DMO in the market. We are supporting Members with promotions that encourage volume, even at lower levels, for newer Members. During the second half of 2023, we experienced importation delays in Mexico as a result of the government delaying timely approval of importation permits which impacted certain of our inventory supply, which we believe adversely affected net sales towards the end of the year. To minimize the risk of disruption to our Mexico market, we continue to work closely with the Mexican government and have seen gradual improvements as additional importation permits were received. The market saw a 2% price increase during June 2023 and a 5% price increase during January 2023.

Current wording

During the second half of 2023 and in the first quarter of 2024, we experienced importation delays in Mexico as a result of the government delaying timely approval of importation permits which impacted certain of our inventory supply, which we believe adversely affected our net sales through the first quarter of 2024. To minimize the risk of disruption to our Mexico market, we continue to work closely with the Mexican government and, during the rest of 2024, we have seen improvements as importation permits were timely received and are no longer experiencing any disruptions. The Mexico market implemented a 5.25% price increase during March 2024. During 2023, the Mexico market implemented 2% and 5% price increases during June 2023 and January 2023, respectively.

Previous wording

Other markets across the region also saw volume declines for the year ended December 31, 2023 versus the 2022 periods. The region has seen difficult economic conditions as well as market-specific factors including political and social instability. Inflationary pressures, improving but remained elevated, and foreign exchange rate fluctuations in certain markets in the region have challenged our Members’ operations and customer demand. The sales volume declines in markets other than Mexico was greatest for Chile, Colombia, Brazil, and Peru. Promotional efforts within the region include increasing in-person activities, supporting on a market-by-market basis the Nutrition Club DMO, utilizing segmented promotions and sales incentives, and launching new products. The majority of the markets in the region instituted price increases to address market-specific conditions during the year ended December 31, 2023.

Current wording

The region has seen difficult economic conditions as well as market-specific factors including political and social instability. Inflationary pressures, are improving but remained elevated, and foreign exchange rate fluctuations in certain markets in the region have challenged our Members’ operations and customer demand. Promotional efforts within the region include increasing in-person activities, adding programs, such as Masterclass training formats, supporting on a market-by-market basis the Nutrition Club DMO, utilizing segmented promotions and sales incentives, and launching new products.

Previous wording

The EMEA region reported net sales of $1,068.8 million for the year ended December 31, 2023. Net sales decreased $9.7 million, or 0.9% for the year ended December 31, 2023 as compared to the same periods in 2022. In local currency, net sales increased 0.8% for the year ended December 31, 2023 as compared to the same periods in 2022. The 0.9% decrease in net sales for the year ended December 31, 2023 was primarily due to a decrease in sales volume, as indicated by a 9.6% decrease in Volume Points, and an 1.7% unfavorable impact of fluctuations in foreign currency exchange rates, partially offset by a 10.9% favorable impact of price increases. The EMEA region has no single market that accounts for a significant portion of our consolidated net sales.

Current wording

The EMEA region reported net sales of $1,084.8 million for the year ended December 31, 2024. Net sales increased $16.0 million, or 1.5% for the year ended December 31, 2024 as compared to the same period in 2023. In local currency, net sales increased 4.4% for the year ended December 31, 2024 as compared to the same period in 2023. The 1.5% increase in net sales for the year ended December 31, 2024 was primarily due to a 9.4% favorable impact of price increases and a 2.2% favorable impact of country sales mix, partially offset by a decrease in sales volume, as indicated by a 7.1% decrease in Volume Points and a 2.9% unfavorable impact of fluctuations in foreign currency exchange rates. The EMEA region has no single market that accounts for a significant portion of our consolidated net sales.

Previous wording

Volumes declined, to a lesser extent, across most EMEA markets during the year ended December 31, 2023 as compared to the 2022 period. Economic conditions across the region, including inflation in certain markets, weakened consumer confidence, and foreign exchange rate fluctuations, as well as political uncertainty in certain markets appear to be further hindering business recovery. The volume declines across the EMEA markets for the year ended December 31, 2023 as compared to the 2022 comparative periods were led by Russia and Spain, partially offset by increases in Kazakhstan. Our Russia entity had significant volume declines during the year ended December 31, 2023 compared to the prior year comparative period, due to the suspension of product shipments to our Russia entity where its inventory has been fully depleted as of September 30, 2023; therefore our Russia entity will not have any product sales in future periods while its inventory remains fully depleted. As a result, Russian Members purchasing products in Kazakhstan, among other neighboring markets, has led to an increase in volume in Kazakhstan.

Current wording

Economic conditions across the region, including inflation in certain markets, weakened consumer confidence, and foreign exchange rate fluctuations, as well as political uncertainty in certain markets appear to be further hindering business recovery. The volume declines across the EMEA markets during the twelve months ended December 31, 2024, as compared to the same period in 2023, were led by Türkiye, Spain and Russia, partially offset by increases in Mongolia, United Kingdom and Kazakhstan. Despite a decline in volume, Türkiye saw a year over year increase in net sales, primarily due to price increases. Our Russia entity had no sales during the twelve months ended December 31, 2024 due to the suspension of product shipments to our Russia entity where its inventory had been fully depleted as of September 30, 2023; therefore our Russia entity will not have any product sales in future periods while its inventory remains fully depleted. As a result, Russian Members purchasing products in Kazakhstan, among other neighboring markets, has led to increases in volume in Kazakhstan.

Previous wording

Focus areas for Herbalife and our Members in the region include branding and promotions, supporting increased numbers of in-person events, launching new products, strengthening the Nutrition Club DMO in certain markets, and other promotional initiatives to incentivize sales. The majority of the markets in the region instituted price increases to address market-specific conditions during the year ended December 31, 2023.

Current wording

Focus areas for Herbalife and our Members in the region include promotions and events, launching new products, enhancing both online and in person training programs and meetings, including new regional Masterclass training formats to help distributors improve their business, supporting Nutrition clubs and other DMOs, and other promotional activities in order to grow our sales in the region. The majority of the markets in the region instituted price increases to address market-specific conditions during the twelve months ended December 31, 2024.

Previous wording

The Asia Pacific region, which excludes China, reported net sales of $1,713.9 million for the year ended December 31, 2023. Net sales increased $27.0 million, or 1.6%, for the year ended December 31, 2023 as compared to the same period in 2022. In local currency, net sales increased 5.3% for the year ended December 31, 2023 as compared to the same period in 2022. The 1.6% increase in net sales for the year ended December 31, 2023 was primarily due to an 8.0% favorable impact of price increases, partially offset by a 3.7% unfavorable impact of fluctuations in foreign currency exchange rates, a 2.1% unfavorable impact of sales mix, and a decrease in sales volume, as indicated by a 0.2% decrease in Volume Points.

Current wording

The Asia Pacific region, which excludes China, reported net sales of $1,723.8 million for the year ended December 31, 2024. Net sales increased $9.9 million, or 0.6%, for the year ended December 31, 2024 as compared to the same period in 2023. In local currency, net sales increased 3.0% for the year ended December 31, 2024 as compared to the same period in 2023. The 0.6% increase in net sales for the year ended December 31, 2024 was primarily due to a 3.5% favorable impact of price increases, partially offset by a 2.4% unfavorable impact of fluctuations in foreign currency exchange rates and a decrease in sales volume, as indicated by a 0.3% decrease in Volume Points.

Previous wording

Net sales in India were $796.6 million for the year ended December 31, 2023. Net sales increased $119.5 million, or 17.6%, for the year ended December 31, 2023 as compared to the same period in 2022. In local currency, net sales increased 23.5% for the year ended December 31, 2023 as compared to the same period in 2022. The fluctuation of foreign currency exchange rates had an unfavorable impact of $39.8 million on net sales for the year ended December 31, 2023. Sales volumes have increased in India in recent years as we continue to promote our brand, such as through sports sponsorships, increase the number of in-person events, launch new products, strengthen the Preferred Customer program in the market, and make it easier for our Members to do business, such as by improving product access points and payment methods. The India market implemented a 4.5% price increase in November 2023.

Current wording

Net sales in India were $844.8 million for the year ended December 31, 2024. Net sales increased $48.2 million, or 6.1%, for the year ended December 31, 2024 as compared to the same period in 2023. In local currency, net sales increased 7.4% for the year ended December 31, 2024 as compared to the same period in 2023. The fluctuation of foreign currency exchange rates had an unfavorable impact of $11.0 million on net sales for the year ended December 31, 2024. The sales volume in India increased 2.4% for the twelve months ended December 31, 2024, as compared to the same period in 2023. We continue to promote our brand, such as through sports sponsorships, in-person events, and introducing new product line for skin care. The India market implemented a 3.0% price increase in November 2024. During 2023, the India market implemented a 4.5% price increase during November 2023.

Previous wording

Net sales in Vietnam were $279.0 million for the year ended December 31, 2023. Net sales decreased $19.9 million, or 6.7%, for the year ended December 31, 2023 as compared to the same period in 2022. In local currency, net sales decreased 4.9% for the year ended December 31, 2023 as compared to the same period in 2022. The fluctuation of foreign currency exchange rates had an unfavorable impact of $5.2 million on net sales for the year ended December 31, 2023. Vietnam saw a sales volume decline for 2023 versus 2022. Members’ Nutrition Club operations continue to be an important DMO in the market which management continues to support and monitor, and we believe, macroeconomic conditions in the market continue to create challenges. The market implemented a 3% price increase in March 2023. Further, changes to direct-selling regulations in the market were approved by local government in April 2023; we continue to work closely with Vietnam government and monitor these regulations and any impact they may have on our business in Vietnam.

Current wording

Net sales in Vietnam were $283.7 million for the year ended December 31, 2024. Net sales increased $4.7 million, or 1.7%, for the year ended December 31, 2024 as compared to the same period in 2023. In local currency, net sales increased 6.8% for the year ended December 31, 2024 as compared to the same period in 2023. The fluctuation of foreign currency exchange rates had an unfavorable impact of $14.4 million on net sales for the year ended December 31, 2024. The sales volume in Vietnam increased for the twelve months ended December 31, 2024, as compared to the 2023 period and was partially driven by, we believe, successful implementation of promotional initiatives and sales events. Members’ Nutrition Club operations continue to be an important DMO in the market which management continues to support and monitor. The market implemented a 3.5% price increase in March 2024. During 2023, the Vietnam market implemented a 3% price increase during March 2023. Further, changes to direct-selling regulations in the market were approved by the Vietnam government in April 2023; we continue to work closely with the Vietnam government to monitor their interpretations of these regulations, and address them accordingly. In January 2025, the Vietnam government renewed our direct selling license, which will remain valid until January 2030, at which time we will seek its renewal.

Previous wording

Across most of the region’s other markets sales volume was down for the year ended December 31, 2023 as compared to the 2022 periods, most significantly for Indonesia, Malaysia and South Korea. Emerging from pandemic conditions, we are seeing lower levels of member retention and new Members for some markets as Members transition back to traditional face-to-face approaches from pandemic-driven virtual methods, and as Members’ Nutrition Club operations recover from pandemic disruption and inflationary pressure in certain markets that have also challenged some areas of customer demand. Our efforts in the region include promotional initiatives to incentivize sales, launching new products, and expanding successful country initiatives throughout the region. The majority of the markets in the region instituted price increases to address market-specific conditions during the twelve months ended December 31, 2023.

Current wording

Across several other markets, sales volume was down for the twelve months ended December 31, 2024 as compared to the 2023 period, most significantly for Indonesia and South Korea. Although total Members declined for the region, we have seen an increase in new distributors for certain of our markets. In addition, as Members’ Nutrition Club operations continue to recover from macroeconomic conditions including inflationary pressure and high interest rates in certain markets that have also challenged some areas of customer demand. Our efforts in the region include programs and promotional initiatives to incentivize sales, and launching new products. Most markets in the region instituted price increases to address market-specific conditions during the twelve months ended December 31, 2024.

Previous wording

Focus areas for China include enhancing our digital capabilities and offerings, such as improving the integration of our technological tools to make it easier for our Members to do business, returning to face-to-face business approaches, encouraging a customer-based approach through DMOs such as weight management challenges, and supporting Members’ establishment of daily consumption-oriented Nutrition Clubs. We have expanded our product line for the China market and continue to conduct sales promotions in the region.

Current wording

Sales volume was down for the twelve months ended December 31, 2024 as compared to the 2023 period as our Members adjust to our sales initiatives and they continue rebuilding and optimizing their business process. We believe, the recent economic difficulties experienced in the region are a contributing factor in China’s recent Volume Point decreases. The frequency and attendance of our and our Members’ in-person training and sales meetings, which are important to the business as they are a central channel for attracting and retaining customers, providing personal and professional development for our Members, and promoting our products, are stabilizing, but continue to be below pre-pandemic levels. Other focus areas for China include enhancing our digital capabilities and offerings, such as improving the integration of our technological and enhanced tools to make it easier for our Members to do business, encouraging a customer-based approach through customer loyalty programs to engage customers, and supporting Nutrition Clubs. We have expanded our product line for the China market and continue to conduct sales promotions in the region.

Previous wording

Net sales for the majority of product categories decreased for the year ended December 31, 2023 as compared to the same period in 2022. The trends and business factors described in the above discussions of the individual geographic regions apply generally to all product categories.

Current wording

The trends and business factors described in the above discussions of the individual geographic regions apply generally to all product categories.

Previous wording

Gross profit was $3,871.4 million and $4,030.8 million for the years ended December 31, 2023 and 2022, respectively. Gross profit as a percentage of net sales was 76.5% and 77.4% for the years ended December 31, 2023 and 2022, respectively, or an unfavorable net decrease of 98 basis points.

Current wording

Gross profit was $3,888.8 million and $3,871.4 million for the years ended December 31, 2024 and 2023, respectively. Gross profit as a percentage of net sales was 77.9% and 76.5% for the years ended December 31, 2024 and 2023, respectively, or a favorable net increase of 141 basis points.

Previous wording

The decrease in gross profit as a percentage of net sales for the year ended December 31, 2023 as compared to the same period in 2022 included unfavorable cost changes related to self-manufacturing and sourcing of 218 basis points primarily related to increased raw material, manufacturing labor, and increased allocated overhead costs due to lower production volume; the unfavorable impact of foreign currency fluctuations of 70 basis points; unfavorable changes in sales mix of 51 basis points; and unfavorable other cost changes of 3 basis points; partially offset by the favorable impact of price increases of 220 basis points; the favorable impact of lower inventory write-downs of 16 basis points; and the favorable impact of cost changes of 8 basis points relating to lower outbound freight costs.

Current wording

The increase in gross profit as a percentage of net sales for the year ended December 31, 2024 as compared to the same period in 2023 included the favorable impact of price increases of 121 basis points; the favorable impact of lower inventory write-downs of 18 basis points; the favorable impact of foreign currency fluctuations of 12 basis points; and favorable other cost changes of 8 basis points; partially offset by unfavorable changes in sales mix of 15 basis points; and unfavorable cost changes related to self-manufacturing and sourcing of 3 basis points primarily related to increased raw material, manufacturing labor, and increased allocated overhead costs due to lower production volume.

Previous wording

Royalty overrides were $1,659.2 million and $1,690.1 million for the years ended December 31, 2023 and 2022, respectively. Royalty overrides as a percentage of net sales were 32.8% and 32.4% for the years ended December 31, 2023 and 2022, respectively.

Current wording

Royalty overrides were $1,633.0 million and $1,659.2 million for the years ended December 31, 2024 and 2023, respectively. Royalty overrides as a percentage of net sales were 32.7% and 32.8% for the years ended December 31, 2024 and 2023, respectively.

Previous wording

The increase in royalty overrides as a percentage of net sales for the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to lower net sales in China as a proportion of our total worldwide net sales. The majority of service fees to our independent service providers in China are included in selling, general, and administrative expenses while Member compensation for all other countries is included in Royalty overrides.

Current wording

The decrease in royalty overrides as a percentage of net sales for the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to favorable changes in mix of products and countries, partially offset by lower net sales in China as a proportion of our total worldwide net sales. Generally, royalty overrides as a percentage of net sales may vary from period to period due to changes in the mix of products and countries because full royalty overrides are not paid on certain products and in certain countries. The majority of service fees to our independent service providers in China are included in selling, general, and administrative expenses while Member compensation for all other countries is included in Royalty overrides.

Previous wording

Selling, general, and administrative expenses were $1,866.0 million and $1,810.4 million for the years ended December 31, 2023 and 2022, respectively. Selling, general, and administrative expenses as a percentage of net sales were 36.9% and 34.8% for the years ended December 31, 2023 and 2022, respectively.

Current wording

Selling, general, and administrative expenses were $1,875.4 million and $1,866.0 million for the years ended December 31, 2024 and 2023, respectively. Selling, general, and administrative expenses as a percentage of net sales were 37.6% and 36.9% for the years ended December 31, 2024 and 2023, respectively.

Previous wording

The increase in selling, general, and administrative expenses for the year ended December 31, 2023 as compared to the same period in 2022 was driven by $46.2 million in higher labor and benefits costs, $26.5 million in higher professional fees primarily from expenses related to the Digital Technology Program, $10.6 million in higher non-income tax expense primarily from the Korea customs duty settlement, $9.1 million in higher foreign exchange losses, partially offset by $31.2 million in lower service fees for China independent service providers due to lower sales in China, and $13.4 million of favorable impact of changes in market value of deferred compensation assets. The increase in labor and benefit costs includes higher employee retention and separation costs related to the Transformation Program, unfavorable impact of changes in market value of deferred compensation liabilities, and savings on labor cost resulting from the Transformation Program.

Current wording

The increase in selling, general, and administrative expenses for the year ended December 31, 2024 as compared to the same period in 2023 was driven by $33.4 million in higher labor and benefits costs and $29.2 million in higher professional fees, partially offset by $15.2 million in lower service fees for China independent service providers due to lower sales in China, $12.4 in lower Member events and promotions, $9.5 million in lower foreign exchange losses, and $8.2 million in lower advertising and sponsorships. The increase in labor and benefit costs includes higher employee retention and separation costs related to the Restructuring Program, and higher employee bonus accruals, partially offset by lower expenses related to the Transformation Program, and savings on labor cost resulting from the restructuring initiatives. The increase in professional fees includes higher costs related to software-as-a-service arrangements, as well as higher expenses related to the Digital Technology Program.

Previous wording

See Note 14, Transformation Program, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for a further discussion on our Transformation Program.

Current wording

See Note 14, Restructuring Activities, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for a further discussion on our Transformation Program and Restructuring Program.

Previous wording

The $10.2 million of other operating income for the year ended December 31, 2023 consisted of $10.2 million of government grant income for China (See Note 2, Basis of Presentation, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K).

Current wording

The $5.5 million of other operating income for the year ended December 31, 2024 consisted of $5.5 million of government grant income for China (See Note 2, Basis of Presentation, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K).

Previous wording

The $14.9 million of other operating income for the year ended December 31, 2022 consisted of $14.9 million of government grant income for China.

Current wording

The $10.2 million of other operating income for the year ended December 31, 2023 consisted of $10.2 million of government grant income for China.

Previous wording

The increase in interest expense, net for the year ended December 31, 2023 as compared to the same periods in 2022 was primarily due to an increase in our weighted-average interest rate, partially offset by a decrease in our overall weighted-average borrowings.

Current wording

The increase in interest expense, net for the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to an increase in our weighted-average interest rate as a result of the April 2024 debt refinancing transactions, partially offset by a decrease in our overall weighted-average borrowings. See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K for further discussion.

Previous wording

The $1.0 million of other income, net for the year ended December 31, 2023 consisted of a gain on the extinguishment of a portion of the 2024 Convertible Notes (See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K).

Current wording

The $10.5 million of other expense (income), net for the year ended December 31, 2024 consisted of a loss on the extinguishment of the 2018 Credit Facility and the partial redemption of the 2025 Notes (See Note 5, Long-Term Debt, to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K).

Previous wording

The $12.8 million of other income, net for the year ended December 31, 2022 consisted of a gain on the extinguishment of a portion of the 2024 Convertible Notes.

Current wording

The $1.0 million of other expense (income), net for the year ended December 31, 2023 consisted of a gain on the extinguishment of a portion of the 2024 Convertible Notes.

Previous wording

We have historically met our short- and long-term working capital and capital expenditure requirements, including funding for expansion of operations, through net cash flows provided by operating activities. Variations in sales of our products directly affect the availability of funds. There are no material contractual restrictions on our ability to transfer and remit funds among our international affiliated companies. However, there are foreign currency restrictions in certain countries which could reduce our ability to timely obtain U.S. dollars. Even with these restrictions and the impacts of the COVID-19 pandemic and the current inflationary environment, we believe we will have sufficient resources, including cash flow from operating activities and longer-term access to capital markets, to meet debt service obligations in a timely manner and be able to continue to meet our objectives.

Current wording

We have historically met our short- and long-term working capital and capital expenditure requirements, including funding for expansion of operations, through net cash flows provided by operating activities. Variations in sales of our products directly affect the availability of funds. There are no material contractual restrictions on our ability to transfer and remit funds among our international affiliated companies. However, there are foreign currency restrictions in certain countries which could reduce our ability to timely obtain U.S. dollars. Even with these restrictions and the current inflationary environment, which is improving but has remained elevated in certain markets during the twelve months ended December 31, 2024, we believe we will have sufficient resources, including cash flow from operating activities and longer-term access to capital markets, to meet debt service obligations in a timely manner and be able to continue to meet our objectives.