Herbalife Nutrition Ltd. (HLF) Earnings

Management highlights

### Strategic Focus: Personalized Nutrition - Management identifies personalized nutrition as a fast-growing $34 billion global health and wellness market, with the AI-powered sub-segment projected to grow at a 27% annual rate to over $10 billion by 2033. - Herbalife's unique competitive advantage is combining AI, science, and data with its longstanding distributor network of trusted human connections, a model the company has used for over 45 years. ### New Product Launches & Acquisitions - Launched **Bionic Go**, the first product from the April 2026 Bionic acquisition, across 11 European/African markets in June 2026, followed by a U.S. launch in July 2026. Additional market launches are planned for H2 2026. Bionic Go is a personalized daily supplement matched to consumers via a digital wellness assessment, with 40 unique formulations. The acquisition includes a call option for Bionic Lab, a peptide distribution business, which management will evaluate on a disciplined basis. - Launched new digital commerce and subscription capabilities alongside Bionic Go in Europe, matching capabilities already available in the U.S. to simplify distributor operations and customer repeat purchases. - Launched **Helio** (a 30g protein all-in-one super shake) and **Activate Energy** (an exogenous ketone energy product) under the Life.io healthy lifespan brand in North America in July 2026, targeting the fast-growing proactive longevity consumer segment to broaden Herbalife's addressable market. ### Platform Development: Protocol - Protocol, Herbalife's AI-powered personalized health operating platform, remains in expanded beta. Management is building it as a full platform rather than a single product, with incremental rollouts planned through 2027. - A major user experience update based on distributor feedback was released recently, with planned H2 2026 additions including smart device integrations, enhanced biomarker support, and distributor-specific business model tools. - A beta program for at-home blood test biomarker integration into Protocol is currently validating the end-to-end customer experience. ### Operational & Leadership Updates - Over 110,000 distributors have attended in-person extravaganza training and networking events across 7 global markets in 2026 YTD, reinforcing distributor engagement and capability building. - The global *Fuel Like Rinaldo* marketing campaign in partnership with Cristiano Ronaldo launched around a major global sporting event, raising brand awareness across 45 markets. - CFO John DeSimone will retire at the end of 2026 after nearly 20 years at the company. Scott Schaefer, Senior Vice President of Finance and Transformation, will succeed him as CFO starting January 2027, with a seamless transition planned over the next five months. - The company completed a successful debt refinancing in April 2026, reducing net interest expense from $54 million in Q2 2025 to $37 million in Q2 2026. Total leverage ratio stands at 2.7x, with a net leverage ratio of 2.2x, and management targets a net leverage ratio below 2x by end-2026.

Guidance

- Q3 2026: Management expects reported net sales growth of 0.5% to 4.5% year-over-year (including a 100 basis point FX headwind), equal to 1.5% to 5.5% constant currency net sales growth. Adjusted EBITDA is guided to $160 million to $180 million reported ($165 million to $185 million constant currency). Capital expenditures are expected to be $15 million to $25 million. - Full year 2026: Management narrowed net sales guidance ranges and raised the midpoint on both reported and constant currency bases, now expecting 2.5% to 5.5% year-over-year net sales growth on both bases. Adjusted EBITDA guidance ranges were narrowed: the constant currency midpoint was raised, while FX movements led to a slight reduction in the reported midpoint. Full-year adjusted EBITDA is now guided to $670 million to $690 million reported ($690 million to $710 million constant currency). - Full year 2026 capital expenditure guidance was narrowed to $50 million to $700 million, down from prior guidance; incremental capitalized SAS implementation costs remain guided to $35 million to $55 million. - Capital allocation priority remains: use Herbalife's strong free cash flow (23% trailing 12-month free cash flow yield) to continue debt reduction, with a commitment to repay over $600 million by the end of 2028.

Segment performance

Herbalife reported Q2 2026 net sales of $1.3 billion, a 5.4% year-over-year increase. On a constant currency basis, net sales grew 5.8% year-over-year. The company's regional segment performance is as follows: - North America: 0.2% year-over-year reported net sales growth, with higher pricing offset by a 2% volume decline. This marks the second quarter of growth in the last four quarters. - Latin America: 17% year-over-year reported net sales growth (8% constant currency growth), its fourth consecutive quarter of double-digit growth. The result came from 2% volume growth, favorable pricing, and an 840 basis point FX tailwind. Mexico, the region's largest market, posted 17% reported growth (5% local currency growth). - Asia Pacific: 15% year-over-year reported net sales growth (23% constant currency growth), driven by 26% volume growth and favorable pricing, partially offset by unfavorable mix and FX headwinds. India led the region with 33% reported net sales growth, driven by 45% volume growth. - EMEA: 3.5% year-over-year reported net sales decline (5.6% constant currency decline), as a 12% volume decline offset higher pricing, favorable mix, and FX tailwinds. - China: 25% year-over-year reported net sales decline (29% constant currency decline), driven by a 29% volume decline. China contributes less than 5% of total worldwide net sales. Adjusted EBITDA for the quarter was $167 million, near the top end of guidance. Gross profit margin was 77.7%, down 30 basis points year-over-year, with 60 basis points of pricing benefits offset by mix, cost, and inventory reserve impacts.

Risks & headwinds

- Unfavorable foreign exchange movements created a 40 basis point headwind to Q2 2026 net sales and an $8 million headwind to adjusted EBITDA, and are expected to create a modest headwind for Q3 2026 results. - Input cost pressure is emerging for whey protein, packaging, and freight (due to higher oil prices), though management notes the impact is manageable for Herbalife, as whey is not the dominant protein type used in its products. - Volume declines in EMEA and China, driven by 12% and 29% respective volume drops, continue to pressure results in those regions. - Rapid growth in India creates execution risk related to maintaining strong distributor retention during the high-growth phase, though management is confident in the region's 18-year track record of disciplined growth.

Analyst Q&A

• Q: With rapid distributor growth in Asia Pacific driven by India, how will you maintain strong distributor retention through this growth phase? /

  A: Management notes India's growth is driven by price adjustments that made products more accessible, paired with established distributor systems for customer onboarding and duplication. India has 18 straight years of consistent growth, with built-in operational discipline beneath expansion that supports sustainable retention. Current data shows existing distributor systems are effectively managing increased customer flow, giving leadership confidence in continued stable growth.

• Q: Narrowing full-year CapEx guidance implies a modest reduction; is this driven by project delays or cash constraints? /

  A: The lower guidance reflects disciplined project prioritization and ROI analysis, not cash constraints or widespread project delays. Herbalife generates ample free cash flow to fund planned investments, and has a history of modest underspending against initial guidance as management approves only high-value projects. The narrowing is simply a reflection of more accurate forecasting after project review.

• Q: What is your outlook for 2025 input cost inflation, and are there any supply shortages? /

  A: Management notes modest input cost pressure, primarily for whey protein, packaging, and freight tied to higher oil prices. The impact is manageable for Herbalife, as whey is not the dominant protein type the company sells. Management expects to fully recover these costs through standard annual price increases, and does not note material supply shortages at this time.

• Q: How do you view P&G's acquisition of premium supplement brand Thorne, and does it change your strategy? /

  A: Management views the acquisition as validation of the growing personalized nutrition market and the value of Herbalife's strategic positioning in this space. It aligns with Herbalife's own launch of the Life.io brand, which targets the same premium proactive wellness consumer segment. The acquisition also indicates valuations for quality nutrition brands are strong, but does not change Herbalife's current strategic direction.