HERBALIFE LTD.

Previous 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 nine months ended September 30, 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.

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 three months ended March 31, 2025, we instituted price increases in certain markets to address region or market-specific conditions. We also instituted localized pricing actions in 2024. 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 a significant 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 operations.

Previous wording

The war in Ukraine has also impacted our results there as well as in Russia and certain neighboring markets; we do not have any manufacturing operations in Russia and Ukraine and our combined total assets in Russia and Ukraine, which primarily consists of short-term assets, was approximately 1% of our consolidated total assets as of September 30, 2024.

Current wording

The war in Ukraine has also impacted our results there as well as in Russia and certain neighboring markets; we do not have any manufacturing operations in Russia and Ukraine and our combined total assets in Russia and Ukraine, which primarily consists of short-term assets, was less than 1% of our consolidated total assets as of March 31, 2025.

Previous wording

Net income was $47.4 million, or $0.46 per diluted share, and $76.4 million, or $0.75 per diluted share, for the three and nine months ended September 30, 2024, respectively. Net income increased $4.6 million, or 10.7%, and decreased $55.6 million, or 42.1%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increase in net income for the three months ended September 30, 2024 was mainly due to $11.3 million lower selling, general, and administrative expenses, and $10.6 million lower royalty overrides, partially offset by $18.0 million higher interest expense, net. The decrease in net income for the nine months ended September 30, 2024 was mainly due to $46.8 million higher selling, general, and administrative expenses, $35.8 million higher interest expense, net, and a $10.5 million loss on extinguishment of debt related to the April 2024 debt refinancing transactions, partially offset by $25.8 million lower royalty overrides, and $12.9 million lower income taxes.

Current wording

Net income was $50.4 million, or $0.49 per diluted share, for the three months ended March 31, 2025. Net income increased $26.1 million, or 107.4%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase in net income for the three months ended March 31, 2025 was mainly due to $60.3 million lower selling, general, and administrative expenses driven by lower labor and benefits costs (see Selling, General, and Administrative Expenses below for further discussion), and $13.4 million lower royalty overrides driven by lower net sales, partially offset by $22.8 million lower gross profit driven by lower net sales, $14.1 million higher interest expense, net, and $10.7 million higher income taxes.

Previous wording

For a discussion of China’s net sales for the three and nine months ended September 30, 2024, see the China section of Sales by Geographic Region below.

Current wording

For a discussion of China’s net sales for the three months ended March 31, 2025 as compared to the same period in 2024, see the China section of Sales by Geographic Region below.

Previous wording

The Primary Reporting Segment reported contribution margin of $502.2 million, or 43.1% of net sales, and $1,517.1 million, or 42.7% of net sales for the three and nine months ended September 30, 2024, respectively, representing an increase of $16.1 million, or 3.3%, and $40.9 million, or 2.8%, respectively, as compared to the same periods in 2023. The 3.3% increase in contribution margin for the three months ended September 30, 2024 was primarily the result of an 8.7% favorable impact of price increases and a 2.6% favorable impact of cost changes related to self-manufacturing and sourcing, partially offset by a 5.0% unfavorable impact of volume decreases as indicated by a decrease in Volume Points, and a 3.2% unfavorable impact of foreign currency fluctuations. The 2.8% increase in contribution margin for the nine months ended September 30, 2024 was primarily the result of a 10.3% favorable impact of price increases, partially offset by a 5.1% unfavorable impact of volume decreases as indicated by a decrease in Volume Points, and a 2.1% unfavorable impact of foreign currency fluctuations.

Current wording

The Primary Reporting Segment reported contribution margin of $499.8 million, or 43.2% of net sales, for the three months ended March 31, 2025, representing a decrease of $1.4 million, or 0.3% as compared to the same period in 2024. The 0.3% decrease in contribution margin for the three months ended March 31, 2025 was primarily the result of a 5.3% unfavorable impact of foreign currency fluctuations, a 1.4% unfavorable impact of sales volume decreases, and a 1.1% unfavorable impact of higher inventory write-downs, partially offset by a 6.4% favorable impact of price increases and a 0.9% favorable impact of cost changes related to self-manufacturing and sourcing primarily related to decreased raw material costs.

Previous wording

The factors described above help Members increase their business, which in turn helps drive Volume Point growth in our business, and thus, net sales growth. The discussion below of net sales details some of the specific drivers of changes in our business and causes of sales fluctuations during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, as well as the unique growth or contraction factors specific to certain geographic regions or significant markets within a region during these periods. Net sales fluctuations, both Company-wide and within a particular geographic region or market, are primarily the result of changes in volume, changes in prices, or changes in foreign currency translation rates. The discussion of changes in net sales quantifies the impact of those drivers that are quantifiable such as changes in foreign currency translation rates, and cites the estimated impact of any significant price changes. The remaining drivers, which management believes are the primary drivers of changes in volume, are typically qualitative factors whose impact cannot be quantified. We use Volume Points as an indication for changes in sales volume.

Current wording

The factors described above help Members increase their business, which in turn helps drive sales volume growth in our business, and thus, net sales growth. The discussion below of net sales details some of the specific drivers of changes in our business and causes of sales fluctuations during the three months ended March 31, 2025, as compared to the same period in 2024, as well as the unique growth or contraction factors specific to certain geographic regions or significant markets within a region during these periods. Net sales fluctuations, both Company-wide and within a particular geographic region or market, are primarily the result of changes in volume, changes in prices, or changes in foreign currency translation rates. The discussion of changes in net sales quantifies the impact of those drivers that are quantifiable such as changes in foreign currency translation rates, and cites the estimated impact of any significant price changes. The remaining drivers, which management believes are the primary drivers of changes in volume, are typically qualitative factors whose impact cannot be quantified.

Previous wording

Global inflationary pressures, supply chain challenges and other macroeconomic factors such as geopolitical conflict 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 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 foreign exchange rate fluctuations, geopolitical conflict, and rising trade tensions, including U.S. tariffs and retaliatory tariffs from foreign countries, may impact both our cost structures and our pricing, with potential adverse 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 below for a more detailed discussion of each geographic region and individual market.

Previous wording

Net sales in the U.S. were $253.5 million and $787.5 million for the three and nine months ended September 30, 2024, respectively. Net sales decreased $16.6 million, or 6.1%, and $67.1 million, or 7.9%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023.

Current wording

Net sales in the U.S. were $247.7 million for the three months ended March 31, 2025. Net sales decreased $11.0 million, or 4.3%, for the three months ended March 31, 2025 as compared to the same period in 2024.

Previous wording

Sales volumes continued to decline for the three and nine months ended September 30, 2024 compared to the 2023 prior year periods. Despite increases in new distributors, we continue to have fewer total number of new Members in the region during the three and nine months ended September 30, 2024 compared to the prior year periods. 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.

Current wording

We are supporting Members with new product launches, a training and recognition program, targeted communications and sales incentives, as well as modernizing our technological tools including the launch of digital start-up kits and E-commerce tools, in order to enhance our Members’ ability to market and sell our products and promote business opportunities. The majority of the region implemented 2.3% price increases during January 2025. During March 2024, the region implemented 3.0% price increases.

Previous wording

Net sales in Mexico were $131.5 million and $415.1 million for the three and nine months ended September 30, 2024, respectively. Net sales decreased $5.8 million, or 4.2%, and increased $11.5 million, or 2.8%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. In local currency, net sales increased 6.1% and 2.2% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The fluctuation of foreign currency exchange rates had an unfavorable impact of $14.0 million and favorable impact of $2.9 million on net sales for the three and nine months ended September 30, 2024, respectively. To a lesser extent, Mexico’s Volume Point decreased for the three and nine months ended September 30, 2024, as compared to the same periods in 2023. Macroeconomic conditions, such as a slowdown in the economy and prolonged high interest rates, have created challenges for Members’ and Members’ Nutrition Club operations, which continue to be an important DMO in the market.

Current wording

Net sales in Mexico were $126.5 million for the three months ended March 31, 2025. Net sales decreased $14.4 million, or 10.2%, for the three months ended March 31, 2025 as compared to the same period in 2024. In local currency, net sales increased 8.1% for the three months ended March 31, 2025 as compared to the same period in 2024. The fluctuation of foreign currency exchange rates had an unfavorable impact of $25.7 million on net sales for the three months ended March 31, 2025. Mexico’s sales volume was flat for the three months ended March 31, 2025 as compared to the same period in 2024. Macroeconomic conditions, such as a slowdown in the economy and prolonged high interest rates, have created challenges for Members’ and Members’ Nutrition Club operations, which continue to be an important DMO in the market. The market saw a 4.2% price increase during February 2025. During March 2024, the Mexico market implemented a 5.25% price increase.

Previous wording

Several markets in the region experienced sales volumes increases during the three months ended September 30, 2024 as compared to the same period in 2023 and experienced lesser volume declines for the nine months ended September 30, 2024 as compared to the same period in 2023. The sales volume declines in markets other than Mexico, were greatest for Chile, Colombia, and Argentina offset by increases in sales volume in our Guatemala market, for the nine months ended September 30, 2024, compared to the same period in 2023. The majority of markets in the region instituted price increases to address market-specific conditions during the first quarter of 2024. During the second quarter of 2024, most markets within the Latin America region, excluding Mexico, implemented a 5% price reduction and Volume Point adjustments to enhance the competitiveness of our product pricing, aiming to stimulate incremental growth in volume and to increase our Members’ ability to promote the business opportunity. We believe these changes may have been a contributing factor for the increases in sales volume for certain of our markets in the region during the third quarter of 2024.

Current wording

The net sales increase was greatest for our Peru and Guatemala markets for the three months ended March 31, 2025, compared to the same period in 2024. The majority of markets in the region instituted price increases to address market-specific conditions during the first quarter of 2025 and 2024. During the second quarter of 2024, most markets within the Latin America region, excluding Mexico, implemented a 5% price reduction and Marketing Plan changes to enhance the competitiveness of our product pricing and aiming to stimulate incremental growth in volume. We believe these changes, coupled with other promotional efforts, may have been a contributing factor for the increases in sales volume for certain markets in the region during the first quarter of 2025.

Previous wording

The EMEA region reported net sales of $261.9 million and $827.6 million for the three and nine months ended September 30, 2024, respectively. Net sales increased $0.9 million, or 0.3%, and $8.9 million, or 1.1%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. In local currency, net sales increased 2.2% and 4.1% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The 0.3% increase in net sales for the three months ended September 30, 2024 was primarily due to a 8.3% favorable impact of price increases, and a 4.4% favorable impact of sales mix, partially offset by a decrease in sales volume, as indicated by a 9.7% decrease in Volume Points, and a 1.8% unfavorable impact of fluctuations in foreign currency exchange rates. The 1.1% increase in net sales for the nine months ended September 30, 2024 was primarily due to a 10.5% favorable impact of price increases, and a 2.5% favorable impact of sales mix, partially offset by a decrease in sales volume, as indicated by an 8.1% decrease in Volume Points, and a 3.0% 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.

Current wording

The EMEA region reported net sales of $273.3 million for the three months ended March 31, 2025. Net sales decreased $4.6 million, or 1.7%, for the three months ended March 31, 2025, as compared to the same period in 2024. In local currency, net sales increased 3.3% for the three months ended March 31, 2025, as compared to the same period in 2024. The 1.7% decrease in net sales for the three months ended March 31, 2025 was primarily due to a 5.0% unfavorable impact of fluctuations in foreign currency exchange rates and a 4.7% decrease in sales volume, partially offset by a 5.1% favorable impact of price increases, and a 2.9% favorable impact of sales mix. EMEA’s sales volume decreased for the three months ended March 31, 2025 as compared to the same period in 2024, and the decrease was slightly lower than the prior year period decrease. The EMEA region has no single market that accounts for a significant portion of our consolidated net sales.

Previous wording

Volumes declined across most EMEA markets during the three and nine months ended September 30, 2024 as compared to the same periods in 2023. 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 nine months ended September 30, 2024, as compared to the same period in 2023, were led by Türkiye, Spain and Russia, partially offset by increases in Kazakhstan. Our Russia entity had no sales during the nine months ended September 30, 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. During the third quarter of 2024, the Kazakhstan market increased its pricing that could negatively impact future sales in this market.

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 net sales decline across the EMEA markets during the three months ended March 31, 2025, as compared to the same period in 2024, were led by Spain and Italy, partially offset by increases in Mongolia and United Kingdom. Our Russia entity had no sales during the three months ended March 31, 2025 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, led to increases in net sales in Kazakhstan, despite the recent quarter declining as compared to the first quarter of 2024.

Previous 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 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 nine months ended September 30, 2024.

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 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 three months ended March 31, 2025 and 2024.

Previous wording

The Asia Pacific region, which excludes China, reported net sales of $436.1 million and $1,284.0 million for the three and nine months ended September 30, 2024, respectively. Net sales decreased $4.9 million, or 1.1%, and increased $3.6 million, or 0.3%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. In local currency, net sales increased 0.8% and 3.0% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The 1.1% decrease in net sales for the three months ended September 30, 2024 was primarily due to a decrease in sales volume, as indicated by a 2.8% decrease in Volume Points and a 1.9% unfavorable impact of fluctuations in foreign currency exchange rates, partially offset by a 3.4% favorable impact of price increases. The 0.3% increase in net sales for the nine months ended September 30, 2024 was primarily due to a 3.6% favorable impact of price increases, partially offset by a 2.7% unfavorable impact of fluctuations in foreign currency exchange rates, 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 $422.5 million for the three months ended March 31, 2025. Net sales decreased $8.7 million, or 2.0%, for the three months ended March 31, 2025, as compared to the same period in 2024. In local currency, net sales increased 1.6% for the three months ended March 31, 2025, as compared to the same period in 2024. The 2.0% decrease in net sales for the three months ended March 31, 2025 was primarily due to a 3.6% unfavorable impact of fluctuations in foreign currency exchange rates, a 1.1% unfavorable impact of sales mix, and a 0.2% decrease in sales volume, partially offset by a 2.8% favorable impact of price increases. Asia Pacific’s sales volume decreased for the three months ended March 31, 2025 as compared to the same period in 2024, after having an increase for the three months ended March 31, 2024.

Previous wording

Net sales in India were $218.3 million and $626.4 million for the three and nine months ended September 30, 2024, respectively. Net sales increased $2.4 million, or 1.1%, and $42.5 million, or 7.3%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. In local currency, net sales increased 2.5% and 8.7% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The fluctuation of foreign currency exchange rates had an unfavorable impact of $2.9 million and $8.0 million on net sales for the three and nine months ended September 30, 2024, respectively. Sales volumes in India increased 3.3% for the nine months ended September 30, 2024, as compared to the same period in 2023, however, sales volume decreased 1.4% in the third quarter of 2024, as compared to the same period in 2023. We continue to promote our brand, such as through sports sponsorships, in-person events, introducing new product line for skin care, strengthening the Preferred Customer program and making it easier for our Preferred Customers to convert to distributors in India. The India market had no price increase during the nine months ended September 30, 2024. During 2023, the India market implemented a 4.5% price increase during November 2023.

Current wording

Net sales in India were $209.3 million for the three months ended March 31, 2025. Net sales increased $5.8 million, or 2.9%, for the three months ended March 31, 2025, as compared to the same period in 2024. In local currency, net sales increased 7.2% for the three months ended March 31, 2025, as compared to the same period in 2024. The fluctuation of foreign currency exchange rates had an unfavorable impact of $8.9 million on net sales for the three months ended March 31, 2025. The sales volume in India increased 4.5% for the three months ended March 31, 2025, as compared to the same period in 2024. Our growth rate in the India market for the three months ended March 31, 2025 was less than the growth rate experienced during the same period in 2024. We continue to promote our brand, such as through sports sponsorships and in-person events. The India market had no price increase during the three months ended March 31, 2025. During November 2024, the India market implemented a 3.0% price increase.

Previous wording

Net sales in Vietnam were $69.7 million and $208.2 million for the three and nine months ended September 30, 2024, respectively. Net sales decreased $1.6 million, or 2.2%, and $0.3 million, or 0.1%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. In local currency, net sales increased 2.5% and 5.4% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The fluctuation of foreign currency exchange rates had an unfavorable impact of $3.4 million and $11.6 million on net sales for the three and nine months ended September 30, 2024, respectively. The sales volume was flat for the three months ended September 30, 2024, as compared to the 2023 period but sales volume slightly increased for the nine months ended September 30, 2024, as compared to the 2023 period and was partially driven by, we believe, the comparison to a 2023 first quarter that included lower level of sales as a result of a January 2023 increase in the local value added tax rate which may have had an adverse impact to our net sales during the first quarter of 2023. 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 3.5% 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 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 $75.4 million for the three months ended March 31, 2025. Net sales decreased $0.2 million, or 0.3%, for the three months ended March 31, 2025, as compared to the same period in 2024. In local currency, net sales increased 3.2% for the three months ended March 31, 2025, as compared to the same period in 2024. The fluctuation of foreign currency exchange rates had an unfavorable impact of $2.6 million on net sales for the three months ended March 31, 2025. The sales volume were flat in Vietnam for the three months ended March 31, 2025, as compared to the 2024 period. Focus areas for Vietnam market include sports sponsorship, 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 2.5% price increase in March 2025. During March 2024, the market implemented a 3.5% price increase. 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 three and nine months ended September 30, 2024 as compared to the 2023 periods, most significantly for Indonesia and South Korea. We continued to see a decline of new Members for some 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 nine months ended September 30, 2024.

Current wording

Across several other markets, net sales was down for the three months ended March 31, 2025 as compared to the 2024 period, most significantly for South Korea, Taiwan, and Indonesia. We continued to see a decline of new Members for some markets. In addition, 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. Some markets in the region instituted price increases to address market-specific conditions during the three months ended March 31, 2025 and 2024.

Previous wording

Sales volume was down for the three and nine months ended September 30, 2024 as compared to the 2023 periods 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.

Current wording

Sales volume was down for the three months ended March 31, 2025 as compared to the 2024 period as our Members adjust to our sales initiatives and they continue rebuilding and optimizing their business process. 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 which we continue to enhance 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

Gross profit was $971.6 million and $978.1 million for the three months ended September 30, 2024 and 2023, respectively, and $2,948.9 million and $2,944.0 million for the nine months ended September 30, 2024 and 2023, respectively. Gross profit as a percentage of net sales was 78.3% and 76.3% for the three months ended September 30, 2024 and 2023, respectively, or a favorable net increase of 200 basis points, and 77.9% and 76.5% for the nine months ended September 30, 2024 and 2023, respectively, or a favorable net increase of 138 basis points.

Current wording

Gross profit was $956.5 million and $979.3 million for the three months ended March 31, 2025 and 2024, respectively. Gross profit as a percentage of net sales was 78.3% and 77.5% for the three months ended March 31, 2025 and 2024, respectively, or a favorable net increase of 84 basis points.

Previous wording

The increase in gross profit as a percentage of net sales for the nine months ended September 30, 2024 as compared to the same period in 2023 included the favorable impact of price increases of 134 basis points; the favorable impact of lower inventory write-downs of 16 basis points; favorable other cost changes of 14 basis points; and the favorable impact of foreign currency fluctuations of 10 basis points; partially offset by unfavorable changes in sales mix of 19 basis points; and unfavorable cost changes related to self-manufacturing and sourcing of 17 basis points.

Current wording

The increase in gross profit as a percentage of net sales for the three months ended March 31, 2025 as compared to the same period in 2024 included the favorable impact of price increases of 81 basis points; favorable cost changes related to self-manufacturing and sourcing of 48 basis points primarily related to decreased raw material costs; and favorable other cost changes of 14 basis points; partially offset by the unfavorable impact of higher inventory write-downs of 47 basis points; unfavorable changes in sales mix of 7 basis points; and the unfavorable impact of foreign currency fluctuations of 5 basis points.

Previous wording

Royalty overrides were $405.5 million and $416.1 million for the three months ended September 30, 2024 and 2023, respectively, and $1,236.0 million and $1,261.8 million for the nine months ended September 30, 2024 and 2023, respectively. Royalty overrides as a percentage of net sales were 32.7% and 32.5% for the three months ended September 30, 2024 and 2023, respectively, and 32.6% and 32.8% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Royalty overrides were $401.8 million and $415.2 million for the three months ended March 31, 2025 and 2024, respectively. Royalty overrides as a percentage of net sales were 32.9% and 32.9% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The increase in royalty overrides as a percentage of net sales for the three months ended September 30, 2024 as compared to the same period in 2023 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. The decrease in royalty overrides as a percentage of net sales for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily due to favorable changes in mix of products and countries. 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.

Current wording

Royalty overrides as a percentage of net sales remained flat for the three months ended March 31, 2025 as compared to the same period in 2024. This was primarily due to favorable changes in mix of products and countries, 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 $444.0 million and $455.3 million for the three months ended September 30, 2024 and 2023, respectively, and $1,438.5 million and $1,391.7 million for the nine months ended September 30, 2024 and 2023, respectively. Selling, general, and administrative expenses as a percentage of net sales were 35.8% and 35.5% for the three months ended September 30, 2024 and 2023, respectively, and 38.0% and 36.2% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Selling, general, and administrative expenses were $431.9 million and $492.2 million for the three months ended March 31, 2025 and 2024, respectively. Selling, general, and administrative expenses as a percentage of net sales were 35.3% and 38.9% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The $11.3 million decrease in selling, general, and administrative expenses for the three months ended September 30, 2024 as compared to the same period in 2023 was driven by $10.1 million in lower non-income taxes, $7.3 million in lower China service provider fees due to lower sales in China, and $4.0 million of gain on sale of the Company’s land, building, and related building improvements of its office building in Torrance, California, partially offset by $11.4 million in higher labor and benefits costs. The increase in labor and benefit costs is primarily due to higher employee bonus accruals.

Current wording

The $60.3 million decrease in selling, general, and administrative expenses for the three months ended March 31, 2025 as compared to the same period in 2024 was driven by $51.5 million in lower labor and benefits costs, $5.3 million in lower service fees for China independent service providers due to lower sales in China, $5.2 million in lower Member events and promotions, and $5.2 million in lower professional fees. The decrease in labor and benefit costs includes lower employee bonus accruals, lower employee retention and separation costs related to the Restructuring Program and the Transformation Program, and savings on labor cost resulting from the restructuring initiatives.

Previous wording

The $5.0 million of other operating income for the three months ended September 30, 2024 consisted of $5.0 million of government grant income for China (See Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for further discussion). We did not recognize any government grant income related to our regional headquarters and distribution centers within China during the three months ended September 30, 2023.

Current wording

We did not recognize any government grant income related to our regional headquarters and distribution centers within China during the three months ended March 31, 2025 and 2024.

Previous wording

The increase in interest expense, net for the three and nine months ended September 30, 2024 as compared to the same periods 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 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

Current wording

The increase in interest expense, net for the three months ended March 31, 2025 as compared to the same period in 2024 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 4, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for further discussion.

Previous wording

Income taxes were $23.2 million and $26.4 million for the three months ended September 30, 2024 and 2023, respectively, and $40.4 million and $53.3 million for the nine months ended September 30, 2024 and 2023, respectively. The effective income tax rate was 32.9% and 38.2% for the three months ended September 30, 2024 and 2023, respectively, and 34.6% and 28.8% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in the effective tax rate for the three months ended September 30, 2024, as compared to the same period in 2023, was due to changes in the geographic mix of our income and an increase in tax benefits from discrete events. The increase in the effective tax rate for the nine months ended September 30, 2024, as compared to the same period in 2023, was due to changes in the geographic mix of our income, partially offset by an increase in tax benefits from discrete events.

Current wording

Income taxes were $20.4 million and $9.7 million for the three months ended March 31, 2025 and 2024, respectively. The effective income tax rate was 28.8% and 28.5% for the three months ended March 31, 2025 and 2024, respectively. The increase in the effective tax rate for the three months ended March 31, 2025, as compared to the same period in 2024, was due to a decrease in tax benefits from discrete events partially offset by changes in the geographic mix of the Company’s income.

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 current inflationary environment, which is improving but has remained elevated in certain markets during the nine months ended September 30, 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.

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 three months ended March 31, 2025, 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.

Previous wording

Historically, our debt has not resulted from the need to fund our normal operations, but instead has resulted primarily from our share repurchase programs. Since inception in 2007, total share repurchases amounted to approximately $6.5 billion. While a significant net sales decline could potentially affect the availability of funds, many of our largest expenses are variable in nature, which we believe protects our funding in all but a dramatic net sales downturn. Our $402.5 million cash and cash equivalents as of September 30, 2024 and our senior secured credit facility, in addition to cash flow from operations, can be used to support general corporate purposes, including any future strategic investment opportunities, share repurchases, and dividends.

Current wording

Historically, our debt has not resulted from the need to fund our normal operations, but instead has resulted primarily from our share repurchase programs. Since inception in 2007, total share repurchases amounted to approximately $6.5 billion. While a significant net sales decline could potentially affect the availability of funds, many of our largest expenses are variable in nature, which we believe protects our funding in all but a dramatic net sales downturn. Our $329.4 million cash and cash equivalents as of March 31, 2025 and our senior secured credit facility, in addition to cash flow from operations, can be used to support general corporate purposes, including any future strategic investment opportunities, share repurchases, and dividends.

Previous wording

For the nine months ended September 30, 2024, we generated $215.8 million of operating cash flow as compared to $261.4 million for the same period in 2023. The decrease in our operating cash flow was primarily the result of $48.1 million of lower net income excluding non-cash and reconciling items disclosed within our condensed consolidated statement of cash flows, partially offset by $2.5 million of net favorable changes in operating assets and liabilities. The $48.1 million of lower net income excluding non-cash and reconciling items was primarily driven by higher selling, general and administrative expenses and higher interest expense, net; partially offset by lower royalty overrides (See Summary Financial Results above for further discussion). The $2.5 million of net favorable changes in operating assets and liabilities was primarily driven by favorable changes in prepaid expenses and other current assets, accounts payable, accrued interest, and accrued compensation primarily from higher employee bonus accrual; partially offset by unfavorable changes in inventories.

Current wording

For the three months ended March 31, 2025, we generated $0.2 million of operating cash flow as compared to $13.8 million of operating cash flow generated for the same period in 2024. The decrease in our operating cash flow was the result of $48.7 million of unfavorable changes in operating assets and liabilities, partially offset by $35.1 million of higher net income excluding non-cash and reconciling items disclosed within our condensed consolidated statement of cash flows. The $48.7 million of unfavorable changes in operating assets and liabilities was primarily the result of unfavorable changes in receivables, inventories, and other current liabilities, partially offset by a favorable change in accounts payable. The $35.1 million of higher net income excluding non-cash and reconciling items was primarily driven by lower selling, general and administrative expense and royalty overrides, partially offset by lower gross profit driven by lower net sales, higher interest expense and higher income taxes (See Summary Financial Results above for further discussion).

Previous wording

Capital expenditures, including accrued capital expenditures, were $83.6 million and $99.8 million for the nine months ended September 30, 2024 and 2023, respectively. The majority of these expenditures during the nine months ended September 30, 2024 represented investments in management information systems, including initiatives to develop enhanced Member tools which includes our $400 million multi-year Digital Technology Program that is focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools to provide enhanced digital capabilities and experiences to our Members, which we also refer to as Herbalife One. We expect to continue our investments in these areas and expect to incur total capital expenditures of approximately $120 million to $140 million for the full year 2024, which includes Herbalife One. Based on our estimates, we expect our total future capital expenditures to remain elevated during 2024 and 2025 as a result of Herbalife One, where we have incurred approximately $310 million of implementation costs relating to Herbalife One as of September 30, 2024. In addition, based on the Herbalife One implementation costs incurred thus far, we began to recognize non-cash amortization expenses during the first quarter of 2024 and continue to expect to recognize approximately $35 million of these non-cash amortization expenses within our full-year 2024 consolidated statement of income; thereafter, we expect to recognize similar amounts of non-cash amortization expenses which could vary depending on the total actual future Herbalife One related expenditures and the associated timing of future technology being available for deployment. The capital expenditures relating to Herbalife One, are separate to the Transformation Program described further below.

Current wording

Capital expenditures, including accrued capital expenditures, for the three months ended March 31, 2025 and 2024 were $20.0 million and $33.6 million, respectively. The majority of these expenditures during the three months ended March 31, 2025 represented investments in management information systems, including initiatives to develop enhanced Member tools which includes our $400 million multi-year Digital Technology Program that is focused on enhancing and rebuilding our Member facing technology platform and web-based Member tools to provide enhanced digital capabilities and experiences to our Members, which we also refer to as Herbalife One. We expect to continue our investments in these areas and expect to incur total capital expenditures of approximately $90 million to $120 million for the full year 2025, which includes Herbalife One. We have incurred approximately $341 million of implementation costs relating to Herbalife One as of March 31, 2025. In addition, based on the Herbalife One implementation costs incurred, we began to recognize non-cash amortization expenses during the first quarter of 2024 and recognized approximately $35 million of these non-cash amortization expenses within our full-year 2024 consolidated statement of income, and we expect to recognize $40 million to $45 million of non-cash amortization expenses for the full-year 2025 and recognize similar amounts of non-cash amortization expenses thereafter, which could vary depending on the total actual future Herbalife One related expenditures and the associated timing of future technology being available for deployment. The capital expenditures relating to Herbalife One, are separate to the Transformation Program described further below.

Previous wording

In March 2024, we hosted our annual global honors event where sales leaders from around the world met, shared best practices, and conducted leadership training, and our management awarded Members $74.9 million of Mark Hughes bonus payments related to their 2023 performance. In March 2023, our management awarded Members $77.9 million of Mark Hughes bonus payments related to their 2022 performance.

Current wording

In March 2025, we hosted our annual global honors event where sales leaders from around the world met, shared best practices, and conducted leadership training, and our management awarded Members $74.3 million of Mark Hughes bonus payments related to their 2024 performance. In March 2024, our management awarded Members $74.9 million of Mark Hughes bonus payments related to their 2023 performance.

Previous wording

In 2021, we initiated a global transformation program to optimize global processes for future growth, or the Transformation Program. The Transformation Program involves the investment in certain new technologies and the realignment of infrastructure and the locations of certain functions to better support distributors and customers. The Transformation Program is expected to deliver annual savings of approximately $110 million with approximately $70 million of savings realized in 2023 and approximately $110 million of annual savings expected to be realized in 2024 and thereafter. We also expect to incur total pre-tax expenses of approximately $90 million to realize these annual run-rate savings. We have already incurred total pre-tax expenses of approximately $88.6 million through September 30, 2024, of which zero and $4.6 million were incurred in the three months ended September 30, 2024 and 2023, respectively, and $9.4 million and $42.0 million were incurred in the nine months ended September 30, 2024 and 2023, respectively, and recognized in selling, general, and administrative expenses within our condensed consolidated statements of income. In addition, we expect approximately $20.0 million of related capital expenditures through 2024, inclusive of the $19.3 million incurred from inception to date, primarily relating to technology, to support the Transformation Program. The Transformation Program is expected to be completed in 2024.

Current wording

In 2021, we initiated a global transformation program to optimize global processes for future growth, or the Transformation Program. The Transformation Program involves the investment in certain new technologies and the realignment of infrastructure and the locations of certain functions to better support distributors and customers. The Transformation Program is expected to deliver annual savings of approximately $110 million with approximately $70 million of savings realized in 2023 and approximately $110 million of annual savings realized in 2024 and thereafter. We have incurred total pre-tax expenses of approximately $92.5 million through March 31, 2025, of which zero and $5.9 million were incurred in the three months ended March 31, 2025 and 2024, respectively, and recognized in selling, general, and administrative expenses within our condensed consolidated statements of income. In addition, we have incurred approximately $20 million of related capital expenditures from inception to date, primarily relating to technology, to support the Transformation Program. The Transformation Program was completed as of December 31, 2024.

Previous wording

During the first quarter of 2024, we initiated a Restructuring Program to streamline our organizational structure to make it more efficient and effective and to allow our management team to work more closely to the markets, our distributors, and our customers. The Restructuring Program is expected to deliver annual savings of at least $80 million beginning in 2025 with at least $50 million of savings expected to be realized in 2024, where at least $20 million and at least $30 million was already realized during the three and nine months ended September 30, 2024, respectively. We also expect to incur total pre-tax expenses of approximately $70 million relating to the Restructuring Program through 2024, of which $2.7 million and $68.2 million were recognized in selling, general, and administrative expenses within the condensed consolidated statement of income during the three and nine months ended September 30, 2024, respectively. We expect to complete the Restructuring Program by the end of 2024. Since the Restructuring Program is still ongoing, these estimated amounts are preliminary and based on management’s estimates and actual results could differ from such estimates.

Current wording

During the first quarter of 2024, we initiated a Restructuring Program to streamline our organizational structure to make it more efficient and effective and to allow our management team to work more closely to the markets, distributors, and customers. The Restructuring Program is expected to deliver annual savings of at least $80 million beginning in 2025 with at least $50 million of savings already realized in 2024. We also expect to incur total pre-tax expenses of approximately $74 million relating to the Restructuring Program, and we have incurred total pre-tax expenses of approximately $72.4 million through March 31, 2025, of which $3.3 million and $16.7 million were incurred in the three months ended March 31, 2025 and 2024, respectively, and recognized in selling, general, and administrative expenses within the condensed consolidated statement of income. The Restructuring Program was substantially completed as of December 31, 2024.

Previous wording

Subsequently, the 2018 Credit Facility was amended in a series of amendments that, as of March 31, 2024, among other things, increased the borrowing capacity of the 2018 Term Loan A to a total of $286.2 million and the 2018 Revolving Credit Facility to a total of $330.0 million and establishing the Secured Overnight Financing Rate, or SOFR, for interest rate purposes under the 2018 Credit Facility. Borrowings utilizing SOFR under both the 2018 Term Loan A and 2018 Revolving Credit Facility, bore interest at, depending on the Company’s total leverage ratio and the Adjusted Term SOFR, which is the rate per annum equal to Term SOFR plus a rate adjustment based on interest periods of one month, three months, six months and twelve months tenors equaling to approximately 0.11%, 0.26%, 0.43% and 0.72%, respectively. The maturity date of both the 2018 Term Loan A and 2018 Revolving Credit Facility was March 19, 2025. The 2018 Term Loan B maturity date was August 18, 2025.

Current wording

Subsequently, the 2018 Credit Facility was amended in a series of amendments that, as of March 31, 2024, among other things, increased the borrowing capacity of the 2018 Term Loan A to a total of $286.2 million and the 2018 Revolving Credit Facility to a total of $330.0 million and establishing the Secured Overnight Financing Rate, or SOFR, for interest rate purposes under the 2018 Credit Facility. Borrowings utilizing SOFR under both the 2018 Term Loan A and 2018 Revolving Credit Facility, bore interest at, depending on our total leverage ratio and the Adjusted Term SOFR, which is the rate per annum equal to Term SOFR plus a rate adjustment based on interest periods of one month, three months, six months and twelve months tenors equaling to approximately 0.11%, 0.26%, 0.43% and 0.72%, respectively. The maturity date of both the 2018 Term Loan A and 2018 Revolving Credit Facility was March 19, 2025. The 2018 Term Loan B maturity date was August 18, 2025.

Previous wording

The 2024 Term Loan B Facility was issued to the lenders at a 7.00% discount, or $28.0 million, and we incurred approximately $10.3 million of debt issuance costs in connection with the 2024 Credit Facility. We may prepay the 2024 Term Loan B at a 102% premium at any time on or before the first anniversary, 101% premium following the first anniversary and on or prior to the second anniversary, and, solely in connection with a repricing event, at a 101% premium after the second anniversary but on or prior to the third anniversary, and generally at no premium thereafter. The 2024 Term Loan B requires quarterly payments equal to 5.0% of the aggregate principal amount of the 2024 Term Loan B per annum, commencing in September 2024. In addition, pursuant to the terms of the 2024 Credit Facility, beginning in fiscal year 2025, the Company may be required to make mandatory prepayments towards the 2024 Term Loan B based on an excess cash flow calculation and consolidated leverage ratio as defined under the terms of the 2024 Credit Facility.

Current wording

The 2024 Term Loan B Facility was issued to the lenders at a 7.00% discount, or $28.0 million, and we incurred approximately $10.3 million of debt issuance costs in connection with the 2024 Credit Facility. We may prepay the 2024 Term Loan B at a 102% premium at any time on or before the first anniversary, 101% premium following the first anniversary and on or prior to the second anniversary, and, solely in connection with a repricing event, at a 101% premium after the second anniversary but on or prior to the third anniversary, and generally at no premium thereafter. The 2024 Term Loan B requires quarterly payments equal to 5.0% of the aggregate principal amount of the 2024 Term Loan B per annum, commencing in September 2024. In addition, pursuant to the terms of the 2024 Credit Facility, we may be required to make mandatory prepayments towards the 2024 Term Loan B based on an annual excess cash flow calculation and consolidated leverage ratio as defined under the terms of the 2024 Credit Facility.

Previous wording

Borrowings utilizing SOFR under the 2024 Credit Facility use Adjusted Term SOFR. The applicable interest rates on our borrowings under the 2024 Term Loan B, as amended, bear interest at either, the Adjusted Term SOFR, which is the rate per annum equal to Term SOFR plus a rate adjustment based on interest periods of one month, three months, six months and twelve months tenors equaling to approximately 0.11%, 0.26%, 0.43% and 0.72%, respectively, plus a margin of 6.75%, or the base rate, which represents the highest of the Federal Funds Rate plus 0.50%, one-month Adjusted Term SOFR plus 1.00%, and the prime rate quoted by The Wall Street Journal, plus a margin of 5.75%. The Adjusted Term SOFR is subject to a floor of 0.00% and the base rate is subject to a floor of 1.00%. The 2024 Term Loan B Facility matures upon the earlier of (i) April 12, 2029, or (ii) March 16, 2028 if the outstanding principal on the 2028 Convertible Notes, as defined below, exceeds $100.0 million and we exceed certain leverage ratios as of that date, or (iii) June 2, 2025 if the outstanding principal on the 2025 Notes, as defined below, exceeds $200.0 million on such date.

Current wording

Borrowings utilizing SOFR under the 2024 Credit Facility use Adjusted Term SOFR. The applicable interest rates on our borrowings under the 2024 Term Loan B, as amended, bear interest at either, the Adjusted Term SOFR, which is the rate per annum equal to Term SOFR plus a rate adjustment based on interest periods of one month, three months, six months and twelve months tenors equaling to approximately 0.11%, 0.26%, 0.43% and 0.72%, respectively, plus a margin of 6.75%, or the base rate, which represents the highest of the Federal Funds Rate plus 0.50%, one-month Adjusted Term SOFR plus 1.00%, and the prime rate quoted by The Wall Street Journal, plus a margin of 5.75%. The Adjusted Term SOFR is subject to a floor of 0.00% and the base rate is subject to a floor of 1.00%. The 2024 Term Loan B Facility matures upon the earlier of (i) April 12, 2029, or (ii) March 16, 2028 if the outstanding principal on the 2028 Convertible Notes, as defined below, exceeds $100.0 million and we exceed certain leverage ratios as of that date, or (iii) June 2, 2025 if the outstanding principal on the 2025 Notes, as defined below, exceeds $200.0 million on such date. The outstanding principal balance of the 2025 Notes was $197.3 million as of March 31, 2025.

Previous wording

Effective after April 12, 2024, depending on our total leverage ratio, borrowings under the 2024 Revolving Credit Facility bear interest at either the Adjusted Term SOFR plus a margin of between 5.50% and 6.50%, or the base rate plus a margin of between 4.50% and 5.50%. The 2024 Revolving Credit Facility matures upon the earlier of (i) April 12, 2028, (ii) December 16, 2027 if the outstanding principal on the 2028 Convertible Notes, as defined below, exceeds $100.0 million and we exceed certain leverage ratios as of that date, or (iii) March 3, 2025 if the outstanding principal on the 2025 Notes, as defined below, exceeds $200.0 million on such date.

Current wording

Depending on our total leverage ratio, borrowings under the 2024 Revolving Credit Facility bear interest at either the Adjusted Term SOFR plus a margin of between 5.50% and 6.50%, or the base rate plus a margin of between 4.50% and 5.50%. The 2024 Revolving Credit Facility matures upon the earlier of (i) April 12, 2028, (ii) December 16, 2027 if the outstanding principal on the 2028 Convertible Notes, as defined below, exceeds $100.0 million and we exceed certain leverage ratios as of that date, or (iii) March 3, 2025 if the outstanding principal on the 2025 Notes, as defined below, exceeds $200.0 million on such date. The outstanding principal balance of the 2025 Notes was $197.3 million as of March 31, 2025. We pay a commitment fee on the 2024 Revolving Credit Facility of, depending on our total leverage ratio, between 0.35% to 0.45% per annum on the undrawn portion of the 2024 Revolving Credit Facility.

Previous wording

The 2024 Credit Facility contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations or prohibitions on declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, making loans and investments, incurring additional indebtedness, granting liens, and effecting mergers, asset sales and transactions with affiliates. In addition, the 2024 Credit Facility contains customary events of default. The 2024 Revolving Credit Facility requires us to maintain a maximum total leverage ratio of 4.50:1.00 through December 31, 2024, stepping down to 4.25:1.00 on March 31, 2025 and 4.00:1.00 at September 30, 2025 and thereafter. The financial covenants also include a maximum first lien net leverage ratio of 2.50:1.00, a minimum fixed charge coverage ratio of 2.00:1.00, and a minimum liquidity of $200 million of revolver availability and accessible cash. As of September 30, 2024 and December 31, 2023, we were in compliance with its financial covenants under the 2024 Credit Facility and 2018 Credit Facility, respectively.

Current wording

The 2024 Credit Facility contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations or prohibitions on declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, making loans and investments, incurring additional indebtedness, granting liens, and effecting mergers, asset sales and transactions with affiliates. In addition, the 2024 Credit Facility contains customary events of default. The 2024 Revolving Credit Facility requires us to maintain a maximum total leverage ratio of 4.50:1.00 through December 31, 2024, stepping down to 4.25:1.00 on March 31, 2025 and 4.00:1.00 at September 30, 2025 and thereafter. The financial covenants also include a maximum first lien net leverage ratio of 2.50:1.00, a minimum fixed charge coverage ratio of 2.00:1.00, and a minimum liquidity of $200 million of revolver availability and accessible cash. As of March 31, 2025 and December 31, 2024, we were in compliance with its financial covenants under the 2024 Credit Facility.